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Sales Tax News and Tips |
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The Sales Tax Institute reviews numerous sales tax publications to monitor state activity on various topics related to sales and use tax. A summary of selected, recent news items organized by topic can be obtained by choosing a category listed below. The available summaries are not intended to represent a comprehensive listing of all law changes, court decisions, and helpful tips but are offered as a source of information of a general nature to aid you in staying current in the dynamic area of sales and use tax. By checking updates routinely, you may be alerted to an impending tax law change critical to your business. The information listed here is high level summary and background material. It omits many details and special rules, and cannot be regarded as legal or tax advice. For more information, be sure to contact your tax advisor. Some of the information sources monitored include: CCH State Tax Day, Sales and Use Tax Alert, State Tax Notes, Vertex, Inc. Reference Manuals, Westlaw, and other miscellaneous state tax newsletters and Department of Revenue notices. SearchTo search all items by keyword or jurisdiction, please visit our news search page. New Items for June 2010Administrative/Rate ChangesWashington Adopts Rules on Nexus Standards, Single Factor Receipts Apportionment Effective June 1, 2010, four new rules have been adopted by the Washington Department of Revenue to implement legislative changes regarding business and occupation (B&O) tax nexus and apportionment. The legislation (Ch.23 (S.B. 6143), Laws 2010, 1st Special Session) established new nexus standards and single factor receipts apportionment for apportionable activities. 1) WAC 458-20-19401 (Minimum Nexus Thresholds for Apportionable Activities): Explains that B&O taxes may not be imposed on a business unless that business has substantial nexus with Washington. Also describes the minimum nexus thresholds for the B&O taxation of apportionable activities. 2) WAC 458-20-19402 (Single Factor Receipts Apportionment – Generally): Establishes a new apportionment method for businesses engaged in apportionable activities and that have nexus with Washington. This rule does not apply to the apportionment of income of financial institutions taxable under RCW 82.04290, which is governed by WAC 458-20-19404, nor the receipt of royalty income from granting the right to use intangible property under WAC 458-20-19403. 3) WAC 458-20-19403 (Single Factor Receipts Apportionment – Royalties): Explains how gross income from royalties must be apportioned when the business receives royalty payments from both within and outside the state. 4) WAC 458-20-19404 (Financial Institutions – Income Apportionment): Explains how gross income from engaging in business as a financial institution is apportioned when the financial institution engages in business both within and outside the state. Additional rules and regulations apply. (WAC 458-20-19401, -19402, -19403, and -19404, Washington Department of Revenue, adopted on an emergency basis effective June 2, 2010) (06/10) Veterans’ Organization Exemption Enacted in Maryland As of July 1, 2010, sales to a nationally-organized and recognized organizations of U.S. armed services veterans are exempt from Maryland sales and use tax. The exemption also applies to an auxiliary of the organization or one of its units, if the organization is exempt under IRC Section 501( c)(4) (H.B. 203/S.B. 237, Laws 2010, effective as noted above). (06/10) New York Refund Claim May be Amended after Statute of Limitations Expires A New York State advisory opinion concluded that a taxpayer may amend New York sales tax refund claims, by reducing the amounts of the refunds claimed, after the statute of limitations period has expired. The only difference between the original claims and the amended claims is the reduction in the amount of refund claimed. The original claims and amended claims arise from the same transactions but the amended claims would cover a reduced number of these transactions. The advisory opinion also noted that this conclusion should not be construed as necessarily extending to an amended refund claim that is larger than the original refund claim. (TSB-A-10(21)S, New York Commissioner of Taxation and Finance, May 6, 2010) (06/10) Mississippi Delays Accelerated Tax Payment Threshold Increase An increase in the amount of average monthly tax liability which triggers the requirement for early payment of Mississippi sales and use taxes has been delayed until July 1, 2012 by Mississippi House Bill 1059. Originally slated to being in 2010, a taxpayer having an average monthly sales and/or use tax liability of at least $50,000 (currently $20,000) for the preceding calendar year must make an estimated payment of its sales and/or use tax liability for the month of June no later than June 25 each year. The payment must be equal to at least 75% of the taxpayer’s estimated sales and/or use tax liability for June of the current calendar year or the taxpayer’s sales and/or use tax liability for June of the preceding calendar year. As this change will take effect in July 1, 2012, the first payment using the new threshold amount will be due June 25, 2013. The taxpayer will not need to include taxes due on credit sales for which the taxpayer has not received payment before June 20. Additional rules and regulations apply. (H.B. 1059, Laws 2010, effective May 21, 2010) (06/10) Kansas Requires Sales and Use Electronic Filing As a result of Senate Bill 430, the Kansas Department of Revenue (KDOR) has released a notice announcing that businesses will be required to electronically file returns for retailer’s sales, compensating use, and withholding tax, effective July 1, 2010. To ensure a smooth transition for Kansas businesses the KDOR will continue to provide paper forms as needed through September 30, 2010. After September 30, 2010, KDOR will no longer have printed paper forms available. Kentucky Allows Expedited Protest Resolution Process Kentucky Governor Steve Beshear has signed legislation that allows an expedited protest resolution process for any tax assessment that, as of January 19, 2010, has been protested, not been the subject of a final ruling and not been the subject of certain enforced collections. The assessment will be considered paid in full if the taxpayer pays the entire amount of tax assessed, exclusive of interest and penalties, on or after June 4, 2010 and before July 31, 2010. All payments of tax are considered final and are not subject to refund or recovery (Kentucky 10 SS HB 2/EN, effective June 4, 2010). (06/10) Kansas Enacts Tax Rate Increase Kansas Governor Mark Parkinson has signed House Bill 2360 enacting the increase to the state’s retailers’ sales and compensating use tax rate from 5.3% to 6.3%, effective July 1, 2010. The Kansas Department of Revenue has recently revised a state and local rate change notice to reflect this rate increase. (H.B. 2360, Laws 2010, effective July 1, 2010; Press Release, Kansas Gov. Mark Parkinson, May 27, 2010; Information Guide No. EDU-96, Kansas Department of Revenue, June 2, 2010) (06/10) Georgia Governor Signs Bill Authorizing 1% Special District Transportation Taxes Georgia Governor Sonny Perdue recently signed legislation creating the Transportation Investment Act of 2010. The legislation allows voters in twelve new special districts to decide on a one-percent, ten year, regional sales tax for all types of transportation improvements. “Regional roundtables” are created in each special tax districts that decide on the projects to be funded. These special district transportation sales and use taxes will not apply to amounts over the first $5,000 of any motor vehicle purchase or lease, transactions to which a sales or use tax exemption applies (however, the tax will apply to sales and uses of food and beverages for off-premises human consumption), the sale or use of any type of fuel used for off-road heavy-duty equipment, off road farm or agricultural equipment, or locomotives, and several other items. The bill generally takes effect on June 2, 2010 (H.B. 277, Laws 2010, effective as noted, Press Release, Georgia Gov. Sonny Perdue, June 2, 2010). (06/10) Kansas Legislation Conforms to SST Agreement changes Senate Bill 430, effective upon publication in the Kansas Register, conforms Kansas provisions with the recent changes to the Streamlined Sales and Use Tax (SST) Agreement. Specifically, the legislation replaces provisions governing direct mail sourcing with and without a direct pay permit with provisions governing advertising and promotional direct mail and other direct mail. S.B. 430 defines advertising and promotional direct mail as printed material that meets the definition of direct mail for which the primary purpose is to attract public attention to a product, person, business or organization, or to attempt to sell, popularize, or secure financial support for a product, person, business, or organization. A purchaser of advertising or promotional direct mail can provide the seller with 1) a direct pay permit; 2) an exemption certificate or other statement approved, authorized, or accepted by the secretary claiming direct mail; or 3) information showing the jurisdiction to which the advertising and promotional direct mail is to be delivered to recipients. Other direct mail has also been updated by S.B. 430 to be defined as any direct mail that is not advertising and promotional direct mail, regardless of whether such advertising and promotional direct mail is included in the same mailing. A purchaser of other direct mail may provide the seller with 1) a direct pay permit, or 2) an exemption certificate, or other statement approved, authorized, or accepted by the secretary claiming direct mail. Arizona Voters Approve 1% Rate Increase Arizona voters passed Proposition 100 which temporarily increases the transaction privilege tax rate from 5.5% to 6.5%. This rate change is effective June 1, 2010 through May 31, 2013 (Proposition 100, approved by the voters at the May 18, 2010, election) (06/10) Treatment of Sales for Resale Modified in Missouri Enacted Missouri legislation clarifies the sales tax treatment for sales for resale. Purchases of tangible personal property or services for resale are exempt if the subsequent sale is any of the following: subject to tax in Missouri or another state, for resale, excluded from tax, subject to tax but exempt, or exempt in another state where the subsequent sale occurs. Two exceptions to the general rule are created for charges for admission or seating accommodations at places of amusement, entertainment, or recreation, and for charges for rooms, meals and drinks. In the case of the two exceptions, operators of such places must remit tax on the gross receipts received by such operators, and subsequent sales will not be subject to tax if they are an arm’s length transaction for fair market value with an unaffiliated entity. The purchase of tangible personal property by a taxpayer will not be considered to be for resale if such property is used or consumed by the taxpayer in providing a service on which tax is not imposed, except for purchases made in fulfillment of any obligation under a defense contract with the U.S. government. (S.B. 928, Laws 2010, effective May 12, 2010). (05/10) Amazon Challenges North Carolina DOR’s Request for Customer Information Amazon.com LLC ("Amazon") has filed a complaint for declaratory relief alleging that its compliance with the North Carolina Department of Revenue’s demand for personally identifiable information about its customers would violate the First Amendment rights of Amazon and its customers. As part of the DOR’s audit of Amazon’s compliance with state sales and use tax laws, Amazon has provided the DOR with each transaction’s order ID number, the city, county, and zip code to which the item was shipped, the total price for the transaction, and the Amazon standard product code for each item, which the DOR can use to immediately find on Amazon’s website a full description of every product purchased by a North Carolina customer. In addition to this information, the DOR is requesting the name and address of every North Carolina customer who purchased or received goods in these transactions, and has stated its plans to serve Amazon an administrative summons and summary contempt proceeding if the information is not supplied. Maine Amends Definition of Sales Price and Exemptions The Governor of Maine has signed a bill that amends the definition of “sales price” to exclude the price received for labor or services used in installing, applying, or repairing the property sold, as long as the price is separately stated. This will not take effect, however, if the 2009 tax reform legislation is rejected by voters at the June 8, 2010 election. If the change is approved, it will apply retroactively beginning January 1, 2009. Additionally, any amount charged for the disposal of used tires is removed from the definition of “sales price” retroactively, effective January 1, 2009, regardless of the outcome of the election. (L.D. 1540 (H.P. 1084), Laws 2010, effective 90 days from the adjournment of the Second Regular Session and applicable as noted) (04/10) Colorado State Law Regarding Tax Refund Appeals Superseded Local Requirements The Colorado Supreme Court has decided that the Executive Director of the Colorado Department of Revenue had jurisdiction to hear a taxpayer’s appeal of two towns’ denial of use tax refund requests. Although the towns’ municipal codes required that the taxpayer submit to both an informal and a formal hearing, the State’s statutes governing use tax refund appeal processes limited the towns to only be able to conduct informal hearings. Further, the taxpayer’s appeal to the Executive Director was proper because the taxpayer waited the required 90-day statutory waiting period after its requests for issuance of formal decisions by the towns were ignored. (MDC Holdings, Inc. v. Town of Parker, Colorado Supreme Court, No. 08SC972, February 8, 2010) (04/10) Nebraska Releases Guide on Illegal Advertising Referring to Sales Tax The Nebraska Department of Revenue has issued an information guide reminding retailers that Nebraska law prohibits retailers from advertising or implying in any way that the sales tax will be assumed or absorbed by the retailer or not added to the selling price. Retailer are required to pass on to their customers the full amount of the sales tax, which must be stated on the customer’s invoice and collected as an item separate and district from the sales price. Examples of prohibited language include “Tax-Free Sale”, “Pay No Sales Tax”, “Purchases Will Be Discounted By the Amount of the Sales Tax”, “Sales Tax Stimulus Sale”, “We Will Pay Your Sales Tax”, and “Tax Credit Sale”. Retailers may contact the Department prior to conducting an advertising campaign to ensure the advertisement does not violate any statuary provisions. (Information Guide 6-493-2010, Unlawful Advertisements Referring To Sales Tax, Nebraska Department of Revenue, March 22, 2010) (04/10) California Reminds Use Tax Registrants of April Deadline The California State Board of Equalization (BOE) has notified more than 180,000 taxpayers that they are required to register with the BOE under a new law in order to report and pay their use tax liability for purchases subject to use tax for the previous calendar year. On April 1, 2010 the BOE issued a news release reminding taxpayers required to register, to a file a return and remit the use tax due directly to the BOE on or before April 15, 2010. However, at its March Board Meeting, the Board directed staff to make it clear to taxpayers that they may request relief from penalty or an extension. In response, forms for both requests have been placed on the home page of the BOE website and other locations for the taxpayer, including form BOE-735, Request for Relief of Penalty. Director/Vice-President Not Responsible for New York Sales Tax Due A taxpayer’s position as a Director and Vice-President of a bankrupt telecommunications company did not make her accountable for the company’s outstanding sales tax liability because she was found to not be a person under a duty to collect and remit unpaid taxes. Despite her position as an officer, she did not have sufficient control or authority over the company’s operations to necessitate this responsibility. This was demonstrated by the taxpayer’s lack of management responsibilities, attendance at board meetings, and inability to sign checks or tax returns on behalf of the company. (Mitchell, New York Division of Tax Appeals, Administrative Law Judge Unit, DTA No. 822072, February 25, 2010) (04/10) Washington Rate Change Rule Amended Effective April 23, 2010, the Washington Department of Revenue has amended a rule that provides specific guidance for the effect of sales tax rate changes for persons performing retail services such as repairing property and construction buildings. The amended rule includes guidance on contracts, sales agreements, and installment sales made prior to the effective date of the rate change. A sales and use tax rate increase applies to the first billing period starting on or after the effective date of the increase, and a sales and use tax decrease applies to bills rendered on or after the effective date of the decrease. Furthermore, the requirement that taxpayers filing returns on a cash basis must make an accounts receivable adjustments at the time of a rate changes has been removed. Additional regulations may apply. (WAC 458-20-235, Washington Department of Revenue, effective April 23, 2010) (04/10) Updated Utah Publication Provides Guidance on Penalty and Interest Waiver The Utah State Tax Commission has revised and reissued and informational publication that provides guidance on the taxes it administers. Included in the publication are the procedures for requesting a waiver of tax penalties or interest and the types of circumstances that may constitute reasonable cause for a waiver. (Publication 17, Utah State Tax Commission, February 2010) (04/10) California Updates Offer in Compromise Publication The California State Board of Equalization (BOE) has updated guidance regarding its Offer in Compromise Program for the taxes and fees it administers. An offer in compromise is a proposal to pay BOE an amount that is less than the full tax or fee liability due. If the taxpayer makes an offer and the BOE accepts it, the taxpayer will no longer be liable for the full amount due and the BOE will release any related tax liens as provided by the terms and conditions relative to the taxpayer’s offer. The Offer in Compromise Program provides a payment alternative for both individuals and businesses that cannot pay their tax or fee liability in full. The updated publication provides information on application, procedure, and evaluation of offers made. (BOE Publication 56, Offer in Compromise, California State Board of Equalization, March 2010) (04/10) New York Posts Delinquent Taxpayers on Department’s Website The New York Department of Taxation and Finance has begun posting the State’s top 250 business and top 250 individual tax debtors. This effort is intended to recover delinquent corporate franchise, personal income, sales and use, and withholding tax liabilities. The lists will be updated monthly (Release, Office of New York Gov. David Paterson, March 5, 2010). (03/10) California Registration Requirements Added to Regulation California legislation enacted in 2009 that imposes registration requirements on qualified purchasers for use tax purposes has been added to Regulation 1699, Permits. Clarification that the provisions refer to seller’s permits has also been added to the regulation. (Regulation 1699, California State Board of Equalization, effective March 17, 2010) (03/10) Oklahoma Posting Delinquent Taxpayers Online As of November 1, 2009, the Oklahoma Tax Commission will maintain a list of all persons who owe more than $25,000 in interest, penalties, fees, costs and taxes on their website. The 100 largest delinquent accounts are featured on a special page. If a taxpayer has entered into a pay plan with the Tax Commission, or is protected by a bankruptcy stay, their name will not appear on the website. Taxpayers will receive written notice that their name is being added to the list at least 90 days prior to being added to the public list. (Oklahoma S.B 318, Enacted June 1, 2009) (03/10) West Virginia Rules Corporate Officer Was Not Liable The West Virginia Office of Tax Appeals found that the former corporate officer of a company was not personally liable for consumers' sales and service tax and assessment tax as he was not a "responsible person" for assessment purposes. The former corporate officer incorporated and acted as the president until giving control of the company to other family members. The court found that he had left the business 10 years prior to the assessment period and it was his son who had signed and filed the incorrect tax returns. As a result of this, the previous owner was found not to be a "responsible person" and could not be imposed with the outstanding tax liability. (Decision Nos. 09-002 & 09-003 W, West Virginia Office of Tax Appeals, February 3, 2010) (03/10) California Amends Rules on Refund Dollar Amount Approval Requirements The California State Board of Equalization (BOE) has amended its rule on approvals required for certain dollar amount refunds. If a Board staff Decision and Recommendation or Supplemental Decision and Recommendation determines a refund in excess of $100,000 (previously $50,000) should be granted or denied, the recommendation must be submitted to the Board for approval. Proposed determinations to grant refund claims for duplicate or erroneous payments made through the electronic funds transfer program in excess of $100,000 must be submitted to the Executive Director for approval. Governor Opposes Tax Increases and Amnesty Program In a recent State of the State address, Mississippi Gov. Haley Barbour expressed that he does not support state tax increases nor tax amnesty programs as solutions to current budget issues. Alternatively, the governor called for a small increase in the Tax Commission budget for collecting unpaid taxes owed to the state (2010 State of the State Address, Mississippi Gov. Haley Barbour, January 18, 2010). (02/10) Virginia Rules Corporate Officer Personally Liable for Unpaid Taxes The Virginia Department of Taxation responded to a letter from an individual who served as the vice president, secretary and treasurer of a corporation who was assessed for unpaid sales and use taxes. After the Department failed to collect the assessment from the corporation, the assessment was levied on the individual. In its letter, the state found that it was correct in assessing the individual for the liabilities. The state found that the act of corporate underpayment was "voluntary, conscious and intentional" and the liability could be transferred to the individual corporate officer who was acting as the responsible officer. (Ruling of the Commissioner, P.D. 09-149, Virginia Department of Taxation, October 8, 2009) (02/10) Wisconsin Discusses Change in Treatment of Drop Shipment Sales Effective October 1, 2009, a manufacturer or other seller may accept an exemption certificate claiming resale from an out-of-state purchaser even when the manufacturer or other seller is directed to ship the product to a consumer in Wisconsin and the out-of-state purchaser does not have a Wisconsin seller’s permit or Wisconsin use tax registration certificate. Prior to October 1, 2009, a manufacturer or other seller could not have accepted an exemption certificate claiming resale from an out-of-state business not holding a Wisconsin seller’s permit or use tax certificate, if the manufacturer or other seller delivered the product to a consumer in Wisconsin. This rule was repealed so Wisconsin's sales and use tax laws would conform to the requirements of the Streamlined Sales and Use Tax Agreement (SSUTA). (Drop Shipment Sales—Change in Wisconsin Sales and Use Tax Treatment, Wisconsin Department of Revenue, January 19, 2010) (02/10) West Virginia Revises Publication Discussing Voluntary Disclosure Procedures In the revised publication, the West Virginia Department of Revenue explains a Voluntary Disclosure Agreement as an opportunity for qualified businesses and individuals to come forward and comply with State tax laws in exchange for a waiver of civil or criminal penalties or prosecution. Additionally, the State may agree to limit the number of returns to be filed, waive penalties, or not audit, assess or demand payment of taxes prior to the look-back period. Although the look-back period is determined by the specifics of the case, it is generally no less than three years. To request an Agreement, the a written, dated request must be made that includes the type of business, activities conducted generally and specifically in West Virginia, types of taxes to be disclosed and those currently being filed, and the relief sought. Washington Readopts Reseller Permit Rules Two sales and use tax emergency rules have been readopted by the Washington Department of Revenue. The rules explain the application process and eligibility requirements for reseller permits and the brief adjudicative proceedings for matters related to reseller permits. Beginning January 1, 2010, seller’s permits issued by the Department replace resale certificates as the documentation necessary to substantiate a wholesale transaction. (WAC 458-20-10201 and WAC 458-20-10202, Washington Department of Revenue, effective December 29, 2009) (01/10) Ohio Explains Sourcing Changes The Ohio Department of Taxation explains the changes made to the way sales of tangible personal property and taxable services are sourced in an information release. Beginning January 1, 2010, vendors that previously switched to destination sourcing for delivery sales will now be required to source their sales to the location where the order is received rather than the delivery location. Remote sales, including mail order, telephone or online sales, by Ohio vendors to Ohio customers will also be sourced to the location where the order is received. Out-of-state vendors making sales to Ohio customers should source their sales to the location where the consumer receives the tangible personal property that was sold. The sale of taxable services should be sourced to the location where the consumer receives the service regardless if the service provider is located in or outside Ohio. No changes were made to the sourcing of lease transactions or direct pay permit holders. Alabama Amends Rule on Exemption for Governmental Entities, Purchases Made by Purchasing Agents The sales and use tax exemption rule on governmental entities and purchases made through purchasing agents has been amended. The rule is amended to include the ability to use Form ST:PAA-1, Purchasing Agent Appointment. This form will allow an exempt entity to appoint a purchasing agent to act on their behalf when making tax-exempt purchases. A contractor may also use this form to appoint subcontractors to make tax-exempt purchases on behalf of the exempt entity. (Rule 810-6-3-.69.02, Alabama Department of Revenue, effective January 5, 2010) (01/10) California Releases New Publication on Voluntary Disclosure Programs The California State Board of Equalization has issued a publication to provide details on its in-state and out-of-state voluntary disclosure programs. The publication describes what the program is, the difference between the two programs, the eligibility requirements, how to apply and the benefits of the program. In addition, the publication discusses penalty waivers and how a taxpayer can request an opinion as to whether or not the BOE would approve their voluntary disclosure request without first revealing their identity. (BOE Publication 178, Voluntary Disclosure Program, California State Board of Equalization, December 2009) (01/10) Connecticut Issues Reminder of Rate Decrease Cancellation In a press release, the Connecticut Department of Revenue Services reminds taxpayers that the sales and use tax rate will not decrease and will remain at 6%. Previously in September 2009, a law was passed to decrease the sales and use tax rate from 6% to 5.5%, beginning January 1, 2010. This rate decrease was contingent on the general fund's gross tax revenue not falling below 1% of the initial budget estimates. Consequently, the rate decrease has been cancelled because the tax revenue projections developed by the Office of Policy and Management, the Office of Fiscal Analysis, and the Office of the State Comptroller all show tax revenues falling below 1% of the initial estimates. (Press Release, Connecticut Department of Revenue Services, December 21, 2009) (01/10) A Recent Case Impacts Sellers’ Use of the Resale Exclusion in Missouri The Missouri Department of Revenue has issued a release discussing the impact of the ICC Management, Inc. v. Director of Revenue case on the resale exclusion. In the case, the court ruled that ICC's purchases of food and consumables were not eligible for the resale exclusion and therefore, subject to sales tax. The court determined that since ICC's supply of food and consumables to inmates are not taxed due to the governmental sales exemption, then the rationale behind the resale exclusion (to avoid double taxation) does not apply. This change applies to all affected transactions occurring after September 1, 2009, the date the decision became final. (Release, Missouri Department of Revenue, December 23, 2009) (01/10) Puerto Rico Updates Exemption Certificate Legislation Effective, November 1, 2009, the 1994 Puerto Rico Internal Revenue Code has been amended by Act No. 7 of March 7, 2009, eliminating the existing resellers exemption certificates issued for sales and use tax purposes and replacing them with new certificates issued by the Puerto Rico Treasury Department. In accordance with the updated legislation, the Secretary of Treasury has been granted some discretion to limit and/or extend the effectiveness of the exemption certificates. Circular Letter No. 09-06 provides that all certificates that expire on or before October 31, 2009 will remain effective until October 31, 2009. All certificates that expire after such date will remain in effect until the last day of the month in which they expire. For example, if a certificate expires on November 15, 2009, it will remain effective until November 30, 2009. Furthermore, the filing date changes from the 20th to the 10th following the close of the month starting with filings for the month of November 2009 (which are due December 10, 2009). Additional rules and regulations apply. (Act 7, March 7, 2009, effective November 1, 2009) (01/10) Rhode Island Amends its EFT Regulation Rhode Island’s regulation relating to mandatory electronic funds transfer (EFT) payments for sales and use tax and personal income tax withholding has been amended. Beginning January 1, 2010, any person with an average monthly sales and use tax liability of $200 or more per month for the look back period, must make payments via EFT. Any taxpayer with 10 or more employees, over the course of the look-back period, is required to make the withholding tax payments via EFT. Taxpayers who are required to make payments by EFT may request a waiver from the EFT requirement if they can show good cause. The regulation provides some reasons that would be considered good cause for a waiver. (Reg. EFT 09-01, Rhode Island Division of Taxation, effective January 1, 2010) (12/09) Special Session Bill on Internet Sales Dies in California Assembly Bill 27, which proposed to tax certain internet sales, died in the third session of the California Assembly. The bill would have amended the definition of a retailer to include any retailer who entered into an agreement with a California resident under which the resident, for a commission or other consideration, directly or indirectly refers potential customers of tangible personal property, whether by a link or an Internet Web site or otherwise, to the retailer. A similar bill, A.B. 178, was introduced on February 2, 2009 and is still pending. (A.B. 27, died at the desk, October 26, 2009; A.B. 178, introduced in the regular session by the California Assembly n February 2, 2009) (11/09) District of Columbia Enacts Second FY 2010 Budget Support Emergency Act The District of Columbia has passed a second budget support act which repeals the previous one, but reenacts some of the repealed acts sales and use tax provisions. Beginning October 1, 2009 and ending September 30, 2012, the general sales and use tax rate will increase from 5.75% to 6%. The authorization to establish an amnesty program to allow taxpayers liable to pay certain taxes on returns or reports was also reenacted. The amnesty is allowed for tax periods ending prior to December 31, 2008 or December 31, 2009 if the program is established after December 31, 2009. In addition, the repeal of the District’s sales tax holidays provisions was reenacted. (Act 18-207 (D.C.B. 18-443), Laws 2009, effective October 15, 2009, for a 90-day period that expires January 13, 2010) (11/09) Louisiana Explains Immovable Property In an informational bulletin, the Louisiana Department of Revenue explains how Act 442 of the Regular Session of the Louisiana Legislature changes the definition of “tangible personal property” to exclude certain property. The Act provides that the term “tangible personal property” shall not include any property that would have been considered immovable property prior to the enactment of Act 632 on July 1, 2008 by the 2008 Louisiana Legislature. Act 632 defines component parts of immovable property as things attached to a building, such as doors, shutters, gutters, cabinetry, plumbing, heating, cooling, electrical and similar systems, or things that are attached to a construction other than a building and attached to such a degree that they cannot be removed without substantial damage to themselves or to the building or other construction. As a result, the purchase, lease, and repair of immovable property shall be excluded from sales tax. In addition, the exclusion shall be applied retroactively and is applicable to all transactions occurring on or after July 1, 2008. (Revenue Information Bulletin No. 09-036, Louisiana Department of Revenue, October 15, 2009) (11/09) Connecticut Summarizes 2009 Legislative Changes, Including Possible Rate Decrease The Connecticut Department of Revenue Services issued a special notice discussing sales and use tax changes resulting from the 2009 regular and June special sessions. Effective January 1, 2010, there will be a decrease in the sales and use tax rate to 5.5% contingent on the cumulative monthly financial statements. There will also be an increase in the new seller's permit from $50 to $100 beginning October 1, 2009. If a seller's permit is suspended or revoked, the fee for a reissued seller's permit is also increased from $50 to $100. Effective July 8, 2009, exemptions for gas, electricity, machinery, materials, tools, and fuel are amended to make persons that make finished products (for example asphalt) used to fulfill a paving contract eligible for them when they are purchased to make the product. (Special Notice 2009(6), Connecticut Department of Revenue Services, October 19, 2009) (11/09) North Carolina Discusses Additional .25% Rate Increase The North Carolina Department of Revenue has issued a notice announcing the state sales and use tax rate has been increased from 5.5% to 5.75%, effective October 1, 2009. Local rates, however, decrease from 2.25% to 2% in all counties except Alexander, Catawba, Cumberland, Haywood, Martin, Pitt, Sampson, and Surry where the county rate decreases from 2.5% to 2.25%. Mecklenburg County continues to impose an additional 0.5% Transit rate. The third one-half cent local tax, previously reduced to 0.25% under Article 44, will decrease to zero. The combined State and local rate will continue to be 7.75% in ninety-one counties, 8% in Alexander, Catawba, Cumberland, Haywood, Martin, Pitt, Sampson, and Surry Counties and 8.25% in Mecklenburg County. For purposes of determining the applicable rate of tax, a sale is considered to be consummated when the item is delivered to the purchaser. Therefore, the rate of tax due is generally the rate in effect when delivery of property occurs. (Important Notice 10-09, North Carolina Department of Revenue, October 2009) (10/09) Delaware Temporarily Increases Gross Receipts Tax Rates Many Delaware gross receipts tax rates, such as those applicable to manufactures, wholesalers, and retailers, are temporarily increased for taxable periods beginning after December 31, 2009 through December 31, 2013. (H.B. 289, Laws 2009, effective as noted above) (10/09) New Registration and Reporting Requirements in California California has issued a news release and special notice informing taxpayers that the new use tax registration and reporting law requires all "qualified purchasers" to register with the BOE and report and pay use tax. A qualified purchaser is a business that meets all of the following tests: 1) is not required to hold a seller’s permit with the BOE; 2) is not required to be registered or otherwise register with the BOE; 3) is not a holder of a use tax direct payment permit; and 4) receives at least $100,000 in gross receipts per year from business operations. The BOE has identified nearly 200,000 businesses that meet the definition of a “qualified purchaser” and is notifying them of their registration requirement. However, even if a business is not contacted by the BOE, any business that meets the requirement is still responsible for registering with the BOE to report and pay use tax. Under existing law, those businesses who do not meet the $100,000 gross receipts threshold are still required to report and pay use tax; they just do not have the mandatory obligation to register with the BOE for that purpose. Kiosks and Sellers with Multiple Stores in Texas Discussed Kiosks and Sellers with Multiple Stores are Discussed in Texas Texas issued a notice on Senate Bill 636, which amends the definition of a “place of business” and changes how retailers who operate multiple places of business in Texas should collect local sales taxes. New York City/State Allows for Unified Program A revised Statement of Audit Procedure (“SAP”) has been issued by the New York City Department of Finance, discussing the Unified Program associated with the Voluntary Disclosure and Compliance Program (“VDCP”). The unified program allows taxpayers that are delinquent for both New York State and New York City taxes to make one request to participate in both VDCPs without making separate requests for each jurisdiction. As part of the program, New York City will conform to New York State procedures, including those requiring taxpayers to identify themselves on their application. The taxpayer will receive one agreement detailing the terms of both jurisdictions, and an authorized employee from each jurisdiction will sign the agreement. All requests to participate in the Unified Program must be made with New York State Department of Taxation and Finance. (Statement of Audit Procedure PP-2009-1rev., New York City Department of Finance) (09/09) Connecticut Governor Allows Budget Bill to Become Law Without Signature – includes Rate Decrease and Amnesty Program On August 31, 2009, Governor Jodi Rell announced that she would allow the budget bill to become law without her signature with the exception of certain line-item vetoes. The bill is scheduled to become law on September 8, 2009. Among the passed items in the bill was a decrease in the sales and use tax rate. The rate will be decreased from 6% to 5.5%, effective January 1, 2010. This rate decrease is contingent upon meeting certain revenue projections. In addition, the fee for a seller’s permit will increase from $50 to $100 beginning October 1, 2009. Another item passed in the bill was a provision to establish a tax settlement initiative program. The bill requires the Department of Revenue to conduct this amnesty program during the period of October 1, 2009 and December 31, 2009, inclusive. The program will allow eligible taxpayers to pay any outstanding taxes from prior periods in exchange for a waiver of all civil penalties and fifty percent of the interest due. (H.B. 6802, passed by the Connecticut General Assembly on August 31, 2009) (09/09) California Amends Sales for Resale Regulation A California sales and use tax regulation discussing sales for resale has been amended to clarify the proper use of qualified resale certificate. The amendments provide that the acceptable resale designation on a purchase order is not limited to the phrase, “for resale” and may include other similar terminology. The amendments also provides that a purchase order where the applicable amount of tax is shown as $0 or is left blank will not be accepted as designating that the property is purchased for resale, unless the purchase order also includes the phrase “for resale” or other similar terminology (Reg. 1668, California State Board of Equalization, effective August 29, 2009). (09/09) District of Columbia Increase Sales Tax Rate and Authorizes Amnesty Program There were several changes included in the District of Columbia’s Budget Support Emergency Act of 2009. Beginning October 1, 2009 and ending September 30, 2012, the general sales and use tax rate will increase from 5.75% to 6%. Also included was the Tax Compliance Emergency Act of 2009 which authorizes the Chief Financial Officer to establish an amnesty program to allow taxpayers liable to pay certain taxes on returns or reports. No dates have been set. The August tax holiday provision was repealed by the Sales Tax Applicability Act of 2009. (Act 18-187 (D.C.B. 18-409), Laws 2009, approved August 26, 2009, effective for a 90-day period expiring November 24, 2009) (09/09) Partial Refund Allowed for Merchandise Returned for Less Than Original Purchase Price in New York A New York advisory opinion was issued addressing how much sales tax may be subject to a refund or credit when a retail customer returns merchandise, but receives less than the original purchase price as a refund. The New York Department of Taxation and Finance concluded that customers are entitled to only a partial refund of the sales tax, based upon the purchase price refunded. The retailer’s return policy explains that customers who do not return their merchandise within sixty days will only receive a partial refund. The partial refund is calculated based on a percentage reduction of the decreased value of the merchandise. The Department takes the view that since the sales tax is initially collected based upon the original transaction, the customer should be entitled to a refund of sales tax only to the extent the original transaction is undone (TSB-A-09(29), New York Commissioner of Taxation and Finance, July 15, 2009). (08/09) Amendments to New York Voluntary Disclosure and Compliance Program Effective April 7, 2009, New York’s Chapter 57 of the Laws of 2009 amended the provisions of the Voluntary Disclosure and Compliance (“VDC”) program. The New York State Department of Taxation and Finance has issued an informational statement stating that the amendment provides that the Tax Department is permitted to disclose any return or report filed by a taxpayer under the VDC program to the Secretary of the Treasure of the United States, his or her delegates (including the Internal Revenue Service (IRS)), or the proper tax officer of any state or city. Prior to the amendment, the law allowed for the disclosure of returns and reports filed under the VDC program to another agency only if the taxpayer failed to comply with the terms of a voluntary disclosure and compliance agreement. The amendment does not apply to any other information obtained from a taxpayer during the voluntary disclosure process, including the taxpayer’s actual disclosure under the VDC program, and only applies to returns or reports filed under the VDC program on or after the effective date. (TSB-M-09(6)I, TSB-M-09(6)C, TSB-M-9(5)M, TSB-M-09(1)R, TSB-M-09(5)S, Office of Tax Policy Analysis, New York Department of Taxation and Finance) (08/09) North Carolina Temporarily Increases Sales and Use Tax Rate North Carolina Governor Bev Perdue has signed a budget that temporarily increases the general state sales and use tax rate from 4.5% to 5.5%. The 1% increase will be applicable to sales made on or after September 1, 2009 and before July 1, 2011. (S.B. 202, Laws 2009, effective as noted) (08/09) Florida Will Collect Administrative Collection Processing Fee Beginning September 2009 Starting September 1, 2009, the Florida Department of Revenue will impose an administrative collection processing fee on various outstanding Department administered and collected taxes, including sales and use taxes. The fee will be equal to 10% of the total amount of the tax, penalty, and interest owed, or $10 per collection event, whichever is greater. A collection event happens any time a taxpayer fails to timely file a complete return or timely pay the full amount of tax reported on a return or assessed during audit. This fee will apply to debt from collection events that are more than 90 days old and debt that remains outstanding for longer than 90 days after initial notification. (Tax Information Publication, No. 09ADM-02, Florida Department of Revenue, June 11, 2009) (08/09) Texas Provides Online Sales Tax Rate Locator The Texas Comptroller has provided a new Web tool which displays the correct sales tax rate in effect for most business addresses in Texas. This Sales Tax Rate Locator is designed to help consumers and businesses understand which of the more than 1,400 city, county, transit system and special purpose district sales tax rates should be charged at a given business location. Colorado Vendor’s Service Fee Temporarily Eliminated The Colorado vendor’s service fee, which is a portion of the sales tax collected that is retained by the vendor to cover expenses relating to collecting and remitting the tax, has been suspended from July 1, 2009, through June 30, 2011. If the September 2010 Legislative Council Staff’s forecast indicates sufficient revenue to fund a 6% increase in General Fund spending for fiscal year 2010-2011, the vendor’s service fee will return to 3.33% on January 1, 2011. Interest and penalties will be waived until August 1, 2009 for remittance errors made due to this change in the vendor’s fee. State Tax Commission Reorganized in Mississippi The Mississippi State Tax Commission has been reorganized under new legislation. The Department of Revenue will now handle administrative functions. A newly established independent Board of Tax Appeals will now have authority over administrative appeals effective July 1, 2010. The Board of Tax Appeals will not be subject in any way to the supervision or control of the Department of Revenue. It will consist of three members, including a chairman and two associate members, who will be appointed by the Governor, along with approval by the Senate. The Board will have the power to adopt, amend, or repeal rules and regulations necessary to implement its duties. Virginia Revises Tax Payment Schedule for Certain Dealers and Direct Pay Permit Holders Effective May 31, 2010, sales and use taxes collected by dealers and direct pay permit holders with annual sales of or in excess of $12 million must be filed and remitted monthly by the 20th day of each (current) month. Beginning in June 2010, all eligible taxpayers must file a return showing the gross sales, gross proceeds, or cost price arising from all taxable transactions for the first fifteen days of the current month and for the last fifteen days of the prior month. All applicable taxes arising from these transactions must be remitted at the time of transmittance. Failure to make a full and timely payment will subject the taxpayer to a penalty of 6% of the amount of the tax underpayment, as well as all applicable interest. Washington Resale Certificate to Be Replaced by Seller’s Permit Effective January 1, 2010, Washington’s self-issued resale certificates will be replaced with seller’s permits issued by the Department of Revenue. The aim of this replacement is to increase compliance and reduce misuse of the certificates, especially in the construction industry which purportedly is responsible for 40 percent of unpaid Washington sales taxes. Massachusetts Increases State Sales Tax Rate by 1.25% Massachusetts has recently enacted legislature that increased the general sales and use tax rate from 5 to 6.25 percent, effective August 1, 2009. The Commissioner of Revenue may adopt reasonable transition rules to apply the increased sales and use tax rate to situations including but not limited to 1) the purchase of building materials and supplies to be used in construction, reconstruction, alternation, remolding, or repair of any building or structure as part of a contract entered into prior to the rate increase or entered into within 60 days after the rate increase if the contract is pursuant to a bid that was required to be submitted prior to the effective date; 2) unconditional written contracts for the sale of taxable tangible personal property entered into before the effective date but delivered not later than 90 days after the effective date; or 3) periodic bills for taxable services that include periods before and after the effective date. In the above rules 1 and 2, the increased tax rate would not apply to rentals or leases of tangible personal property. (H.B. 4129 (Ch. 27), approved (in part) by the Governor, 6/26/09) (07/09) Tax HolidaysTexas Discusses Energy Star Sales Tax Holiday The Texas Comptroller of Public Accounts issued a newsletter that discusses, among other things, the annual Memorial Day weekend Energy Star Sales Tax Holiday. The 2010 Holiday will begin at 12:01 a.m. on Saturday, May 29, and end at 11:59 p.m. on Monday, May 31. The holiday applies to state and local sales tax, and use tax on purchases of energy efficient products, including some Internet, catalog, and layaway plan purchases. The following products qualify for the exemption, provided that the Energy Star logo is displayed on the appliance, packaging, or Energy Guide label: room and central unit air conditioners priced under $6000, clothes washers, ceiling fans, dehumidifiers, dishwashers, incandescent and fluorescent light bulbs, programmable thermostats, and refrigerators priced under $2000. Since Energy Star does not currently label any clothes dryers, these are excluded from the holiday. (Tax Policy news, Texas Comptroller of Public Accounts, April 2010) (05/10) West Virginia Governor Vetoes Firearms Tax Holiday West Virginia Gov. Joe Manchin III has vetoed House Bill 4521, a bill that was termed the Second Amendment Appreciation Act for providing a state sales tax holiday for the purchase of firearms. The governor stated loss in sales tax revenues and noncompliance with the Streamlined Sales and Use Tax (SST) Agreement as reasons for the veto. (News Release, West Virginia Gov. Joe Manchin III, April 2, 2010 (04/10) 2010 Tax Holidays Chart updated regularly:Click here for chart (04/10) District of Columbia Repeals its Back-to-School Tax Holiday In a move to increase revenues, legislation has been enacted in D.C. to repeal the August 2009 sales tax holiday. In earlier years the tax holiday provided a nine day exemption from the 5.75 percent sales tax on purchase of clothing, accessories, shoes and school supplies for $100 or less. Nothing has been said about the status of the other sales tax holiday at the end of 2009. (News Release, District of Columbia Office of Tax and Revenue, July 20, 2009) (07/09) Advertising Utah Clarifies Taxability of Public Relations, Media, And Web Design Services A private letter ruling was issued by the Utah State Tax Commission in response to a taxpayer’s questions concerning sales and use tax treatment of various charges associated with public relations, advertising and marketing. Direct Mail Sellers Informed with Recipient Location Must Collect Utah Tax Effective July 1, 2010, if a seller of advertising and promotional direct mail receives information indicating the locations of the recipients to which the advertising and promotional direct mail is delivered, the seller must collect and remit sales and use tax to the Utah commission in accordance with the information the purchaser provides. (H.B. 349, Laws 2010, effective July 1, 2010) (04/10) Entire Charge Taxable When Printing Charges Taxable in Florida when not Separately-Stated A taxpayer's charges to contributing firms to participate in the publication of financial/legal books were determined to be taxable for sales tax purposes. The books, which are distributed to the contributing firms free of charge, are considered promotional goods. The sale of advertising services is exempt in Florida, but the sale of promotional goods is not exempt. Therefore, when an advertising agency sells promotional goods along with exempt items or services, the taxable items must be separately-stated in order for the exempt items to receive the exemption. In this transaction, the taxpayer did not separately state the printing charges. As a result, the entire charge to the contributing firms was found subject to Florida sales tax. (Technical Assistance Advisement, No. 09A-052, Florida Department of Revenue, October 9, 2009) (12/09) Washington Sources Intrastate Direct Mail to the Shipping Location Washington has issued a special notice on the sourcing rule changes for direct mail sellers. Effective July 26, 2009, sellers of direct mail originating in Washington and delivered to another location within Washington collect sales tax based on the address from which the direct mail is shipped, unless the purchaser provides a direct pay permit or SSUTA exemption certificate claiming "direct mail." If the seller can document that any portion of the direct mail is delivered outside Washington, the seller is not required to collect Washington's sales tax on that portion. (Special Notice, Washington Department of Revenue, July 2, 2009) (09/09) Amnesty Florida Releases Amnesty Details The Florida Department of Revenue has issued detailed information concerning the tax amnesty program running from July 1, 2010 to September 30, 2010. Tax amnesty applies to state and local option tax liabilities that were due before July 1, 2010. Penalties and 50% of interest due will be waived for taxpayers who are reporting a tax liability previously unknown to the Department or who are responding to a Letter of Inquiry, self-audit or self-analysis. Penalties and 25% of interest due will be waived for taxpayers who are responding to a bill, delinquency, audit, or other assessment issued by the Department. Eligible taxes include, but are not limited to, sales and use tax, communications services tax, estate tax, and motor fuel tax. A complete list of eligible and non-eligible taxes, along with participant eligibility requirements can be found on the Florida Department of Revenue’s website (Facts About Florida’s Tax Amnesty, Florida Department of Revenue, June 11, 2010). Kentucky Allows Expedited Protest Resolution Process Kentucky Governor Steve Beshear has signed legislation that allows an expedited protest resolution process for any tax assessment that, as of January 19, 2010, has been protested, not been the subject of a final ruling and not been the subject of certain enforced collections. The assessment will be considered paid in full if the taxpayer pays the entire amount of tax assessed, exclusive of interest and penalties, on or after June 4, 2010 and before July 31, 2010. All payments of tax are considered final and are not subject to refund or recovery (Kentucky 10 SS HB 2/EN, effective June 4, 2010). (06/10) Florida Amnesty Program Enacted The Florida Department of Revenue will develop and implement an amnesty program for taxpayers subject to various state and local taxes, including, corporate income, sales and use, severance, estate, and intangible personal property taxes. The program will run from July 1, 2010 to September 30, 2010. Eligible taxpayers must file the forms and other documentation specified by the Department of Revenue, including returns, full payment of tax due, interest, and the administrative collection processing fee. The amnesty program is a one-time opportunity for eligible taxpayers to satisfy their tax liabilities and avoid criminal prosecution, penalties, and in some cases, interest due. Any taxpayer which has entered into a settlement of liability for state or local option taxes before July 1, 2010, whether or not full and complete payment of the settlement amount has been made, is not eligible to participate in the amnesty program. However, taxpayers who may be under audit, inquiry, examination, or civil investigation initiated by the department may participate in the program and pay the full amount of the tax due, plus 75 percent of the interest. Taxpayers who make initial contact with the Department pursuant to the amnesty program will pay the full amount of the tax due and 50 percent of the amount of interest due. Additional rules and regulations may apply. (Ch. 2010-166 (H.B. 5801), Laws 2010, effective May 28, 2010) (06/10) Internet Transactions Resolution Program Announced in North Carolina In collaboration with e-commerce retailers, the North Carolina Department of Revenue has developed the Internet Transactions Resolution Program. Participants may resolve their prior tax liability by registering for sales and use tax and agreeing to collect and remit those taxes for four years, beginning September 1, 2010. Any retailer that failed to register for sales and use tax as a result of operating an affiliate program in North Carolina at any time is eligible to participate. The Department will not assess tax, penalties or interest for periods prior to September 1, 2010 for retailers that successfully complete the program. Also, the Department will not obtain consumer information from the retailer to collect a tax liability for the period prior to September 1, 2010. The program begins on April 23, 2010. Eligible retailers must submit an election to participate by June 30, 2010. A resolution agreement must be signed by both the retailer and the Department by August 31, 2010 Internet Transactions Resolution Program, North Carolina Department of Revenue, April 23 , 2010). (06/10) Nevada Approves Tax Amnesty The Governor of Nevada has signed a bill that authorizes a tax amnesty program that will run from July 1, 2010 through October 1, 2010 for taxes, fees, and assessments that are delinquent as of July 1, 2010. All interest and penalties will be waived for taxpayers who file a request for relief with the department and pay the unpaid liability in full by October 1, 2010. Specific rules regarding the amnesty program have not yet been announced. (Ch. 10 (A.B. 6), Laws 2010, Special Session, effective May 1, 2010. (05/10) Philadelphia Sets Dates for Amnesty Program The Philadelphia Department of has set the dates for its tax amnesty program: May 3, 2010 to June 25, 2010. All taxes the city administers will be eligible except for sales and use tax, hotel occupancy tax, general acute care hospital assessment, and high volume Medicaid hospital assessment. Penalties and half of interest due will be waived under the program for taxpayers who pay all past delinquencies. Sales and use tax may be eligible for amnesty through the state’s amnesty program (Philadelphia Tax Amnesty 2010, Philadelphia Department of Revenue, March 9, 2010). (04/10) Massachusetts Provides Limited Amnesty for Business Taxpayers The Massachusetts Department of Revenue has established a two-month amnesty program for business taxpayers with existing tax liabilities. The program will run from April 1, 2010 to June 1, 2010 and will apply to tax years or periods ending on or before December 31, 2009. The program is limited to taxpayers with many existing business liabilities, including sales/use tax, sales tax on telecommunications services, meals tax, withholding income, room occupancy excise, gasoline excise, special fuels excise, and boat/recreational vehicles sales tax. See Technical Information Release for full list. Penalties will be waived for eligible taxpayers who pay the full outstanding balance and interest due. Any taxpayer who is eligible for the amnesty program, but fails to come forward before June 30, 2010 will, in addition to all other penalties, be subject to an additional penalty of $500. (Technical Information Release 10-5, Massachusetts Department of Revenue, March 12, 2010). (04/10) Maine Announces Amnesty Initiatives Maine has announced two tax amnesty initiatives that will run from September 1, 2010 through November 30, 2010. Under the “short-term initiative” 95% of penalties will be waived on taxes assessed as of December 31, 2009. Under the “five-year initiative”, 95% of penalties and interest will be waived on taxes assessed as of June 30, 2005. Participation in the initiatives is conditioned upon the taxpayer’s agreement to forgo or withdraw a protest, administrative or judicial proceeding, or refund claim relating to liabilities paid under the initiatives. Additionally, to be eligible, a tax payer must properly complete a file a 2010 tax initiative application, pay all tax, interest, and penalties, and not have criminal action or collection by warrant or civil action pending. (L.D. 1671 (H.P. 1183), Laws 2010, effective March 31, 2010) (04/10) Philadelphia Amnesty Ordinance Signed The City of Philadelphia has passed an ordinance authorizing a tax amnesty program which will occur over a 45 day period ending in June 2010, and overlap with the state amnesty program. During this period, delinquent taxpayers will be allowed to pay taxes owed with a full waiver of penalties and 50% of accrued interest. The program applies to 17 city taxes originally due on or after February 1, 1986 and on or before June 30, 2009. Taxpayers that are under any criminal investigation related to delinquency or who have participated in any prior tax amnesty program are ineligible to participate (Bill No. 090686, City of Philadelphia, signed by Mayor Nutter on January 27, 2010). (02/10) Governor Opposes Tax Increases and Amnesty Program In a recent State of the State address, Mississippi Gov. Haley Barbour expressed that he does not support state tax increases nor tax amnesty programs as solutions to current budget issues. Alternatively, the governor called for a small increase in the Tax Commission budget for collecting unpaid taxes owed to the state (2010 State of the State Address, Mississippi Gov. Haley Barbour, January 18, 2010). (02/10) Pennsylvania DOR Issues 2010 Amnesty Guidelines Pennsylvania has issued rules and guidelines for its upcoming tax amnesty program. The 2010 Tax Amnesty will apply to any taxes administered by the Department of Revenue and will run from April 26, 2010 to June 18, 2010. To participate, taxpayers will need to file an online Amnesty return, file all delinquent tax returns and make the required payment within the Amnesty Period. All penalties and one-half of the interest due will be waived. The periods eligible are those where a known or unknown delinquency exists as of June 30, 2009. At the conclusion of the Amnesty Period, a 5% non-participation penalty will be imposed on all un-paid tax, penalty and interest not paid in full during the Amnesty Period. (2010 Tax Amnesty Program Guidelines, Pennsylvania Department of Revenue, December 5, 2009) (12/09) New York Legislature Passes Amnesty Measure On December 2, 2009, the New York legislature passed a tax amnesty measure to authorize an accounts receivable discount program. This program will allow eligible taxpayers to pay outstanding taxes, fees, or surcharges imposed by the state. This measure has been sent to Governor David A. Paterson for his signature. Under the accounts receivable discount program, fifty percent of the penalties will be waived for eligible tax liabilities issued after December 31, 2003 and on or before December 31, 2006. For tax liabilities issued on or before December 31, 2003, eighty percent of the penalties will be waived. It is expected that the limited forgiveness period would take place in the last quarter of 2009-10. (A.B. 21, Laws 2009, Fourth Special Session; Fact Sheet: $2.7 Billion Enacted Deficit Reduction Legislation, Office of New York Gov. David Paterson, December 3, 2009) (12/09) Massachusetts Authorizes an Amnesty Program The Massachusetts Governor signed legislation to implement a two-month tax amnesty program that is set to end no later than June 30, 2010. All penalties, in which the Commissioner has sole authority, will be waived provided the taxpayer files returns and makes payments as required by the tax amnesty program. Amnesty shall not apply to those penalties which the commissioner would not have the sole authority to waive including, but not limited to, fuel taxes administered under the International Fuel Tax Agreement or under the local option portions of taxes or excises collected for the benefit of cities, towns or state governmental authorities. The Commissioner will determine the scope of the program, including the particular tax types and periods covered, including any limited look-back period for unfiled returns. The amnesty program will not apply to taxpayers who were the subject of a tax-related criminal investigation or prosecution before the start date of the amnesty program. Any taxpayer who was eligible for the amnesty program, but failed to come forward before June 30, 2010 will, in addition to all other penalties, be subject to an additional penalty of $500. (Ch. 166 (H.B. 4359), Laws 2009, effective November 24, 2009) (12/09) Pennsylvania Enacts Tax Amnesty for 2010 The Pennsylvania Department of Revenue has announced dates for its 2010 tax amnesty program. The tax amnesty period from will run from April 26 to June 18, 2010. During this time, the Pennsylvania Department of Revenue will waive all penalties and one-half of the interest for anyone who pays their delinquent state taxes. The amnesty will be applicable to any taxes administered by the Department that are delinquent as of June 30, 2009. (Pennsylvania Department of Revenue website) (11/09) District of Columbia Enacts Second FY 2010 Budget Support Emergency Act The District of Columbia has passed a second budget support act which repeals the previous one, but reenacts some of the repealed acts sales and use tax provisions. Beginning October 1, 2009 and ending September 30, 2012, the general sales and use tax rate will increase from 5.75% to 6%. The authorization to establish an amnesty program to allow taxpayers liable to pay certain taxes on returns or reports was also reenacted. The amnesty is allowed for tax periods ending prior to December 31, 2008 or December 31, 2009 if the program is established after December 31, 2009. In addition, the repeal of the District’s sales tax holidays provisions was reenacted. (Act 18-207 (D.C.B. 18-443), Laws 2009, effective October 15, 2009, for a 90-day period that expires January 13, 2010) (11/09) Virginia Issues Guidelines for the Tax Amnesty Program Virginia has issued rules and guidelines for its upcoming tax amnesty program. The 2009 Virginia Tax Amnesty program will run from October 7, 2009 to December 5, 2009 and will generally apply to any taxes administered or collected by the Virginia Department of Taxation. Penalties and one-half interest will be waived for all eligible amnesty tax assessments and delinquent return liabilities provided full payment of the tax and one-half interest is made. In order to qualify, tax bills must be related to an amnesty eligible tax type and period and have an assessment date on or before July 9, 2009, while returns must be applicable to an eligible tax type and period. With respect to amnesty eligible bills with an assessment date on or before July 9, 2009, payments must be postmarked by December 5, 2009. For delinquent tax returns, taxpayers are required to file by December 5, 2009 all relevant tax returns and associated documentation, and pay the tax and one-half of the interest that’s due by December 5, 2009, or within 30 days of the date the assessment was issued, whichever is later. The Department has also noted that if delinquent taxpayers do not pay their tax bill by December 5, 2009, they will be charged full interest and an additional 20 percent penalty for late taxes. (Ruling of Commissioner, P.D. 09-40, Virginia Department of Taxation, September 28, 2009; Press Release, Office of Virginia Gov. Tim Kaine, September 28, 2009) (09/09) New Orleans Offers Sales Tax Amnesty Program The City of New Orleans is offering a sales tax amnesty program that will run from October 1, 2009 through December 4, 2009. The program will allow businesses to come forward and pay their tax liabilities without any late penalties. The program also offers a 50 percent reduction in interest. Businesses that owe overdue sales, use, hotel/motel, parking, alcoholic beverage, mayoralty and occupational license taxes are eligible to participate (Sales Tax Amnesty Program, Bureau of Revenue, http://www.cityofno.com/pg-94-26-sales-tax-amnesty-program.aspx, September 9, 2009) (09/09) Connecticut Governor Allows Budget Bill to Become Law Without Signature – includes Rate Decrease and Amnesty Program On August 31, 2009, Governor Jodi Rell announced that she would allow the budget bill to become law without her signature with the exception of certain line-item vetoes. The bill is scheduled to become law on September 8, 2009. Among the passed items in the bill was a decrease in the sales and use tax rate. The rate will be decreased from 6% to 5.5%, effective January 1, 2010. This rate decrease is contingent upon meeting certain revenue projections. In addition, the fee for a seller’s permit will increase from $50 to $100 beginning October 1, 2009. Another item passed in the bill was a provision to establish a tax settlement initiative program. The bill requires the Department of Revenue to conduct this amnesty program during the period of October 1, 2009 and December 31, 2009, inclusive. The program will allow eligible taxpayers to pay any outstanding taxes from prior periods in exchange for a waiver of all civil penalties and fifty percent of the interest due. (H.B. 6802, passed by the Connecticut General Assembly on August 31, 2009) (09/09) Wisconsin SST Amnesty Program Enacted As part of Wisconsin’s membership in the Streamlined Sales and Use Tax Agreement, Wisconsin will offer a sales tax amnesty program for qualifying businesses that currently are not registered to collect and remit sales and use tax. The Wisconsin amnesty period runs from July 1, 2009 to September 30, 2010. To qualify, businesses must voluntarily register (between the above dates) to collect and remit Wisconsin sales tax, as well as sales tax for all other states that have been members of the SST Agreement for at least 36 months. Businesses that meet the eligibility requirements and register for the program will not be required to remit Wisconsin sales and use tax on sales made prior to registration for the amnesty program. The program does not apply to any sales and use tax that a person owes as a purchaser. Businesses are eligible for the program unless one or more of the following apply: 1) currently registered to collect Wisconsin sales tax; 2) registered to collect Wisconsin sales tax at any time during the past 12 months; 3) received an audit notice, unless the audit and all related appeals are resolved; and/or 4) committed or been involved in fraud or intentional misrepresentation. Additional rules and regulations apply. (Wisconsin offers Streamlined Sales Tax amnesty program, Wisconsin Department of Revenue) (08/09) Louisiana Sets Dates for Tax Amnesty Program The Louisiana Tax Delinquency Act of 2009, which establishes a tax amnesty program, is set to run from September 1, 2009 through October 31, 2009. The amnesty program will apply to all taxes administered by the Department with the exception of motor fuel taxes and waive all penalties and half of the interest due. This amnesty will be applicable to taxes that became due on or after July 1, 2001 and before January 1, 2009, taxes due prior to January 1, 2009 for which LDR has issued a billing notice or demand for payment on or after July 1, 2001 and before May 31, 2009, taxes for which the taxpayer and LDR have entered into an agreement to suspend the running of prescription until December 31, 2009, or taxes due on or before July 1, 2001, but were ineligible for an earlier amnesty program due to having a matter in civil litigation. A taxpayer qualifies for the amnesty program if they failed to file a tax return or report; failed to report all income or all tax, interest and penalties that were due; claimed incorrect credits or deductions; misrepresented or omitted any tax due; or are under audit or in administrative or judicial litigation. (Tax Topics, Louisiana Department of Revenue, July 14, 2009) (07/09) Vermont Announces Amnesty Program Dates Vermont has approved a six week amnesty program beginning July 20, 2009 and ending August 31, 2009. During this time, certain tax penalties may be waived upon payment of the tax and interest due, without the need for proof of reasonable cause or the absence of willful neglect. The amnesty program will apply to any tax type and any periods for which the due date of the return was before January 26, 2009, but will not apply to those penalties in which the commissioner would not have the sole authority to waive .(Highlights of 2009 Tax Legislation, Vermont Department of Taxes, June 11, 2009). (06/09) Hawaii Announces Amnesty Program The Hawaii Department of Taxation is offering a “Tax Fresh Start Program” to taxpayers who owe eligible taxes for any taxable period ending on or before December 31, 2007. The program, effective May 27, 2009 through June 26, 2009, covers all taxes administered by the Department and is available to eligible taxpayers who have failed to file a return for a taxable period, or have underreported tax due on a previously filed return. The program offers a 50% reduction in interest, waived penalties, and potentially avoiding referral for criminal prosecution. Taxpayers are not be eligible for the program if they are currently under audit by the Department or the federal government, currently under criminal investigation or litigation, or if they are currently in the Department’s collection program. Taxpayers who are not eligible for a certain tax types may still be eligible for others. (News Release, Hawaii Department of Taxation, May 27, 2009). (06/09) Computers/SoftwareExemption for Computer Data Centers Enacted in Washington Washington passed legislation which allows a sales and use tax exemption for the sales of eligible server equipment to be installed in qualifying computer data centers. To be eligible, a computer data center must be located in a rural county, have at least twenty thousand square feet dedicated to housing working servers, and have commenced construction between March 31, 2010 and July 1, 2011. Eligible server equipment includes original server equipment installed in an eligible computer data center on or after April 1, 2010 as well as replacement server equipment installed before April 1, 2018. Replacement servers only qualify if replacing originally qualified servers. A qualifying business must establish within six years that is has increased employment in a computer data center by a minimum of thirty-five family wage jobs from the date it became operational. Other rules apply. The exemption takes effect on April 1, 2010 and expires on April 1, 2018 (Ch. 1 (S.B. 6789), Laws 2010, 1st Special Session, effective April 1, 2010). (05/10) Nebraska Amends Advantage Act to include Data Centers and Sales of Electronically-Delivered Systems The Nebraska Advantage Act has been amended to include the research, development, and maintenance of a data center as an investment eligible for the sales and use, income, and personal property tax incentives available under the Act. For purposes of the legislation, a data center means a group of computers, supporting equipment, and other organized assembly of hardware or software in one or more interrelated physical locations that is designed to centralize the storage, management, or dissemination of data or information. Further, the sale of electronically-delivered software development systems, product testing services, computer and other system design, or licensing of technology now qualify as eligible investment activities, regardless of where the computer storing the software or data is located, provided certain conditions are met. (L.B. 918, Laws 2010, effective three months after adjournment of the 2010 Legislature) (05/10) Colorado Issues Emergency Regulation Explaining Taxation of Multiple Points of Use Software In response to Colorado’s recent elimination of the exemption for electronically-delivered software, an emergency regulation has been issued that explains, among other things, the taxation of standardized software that is concurrently available for use in multiple jurisdictions. If the purchaser knows at the time of purchase the software is Multiple Point of Use (MPU) Software, he or she should present the seller with a MPU Exemption Certificate. Upon receiving the MPU Exemption Certificate, the seller is relieved of all obligations to collect, pay, or remit tax, and the burden is on the purchaser to apportion, pay and remit the tax and submit a copy of the certificate to the Colorado DOR. Electronically Delivered Products and Remotely Accessed Software, Materials, and Media Taxable in Louisiana In a recent revenue ruling, Louisiana stated that all products delivered electronically to equipment located within the State, including computer software and applications, stored media, and entertainment media and products are considered tangible personal property, and are therefore subject to sales, use, or lease tax. Similarly, remotely accessed software, information materials, and entertainment products or media are taxable transactions when the access requires payment or consideration in any form. This applies whether accessed one-time or as part of a subscription, and regardless of if the item can be only be viewed or if it is downloaded. Further, any consideration paid for electronic receipt or access to data, materials, media, information, or other form of communication that is converted to readable, usable, or viewable form by software or browsers installed on hardware located in Louisiana is also subject to sales, use or lease tax. (Revenue Ruling No. 10-001, Louisiana Department of Revenue, March 23, 2010) (04/10) Receptionist Software Accessed From Web Site Is Taxable in Indiana A taxpayer’s purchase of licenses of software that handled various office management duties commonly performed by a receptionist and accessed through the software vendor’s website was found under audit to be taxable as prewritten software because the software was not custom and is available to anyone who pays for access. Since the taxpayer must interface with the vendor’s servers to access the software, it claimed it had not purchased a tangible asset and had instead merely accessed a website for a fee. Although the taxpayer came to this conclusion by relying on an earlier Letter of Findings, the Department rejected this claim because the facts of the instant case were substantially different from the case discussed in the letter of finding. However, the Department did abate the ten percent negligence penalty because it agreed that the taxpayer had a reasonable cause to believe it was not required to pay sales or use tax when it purchased the licenses. (Letter of Findings No. 09-0656, Indiana Department of Revenue, March 24, 2010) (04/10) North Carolina Provides Guidance Regarding Taxability of Computer Software The North Carolina Department of Revenue has issued a notice discussing enacted legislation concerning the taxability of computer software. Effective January 1 ,2010, the sale at retail and the use, storage, or consumption of computer software that meets the following requirements is exempt from tax: (1) software that is designed to run on an enterprise server operating system; (2) software that is sold to a person who operates a datacenter and is used within the datacenter; (3) software that is sold to a person who provides cable service, telecommunications service, or video programming and is used to provide ancillary service, cable service, Internet access service, telecommunications service, or video programming. Prior to January 1, 2010, computer software delivered electronically or by load and leave was exempt from sales and use tax. Also effective January 1, 2010, computer software or digital property that becomes a component part of other computer software of digital property that is offered for sale or of a service that is offered for sale is exempt. Custom computer software and the portion of prewritten computer software that is modified or enhanced if the modification or enhancement is designed and developed to the specifications of a specific purchaser and the charges for the modification or enhancement are separately stated continue to be exempt. Prewritten computer software or licenses purchased by consumers for personal use are taxable (Important Notice: Computer Software, North Carolina Department of Revenue, February 2010). (04/10) Nebraska Web Site Design and Hosting are Exempt Retail sales of Web site design, development, and hosting by a Web site service provider are not subject to tax in Nebraska unless the Web site design is transferred to the customer on a tangible storage medium. If the Web site design is retained by the service provider for hosting, or electronically transferred to either a third party hosting entity or to the customer, the charges are exempt. Furthermore, Web site hosting by a service provider is not taxable because it is not one of the statutorily enumerated services subject to tax in Nebraska. (Revenue Ruling 01-10-2, Nebraska Department of Revenue, March 1, 2010) (04/10) Taxation of Digital Products and Services in Washington Explained The Washington Department of Revenue issued a notice explaining Engrossed Substitute House Bill 2075, which affects the taxability of digital products. Beginning July 26, 2009, all digital products, regardless how they are accessed, will be subject to sales or use tax. While downloaded digital goods have always been subject to tax, the new legislation now applies to digital products that are assessed by others means, such as streaming or subscription, digital automated services and remote access software. The Department further explains that the following services remain subject to the business and occupation (B&O) tax, but are not subject to sales tax: web site development or hosting, digital data storage, and online advertising (Tax Topics: Digital Products, Washington Department of Revenue, March 3, 2010). (03/10) Fees Charged for Playing Computer Video Games Taxable in New York Fees charged by a company to its customers for playing computer video games and using its computer equipment at its facility are subject to New York sales tax. The taxpayer’s computer games are considered prewritten software, thus making the fees taxable for the use of tangible personal property. Rentals of computer hardware are also taxable under New York tax law. (TSB-A-10(2)S, New York Commissioner of Taxation and Finance, January 20, 2010). (03/10) Indiana Rules on Taxability of Vehicle Repair Supplies and Software An Indiana car dealer had purchased web-based software for a yearly license fee. The taxpayer argued that the yearly payments were for "software support services" and not for the software itself. The state found that software license agreement fell under the definition of taxable, pre-written software and tax was due on the item. The state also found that consumable supplies used in the auto repair function of the customer's business were subject to tax. The taxpayer argued that the cost of the consumable supplies was included in the amount eventually billed to the end customer, but the state found that the auto dealer was the end user of the supplies and, therefore, responsible for the tax. (Letter of Findings No. 09-0418, Indiana Department of Revenue, January 27, 2010) (02/10) Texas Discusses Server Housing and Network Management Services The Texas Comptroller discusses the taxability of charges made by a taxpayer who provides its customers a secure location within a building (a “co-location space”) to store the customer's equipment or to utilize as a disaster workforce and recovery back-up facility. Missouri Discusses the Taxability of Computer Purchases by Firm Headquartered In-State A taxpayer that operated as an architectural, engineering, and consulting firm was allowed to claim the benefit of the sales tax exemption provided by Section 144.030.2(28). The section provides an exemption on purchases of computers, computer software and computer security systems by architectural or engineering firms headquartered in Missouri. In addition to having two physical locations that serve as places of business for its corporate headquarters, the taxpayer also has five offices in Missouri. The taxpayer’s facilities are integrated through central management and direction, common usage of resources and uniform professional practice. As a result, the taxpayer is entitled to claim the exemption set forth in Section 144.030.2(28), when making purchases of computers, computer software and computer security systems for its own use. (Letter Ruling No. LR5934, Missouri Department of Revenue, October 7, 2009) (12/09) New York Discusses the Taxability of Software Licenses and Services The New York Commissioner recently determined that a taxpayer’s sale of software licenses are subject to New York sales and use tax. The taxpayer licenses software that is further customized to meet the needs of the customer. The separately-stated customizations charges are billed to the customer as performed instead of spread out over the licensing period. Since, prewritten computer software is included within the definition of tangible personal property, the Taxpayer’s sale of the license to use its basic software is subject to sales tax to the extent the software is used in New York. If the locations in which the customer will use the software are both in and out of New York, the Taxpayer should collect tax based on the portion of the taxable receipts attributable to the customer's use in New York. Licensing of Customized Software Not Subject to Tax in Florida A taxpayer’s sale of customized software was determined to be service transaction that is not subject to Florida sales and use tax. Custom software represents software in which the vendor, at the customer's request, modifies or alters a prepackaged program to the customer's specification. The software is still viewed as a custom service transaction even when the taxpayer provides the customized software after the termination of a hosting agreement. Therefore, the licensing of the taxpayer's software is not subject to Florida sales tax as the sale of tangible personal property. (Technical Assistance Advisement, No. 09A-044, Florida Department of Revenue, September 2, 2009, released October 2009) (10/09) Texas Exempts Software Transferred to Out-of-State Franchise Stores A taxpayer, who operates retail convenience stores (company stores) and franchises others to third parties (franchise stores), was entitled to a partial refund of sales tax paid on its purchase of financial software for its out-of-state stores. The taxpayer contended that the software was used to provide the franchise stores data processing services like payroll and should therefore qualify for the resale exemption. The Court agreed that the transfer of the software to the franchise stores would qualify for the resale exemption because a “sale for resale” includes the sale of tangible personal property to a purchaser who acquires the property for the purpose of transferring it as an integral part of a taxable service. The State argued that the taxpayer should not be allowed the resale exemption because the taxpayer cannot derive any direct benefit and must show evidence that tax was actually charged to the franchise stores. Both arguments were rejected because the resale exemption statute does not restrict a taxpayer from obtaining benefit when tangible personal property is transferred as an integral part of a taxable service. In addition, the statute does not require that the reseller actually collect sales tax on the taxable item, noting the resale transactions that occur between contractors and the federal government. Sale of Hosted Software Without Tangible Component Not Taxable in Missouri A letter ruling issued by the Missouri Department of Revenue determined that an out-of-state corporation’s sales of hosted software of which no component is delivered in a tangible format was not subject to Missouri sales tax. Kansas Discusses Taxability of Software Access Charges A private letter ruling issued by the Kansas Department of Revenue determined the taxability of monthly fees charged by a California corporation to a customer in Kansas to access and use pre-written computer software located on a server in California. Since Kansas does not impose a tax on charges for electronic access to information on a server located out-of-state, the California corporation’s charges are not subject to Kansas sales or use tax. (Private Letter Ruling No. P-2009-005, Kansas Department of Revenue, June 26, 2009) (09/09) Utah Discusses Software-Supported Services The Utah State Tax Commission has revisited a private letter ruling that discusses the application of Utah sales tax to a corporation’s sale of a software-supported automobile dealer management service and associated services. Although the original letter ruling found the associated services to be taxable, the newly described facts indicate that set-up and training fees charged to customers are not taxable. Since the services are separately-stated on the invoice, optional to the client, and because some clients utilize other companies for these services or use the instructions provided by the seller to perform the services themselves, they are not “necessary to complete the sale”, and,, therefore, should not be included in the purchase price. Electronically-Delivered Prewritten Software Not Taxable in Virginia The Tax Commissioner of Virginia has reversed a sales and use tax auditor’s determination that tax was due on a software developer’s charges for prewritten software that was electronically delivered to the customer. Virginia code provides an exemption for electronically-delivered prewritten software, provided that at a minimum, the sales invoice, contract, or other sales agreement expressly certifies the electronic delivery of the software and that no tangible medium for that software has been or is to be furnished to the customer. The Statement of Work of the contract entered into by the software developer and its customer expressly stated that the software would be delivered electronically. Further, the software developer furnished an email that was sent to the customer stating that the software files were uploaded to a public file transfer protocol (FTP) server for download, which is a common method for downloading or transferring data from one computer to another over the internet. Although the software maintenance and support terms set out in a schedule attached to the contract stated that supported methods of electronic transfer include CD-ROMS or diskettes, this language does not apply to the software at issue because these maintenance terms were not integrated into the contract’s Statement of Work. Therefore, the Statement of Work was sufficient to establish that the software was intended for electronic delivery, and the furnished email shows that this intention was carried out. (Ruling of Commissioner, P.D. 09-83, Virginia Department of Taxation, May 28, 2009) (08/09) ConstructionNebraska Construction Contractor Taxability Guide Updated On April 2, 2010, an updated sales and use tax checklist for construction contractors was released by the Nebraska Department of Revenue. The checklist describes the forms and the processes by which option 1, 2 and 3 contractors pay or collect sales tax on building materials and fixtures. The tax status of purchases by contractors of certain services and tangible personal property is also described on the checklist. (Construction Contractor Taxability Check List, Nebraska Department of Revenue, February 2010, released April 2, 2010) (04/10) Virginia Countertop Sales and Installation are Taxable A Virginia taxpayer disputed its classification on an audit as a real property contractor and maintained that it is a retailer of countertops, regardless of whether or not it installs the countertops. According to the Virginia Tax Commissioner, the countertop sold and installed by the taxpayer became real property upon installation, and therefore, the taxpayer was correctly classified as a real property contractor. Its sales and installations of granite and marble countertops were subject to retail sales and use tax. Furthermore, the Commissioner ruled that that the machinery, tools, and supplies used to fabricate the countertops were also subject to tax. Generally, tools and supplies used to install tangible personal property are taxable at the time of purchase, whether the installed property remains tangible or becomes real property after installation. (Ruling of Commissioner, P.D. 10-20, Virginia Department of Taxation, March 26, 2010) (04/10) Virginia Solid Surface Countertops Sales Taxable As a result of an audit, a Virginia taxpayer issued a letter requesting correction of a retail sales and use tax assessment. According to the taxpayer, no use tax liability should have been assessed because its customers (wholesalers/contractors) charge sales tax on the solid surface countertops sold and installed by the taxpayer, and by assessing use tax under these circumstances double taxation would be applied. Furthermore, the taxpayer also contended it was not given prior notice of any policy change, especially since the prior audit did not apply use tax to the solids surface materials furnished and installed. The Virginia Tax Commissioner found the assessment by the Department of Taxation to be correct and considered the taxpayer the user or consumer of all materials used in transactions requiring it to sell and install kitchen countertops, regardless of whether made with laminated, sold surface, or natural materials. The taxpayer failed to furnish any documentation from the prior audit period in support of its contentions and in fact, a review of the prior audit report showed that the taxpayer was engaged in the fabrication of laminated countertops for sale to home builders, distributors, and retailers. The taxpayer’s sales of solid surface countertops and related materials were subject to Virginia retail sales and use tax. (Ruling of Commissioner, P.D. 09-102, Virginia Department of Taxation, July 24, 2009) (03/10) Virginia Real Estate Contractor Liable for Taxon Purchases, Not Subcontractor A Virginia residential building contractor is liable for the applicable use tax on its purchases of floating floors it purchased; not the subcontractor it utilized to install the flooring. Virginia law imposes tax upon purchases made by real estate construction contractors, not subcontractors. In addition, although the seller is legally obligated to collect the tax from the purchaser, Virginia courts have held the tax is the legal debt of the purchaser (Ruling of Commissioner, P.D. 09-154, Virginia Department of Taxation, October 16, 2009). (03/10) Alabama Amends Rule on Exemption for Governmental Entities, Purchases Made by Purchasing Agents The sales and use tax exemption rule on governmental entities and purchases made through purchasing agents has been amended. The rule is amended to include the ability to use Form ST:PAA-1, Purchasing Agent Appointment. This form will allow an exempt entity to appoint a purchasing agent to act on their behalf when making tax-exempt purchases. A contractor may also use this form to appoint subcontractors to make tax-exempt purchases on behalf of the exempt entity. (Rule 810-6-3-.69.02, Alabama Department of Revenue, effective January 5, 2010) (01/10) Louisiana Department of Revenue Ceases Issuing Contractor Certifications The Louisiana Department of Revenue reminded taxpayers that the Contractor Registration Program will no longer issue new certifications beginning January 1, 2010. The Department will no longer certify the residency of contractors performing jobs in Louisiana or issue certificates for jobs performed by nonresident contractors. In addition, nonresident contractors will no longer be required to pay the ten-dollar application fee per contract or post a bond. Also beginning January 1, 2010, resident contractors are not required to renew their certifications. Jobs performed by nonresident contractors certified prior to January 1, 2010 should continue to Louisiana law as it relates to nonresident contractors. Furthermore, every resident or nonresident contractor performing jobs in Louisiana must register for Louisiana general sales tax as well as any other applicable taxes like income or withholding. (Revenue Information Bulletin No. 09-057, Louisiana Department of Revenue, December 29, 2009) (01/10) Nebraska Explains the Taxability of Contractor Purchases The Nebraska Department of Revenue has issued a contractor taxability checklist which provides the taxability of a contractor’s purchase of services as well as materials, consumables, and equipment. In addition, the checklist gives details on how option 1, 2, and 3 contractors should pay or collect tax on building material or fixtures and which forms to use. (Construction Contractor Taxability Check List, Nebraska Department of Revenue, September 30, 2009) (12/09) Floor Coverings Purchased by Installer for Exempt Entities Deemed Taxable in Minnesota A taxpayer, that sells and installs carpets and floor coverings, was found liable for use tax on its purchases of materials for contracts with exempt entities. Under the contracts in question, the taxpayer would purchase the materials and install them for the exempt entities. Therefore, it was the Commissioner’s position that the taxpayer was acting as a contractor when it installed the carpeting and responsible for use tax on the materials being installed in the absence of a properly executed purchasing agent agreement. Minnesota law provides that if the exempt entity purchases materials directly, that purchase is exempt from taxation, but a purchase by a contractor for use in an improvement to the tax exempt entity's real property is taxable. Louisiana Explains Immovable Property In an informational bulletin, the Louisiana Department of Revenue explains how Act 442 of the Regular Session of the Louisiana Legislature changes the definition of “tangible personal property” to exclude certain property. The Act provides that the term “tangible personal property” shall not include any property that would have been considered immovable property prior to the enactment of Act 632 on July 1, 2008 by the 2008 Louisiana Legislature. Act 632 defines component parts of immovable property as things attached to a building, such as doors, shutters, gutters, cabinetry, plumbing, heating, cooling, electrical and similar systems, or things that are attached to a construction other than a building and attached to such a degree that they cannot be removed without substantial damage to themselves or to the building or other construction. As a result, the purchase, lease, and repair of immovable property shall be excluded from sales tax. In addition, the exclusion shall be applied retroactively and is applicable to all transactions occurring on or after July 1, 2008. (Revenue Information Bulletin No. 09-036, Louisiana Department of Revenue, October 15, 2009) (11/09) Purchases by Missouri Contractor Do Not Qualify for Resale Exemption The Missouri Supreme Court has affirmed the Director of Revenue’s audit determination that a private jail facility operator’s purchases of inmate consumables pursuant to contracts with municipalities are subject to sales and use taxes. The jail operator argued that it is reselling the consumables to the municipalities, and is therefore eligible for a resale exemption because it factors the cost of the consumables into the fee it charges the municipalities. However, since the municipalities are exempt entities, the jail operator does not charge sales tax when the consumables are transferred. Since the underlying reasoning behind the exemption is to avoid double taxation, the operator’s purchases are not eligible for the resale exemption because allowing such would result in avoiding taxation even once. (ICC Management Inc. v. Director of Revenue, No. SC89559, Mo. Sup. Ct. 6/16/09) (08/09) Washington Resale Certificate to Be Replaced by Seller’s Permit Effective January 1, 2010, Washington’s self-issued resale certificates will be replaced with seller’s permits issued by the Department of Revenue. The aim of this replacement is to increase compliance and reduce misuse of the certificates, especially in the construction industry which purportedly is responsible for 40 percent of unpaid Washington sales taxes. Credits and IncentivesWashington’s Tax Incentives for the Aluminum Industry Extended The State of Washington has extended the sunset date of business and occupation (B&O) and sales and use tax incentives for the aluminum industry to January 1, 2017. The incentives were originally set to expire on January 1, 2012. The incentives include a reduction in the B&O tax rate for manufacturers of aluminum, a B&O property tax credit equal to property taxes paid on an aluminum smelter, a sales and use tax credit against the state tax on construction materials and personal property incorporated into an aluminum smelter, and for labor and services performed on property and buildings at a smelter, and an exemption for the brokered natural gas use tax on natural or manufactured gas by an aluminum smelter. These incentives will be reviewed by the Joint Legislative Audit and Review Committee in 2015. (Ch. 2 (H.B. 2672), laws 2010, 1st Special Session, effective date contingent on sine die of 1st Special Session or no later than July 13, 2010; House Bull Report, March 2010 (04/10) Energy Efficient Appliance Rebates Subject to Illinois Tax Gross receipts subject to Illinois Retailer’s Occupation (sales) Tax are defined as all the consideration actually received by the seller, except traded-in tangible personal property. If a seller receives a reimbursement or rebate for a discount, the amount of that reimbursement or rebate is considered part of the gross receipts received by the seller and it is fully taxable. Therefore, rebates that retailers receive under the Illinois Energy Efficient Appliance Rebate Program are considered part of the gross receipts received by the retailer and are subject to retailer’s occupation tax. Missouri Discusses the Taxability of Equipment and Food Used in Pharmaceutical Research The Missouri Department of Revenue recently determined that a taxpayer’s purchase of laboratory and medical monitoring equipment were exempt from sales and use tax. The taxpayer conducts contract research for pharmaceutical companies through a variety of studies that require special laboratory and medical monitoring equipment. Some of the studies require the study participants to be housed and provided food in accord with the testing protocols established by the pharmaceutical companies. Since the equipment is being used or consumed directly and exclusively in the research and development of prescription pharmaceuticals consumed by humans, it may be purchased exempt from sales tax. However, the food and food serving products purchased for study participants may not be purchased exempt from sales tax because they are not used directly or exclusively in the research and development of prescription pharmaceuticals consumed by humans. (Letter Ruling No. LR5848, Missouri Department of Revenue, August 20, 2009) (10/09) Healthcare South Carolina Explains Exemptions for Medicines and Medical Supplies The South Carolina Department of Revenue has issued an updated revenue ruling on the exemptions for certain medicines, prosthetic devices and medical supplies. The ruling explains how exemptions are applied for these items, including: Missouri Discusses the Taxability of Insulin Pumps and Home Blood Glucose Testing Products An out-of-state company selling durable medical equipment and supplies was not subject to sales tax on its sales of insulin pumps. Missouri law provides and exemption for sales of insulin and sales of prosthetic or orthopedic devices. The insulin pump is a prosthetic device because it replaces a part of the function of an inoperative or malfunctioning pancreas by continuously releasing insulin into the body, like the pancreas would. Accordingly, sales of insulin pumps are exempt from tax. Missouri Discusses the Taxability of Equipment and Food Used in Pharmaceutical Research The Missouri Department of Revenue recently determined that a taxpayer’s purchase of laboratory and medical monitoring equipment were exempt from sales and use tax. The taxpayer conducts contract research for pharmaceutical companies through a variety of studies that require special laboratory and medical monitoring equipment. Some of the studies require the study participants to be housed and provided food in accord with the testing protocols established by the pharmaceutical companies. Since the equipment is being used or consumed directly and exclusively in the research and development of prescription pharmaceuticals consumed by humans, it may be purchased exempt from sales tax. However, the food and food serving products purchased for study participants may not be purchased exempt from sales tax because they are not used directly or exclusively in the research and development of prescription pharmaceuticals consumed by humans. (Letter Ruling No. LR5848, Missouri Department of Revenue, August 20, 2009) (10/09) Free Flu Vaccines are Taxable in Iowa In a policy letter, the Iowa Department of Revenue determined that the free distributions of flu vaccines are subject to Iowa sales and use tax. The taxpayer was considering a campaign to provide free flu vaccinations, which do not require a prescription, to uninsured persons. The vaccine would be purchased outside of Iowa for subsequent use in Iowa. Therefore, it was determined that this flu vaccine distribution would be a use “incident to ownership” in this state and taxable in the initial instance under Iowa law. It was also noted that the vaccine is not a prescription drug and would not be exempt from Iowa sales and use tax. (Policy Letter No. 09300051, Iowa Department of Revenue, August 17, 2009) (10/09) InternetTaxation of Digital Products and Services in Washington Explained The Washington Department of Revenue issued a notice explaining Engrossed Substitute House Bill 2075, which affects the taxability of digital products. Beginning July 26, 2009, all digital products, regardless how they are accessed, will be subject to sales or use tax. While downloaded digital goods have always been subject to tax, the new legislation now applies to digital products that are assessed by others means, such as streaming or subscription, digital automated services and remote access software. The Department further explains that the following services remain subject to the business and occupation (B&O) tax, but are not subject to sales tax: web site development or hosting, digital data storage, and online advertising (Tax Topics: Digital Products, Washington Department of Revenue, March 3, 2010). (03/10) LeasingHawaii Rental Receipts Not Taxable for Agent According to a Hawaii Letter Ruling, a real property rental agent’s receipts of rental deposits and payments that were forwarded to the real property owners were considered income of the owners, and therefore the agent was not liable for Hawaii general excise tax on such receipts. Furthermore, the amounts the agent withheld from rental receipts in order to pay expenses on behalf of the owners were not income of the agent. Amounts the agent received from the owners in reimbursement for expenses of owners paid by the agent were exempt reimbursements under common law and statute HRS 237-20. The Department of Taxation made no determination of whether an agency relationship existed between the company requesting the ruling and the real property owners. The above determination was solely based on the requestor’s representation that it was an agent for the real property owners. (Letter Ruling No. 2010-06, Hawaii Department of Taxation, March 23, 2010) (04/10) Truck Rental Business’ Payments to Dealers Not Subject to Florida Tax A truck rental business’ commission payments to dealers who rented trucks and equipment to customers were found to be not subject to Florida sales tax because the taxpayer did not have use, access, or control over the dealer’s real property, the dealer had sole discretion as to where to locate the trucks and equipment, the trucks and equipment did not reside on a set amount of space, and the taxpayer did not have a right to enter the dealer’s locations to reclaim property. Further, although the commission payments are made up of a variety of factors (such as safety, maintenance, customer complaints, etc), the payments are essentially tied to the amount of the time the trucks and equipment are rented out by the dealer and not located on the dealer’s property; if the trucks and equipment do not leave the dealer’s location, the dealer will not receive a commission. Because of these factors, the taxpayer was found to not be leasing or being granted a license for the use of the dealer’s real property, and therefore its payments to the dealer are not subject to sales tax. (Technical Assistance Advisement, No. 10A-005, Florida Department of Revenue, February 10, 2010) (04/10) Minnesota Revenue Notice Modified to Consider One-Time Rental of Laundered Items as Linen Supply Service A 1992 Minnesota Revenue Ruling has been modified to state that effective February 22, 2010, the renting and furnishing of laundered items on a one-time basis is considered a linen supply service, instead of a rental of tangible personal property. Since Minnesota Statutes provide an exemption for materials used in providing laundry and dry cleaning services, such as solvents, detergents, plastic bags, and hangers, the materials used or consumed in the provision of the one-time service, including materials used to launder or maintain the items being rented or furnished, are now exempt. (Modification of Revenue Notice No. 92-24, Minnesota Department of Revenue, February 22, 2010) (04/10) Online Travel Companies Not Liable for New Mexico Local Occupancy Tax on Mark-Up The U.S. District Court for the District of New Mexico found that online travel companies were not liable for city-imposed additional New Mexico lodging tax on the difference between the total price of a hotel room collected from customers and the lower discounted room rate that the travel companies negotiated with the hotel operators. Since the travel companies had previously been ruled not to be vendors, and because the relevant city ordinance states that the tax is imposed on gross taxable rent paid to vendors, the city-level tax should only be assessed on the wholesale room rate paid by the travel companies to the hotel operators. Additionally, the city failed to prove that the travel companies were trustees of any unpaid charged taxes, or that they fraudulently concealed information. (City of Gallup, New Mexico v. Hotels.com, L.P., United States District Court, District of New Mexico, No. CV 07-644 JC/RLP, March 1, 2010) (04/10) Wisconsin Taxability of Equipment Provided with Operator Changed In order to conform to the requirements of the Streamlined Sales and Use Tax (SST) Agreement and the definition of lease or rental, the Wisconsin Department of Revenue has made changes in the sales and use tax treatment of equipment provided with an operator. In general, effective October 1, 2009, when equipment is provided with an operator that does more than maintain, inspect, or set up the equipment and the operator is necessary for the equipment to perform in the manner for which it is designed, the transaction is considered to be a service and not a lease or rental of the equipment. Before October 1, 2009, when equipment was provided with an operator, the tax treatment of the transaction depended on who was responsible for the satisfactory completion of the job. For information on how this change specifically relates to: Leases and Rentals of Equipment, Equipment Used to Provide a Service and Service Contracts for Equipment please visit the department’s Web site at http://www.dor.state.wi.us/taxpro/news/index.html for the news release “Equipment Provided with Operator – Tax Treatment Changed.” (News for Tax Practitioners, Wisconsin Department of Revenue, December 4, 2009) (01/10) New York Discusses the Taxability of Food Container Rentals and Related Charges The New York Tax Commissioner has determined that a taxpayers’ rental fees and related charges for reusable food containers to farmers were not exempt from New York sales and use tax. In the opinion, the taxpayer contended that the rental should be exempt because the farmers use the containers to ship produce to the farmers’ customers. New York law does exempt containers if they are used by a vendor to package tangible personal property for sale and the container is actually transferred by the vendor to the purchaser. However, in this situation, the farmers are obligated to return the containers back to the taxpayer. Therefore, the containers are not actually transferred to the customers and the rental fees are subject to New York sales and use tax. The pallet and delivery charges are also subject to tax because they are components of the rental receipts and cannot be deducted. If the taxpayer delivers containers to a farmer at a point outside New York and the farmer is a resident of this State and brings the container into this State for use here, then the farmer's use of the containers in New York would be subject to state and local use tax, including pallet and delivery charges, unless otherwise exempt. Florida Determines Amount of Exemption On Multiple Use Property When a lease involves multiple use of real property, partially taxable and partially exempt, the Department will determine which portion of the total rental charge is exempt from the tax. This determination will be done a on a case-by-case basis, using the lease or license and any other information that may be available. Once the total taxable portion of the property is determined, the Department will divide that by the total area to come up with a taxable percentage to be multiplied by the total rent. (Technical Assistance Advisement, No. 09A-032, Florida Department of Revenue, July 1, 2009, released August 2009) (09/09) Manufacturing Incentives for Aircraft Repair Stations, Clean Fuel Vehicles, Certain Manufacturing Facilities Extended in Washington Washington has extended the 0.2904% business and occupation tax rate for Federal Aviation Regulation part 145 certified repair stations from July 1, 2011 to July 1, 2024. The legislation also extends, through December 31, 2015, the sales and use tax exemption for sales of new passenger cars, light duty trucks, and medium duty passenger vehicles, that are exclusively powered by a clean alternative fuel. The exemption is expanded to include sales of qualifying used passenger cars, light duty trucks, and medium duty passenger vehicles that have been modified after their initial purchase to be exclusively powered by a clean alternative fuel. Qualifying used vehicles must be a part of a fleet of at least five vehicles, owned by the same person, have an odometer reading of less than thirty thousand miles, be less than two years past their original date of manufacture, and sold for the first time after modification. Ohio Manufacturer Qualified for Direct Marketing Exemption An Ohio automobile manufacturer’s business activities qualified for the direct marketing exemption and were, therefore, exempt from sales and use tax on items used in the storing, handling, transporting, and mailing of inventory. The manufacturer’s activities qualified as direct marketing because its customers fell within the statutory definition of “consumer” which does not exclude persons who purchase items for resale. It should be noted, however, that the manufacturer’s customer service department used certain items that were deemed taxable because it could be proven that they were used in storing, transporting, mailing, or handling inventory. (Freudenberg NOK General Partnership v. Wilkins, Ohio Board of Tax Appeals, No. 2006-K-1556, April 13, 2010) (05/10) Michigan Steel Manufacturer’s Conveyor System Exempt A Michigan steel manufacturer’s material handling conveyor system qualified for the industrial processing exemption from Michigan use tax. The exemption applied to production material handling because once the transportation of raw materials was initialized by the preliminary movement of the pellets from storage on to the hopper conveyors, the process of moving the pellets to the blast furnaces was continuous and part of the industrial process. During the audit period, the industrial processing statute was ambiguous, but was later amended to clarify that production material handling falls within the definition of industrial processing. Furthermore, a Department of Treasury rule had specifically cited production material handling as an example of an industrial processing activity. (Rouge Steel Company v. Department of Treasury, Michigan Tax Tribunal, No. 315388, November 30, 2009, release April 2010) (05/10) Washington’s Tax Incentives for the Aluminum Industry Extended The State of Washington has extended the sunset date of business and occupation (B&O) and sales and use tax incentives for the aluminum industry to January 1, 2017. The incentives were originally set to expire on January 1, 2012. The incentives include a reduction in the B&O tax rate for manufacturers of aluminum, a B&O property tax credit equal to property taxes paid on an aluminum smelter, a sales and use tax credit against the state tax on construction materials and personal property incorporated into an aluminum smelter, and for labor and services performed on property and buildings at a smelter, and an exemption for the brokered natural gas use tax on natural or manufactured gas by an aluminum smelter. These incentives will be reviewed by the Joint Legislative Audit and Review Committee in 2015. (Ch. 2 (H.B. 2672), laws 2010, 1st Special Session, effective date contingent on sine die of 1st Special Session or no later than July 13, 2010; House Bull Report, March 2010 (04/10) Publisher Not Eligible for Refund of Florida Sales and Use Tax A newspaper publisher and commercial printer failed to demonstrate eligibility for a sales and use tax exemption for industrial machinery and equipment used in expanding manufacturing facilities to increase productive output by at least 10%. To reach the 10% requirement, the publisher erroneously counted custom and circulation inserts separately from newspaper. Since the exemption states that component parts of a newspaper, like the inserts, are not to be treated separately for tax purposes, the publisher was not entitled to a refund of sales and use tax paid. (Times Publishing, Co. v. Department of Revenue, Florida Department of Revenue, DOAH Case Nos. 08-3938 and 08-3939 (DOR 10-01-FOF), February 11, 2010. (04/10) Nebraska Retail Sales of Wood and Corn Used as Fuel are Exempt The Nebraska Department of Revenue has released a revenue ruling confirming that the sale or purchase of wood or corn for use as an energy source are exempt from sales and use taxes. The following conditions must be met to qualify for the exemption: 1) more than 50% of the wood or corn sold or purchased is used or directly consumed in manufacturing, processing, refining, the generation of electricity, irrigation or farming, or by any hospital, and 2) the purchaser gives the seller a completed Nebraska Energy Source Exempt Sale Certificate. Additional regulation and rules may apply. (Revenue Ruling 01-10-1, Nebraska Department of Revenue, February 22, 2010) (04/10) Restaurant Equipment Does Not Qualify for Manufacturing Exemption in Missouri A Missouri restaurant’s purchases of equipment used in the restaurant’s operations were not exempt from Missouri state sales and use tax as manufacturing equipment under Section 144.054, RSMo. To qualify for the manufacturing exemption, equipment must be used or consumed in the manufacturing process. Missouri takes the position that a restaurant does not manufacture products, but is in the business of selling and merchandising food and drinks, therefore not eligible of the manufacturing exemption (Letter Ruling No. LR5609, Missouri Department of Revenue, April 20, 2009) (03/10) Gas and Electricity Used in Container Leasing Business Did Not Qualify for Texas Agricultural Exemption A taxpayer’s purchase of gas and electricity used to power equipment related to cleaning, sanitizing, and wrapping plastic containers were not exempt from Texas sales and use tax under the agricultural exemption. To qualify for the agricultural exemption, purchases of gas and electricity must be used for agricultural purposes. The taxpayer’s activities of cleaning and sanitizing tangible personal property were not considered an agricultural use (Decision, Hearing No. 100,486, Texas Comptroller of Public Accounts, November 24, 2009, released March 2010) (03/10) Wyoming Manufacturing Exemption Extended The Wyoming sales and use tax exemption for the sale or lease of machinery used directly and predominantly in manufacturing tangible personal property has been extended from its original discontinuance date of December 31, 2010 to December 31, 2011 (Ch. 33 (H.B. 49), Laws 2010, effective March 4, 2010, and as noted). (03/10) Bar Code Verifiers Not Use in Exempt Quality Control Process in Texas A manufacturer of shampoos, conditioners, and other cosmetics was denied a manufacturing exemption on its purchases of bar code verifiers. The manufacturer contended that they were used in used in an exempt quality control process to ensure that bar codes on packaged products could be read by store scanners. However, it was determined that the bar code verifiers were not used to ensure that the product met the specifications of the ultimate consumers, but to ensure that the packaged items met the inventory control needs of the stores. Therefore, the scanners were used in the taxpayer's overall inventory control system and not for exempt quality control in manufacturing. (Decision, Hearing No. 49,528, Texas Comptroller of Public Accounts, October 9, 2009, released January 2010) (03/10) Texas Denies Exemptions to Oil and Gas Producer A petroleum and natural gas producer was denied an exemption for its purchase of down-hole equipment because it is considered taxable transportation equipment. Since this equipment is not exempt manufacturing equipment, the taxpayer could not receive a credit for tax paid on services to repair the equipment. The exemption claim for aboveground equipment was also denied due to a lack of evidence. Lastly, the taxpayer was denied a refund on backhoe services used to cleanup an oil spill because the invoice did not indicate where the cleanup service occurred. Oil spill cleanup services can be taxable or nontaxable, depending on where they are performed. For example, if the service is performed at a plant or on land not at the well site, then it is a taxable real property service. (Decision, Hearing No. 100,619, Texas Comptroller of Public Accounts, October 15, 2009, released January 2010) (03/10) Indiana Rules on Taxability of Equipment Used in Handling and Blending of Products An Indiana taxpayer selling fuels, animal feed and fertilizer was found to owe tax on equipment used in their fertilizer and petroleum bulk plant. The taxpayer had not paid tax on the equipment as they contended that the equipment qualified for the manufacturing equipment exemption. The taxpayer's business was purchasing various types of dry fertilizer or fuels and blending them to order. The state found that this process did not meet the definition of "manufacturing" so the equipment was subject to use tax. (Letter of Findings No. 09-0563, Indiana Department of Revenue, January 27, 2010) (02/10) Recycling Activity Not Eligible for Manufacturing Exemption in Indiana The Indiana Department of Revenue found a taxpayer’s purchases of tangible personal property did not qualify for the manufacturing activity. The taxpayer disassembles articles for the scrap components to sell them to scrap buyers. The state found that the taxpayer does not add new parts to the articles being disassembled, but instead removes parts and separates them into groupings. As a result, the state determined that this recycling activity did not constitute manufacturing since no new article is produced. (Letter of Findings No. 09-0311, Indiana Department of Revenue, November 25, 2009) (12/09) Georgia Adopts a New Manufacturing Machinery and Equipment Rule The Georgia Department of Revenue has adopted a sales and use tax rule that relates to exemptions for manufacturing machinery and equipment. This new rule provides and exemption from sales tax for machinery and equipment, including repair and replacements parts, necessary and integral to the manufacture of tangible personal property in a manufacturing facility. The rule is effective December 9, 2009 and will apply to transactions that occur on or after January 1, 2009. Mississippi Discussed the Reduced rate for Farm Tractors and Implements The Mississippi State Tax Commission has issued a notice concerning the 1.5% reduced state sales tax rate on purchases of farm tractors, farm implements and parts and labor for agricultural purposes beginning July 1, 2009. A farm tractor is defined as self-propelled equipment which performs no farm function other than to move, draw or furnish power to other implements which may be attached. A farm implement is a complete unit that performs a specialized mechanical function and is identifiable as a specific piece of equipment that is ordinarily and customarily used on a farm. All parts and labor purchased for the maintenance and/or repair of farm tractors and implements are also subject to the reduced 1½% rate of sales tax. If a tractor is purchased for non-agricultural purposes, it is subject to the full 7% rate of sales tax. Purchases of Packaging Used to Secure Yarn is Exempt in North Carolina A yarn manufacturer’s purchase of packaging material used to deliver yarn to its customers was found exempt from North Carolina sales and use tax. To ship its cones of yarn to customers, the taxpayer uses a “yarn pak” which is returned to the taxpayer for recycling and reuse. After the cones of yarn are packed into the yarn pak, the taxpayer typically wraps it in “shrink wrap,” overlapping the edges of the bottom and top pallets as well as the dividers. Although, the shrink wrap is not part of the yarn pak and is not necessary to hold the yarn pak together, it does provide a protective barrier against dust and moisture during shipping. Testing and Recertification Activity Did Not Qualify for Manufacturing in Indiana Recently, the Indiana Department of Revenue determined that a taxpayer’s testing and recertification activities did not qualify for a manufacturing exemption. The taxpayer, who tests and recertifies used gas cylinders for its customers pursuant to federal regulatory requirements, contended that it was a remanufacturer of used gas cylinders and therefore was entitled to a manufacturing exemption. Upon arrival of the cylinders, the taxpayer performs a visual inspection and the cylinders that pass inspection are recertified. The Department concluded that although this recertification process is complex, it does not substantially change the existing cylinders. In addition to this, the work performed on the cylinders was contemplated as a normal part of the life cycle of the existing cylinders. As a result the taxpayer was found not to be a remanufacturer of used gas cylinders and therefore, not entitled to any manufacturing exemptions. (Letter of Findings, Indiana Department of Revenue, September 30, 2009) (10/09) Texas Aircraft used for Agricultural Operations Exempt Texas has clarified changes relating to exemptions from sales and use tax for certain aircraft, including related machinery and equipment. Effective September 1, 2009, machinery and equipment exclusively used in an agricultural aircraft operation, as defined by 14 C.F.R. Section 137.3, are exempt from sales and use tax. Aircraft are exempt from sales and use tax if sold to a person for use exclusively in connection with an agricultural purpose and used for: 1) predator control; 2) wildlife or livestock capture; 3) wildlife or livestock surveys; 4) census counts of wildlife or livestock; 5) animal or plant health inspection services; 6) crop dusting, pollination, or seeding; or 7) repair, remodeling, and maintenance services. To qualify for the exemption, an aircraft must be used exclusively in connection with an agricultural purpose – met if 95% of the use is for the purposes listed above. Travel of less than 30 miles each way to a location to perform one of the listed services does not disqualify an aircraft from the exemption. A person who claims the exemption must maintain and make available to the comptroller flight records for all uses of the aircraft. (S.B. 958, Laws 2009, effective September 1, 2009) (09/09) Indiana Finds That Farm's Forklift Was Taxable The Indiana Department of Revenue has found that a farmer's use of a forklift did not qualify it for the agricultural exemption. The farmer contested an audit finding with the argument that the forklift was used for agricultural purposes and was, therefore, exempt from tax. The Department of Revenue denied this argument due to the fact that the forklift did not have "direct use in the production process" as required by the agricultural exemption. The forklift was used for moving containers of seeds and harvested watermelons, which the department ruled to be pre-production and post production activities. (Letter of Findings No. 09-0090, Indiana Department of Revenue, July 29, 2009) (09/09) New York Discusses the Taxability of Food Container Rentals and Related Charges The New York Tax Commissioner has determined that a taxpayers’ rental fees and related charges for reusable food containers to farmers were not exempt from New York sales and use tax. In the opinion, the taxpayer contended that the rental should be exempt because the farmers use the containers to ship produce to the farmers’ customers. New York law does exempt containers if they are used by a vendor to package tangible personal property for sale and the container is actually transferred by the vendor to the purchaser. However, in this situation, the farmers are obligated to return the containers back to the taxpayer. Therefore, the containers are not actually transferred to the customers and the rental fees are subject to New York sales and use tax. The pallet and delivery charges are also subject to tax because they are components of the rental receipts and cannot be deducted. If the taxpayer delivers containers to a farmer at a point outside New York and the farmer is a resident of this State and brings the container into this State for use here, then the farmer's use of the containers in New York would be subject to state and local use tax, including pallet and delivery charges, unless otherwise exempt. Texas Decides Charges for Manufacturer’s Solid Waste Disposal Were Taxable The Texas Court of Appeals has upheld a District Court’s decision that a plastic closure manufacturer was not entitled to a refund of sales tax paid on charges for removal and disposal of waste from its plant. The manufacturer paid a single charge for the disposal of commingled manufacturing waste, discarded wrapping and packaging materials, and office and cafeteria waste. The relative amounts contributed by each category was not differentiated or documented. Although subsequent tests of the composition of the waste stream indicated that at least 95% of the solid waste removed would qualify for exempt industrial waste removal and disposal, the manufacturer did not adequately document with “books and records” the composition of the waste stream during the periods at issue. Kansas Court of Appeals Denies Judgment in Integrated Plant Theory Case
The Kansas State Court of Tax Appeals has denied the Kansas Department of Revenue’s request for summary judgment in response to a cement manufacturer’s appeal of the Department’s final written determination denying the manufacturer’s refund request of sales tax paid on purchases of repair parts for equipment used to transport limestone. The Department argued that the manufacturer engaged in two distinct business operations: 1) limestone evacuation in and around a quarry and 2) cement manufacturing that begins when crushing activities commence at hammermill machines. The Department reasoned that this precluded the repair parts from the manufacturing exemption because they were not used in an integrated production operation by a manufacturing or processing plant or facility, as required by the “integrated plant” statutes. Illinois Extends Graphic Arts Exemption and Manufacturer’s Purchase Credit The Illinois retailer’s occupation (sales) tax, service occupation tax, use tax, and service use tax exemption for graphic arts machinery and equipment, including repair and replacement parts, used primarily in the production of graphic arts has been extended from its automatic sunset date of July 30, 2009 to August 30, 2014. The corresponding Manufacturer’s Purchase Credit (MPC) earned on purchases of graphic arts and manufacturing machinery and equipment has also been extended to August 30, 2014. MiscellaneousNew Jersey Imposes Admissions Surcharge The New Jersey Division of Taxation authorized municipalities to impose a 5% surcharge of each admission charge to a major place of amusement that is subject to New Jersey sales tax, effective April 1, 2010. The surcharge must be separately stated on any bill, receipt, invoice or similar document provided to the patron. Guidance on the surcharge has been provided by the Division, including definitions, registration and exemption information, and filing and payment requirements. (News Release, New Jersey Division of Taxation, March 30, 2010) (04/10) Maine Nonprofit Requirement for Snowmobile Trail Grooming Equipment Exemption Continues Maine legislation has reinstated the nonprofit requirement for a snowmobile club to qualify for the sales and use tax exemption for purchases of snowmobile trail grooming equipment used directly and exclusively for the grooming of snowmobile trails. When originally introduced, the bill removed the nonprofit requirement. However, as amended and enacted, to be eligible for the exemption, snowmobile clubs must be incorporated under the Maine Nonprofit Corporation Act (L.D. 1637 (H.P. 1165), Laws 2010, effective 90 days from adjournment of the Second Regular Session). (03/10) Nexus Amazon Challenges North Carolina DOR’s Request for Customer Information Amazon.com LLC ("Amazon") has filed a complaint for declaratory relief alleging that its compliance with the North Carolina Department of Revenue’s demand for personally identifiable information about its customers would violate the First Amendment rights of Amazon and its customers. As part of the DOR’s audit of Amazon’s compliance with state sales and use tax laws, Amazon has provided the DOR with each transaction’s order ID number, the city, county, and zip code to which the item was shipped, the total price for the transaction, and the Amazon standard product code for each item, which the DOR can use to immediately find on Amazon’s website a full description of every product purchased by a North Carolina customer. In addition to this information, the DOR is requesting the name and address of every North Carolina customer who purchased or received goods in these transactions, and has stated its plans to serve Amazon an administrative summons and summary contempt proceeding if the information is not supplied. Washington Insurance Company Created Nexus for Affiliated Mail Order Pharmacy The Washington Department of Revenue has determined that business and occupation tax is due on an out-of-state mail order pharmacy’s sales to an in-state affiliated insurance company’s benefit plan subscribers. The insurance company’s and/or its representatives distributed brochures containing information about the benefits of ordering from the pharmacy to subscribers, contained descriptive information and a link to the pharmacy’s’ website on its website, and enabled subscribers to order drugs from the pharmacy from within its secure site. Although the pharmacy claimed that the insurance company’s actions were done solely to establish and maintain a market for its health plans and that it is not performing services on behalf of the pharmacy at the pharmacy’s direction and control, as evidenced by a written agreement between the two corporations, the court determined that an agency or representative relationship was created based on the practice of the parties. Since the in-state affiliate acted as an agent or representative engaged in establishing or maintaining a market in Washington for the out-of-state pharmacy, the pharmacy was found to have substantial nexus with the State. (Tax Determination No. 08-015ER, Washington Department of Revenue, March 25, 2010) (04/10) Persons Subcontracting With the State of Illinois Must Collect and Remit Illinois Use Tax Effective July 1, 2010, all persons entering into a contract or subcontract with an Illinois State Agency, and all affiliates of the person, must collect and remit Illinois use tax on all sales into the state of tangible personal property. This requirement applies even if the person or affiliate does not meet the definition of “retailer maintaining a place of business within the state”. Prior to July 1, 2010, this rule only applied to contracts, not subcontracts. (S.B. 51 and S.B. 1732, Laws 2009, effective as noted above). (03/10) Out-of-State Company’s Drop Shipment Sales Not Taxable in New Mexico A taxpayer, drop ships tangible personal property to its New Mexico customers, was not liable for New Mexico gross receipts because it did not have nexus in New Mexico. The taxpayer’s sales agreement with its customers provides that the transfer of title, ownership and risk of loss from the taxpayer’s out-of-state location occurs when the taxpayer has received a purchase order from the customer and the customer has received the property. As a result, the property is briefly owned by the taxpayer, even though the taxpayer never takes physical possession of the property in New Mexico. This brief ownership of the property was not considered sufficient ownership of property in New Mexico to establish nexus since there was no physical possession of the property. For that reason, the taxpayer may have gross receipts from selling property in New Mexico, but it does not have nexus and is not liable for gross receipts tax. Employee Visits in Washington Establishes Nexus An out-of-state manufacturer of vapor barriers and insulation facings established nexus in Washington state for business and occupation (B&O) tax purposes. Even though the company did not have an office in the state and made no direct sales, by having the company’s employees visit customers to establish and maintain a market was enough activity in Washington to create nexus. The court stated that the language of Quill, 504 U.S. 298 (1992), was limited to sales tax and did not support the company’s contention that physical presence was required to establish nexus in the context of B&O taxes. Furthermore, the activities of the company’s employees within Washington were significantly associated with its ability to establish and maintain its market, particularly in light of a business model that entailed maintaining a small number of high-volume customers long term. The Washington Court of Appeals also held that the company’s customers received the products in Washington. An applicable rule specifies that B&O tax applies to interstate sales of tangible personal property when goods originating outside Washington are received by the purchaser in Washington and the out-of-state seller had nexus with Washington. (Lamtec Corp v. Department of Revenue, Washington Court of Appeals, Division II, No. 35716-8-11, August 4, 2009) (01/10) Use of Independent Consultant Does not Create Nexus in Florida The Florida Department of Revenue found that a taxpayer’s use of an independent consultant in Florida did not create nexus for Florida sales and use tax. The taxpayer is a limited liability company that makes interstate sales of general merchandise through the mail to customers located in Florida and other states. Florida law provides that a dealer who makes mail order sales must collect and remit Florida tax on such sales, when the dealer has agents in this state “who solicit business or transact business on behalf of the dealer.” Generally, the “transaction of business” on behalf of the dealer includes activities that further “the taxpayer's ability to establish and maintain a market in this state”. However, the taxpayer claimed that it no longer maintains any place of business, inventory, or other property in Florida. In addition, the taxpayer does not have any employees, agents, or representatives in Florida soliciting sales orders or conducting any other business activities on behalf of taxpayer. Related Seller Was Not Required to Register in Utah In a private letter ruling, the Utah State Tax Commission found that an out-of-state “nexus seller” would not create nexus for an out-of-state “related seller”. In the letter, the nexus seller has an office in Utah as well as employees to support and service its Utah customers. The related seller does not have any retail stores or employees, engage in any Utah activities, or own or lease any real property in Utah. Under these facts, the Commission found that the related seller does not meet Utah’s statutory definition of a retailer engaged in business. On the other hand, since the related seller is an affiliate, further analysis had to be done to determine if the related seller had affiliate nexus instead. The nexus seller was a web-based provider of e-commerce services and did provide the related seller with certain business services for its backend infrastructure, including content delivery network and storage services. However, these services were not provided in Utah. It was therefore determined that the related seller does not have affiliate nexus in Utah based on the types of services performed as long as those services are not directly related to establishing or maintaining a market in Utah for new or existing customers. (Private Letter Ruling, Opinion No. 09-008, Utah State Tax Commission, July 28, 2009) (10/09) North Carolina Governor Signs Budget that Includes Amazon Provision North Carolina Governor Bev Purdue has signed a budget bill that passes the Amazon provision related to nexus. This provision states that a retailer is presumed to be soliciting or transacting business in North Carolina if the retailer enters into an agreement with a resident of this State under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet Web site or otherwise, to the retailer. This presumption applies only if the cumulative gross receipts from sales by the retailer to purchasers in this State who are referred to the retailer by all residents with this type of agreement with the retailer is in excess of ten thousand dollars ($10,000) during the preceding four quarterly periods. (S.B. 202, Laws 2009, effective as noted) (08/09) Virginia Rules Third-Party Installation Services Did Not Cause Nexus A seller of storage systems located outside of Virginia was not required to register for Virginia sales and income tax as the result of installation services provided by a third party. The Virginia Department of Taxation found that the nexus requirements were not met for the seller of the storage systems as the retailer never had a physical presence in the state. The installers of the system were a true third party who received the installation materials from a distributor and then performed the installation independently of the retailer. (Ruling of Commissioner, P.D. 09-44, Virginia Department of Taxation, April 27, 2009) (08/09) Out-Of-State Vendor Selling in Missouri Creates Nexus The Missouri Department of Revenue issued a Letter Ruling stating that the sales of an out-of-state business are subject to Missouri use tax because its activities established nexus with Missouri. The company is an out-of-state vendor that sells tangible personal property to customers and resellers within Missouri. The company’s activities within the state include: Connecticut Legislation that Would Have Taxed Certain Internet Sales Dies in Committee Senate Bill 806, which would have required every person making sales of tangible personal property or services through an independent contractor or other representative in Connecticut through an agreement under which the resident, for a consideration, directly or indirectly refers potential customers via a link on an Internet web site or otherwise died in committee. (S.B. 806 died in the committee on Revenue, Finance, and Bonding on June 2, 2009) (08/09) New York Expands Definition of Sales Tax Vendor Effective June 1, 2009, the definition of a sales tax vendor in New York has been amended to include, under certain circumstances, remote sellers of taxable property and services that are affiliated with a business located in the state. Previously, an in-state business could cause an out-of-state business to be classified as a sales tax vendor if, among other activities, it engaged in solicitation on behalf of the remote seller. The new definition expands the types of activities engaged in by the in-state vendor that cause an out-of-state vendor to be considered a sales tax vendor if one of the companies owns, directly or indirectly, more than 5% of the other or if the same person or affiliated group of persons owns, directly or indirectly, more than 5% of both companies. California Governor Schwarzenegger Vetoes “Amazon” Nexus Provisions Governor Schwarzenegger vetoed a majority vote tax increase passed by the California legislature after Overstock.com announced that it would pull its affiliate advertising from the State. California lawmakers had proposed a tax on affiliate advertising similar to New York’s “Amazon” laws. The new laws would have changed the definition of “retailer engaging in business in this state” to include any retailer entering into an agreement with a resident of California under which the resident, for a commission or other consideration, directly or indirectly refers potential customers of tangible personal property via a link on its website or otherwise to the retailer. Governor Schwarzenegger stressed his commitment to not raising taxes and his fight to keep and create jobs in California. Overstock.com will continue to do business with affiliates in California (Press Release, Governor Schwarzenegger Remains Committed to No New Taxes, Announces Overstock.com Will Continue to do Business in California (July 1, 2009). (07/09) New York Enacts Budget with Expanded Definition of “Vendor” As part of the 2009-10 enacted New York budget package, a new clause was added to the tax law that includes an affiliate nexus provision. This clause, effective June 1, 2009, expands the definition of a “vendor” to include seller’s of taxable tangible personal property and services if either 1) an affiliated in-state vendor uses the same trademarks, service marks, or trade names as the seller; or 2) an affiliated person engages in activities in New York that benefit the seller in its development or maintenance of a market for its goods or services in the state, provided those activities are sufficient to satisfy the nexus requirements of the U.S. Constitution. (Ch. 57 (A.B. 157), Laws 2009, effective June 1, 2009) (07/09) RetailFood Sold at New York Sports Stadium by Group of Related Restaurant Entities Taxable In a recent Advisory Opinion, the New York Commissioner of Taxation and Finance determined that unheated food sold by a corporation that provides food products to sports facilities and other large-scale entertainment venues to an unrelated Concessioner are taxable because entities related to the producer and are part of the same Restaurant Group provide catering and food management services related to the food on behalf of the producer. New York Tax Law imposes sales tax on sales of food or drink where the vendor serves or assists in serving, cooks, heats, or provides other services with relation to the food or drink. Although the food producer did not itself provide services in the Stadium beyond delivery, its related entity’s employees did provide such services and, therefore, the charges for the prepared food provided to the Concessioner are taxable. (TSB-A-10(12)S, New York Commissioner of Taxation and Finance, April 5, 2010) (05/10) Treatment of Sales for Resale Modified in Missouri Enacted Missouri legislation clarifies the sales tax treatment for sales for resale. Purchases of tangible personal property or services for resale are exempt if the subsequent sale is any of the following: subject to tax in Missouri or another state, for resale, excluded from tax, subject to tax but exempt, or exempt in another state where the subsequent sale occurs. Two exceptions to the general rule are created for charges for admission or seating accommodations at places of amusement, entertainment, or recreation, and for charges for rooms, meals and drinks. In the case of the two exceptions, operators of such places must remit tax on the gross receipts received by such operators, and subsequent sales will not be subject to tax if they are an arm’s length transaction for fair market value with an unaffiliated entity. The purchase of tangible personal property by a taxpayer will not be considered to be for resale if such property is used or consumed by the taxpayer in providing a service on which tax is not imposed, except for purchases made in fulfillment of any obligation under a defense contract with the U.S. government. (S.B. 928, Laws 2010, effective May 12, 2010). (05/10) Aircraft Subject to Florida Use Tax An aircraft that was purchased and repaired in California more than six months to its use in Florida will be subject to Florida use tax because the taxpayer purchased the aircraft with the intent to base and use the aircraft in Florida. The taxpayer stated that the aircraft should be exempt from use tax because Florida law provides that an aircraft purchased outside the state and used in another state for six months or more prior to the time it is brought into Florida is presumed to be exempt as purchased for use outside of Florida. However, the taxpayer had indicated that the aircraft was intended to be used in Florida at the time of purchase, including that the aircraft would be flown to and be based in Florida following the repair and restoration work to render the aircraft serviceable. Any presumption that the aircraft was purchased for use outside Florida was rebutted with the taxpayer’s stated intent to base the aircraft in Florida following the repair and restoration work. (Technical Assistance Advisement, No. 10A-006, Florida Department of Revenue, February 10, 2010, released May 2010) Wisconsin Supreme Court Upholds Symphony Orchestra Tickets as Taxable The Wisconsin Supreme Court has upheld the Court of Appeals’ determination that sales of tickets to classical, pop, and youth concerts are taxable because they are considered to be primarily entertainment in nature, not educational. Although the court recognized that learning was a component of attending the concerts and that the orchestra’s mission statement and certain activities were directed at educating the public in order to develop a greater appreciation for music, the court ultimately determined that most attendees viewed the event as a form of entertainment, which was highlighted in the orchestra’s promotional materials. Further, the orchestra’s optional pre and post-concert lectures and written materials about the music performed at certain concerts did not transform the performances into primarily educational events. (Milwaukee Symphony Orchestra, Inc. v. Wisconsin Department of Revenue, Wisconsin Supreme Court, No. 2008AP1684, May 5, 2010) (05/10) Food Products Sold From Farmers’ Markets Exempt in Mississippi Effective April 1, 2010, food products that are grown, made or processed in Mississippi and sold from farmers’ markets that have been certified by the Mississippi Department of Agriculture and Commerce are exempt from Mississippi sales and use tax (H.B. 1566, Laws 2010, effective as noted). (05/10) Signs Sold, but Not Installed, are Taxable in Florida When a taxpayer sells a sign for delivery or customer pick-up, but is not responsible for the installation of the sign, the sale constitutes a taxable sale of tangible personal property. The taxpayer should collect tax or an exemption certificate from the customer. The taxpayer does not owe use tax on the fabricated cost of the sign because materials and labor are considered to be purchased for incorporation into the sign for resale. When the taxpayer is responsible for the installation of the sign, either through employees or subcontractors, the taxpayer is the ultimate consumer of the materials incorporated into the sign and only owes use tax on the fabricated cost of the sign. In this situation, sales tax should not be charged to or collected from the customer. (Technical Assistance Advisement, No. 10A-001, Florida Department of Revenue, February 23, 2010) (05/10) Nebraska Releases Guide on Illegal Advertising Referring to Sales Tax The Nebraska Department of Revenue has issued an information guide reminding retailers that Nebraska law prohibits retailers from advertising or implying in any way that the sales tax will be assumed or absorbed by the retailer or not added to the selling price. Retailer are required to pass on to their customers the full amount of the sales tax, which must be stated on the customer’s invoice and collected as an item separate and district from the sales price. Examples of prohibited language include “Tax-Free Sale”, “Pay No Sales Tax”, “Purchases Will Be Discounted By the Amount of the Sales Tax”, “Sales Tax Stimulus Sale”, “We Will Pay Your Sales Tax”, and “Tax Credit Sale”. Retailers may contact the Department prior to conducting an advertising campaign to ensure the advertisement does not violate any statuary provisions. (Information Guide 6-493-2010, Unlawful Advertisements Referring To Sales Tax, Nebraska Department of Revenue, March 22, 2010) (04/10) Energy Efficient Appliance Rebates Subject to Illinois Tax Gross receipts subject to Illinois Retailer’s Occupation (sales) Tax are defined as all the consideration actually received by the seller, except traded-in tangible personal property. If a seller receives a reimbursement or rebate for a discount, the amount of that reimbursement or rebate is considered part of the gross receipts received by the seller and it is fully taxable. Therefore, rebates that retailers receive under the Illinois Energy Efficient Appliance Rebate Program are considered part of the gross receipts received by the retailer and are subject to retailer’s occupation tax. Missouri Resale Shipped to End User Exempt According to a Letter Ruling issued by the Missouri Director of Revenue, a company that maintains a warehouse should not charge Missouri sales tax on its sales of gloves. The taxpayer drop ships gloves that are ordered from a seller of gloves (Company A) to a separate purchaser (Company B). The taxpayer invoices and collects payment from Company A for the cost of the gloves and shipping, that in turn invoices Company B for the contract price. Since the taxpayer’s sale of gloves to Company A is considered a resale to a third party and not a sale at retail, the taxpayer should not be liable for sales tax. The fact that the taxpayer actually ships the product to the end user did not change the letter ruling analysis. (Letter Ruling No. LR5797, Missouri Department of Revenue, July 16, 2009) (03/10) Virginia Solid Surface Countertops Sales Taxable As a result of an audit, a Virginia taxpayer issued a letter requesting correction of a retail sales and use tax assessment. According to the taxpayer, no use tax liability should have been assessed because its customers (wholesalers/contractors) charge sales tax on the solid surface countertops sold and installed by the taxpayer, and by assessing use tax under these circumstances double taxation would be applied. Furthermore, the taxpayer also contended it was not given prior notice of any policy change, especially since the prior audit did not apply use tax to the solids surface materials furnished and installed. The Virginia Tax Commissioner found the assessment by the Department of Taxation to be correct and considered the taxpayer the user or consumer of all materials used in transactions requiring it to sell and install kitchen countertops, regardless of whether made with laminated, sold surface, or natural materials. The taxpayer failed to furnish any documentation from the prior audit period in support of its contentions and in fact, a review of the prior audit report showed that the taxpayer was engaged in the fabrication of laminated countertops for sale to home builders, distributors, and retailers. The taxpayer’s sales of solid surface countertops and related materials were subject to Virginia retail sales and use tax. (Ruling of Commissioner, P.D. 09-102, Virginia Department of Taxation, July 24, 2009) (03/10) Maine Nonprofit Requirement for Snowmobile Trail Grooming Equipment Exemption Continues Maine legislation has reinstated the nonprofit requirement for a snowmobile club to qualify for the sales and use tax exemption for purchases of snowmobile trail grooming equipment used directly and exclusively for the grooming of snowmobile trails. When originally introduced, the bill removed the nonprofit requirement. However, as amended and enacted, to be eligible for the exemption, snowmobile clubs must be incorporated under the Maine Nonprofit Corporation Act (L.D. 1637 (H.P. 1165), Laws 2010, effective 90 days from adjournment of the Second Regular Session). (03/10) Certain Purchases by Newspaper Exempt in Missouri Purchases of newsprint, ink and other articles of tangible personal property used to produce newspapers are exempt from sales tax, whether the newspaper is sold at retail or given away free. However, the taxpayer’s purchases of printed copies of its publication are subject to sales tax. (Letter Ruling No. LR5988, Missouri Department of Revenue, November 24, 2009) (03/10) Wisconsin Discusses Sales of Food by Hospitals and Other Facilities Sales of food and food ingredients by hospitals, sanatoriums, nursing homes, retirement homes, community-based residential facilities, or day care centers licensed are exempt from sales and use taxes, regardless of whether the food and food ingredients are served at the facility. “Mobile meals on wheels” sold to the elderly and handicapped will continue to be exempt from tax. It was noted that this exemption does not apply to soft drinks and alcoholic beverages. Prior to October 1, 2009, the exemption applied only to meals, food, food products, and beverages that were sold by a hospital, sanatorium, nursing homes, retirement home, community-based residential facility, or day care center, and served at the facility. (Sales of Food and Food Ingredients by Hospitals and Other Facilities, Wisconsin Department of Revenue, January 19, 2010) (03/10) Wisconsin Discusses Food Provided to Restaurant Employees Effective October 1, 2009, candy, soft drinks, dietary supplements, and prepared foods, and disposable products that are transferred with such items are exempt from sales tax only if furnished for no consideration by a restaurant to the restaurant's employee during the employee's work hours. A restaurant’s sales of such items are subject to tax. Prior to October 1, 2009, certain food, food products, and beverages and disposable products that were transferred with such items were exempt from sales tax if the items were provided by a restaurant to the restaurant’s employees during the employee’s work hours, regardless of whether the restaurant sold the items to the employee or furnished the items to the employee for no consideration. (Sales To Restaurant Employees, Wisconsin Department of Revenue, January 19, 2010) (02/10) Wisconsin Discusses Change in Treatment of Drop Shipment Sales Effective October 1, 2009, a manufacturer or other seller may accept an exemption certificate claiming resale from an out-of-state purchaser even when the manufacturer or other seller is directed to ship the product to a consumer in Wisconsin and the out-of-state purchaser does not have a Wisconsin seller’s permit or Wisconsin use tax registration certificate. Prior to October 1, 2009, a manufacturer or other seller could not have accepted an exemption certificate claiming resale from an out-of-state business not holding a Wisconsin seller’s permit or use tax certificate, if the manufacturer or other seller delivered the product to a consumer in Wisconsin. This rule was repealed so Wisconsin's sales and use tax laws would conform to the requirements of the Streamlined Sales and Use Tax Agreement (SSUTA). (Drop Shipment Sales—Change in Wisconsin Sales and Use Tax Treatment, Wisconsin Department of Revenue, January 19, 2010) (02/10) Illinois Clarifies Rate of Tax on Bakery Items The Illinois Department of Revenue has issued a letter ruling that clarifies which rate of tax should be used by a bakery that sells both food which has been prepared for immediate consumption and grocery-type items and also provides facilities for on-premises consumption. Bakery items prepared by the bakery can be taxed at the lower rate if the area for on-premises consumption is physically separated or otherwise distinguishable from the area where food not for immediate consumption is sold and the retailer has a separate means of recording and accounting for collection of receipts from sales of both high and low rate foods. California has Revised its Publication that Addresses the Taxability of Combination Packages and Gift-Wrapping The California State Board of Equalization has revised its publication on gift-wrapping charges to include the taxability of gift packages with a combination of food and nonfood items. Gift packages that contain only food, such as cheese, crackers, or fruit, are generally exempt from tax. However, it may be necessary to determine the taxable portion of a package if nonfood products are included in the gift basket. Washington Readopts Reseller Permit Rules Two sales and use tax emergency rules have been readopted by the Washington Department of Revenue. The rules explain the application process and eligibility requirements for reseller permits and the brief adjudicative proceedings for matters related to reseller permits. Beginning January 1, 2010, seller’s permits issued by the Department replace resale certificates as the documentation necessary to substantiate a wholesale transaction. (WAC 458-20-10201 and WAC 458-20-10202, Washington Department of Revenue, effective December 29, 2009) (01/10) Ohio Explains Sourcing Changes The Ohio Department of Taxation explains the changes made to the way sales of tangible personal property and taxable services are sourced in an information release. Beginning January 1, 2010, vendors that previously switched to destination sourcing for delivery sales will now be required to source their sales to the location where the order is received rather than the delivery location. Remote sales, including mail order, telephone or online sales, by Ohio vendors to Ohio customers will also be sourced to the location where the order is received. Out-of-state vendors making sales to Ohio customers should source their sales to the location where the consumer receives the tangible personal property that was sold. The sale of taxable services should be sourced to the location where the consumer receives the service regardless if the service provider is located in or outside Ohio. No changes were made to the sourcing of lease transactions or direct pay permit holders. Minnesota Amends its Rules Regarding Food, Sales to Exempt Entities The Minnesota Department of Revenue has amended its rules on food, drinks, and meals; sales to exempt entities; and charitable, religious, and educational organizations. These amendments are temporary and will expire in November 2011. A Recent Case Impacts Sellers’ Use of the Resale Exclusion in Missouri The Missouri Department of Revenue has issued a release discussing the impact of the ICC Management, Inc. v. Director of Revenue case on the resale exclusion. In the case, the court ruled that ICC's purchases of food and consumables were not eligible for the resale exclusion and therefore, subject to sales tax. The court determined that since ICC's supply of food and consumables to inmates are not taxed due to the governmental sales exemption, then the rationale behind the resale exclusion (to avoid double taxation) does not apply. This change applies to all affected transactions occurring after September 1, 2009, the date the decision became final. (Release, Missouri Department of Revenue, December 23, 2009) (01/10) Virginia Assessment Properly Includes Storage Taxes in Sales Price of Fuel In response to a taxpayer’s letter, the Virginia Department of Taxation agreed with a retail sales tax assessment imposed on the taxpayer’s business that sells gas, diesel and heating fuels. The assessment properly included both the federal leaking underground storage tax and federal storage tax. Both storage taxes were directly in connection with the sale of fuel by the taxpayer, and should have been included in the sales prices for the intention of computing the sales and use tax on the taxpayer’s sale of fuel to its customers. Also, the storage taxes were not specifically listed in Virginia Code §58.1602 as the type of taxes that were excluded from the sales price for the purposes of computing the Virginia sales and use tax. Accordingly, the taxpayer’s sales of gas, diesel and heating fuels were subject to Virginia sales and use tax. (Ruling of Commissioner, P.D. 09-161, Virginia Department of Taxation, October 16, 2009) (01/10) Wisconsin Revises its Tax Publication on Digital Goods The Wisconsin Department of Revenue has revised its publication regarding the sales and use tax treatment of digital goods, specifically, newspapers and other news or information products. The sections that discuss digital books also had some small changes. In addition to explaining the taxability of digital goods, the publication gives details on seller's permits and use tax registration certificates, filing returns and paying tax, definitions, sourcing, and exemptions. (Publication No. 240, Wisconsin Department of Revenue, October 2009) (12/09) Internet and Catalog Purchases Are Taxable in Nebraska The Nebraska Department of Revenue has issued a news release to remind taxpayer that if an internet retailer or catalog company does not collect the state and applicable local taxes, they are still responsible for paying the tax as consumer’s use tax. For items such as clothing, books, and wine that are delivered into Nebraska, consumer use tax is due on the sale price, including the delivery and handling charges. The consumer use tax should be reported on the Nebraska Individual Consumer’s Use Tax Return Form 3. The return for purchases made during 2009 is due January 25, 2010. (News Release, Nebraska Department of Revenue, December 2, 2009) (12/09) Beverages Sold with Bartending Services are Meals in Massachusetts A liquor store, who sometimes delivers beverages to a customer and also provides related bartending services, was found subject to Massachusetts sales/meals tax. The store contended that it is not a restaurant and is not making sales of “meals” subject to sales/meals tax. The statutory definition of a restaurant includes caterers and any establishment where food or beverages are provided for a charge, regardless of who owns or operates the establishment. The argument that sales of alcohol alone are not considered meals was denied because a meal is defined as any food or beverage, or both. Since there is no agency relationship between the store and the customer, the question of whether the customer or caterer owns the meal at the time of sale is irrelevant. In addition, the taxable sales price includes fees for bartending and set-up, whether or not separately stated. (Letter Ruling 09-8, Massachusetts Department of Revenue, November 30, 2009) Sales by an Out-of-State Piano Vendor Deemed Taxable in Missouri An out-of-state piano vendor’s sales to Missouri customers were found subject to Missouri use tax. When sales are approved and finalized outside Missouri, they are not subject to sales tax. However, the sales are subject to Missouri use tax in cases when the vendor delivers the pianos and organs directly to the customer in Missouri. Missouri use tax is imposed for the privilege of storing, using or consuming any article of tangible personal property within the state. In addition, the vendor should collect the local use tax rate in effect where the piano or organ is first delivered in Missouri. (Letter Ruling No. LR5930, Missouri Department of Revenue, October 23, 2009) (12/09) Floor Coverings Purchased by Installer for Exempt Entities Deemed Taxable in Minnesota A taxpayer, that sells and installs carpets and floor coverings, was found liable for use tax on its purchases of materials for contracts with exempt entities. Under the contracts in question, the taxpayer would purchase the materials and install them for the exempt entities. Therefore, it was the Commissioner’s position that the taxpayer was acting as a contractor when it installed the carpeting and responsible for use tax on the materials being installed in the absence of a properly executed purchasing agent agreement. Minnesota law provides that if the exempt entity purchases materials directly, that purchase is exempt from taxation, but a purchase by a contractor for use in an improvement to the tax exempt entity's real property is taxable. Missouri Discusses the Taxability of Countertop Sales and Installations An out-of-state retailer was found liable for Missouri sales and use tax on its sales of uninstalled countertops. Conversely, the taxpayer was not required to collect tax on its sales of installed countertops to Missouri customers. The taxpayer sells home improvement products, such as countertops, both uninstalled and installed. Since an uninstalled countertop is tangible personal property, the taxpayer should collect sales tax on its sale to a Missouri customer. For the installed countertop sales, the fabrication and installation is subcontracted to other companies (Missouri supplier and out-of-state supplier). The suppliers bill the taxpayer for the fabrication and installation of the countertops. Therefore, the taxpayer is a contractor making improvements to the real property and should not collect sales tax from the customer. However, when the taxpayer subcontracts the installation to the third party suppliers, they are considered the final user of the countertop prior to it becoming part of the real property. As the final user of the item, the suppliers should self-remit sales or use tax on their cost of materials to manufacture and install the countertop. (Letter Ruling No. LR5820, Missouri Department of Revenue, August 7, 2009) (11/09) Ohio Adopts Rule on Negative Equity in Vehicles Sales The Ohio Department of Taxation has adopted a regulation on the tax treatment of negative equity in a vehicle sales transaction. "Negative equity" is a term applied when a motor vehicle purchaser is trading in a vehicle with a current value that is less than the amount owed on the existing loan for that vehicle. For example, a customer trades in a motor vehicle to a dealer in connection with the purchase of another vehicle. The dealer allows a $4,000 trade-in credit towards the purchase of the second vehicle, but the customer still owes $7,000 on the existing loan. The negative equity amount is $3,000. Missouri Private Jail Liable for Tax Due on Purchases of Consumables Provided to Inmates In a Missouri court case, a private jail operator's purchases of consumables (soap, meals and clothing) that were provided to inmates pursuant to contracts with municipalities were found taxable. The court found that in order to be eligible for the resale exemption the items purchased by the taxpayer had to subsequently be subject to a taxable sale at retail. The taxpayer argued that its purchases were eligible for the resale exemption because it purchased those products for resale to the municipalities that sent inmates to its jail facility. However, since the tax-exempt governmental entities were not required to pay sales tax on the consumable goods, an exemption from sales tax was not allowed. In addition, the taxpayer did not meet the statutory definition of a "seller," which also precluded it from the resale exemption. As a result of this court decision, the Missouri Department of Revenue has proposed an interpretation to implement this decision. At this time, it is unclear whether this interpretation will become a rule. This decision raises significant issues for all Missouri taxpayers who purchase items for resale, including raw materials, if they make sales to exempt customers. (ICC Management, Inc. v. Director of Revenue, Missouri Supreme Court, No. SC89559, June 16, 2009) (11/09) Mississippi Discussed the Reduced rate for Farm Tractors and Implements The Mississippi State Tax Commission has issued a notice concerning the 1.5% reduced state sales tax rate on purchases of farm tractors, farm implements and parts and labor for agricultural purposes beginning July 1, 2009. A farm tractor is defined as self-propelled equipment which performs no farm function other than to move, draw or furnish power to other implements which may be attached. A farm implement is a complete unit that performs a specialized mechanical function and is identifiable as a specific piece of equipment that is ordinarily and customarily used on a farm. All parts and labor purchased for the maintenance and/or repair of farm tractors and implements are also subject to the reduced 1½% rate of sales tax. If a tractor is purchased for non-agricultural purposes, it is subject to the full 7% rate of sales tax. Purchases of Packaging Used to Secure Yarn is Exempt in North Carolina A yarn manufacturer’s purchase of packaging material used to deliver yarn to its customers was found exempt from North Carolina sales and use tax. To ship its cones of yarn to customers, the taxpayer uses a “yarn pak” which is returned to the taxpayer for recycling and reuse. After the cones of yarn are packed into the yarn pak, the taxpayer typically wraps it in “shrink wrap,” overlapping the edges of the bottom and top pallets as well as the dividers. Although, the shrink wrap is not part of the yarn pak and is not necessary to hold the yarn pak together, it does provide a protective barrier against dust and moisture during shipping. Texas Discusses Aircraft Trade-Ins The Texas Comptroller indicated that an aircraft transaction that qualifies as a tax free exchange exempt from federal taxation under IRC- Section 1031 does not impact the taxability of a transaction for Texas sales and use tax. The sale or lease of an aircraft by a dealer engaged in business in Texas is subject to Texas state and local sales tax based on the total consideration paid for the aircraft. The total consideration may be adjusted for the value of a trade-in if (1) the title to the trade-in (aircraft) must pass to the seller of the new aircraft; (2) the aircraft being traded in must be separately identified to the purchaser of the new aircraft on an invoice, billing, sales slip or ticket, or contract; and (3) the seller's books and records must reflect the acceptance of the trade-in, the credit allowance for the trade-in, and the sale of the trade-in to a third party. (Letter No. 200903447L, Texas Comptroller of Public Accounts, March 30, 2009, received September 2009) (10/09) Free Flu Vaccines are Taxable in Iowa In a policy letter, the Iowa Department of Revenue determined that the free distributions of flu vaccines are subject to Iowa sales and use tax. The taxpayer was considering a campaign to provide free flu vaccinations, which do not require a prescription, to uninsured persons. The vaccine would be purchased outside of Iowa for subsequent use in Iowa. Therefore, it was determined that this flu vaccine distribution would be a use “incident to ownership” in this state and taxable in the initial instance under Iowa law. It was also noted that the vaccine is not a prescription drug and would not be exempt from Iowa sales and use tax. (Policy Letter No. 09300051, Iowa Department of Revenue, August 17, 2009) (10/09) Aircraft Repair, Maintenance, and Replacement Items Exempt in Illinois Illinois has amended its laws to include an exemption for aircraft repair, maintenance, and replacement items. Specifically, materials, parts, equipment, components, and furnishings incorporated into or upon an aircraft as part of the modification, refurbishment, completion, replacement, repair, or maintenance of the aircraft are exempt from Illinois retailers’ occupation tax, service occupation tax, use tax, and service use tax, beginning January 1, 2010. Consumable supplies, such as adhesive, tape, sandpaper, general purpose lubricants, cleaning solution, latex gloves, and protective films are also eligible for the exemption. Items used in modifying, replacing, repairing, and maintaining aircraft engines or power plants, however, are not eligible. West Virginia Adopts Taxation of Vehicles Legislation Effective July 1, 2009, the West Virginia Department of Transportation, Division of Motor Vehicles, enacted legislative regulations establishing the imposition of a 5% sales tax on vehicles prior to the issuance of a certificate of title. The division will collect the sales tax prior to issuing a title, regardless of whether the applicant has paid a similar sales or privilege tax on the vehicle in any other jurisdiction. The only exception applies to a new resident (person or business entity) establishing domicile in West Virginia is exempt from paying the tax on vehicles titled previously in the former state. The sales tax on applications for title on a vehicle purchased from a dealer either in-state or out-of-state is based on the purchase price minus any applicable trade-in vehicle: note: 1) the trade in vehicle must be titled in West Virginia; and 2) rebates received after the sale do not reduce the taxable purchase price. Furthermore, the sales tax does not apply to transfer of ownership without consideration (i.e. gifts, donations, or an inheritance). Kiosks and Sellers with Multiple Stores in Texas Discussed Kiosks and Sellers with Multiple Stores are Discussed in Texas Texas issued a notice on Senate Bill 636, which amends the definition of a “place of business” and changes how retailers who operate multiple places of business in Texas should collect local sales taxes. Illinois Discusses Rate Hike on Candy, Grooming Products, and Soft Drinks Illinois has released and information bulletin explaining the change in tax bases for certain classes of merchandise. Effective September 1, 2009, these items will be taxed at the general state rate of 6.25%. New Hampshire Tire Seller Not Liable for Tax in Massachusetts The Massachusetts Supreme Court reversed a decision made by the Appellate Tax Board and ruled that a New Hampshire tire seller was not liable for Massachusetts sales tax on sales made to Massachusetts residents in New Hampshire. The Department argued that due to the seller’s knowledge of the customers’ residence, the seller should have known the tires would be used in Massachusetts and, therefore, should have collected sales tax. After a review of a vendor’s liability for use tax, the Court denied the Commissioner’s arguments because the language in Massachusetts statute does not allow for the presumption of use that the Commissioner seeks to impose. Accordingly, the Appellate Tax Board’s decision was reversed. The court mentioned that the Legislature may, of course, enact such a presumption, but in the absence of any such statutory authorization, it is error to rely on a presumption that tires sold to a Massachusetts resident outside the Commonwealth were actually used in the Commonwealth. (Town Fair Tire Centers, Inc v. Commissioner of Revenue, Massachusetts Supreme Judicial Court, No. SJC-10360, August 25, 2009) (09/09) Utah Finds Exempt Organization Could Not Recover Taxes Reimbursed to Employees A Utah university sought clarification on the exempt purchase of goods by employees at point of sale. When employees made these purchases, they were charged sales tax. The university would reimburse employees for the sales tax paid. The university requested a refund of these reimbursed amounts as they were a 501(c)3 organization and were exempt from sales tax. The state found that the university was not eligible for a refund as the sales were not "made to" a charitable institution, as the applicable statute states. The sales were made to the employees of the university, who made the payments for the sales, even though they were for university use. (Private Letter Ruling, Opinion No. 08-014, Utah State Tax Commission, April 7, 2009) (09/09) Texas Discusses School Fundraising and Sales by School Organizations The Texas Comptroller of Public Accounts has released a publication detailing the taxability of sales made by schools and school organizations. The publication states that "school districts, public schools, qualified exempt private schools and bona fide chapters within a qualifying school" are eligible to make tax free sales on two days each calendar year. The school and a qualifying chapter, such as a yearbook club, can make tax free sales on two days, which do not have to occur at the same time. For example, the school can make sales of merchandise on a day and the yearbook club can make sales of yearbooks on another, and each club will have one additional day to make tax free sales. The publication details the types of clubs and sales which would be subject to these rules and can be found on the website of the Texas Comptroller of Public Accounts. (Publication 94-183, Texas Comptroller of Public Accounts, July 2009) (09/09) Trade-In Credit Not Excluded from Sales Price in Florida Florida has issued a technical Assistance Advisement stating that store credits issued in cards or paper form for use on a subsequent purchase are not excluded from Florida sales and use tax. The taxpayer believed that the trade-ins are taken at the time of sale as required in the Florida statute. However, it was determined that a subsequent purchase assumes that at the time of the trade-in, the customer has not identified, nor possessed, tangible personal property. Therefore, the future sale has not been executed at the time of the trade-in when the cards or paper credits are issued. It was further noted that the trade-in credits are analogous to a gift certificate or cash equivalent which is included in the sales price subject to tax. (Technical Assistance Advisement, No. 09A-038, Florida Department of Revenue, July 21, 2009) (09/09) Texas Amends Taxation of Motor Vehicle Gifts Effective September 1, 2009, the $10 tax imposed on the recipient of a gift of a motor vehicle only applies if 1) the gift is received from the recipient’s spouse, parent, stepparent, grandparent, grandchild, child, stepchild, sibling, guardian, or a decedent’s estate; or 2) the recipient is exempt from federal income taxation as an exempt organization that will use the vehicle for the organization’s purposes. All other transactions in which a motor vehicle is transferred without payment of consideration do not qualify as gifts and will be treated as ordinary sales. Partial Refund Allowed for Merchandise Returned for Less Than Original Purchase Price in New York A New York advisory opinion was issued addressing how much sales tax may be subject to a refund or credit when a retail customer returns merchandise, but receives less than the original purchase price as a refund. The New York Department of Taxation and Finance concluded that customers are entitled to only a partial refund of the sales tax, based upon the purchase price refunded. The retailer’s return policy explains that customers who do not return their merchandise within sixty days will only receive a partial refund. The partial refund is calculated based on a percentage reduction of the decreased value of the merchandise. The Department takes the view that since the sales tax is initially collected based upon the original transaction, the customer should be entitled to a refund of sales tax only to the extent the original transaction is undone (TSB-A-09(29), New York Commissioner of Taxation and Finance, July 15, 2009). (08/09) Services New York Exempts Litigation Support Services The New York Department of Taxation and Finance has issued an Advisory Opinion concluding that a company’s litigation support service is not subject to New York sales tax imposed on information services. Although it is considered an information service because it includes analyzing, compiling, and organizing customer information, the service does more that merely recast or reformat the customer’s information in that it adds to intelligence contained in the original documents. The company’s litigation support services are considered to be personal and individual in nature, and therefore not subject to New York State and local sales tax on information services. Furthermore, the taxpayer organizes and analyzes the customer’s own documents and does not provide the original documents, or the analysis, compilation, or organization, to any party other than the customer. The fact that the customer, in the context of a litigation discovery process, may provide the original documents to a third party does not change this result, because neither the taxpayer nor the customer is providing the information furnished by the taxpayer to others or incorporating the same into reports furnished to others. CDs Provided with Non-Taxable Missouri Services Exempt A printing company’s charges for scanning and imaging customer documents onto CDs for distribution to its customers were services not subject to Missouri sales tax. The true object of the transaction was not to obtain the CDs, but to obtain access to the customer’s own documents in a paperless format. The CD was merely a medium of transmission for the intangible product and incidental to a nontaxable service. Furthermore, the taxpayer’s charges per CD were not separated from the cost of the labor used in processing the scanned information and replicating the CDs. The production of the CDs was deemed a service rather than a taxable sale at retail. Since there was no sale of tangible personal property at retail, the taxpayer was not liable for sales tax on it production and distribution of the CDs. (Western Blue Print Co. v. Director of Revenue, Missouri Supreme Court, No. SC90172, April 20, 2010) (06/10) Indiana Use Tax Due on Waste Hauling Trucks Because Public Transportation Exemption Requirements Not Met An Indiana corporation engaged in waste hauling was found liable for use tax on the purchase and repair of trucks used to haul waste. The taxpayer argued that these trucks qualified for the public transportation exemption because it contracts with a broker who acts as the taxpayer’s agent in securing waste from customers for transport to landfills, and therefore does not own the waste and is transporting the property of another. Although it is undisputed that the language of the agreement between the taxpayer and the broker limits the agency relationship to the transportation of the material and not the material itself, the agreement does not contain language that suggests that the broker or the customers own the waste. The precedent set in other cases dictates that absent this specific language, the waste hauler is presumed to be the owner of the waste at the moment it is picked up. Since the taxpayer was found to own the waste, it is not transporting the personal property of another and therefore does not qualify for the exemption. (Letter of Findings No. 09-0591, Indiana Department of Revenue, April 29, 2010) (06/10) Indiana Car Dealerships Sales of Optional Warranty Contract and Purchases of Credit Reports Taxable The Indiana Department of Revenue found that a dealership’s sale of optional warranty contracts were subject to tax because the contracts were billed as a single price for the service, labor, and parts provided under the contract. Since the dealership did not separate the cost of the service from the cost of the cost of the tires and wheels that would be provided in the event of a repair, the Department’s decision to impose sales tax on the warranties is reasonable and within its statutory authority. California has Revised its Publication that Addresses the Taxability of Combination Packages and Gift-Wrapping The California State Board of Equalization has revised its publication on gift-wrapping charges to include the taxability of gift packages with a combination of food and nonfood items. Gift packages that contain only food, such as cheese, crackers, or fruit, are generally exempt from tax. However, it may be necessary to determine the taxable portion of a package if nonfood products are included in the gift basket. Ohio Explains Sourcing Changes The Ohio Department of Taxation explains the changes made to the way sales of tangible personal property and taxable services are sourced in an information release. Beginning January 1, 2010, vendors that previously switched to destination sourcing for delivery sales will now be required to source their sales to the location where the order is received rather than the delivery location. Remote sales, including mail order, telephone or online sales, by Ohio vendors to Ohio customers will also be sourced to the location where the order is received. Out-of-state vendors making sales to Ohio customers should source their sales to the location where the consumer receives the tangible personal property that was sold. The sale of taxable services should be sourced to the location where the consumer receives the service regardless if the service provider is located in or outside Ohio. No changes were made to the sourcing of lease transactions or direct pay permit holders. Caterer’s Rental of Audiovisual Equipment Taxable in New York The New York Supreme Court, Appellate Division, determined that a catering business should have paid sales tax on its rental of audiovisual equipment. Since the petitioner did not rent the equipment to anyone other than its catering customers, the rerental of the equipment is purely incidental to the primary purpose of the business and not a rerental that would qualify for the resale exemption. (21 Club, Inc. v. Tax Appeals Tribunal, New York Supreme Court, Appellate Division, Third Judicial Department, No. 505992, January 7, 2010) (01/10) Lighting Design Services Taxable in New York An advisory opinion determined a taxpayer’s lighting design services were subject to New York sales tax. The taxpayer performs these services as a subconsultant to architects and engineers and occasionally, the actual building owner. New York imposes sales tax on the sale of interior decorating and designing services (whether or not in conjunction with the sale of tangible personal property), by anyone, including interior decorators and designers, architects or engineers. However, New York does provide an exclusion from tax for services that consist of the practice of architecture or engineering, if they are performed by a licensed architect or engineer. This exclusion applies to a licensed architects or engineers sale of architectural or engineering services and not their purchases of design services. Therefore, the taxpayer’s sale of interior design services to architects or engineers do not qualify for the resale exclusion because the architects and engineers are not themselves selling a design service subject to sales tax. The incorporation of the taxpayer's design work into the architect's or engineer's own signed and sealed designs has no bearing on the taxability of taxpayer's service. The exclusion also does not apply because the taxpayer is performing design services and none of its employees are licensed architects or engineers. The Department also determined that the taxpayer’s sale of design services to the building owners who hire an architect or engineer separately were also subject to sales tax. The incorporation of the taxpayer's design work into the design performed by an architect or engineer does not affect the taxability of Petitioner's service. Professional Employer Organization Services Not Taxable in Pennsylvania A Professional Employer Organization’s (PEO) charges for providing certain human resources-related services (PEO Services) to clients through the placement the clients' employees on the payroll of the PEO were found not subject to Pennsylvania sales and use tax. Pennsylvania imposes sales tax on “help supply services,” which are defined as supplying temporary help on the payroll of the supplying entity that is under the supervision of the business to which help is furnished. However, the PEO’s services are performed solely by PEO's own employees, and the PEO, not the clients, supervise the employees providing the PEO Services. In addition, the PEO does not provide help, i.e., personnel, to any of its clients nor does it have a supply of potential employees to recommend to a client. (All Staffing, Inc. v. Pennsylvania, Pennsylvania Commonwealth Court, No. 325 F.R. 2006, January 5, 2010) (01/10) Entry Fee to Museum Taxable in Florida In a technical assistance advisement, the Florida Department of Revenue determined that payments made by museum patrons to a museum (the taxpayer) for the privilege of entering exhibits are subject to sales and use tax absent any applicable exemptions. In this situation, the exemption allowed for events sponsored by universities does not apply because the exhibits are not the result of exclusive faculty and student talent. In addition, the taxpayer is not allowed the exemption for sponsoring exhibits so long as it assumed 100 percent of the risk of the venture because this exemption was repealed July 1, 2009. (Technical Assistance Advisement, No. 09A-061, Florida Department of Revenue, November 23, 2009) (01/10) Web-Based Reports Delivered to Customers in New York are Subject to New York Sales Tax A taxpayer sale of a web-based report that allows retailers, shopping centers, and real estate developers to assess the potential success of specific retail brands for a given location was found subject to New York sales tax. The sale of information services, including the services of collecting, compiling or analyzing information and furnishing reports (excluding the furnishing of information which is personal or individual in nature and which is not or may not be substantially incorporated in reports furnished to other persons) is subject to sales tax. Generally, if a common database is used to generate reports, the information sold is taxable even though the reports may be customized to meet the specific needs of customers. In this situation, although the report about a potential tenant for a specific site location may seem to constitute information that is personal or individual in nature, the demographic information delivered by the taxpayer is common data base information that is available to and offered to any other person requesting information about potential tenants (which may include the same tenants that were suggested to the first requestor). Therefore, the charges by the taxpayer to for its reports constitute taxable information services when delivered in New York. For sourcing purposes, it is the point of delivery that determines the imposition of tax. Services are taxed based upon the location to which they are delivered notwithstanding that the service may have been performed elsewhere. The reports delivered to the customer in New York are subject to sales tax regardless of whether the site location that is the subject matter of the report is within or without the state. (TSB-A-09(55)S, New York Commissioner of Taxation and Finance, December 7, 2009) (01/10) Check Verification Service Not Taxable Information Service in New York A taxpayer’s service of providing check verification, under which the taxpayer provides a recommendation to a merchant to either accept or reject a customer’s check in payment for goods or services, was not subject to New York sales tax as an information service. The taxpayer provided its clients with advice as whether or not to accept a customer’s checks by using sophisticated analysis techniques and built in-house risk scoring systems. Taxable information services include collecting, compiling or analyzing information of any kind and furnishing reports thereof to other persons. Thus, the taxpayer’s service was not considered an information service. Even if it was considered an information service, receipts from those services would not be taxable because the information was personal and individual in nature and could not be substantially incorporated in reports furnished to other persons (Telecheck Services, Inc., New York Division of Tax Appeals, Administrative Law Judge Unit, DTA No. 822275, November 5 ,2009). (01/10) Missouri Discusses the Taxability of Countertop Sales and Installations An out-of-state retailer was found liable for Missouri sales and use tax on its sales of uninstalled countertops. Conversely, the taxpayer was not required to collect tax on its sales of installed countertops to Missouri customers. The taxpayer sells home improvement products, such as countertops, both uninstalled and installed. Since an uninstalled countertop is tangible personal property, the taxpayer should collect sales tax on its sale to a Missouri customer. For the installed countertop sales, the fabrication and installation is subcontracted to other companies (Missouri supplier and out-of-state supplier). The suppliers bill the taxpayer for the fabrication and installation of the countertops. Therefore, the taxpayer is a contractor making improvements to the real property and should not collect sales tax from the customer. However, when the taxpayer subcontracts the installation to the third party suppliers, they are considered the final user of the countertop prior to it becoming part of the real property. As the final user of the item, the suppliers should self-remit sales or use tax on their cost of materials to manufacture and install the countertop. (Letter Ruling No. LR5820, Missouri Department of Revenue, August 7, 2009) (11/09) Maine Expands Its Services Tax Base Maine Revenue Services has issued an information bulletin announcing the application of sales and use tax on certain specified services beginning January 1, 2010. Sales and use tax will now apply to certain amusement, entertainment, and recreations services such as admission fees to entertainment venues and performances. In addition, sales and use tax will apply to the following types of services: Installation, repair, and maintenance services; personal property services; and transportation and courier services. For further information, see General Information Bulletin No. 99. (General Information Bulletin No. 99, Maine Revenue Services, September 12, 2009, effective as noted) (10/09) Charges for Deliveries Made by Common Carrier Taxable in Alabama In an administrative law decision, a taxpayer’s charges for deliveries made by common carrier were determined to be taxable. The Taxpayer charged its customers a delivery fee on the sand, gravel, and similar products that it sells. The common carrier used by the Taxpayer to deliver the goods is also owned by the same individuals. Alabama law provides that a common carrier is deemed to be the agent of the seller. Consequently, if goods are delivered by common carrier, the sale is not closed until the common carrier finishes delivery of the goods to the customer. Therefore, the delivery charges are a part of the sale and subject to Alabama sales and use tax. However, the law further provides that transportation charges paid to a common carrier are not a part of the taxable selling price if billed as a separate item to and paid by the purchaser. The Court ruled that in this case, the common carrier was clearly acting as agent for the Taxpayer when it delivered the goods to the Taxpayer's customers and as such, the delivery fees charged by the Taxpayer constituted a part of the sales subject to tax. The exception noted also does not apply because while the Taxpayer billed the transportation charges to its customers as a separate item, the Taxpayer did not pay the common carrier for hauling the goods. (Alabama Rock, LLC v. Alabama Department of Revenue, Alabama Department of Revenue, Administrative Law Decision, No. S. 09-255, September 11, 2009) (10/09) Utah Provides Clarification on Sourcing The Utah State Tax Commission has revised its tax publication related to the sourcing of taxable sales in the state. The publication now clarifies that the retail sale of taxable services in Utah, when the seller sells, leases, or rents any tangible personal property (including products transferred electronically), should be sourced to the seller's fixed place of business or the customer's location depending on the seller's preference. If the seller does not have a fixed place of business, (vending machine operators, mobile tool companies, etc.), the seller should source the sale to the location where the sale took place. For sales at special events (fairs, swap meets, etc.), the event location should be used for sourcing purposes. In addition, retail sales of a taxable service where the seller does not sell, lease or rent any tangible personal property (including products transferred electronically), should be sourced to the customer's location. (Publication 25, Utah State Tax Commission, June 2009) (10/09) Free Flu Vaccines are Taxable in Iowa In a policy letter, the Iowa Department of Revenue determined that the free distributions of flu vaccines are subject to Iowa sales and use tax. The taxpayer was considering a campaign to provide free flu vaccinations, which do not require a prescription, to uninsured persons. The vaccine would be purchased outside of Iowa for subsequent use in Iowa. Therefore, it was determined that this flu vaccine distribution would be a use “incident to ownership” in this state and taxable in the initial instance under Iowa law. It was also noted that the vaccine is not a prescription drug and would not be exempt from Iowa sales and use tax. (Policy Letter No. 09300051, Iowa Department of Revenue, August 17, 2009) (10/09) Separately Stated Minimum Load Charges Exempt in Virginia A brick manufacturer’s minimum load charges were exempt from Virginia sales and use tax because they were separately-stated. The manufacturer uses a third party trucking company for deliveries to customers. The trucking company charges on a full load basis no matter how much brick is actually carried. Because of the rising cost of shipping and fuel, the trucking company’s charges were usually higher than the amount of freight. To recover the difference, the manufacturer charges a minimum load charge. The minimum load charges are add-on transportation or delivery charges, not handling charges or other taxable services in connection with a sale (Ruling of Commissioner, P.D. 09-76, Virginia Department of Taxation, May 26, 2009). (09/09) Missouri Discusses Taxability of Personal Training Fees Fees paid directly to personal trainers from customers for training services received are not subject to Missouri sales and use tax. However, fees paid by personal trainers to fitness centers for use of the facility are subject to sales and use tax. Fees that fitness centers charge their members for personal training services are also taxable. Under Missouri law, a fitness center is considered a place of amusement, and any fees paid to it, including for personal training, are subject to tax under Section 144.020.1(2) (Letter Ruling No. LR5806, Missouri Department of Revenue, July 24, 2009). (09/09) Temporary Help Services Not Taxable in Wisconsin The State of Wisconsin Tax Appeals Commission found that the temporary help services provided by a taxpayer were not subject to Wisconsin sales tax. The taxpayer provides its clients workers with a wide range of skills who work under the direction and control of those clients. The taxpayer pays the wages of the workers it places and also pays for withholding taxes, other payroll expenses and, in some circumstances, certain fringe benefits. In addition, the taxpayer does not contract to provide certain outcomes or results, supply tools or equipment for its workers, or train its employees to provide a particular outcome. The Department of Revenue argued the “look through” position which states that when a worker placed by the taxpayer performs a task which would be taxable if provided as part of a taxable service, then the taxpayers’ gross receipts related to that task are subject to the sales tax. On the other hand, the taxpayer contended that temporary help services are not one of the services enumerated under Wisconsin law and provided several claims in support of this. Additionally, the taxpayer was audited three previous times and was not issued a similar assessment. The Commission found that Department's approach goes against the rule of construction that taxes may only be imposed by clear and express language, with all doubts and ambiguities resolved in favor of the taxpayer. It was also mentioned that "temporary help services" are not listed as a taxable service, and that such services are distinguishable from the services enumerated in the Wisconsin statutes. (Manpower Inc. v. Wisconsin Department of Revenue, Wisconsin Tax Appeals Commission, No. 05-S-046, August 12, 2009 (09/09) Texas Decides Charges for Manufacturer’s Solid Waste Disposal Were Taxable The Texas Court of Appeals has upheld a District Court’s decision that a plastic closure manufacturer was not entitled to a refund of sales tax paid on charges for removal and disposal of waste from its plant. The manufacturer paid a single charge for the disposal of commingled manufacturing waste, discarded wrapping and packaging materials, and office and cafeteria waste. The relative amounts contributed by each category was not differentiated or documented. Although subsequent tests of the composition of the waste stream indicated that at least 95% of the solid waste removed would qualify for exempt industrial waste removal and disposal, the manufacturer did not adequately document with “books and records” the composition of the waste stream during the periods at issue. Alabama Rules on Taxability of Paint Used on Government Aircraft The Alabama Department of Revenue has ruled on a taxpayer's claim that paint used on government aircraft was not subject to sales and use tax. The Department of Revenue disagreed with the taxpayer's claim that the paint used on an aircraft was for corrosion protection and, therefore, qualified as a part installed on the aircraft. The definition of "parts and pieces" cited by the taxpayer related to parts used in the repair of an automobile. Another definition in the same regulation stated that painting was a service and that any materials consumed in the performance of the painting service were subject to use tax payable by the party performing the service. The taxpayer was responsible for the use tax based on these definitions. (Helispec LLC v. Alabama Department of Revenue, Alabama Department of Revenue Administrative Law Division, No. S. 08-661, July 24, 2009) (09/09) Simplified Sales Tax Kansas Legislation Conforms to SST Agreement changes Senate Bill 430, effective upon publication in the Kansas Register, conforms Kansas provisions with the recent changes to the Streamlined Sales and Use Tax (SST) Agreement. Specifically, the legislation replaces provisions governing direct mail sourcing with and without a direct pay permit with provisions governing advertising and promotional direct mail and other direct mail. S.B. 430 defines advertising and promotional direct mail as printed material that meets the definition of direct mail for which the primary purpose is to attract public attention to a product, person, business or organization, or to attempt to sell, popularize, or secure financial support for a product, person, business, or organization. A purchaser of advertising or promotional direct mail can provide the seller with 1) a direct pay permit; 2) an exemption certificate or other statement approved, authorized, or accepted by the secretary claiming direct mail; or 3) information showing the jurisdiction to which the advertising and promotional direct mail is to be delivered to recipients. Other direct mail has also been updated by S.B. 430 to be defined as any direct mail that is not advertising and promotional direct mail, regardless of whether such advertising and promotional direct mail is included in the same mailing. A purchaser of other direct mail may provide the seller with 1) a direct pay permit, or 2) an exemption certificate, or other statement approved, authorized, or accepted by the secretary claiming direct mail. Florida SST Conformity Legislation Dies Florida bill numbers do not carry over from one session to another, so any bills that did not pass are considered dead. Legislation that would have brought Florida into conformity with the Streamlined Sales and Use Tax (SST) Agreement effective January 1, 2011, died on April 30, 2010. H.B. 165 was prefiled October 1, 2009, and S.B. 204 was prefiled October 5, 2009. It is not clear when (or if) the legislation will be introduced in a future session. (H.B. 165 and S.B. 204, died upon adjournment of the Florida Legislature on April 30, 2010) (05/10) Washington Commercial Printer Must Follow Destination-Based Sourcing As Washington follows the Streamlined Sales and Use Tax Agreement’s destination-based sourcing rules, a commercial printer that performs bid distribution and other printing jobs was required to source its print jobs and sales of paper and supplies to the location where the customer takes receipt of those items. The taxpayer did not qualify for the direct mail sourcing rule because it delivers its own products and does not deliver its printed material by U.S. mail or other delivery service to a mass audience. (Tax Determination No. 09-0203, Washington Department of Revenue, July 31, 2009, released April 30, 2010) (05/10) Hawaii SST Conformity Legislation Dead Hawaii SST Conformity Legislation Dead. A bill that would have conformed Hawaii, an advisor state on the SST Governing Board, to the provisions of the Streamlined Sales and Use Tax (SST) Agreement died on April 29, 2010. The legislation, as passed by the Senate, would have: Utah Legislation Amended for SST Agreement Conformity Utah legislation, H.B. 50, Laws 2010, has amended the Sales and Use Tax Act to conform with recent changes to the Streamlined Sales and Use Tax (SST) Agreement. Amended provisions include sourcing of transactions involving a prepaid wireless calling service, the definition of bundled transaction, and the tax rate at which sales and use taxes are collected. SST Panel Interprets Souring Rule of Short-Term Rentals In December 2009, a release was issued by Ohio, an SST associate member state, announcing that the state had changed its laws to benefit from a Streamlined Sales Tax (SST) Agreement amendment that retains origin sourcing for most sales. However, the release stated that leases of tangible personal property generally must be sourced on a destination basis. Hawaii Introduces SST Conformity Legislation The Hawaii House of Representatives has introduced legislation to conform Hawaii’s general excise tax laws to the provisions of the Streamlined Sales and Use Tax (SST) Agreement. Hawaii, an advisor state on the SST Governing Board, could petition to become a full member state if this legislation is enacted. SST Conformity Legislation Introduced in Virginia The Virginia Senate has introduced legislation to conform Virginia laws to the Streamlined Sales and Use Tax Agreement, effective July 1, 2011. Previous sessions have failed to pass this legislation. (S.B. 340, as introduced in the Virginia Senate on January 13, 2010) (01/10) Nevada Adopts SST Rules The Nevada Tax Commission has adopted regulations that conform to the Streamlined Sales and Use Tax Agreement laws. These regulatory changes included the following: Wisconsin Taxability of Equipment Provided with Operator Changed In order to conform to the requirements of the Streamlined Sales and Use Tax (SST) Agreement and the definition of lease or rental, the Wisconsin Department of Revenue has made changes in the sales and use tax treatment of equipment provided with an operator. In general, effective October 1, 2009, when equipment is provided with an operator that does more than maintain, inspect, or set up the equipment and the operator is necessary for the equipment to perform in the manner for which it is designed, the transaction is considered to be a service and not a lease or rental of the equipment. Before October 1, 2009, when equipment was provided with an operator, the tax treatment of the transaction depended on who was responsible for the satisfactory completion of the job. For information on how this change specifically relates to: Leases and Rentals of Equipment, Equipment Used to Provide a Service and Service Contracts for Equipment please visit the department’s Web site at http://www.dor.state.wi.us/taxpro/news/index.html for the news release “Equipment Provided with Operator – Tax Treatment Changed.” (News for Tax Practitioners, Wisconsin Department of Revenue, December 4, 2009) (01/10) SST Panel Releases Report on 2009 Compliance of Member States The SST Compliance Review and Interpretations Committee (CRIC) has issued a report on its annual recertification review of member states. All states except Indiana and Iowa were found to be in compliance. The SST Governing Board will review the CRIC’s report and recommendations at their December 17 teleconference meeting. (2009 Compliance Review Report, SST Compliance Review and Interpretations Committee, December 4, 2009) (12/09) Vermont Discusses the Sourcing of Wireless Prepaid Calling Services The Vermont Department of Taxes noted that Vermont sources the sale of wireless prepaid calling sources in accordance with Section 310 of the Streamlined Sales and Use Tax Agreement. Section 314, subsection (C)(3) says that the sourcing for wireless prepaid calling services will follow the sourcing rules of section 310. It also states that the rule provided in Section 310, subsection (A)(5) shall include as an option the location associated with the mobile telephone number. (Streamlined Sales Tax, Vermont Department of Taxes, November 2009) (12/09) Hawaii SST Non-Conformity - Bill Vetoed Hawaii Governor Linda Lingle has vetoed Senate Bill 1678, which would have conformed Hawaii general excise tax laws with the Streamlined Sales and Use Tax Agreement. Although the Senate voted 23-2 to override the veto, the House of Representatives declined to override the veto; thereby, making the veto stand. The bill would have moved certain tax rates to new chapters (i.e. 0.5% tax on wholesale transactions); added a new chapter on the taxation of imports of property, services, and contracting; and eliminated the tax on businesses owned by disabled persons. Furthermore, the legislation would have provided for destination-based sourcing and amnesty. (S.B. 1678, vetoed by Hawaii Gov. Linda Lingle on July 15, 2009; Telephone Conversation, Hawaii Legislative Reference Bureau, July 16, 2009) (08/09) Wisconsin SST Amnesty Program Enacted As part of Wisconsin’s membership in the Streamlined Sales and Use Tax Agreement, Wisconsin will offer a sales tax amnesty program for qualifying businesses that currently are not registered to collect and remit sales and use tax. The Wisconsin amnesty period runs from July 1, 2009 to September 30, 2010. To qualify, businesses must voluntarily register (between the above dates) to collect and remit Wisconsin sales tax, as well as sales tax for all other states that have been members of the SST Agreement for at least 36 months. Businesses that meet the eligibility requirements and register for the program will not be required to remit Wisconsin sales and use tax on sales made prior to registration for the amnesty program. The program does not apply to any sales and use tax that a person owes as a purchaser. Businesses are eligible for the program unless one or more of the following apply: 1) currently registered to collect Wisconsin sales tax; 2) registered to collect Wisconsin sales tax at any time during the past 12 months; 3) received an audit notice, unless the audit and all related appeals are resolved; and/or 4) committed or been involved in fraud or intentional misrepresentation. Additional rules and regulations apply. (Wisconsin offers Streamlined Sales Tax amnesty program, Wisconsin Department of Revenue) (08/09) TelecommunicationsIndiana Updates Telecommunication Bulletin – Ancillary Services Exempt An updated bulletin on telecommunications services, released by the Indiana Department of Revenue, highlights that ancillary services do not qualify as telecommunications services and are therefore not taxable. Pursuant to Indiana legislation, the definition of ancillary services means services that are associated with or incidental to the provision of telecommunication services, including detailed telecommunication billing, directory assistance, vertical services, and voice mail services. Furthermore, a vertical service is defined under the Streamlined Sales and Use Tax Agreement to mean an ancillary service that is offered in connection with one or more telecommunication services, which offers advanced calling features that allow customer to identify callers and to manage multiple calls and call connections, including conference bridging services. Call waiting, caller ID, call forwarding, distinct ringing, and voice mail services all qualify as vertical services and are therefore exempt. (Informational Bulletin #51T, April 8, 2010) (04/10) Indiana Information Bulletin Explains Taxability of Telecommunication Services The Indiana Department of Revenue has issued an Information Bulletin explaining the taxability of telecommunications services. Telecommunication service means the electronic transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals to a point or between or among points. The term also includes the transmission, conveyance, or routing in which computer processing applications are used to act on the form, code, or protocol of the content for purposes of transmission, conveyance, or routing regardless of whether the service is referred to as voice over Internet protocol services or is classified by the Federal Communications Commission as enhanced or value added. The bulletin also provides several examples of the taxability of telecommunications service transactions involving public utilities, retail transactions for telecommunication providers, and miscellaneous charges (Information Bulletin #1T, November 2009). (01/10) Wyoming Clarifies Telecommunications Services Sourcing The sourcing rules for ancillary services and prepaid wireless calling services are clarified in a policy statement issued by the Wyoming Department of Revenue. The sourcing rules for these two services were left out of the telecommunications sourcing rules adopted by the legislature in the 2006 Budget Session. Therefore, until these services can be added to the Wyoming Statutes by the legislature, it will be the intent and practice of the Department of Revenue to source these two services in accordance with the Streamlined Sales and Use Tax Agreement, as stated below. Mandatory Charges Related to Telecommunication Services are Taxable in Missouri The Regulatory Cost Recovery Charge, the Federal Universal Service Charge, and the Municipal Gross Receipts Surcharge collected by a telephone company are mandatory charges subject to state and local sales tax. These charges and the tax are included on the billing statement so the telephone company can recover its cost for providing telecommunication services. Since the charges and tax are direct costs of the telephone company and not the customer, they are also included in the basic rate subject to tax. (Letter Ruling No. LR5980, Missouri Department of Revenue, October 30, 2009) (12/09) Vermont Discusses the Sourcing of Wireless Prepaid Calling Services The Vermont Department of Taxes noted that Vermont sources the sale of wireless prepaid calling sources in accordance with Section 310 of the Streamlined Sales and Use Tax Agreement. Section 314, subsection (C)(3) says that the sourcing for wireless prepaid calling services will follow the sourcing rules of section 310. It also states that the rule provided in Section 310, subsection (A)(5) shall include as an option the location associated with the mobile telephone number. (Streamlined Sales Tax, Vermont Department of Taxes, November 2009) (12/09) Use Tax Aircraft Subject to Florida Use Tax An aircraft that was purchased and repaired in California more than six months to its use in Florida will be subject to Florida use tax because the taxpayer purchased the aircraft with the intent to base and use the aircraft in Florida. The taxpayer stated that the aircraft should be exempt from use tax because Florida law provides that an aircraft purchased outside the state and used in another state for six months or more prior to the time it is brought into Florida is presumed to be exempt as purchased for use outside of Florida. However, the taxpayer had indicated that the aircraft was intended to be used in Florida at the time of purchase, including that the aircraft would be flown to and be based in Florida following the repair and restoration work to render the aircraft serviceable. Any presumption that the aircraft was purchased for use outside Florida was rebutted with the taxpayer’s stated intent to base the aircraft in Florida following the repair and restoration work. (Technical Assistance Advisement, No. 10A-006, Florida Department of Revenue, February 10, 2010, released May 2010) California Reminds Use Tax Registrants of April Deadline The California State Board of Equalization (BOE) has notified more than 180,000 taxpayers that they are required to register with the BOE under a new law in order to report and pay their use tax liability for purchases subject to use tax for the previous calendar year. On April 1, 2010 the BOE issued a news release reminding taxpayers required to register, to a file a return and remit the use tax due directly to the BOE on or before April 15, 2010. However, at its March Board Meeting, the Board directed staff to make it clear to taxpayers that they may request relief from penalty or an extension. In response, forms for both requests have been placed on the home page of the BOE website and other locations for the taxpayer, including form BOE-735, Request for Relief of Penalty. South Carolina Explains Temporary Storage Exclusion The Department of Revenue issued a ruling on the qualification of property temporarily stored in South Carolina. The Department ruled that property purchased at retail (not wholesale) outside of the state and purchased for primary use outside of the state is exempt from South Carolina use tax. The party claiming this exclusion must have records proving the known intended use at time of purchase and proof showing that the purchases were retail purchases and not wholesale. For purposes of this provision, "storage" means keeping property purchased in the state for any purpose other than sale or subsequent use outside the state. (Revenue Ruling 09-17, South Carolina Department of Revenue, November 19, 2009) Jet Engine Imported for Use as Spare Part not Subject to Use Tax in Hawaii A commercial airline’s purchase and subsequent importation of a jet engine into Hawaii for use as a spare part in the repair and maintenance of its jet aircraft fleet is not subject Hawaii use tax. The definition of “use” provides an exemption from use tax for material, parts, or tools imported or purchased by a person licensed under chapter 237 which are used for aircraft service and maintenance. Since the jet engine’s primary purpose is that of a spare part in furtherance of aircraft or aircraft engine upkeep, it constitutes a “part” and not a taxable “use.” (Letter Ruling No. 2010-01, Hawaii Department of Taxation, January 22, 2010) (03/10) Connecticut Issues Individual Use Tax Guidance The Connecticut Department of Revenue has issued a new informational publication that answers commonly asked questions about Connecticut use tax. This publication modifies and supersedes Informational Publication 2007(27), Q & A on the Connecticut Individual Use Tax. The new publication discusses various topics including: who must pay use tax, what kinds of goods or services are subject to use tax, exemptions available, how to report use tax liabilities, purchases made for use in the trade or business, purchases made from an out-of-state mail-order company, television shopping channel, or over the Internet, use tax filing requirements for motor vehicles, snowmobiles, vessels, and aircraft, and the penalties and interest for not paying the use tax. (Informational Publication 2009(33), Connecticut Department of Revenue Services, December 29, 2009) (01/10) Internet and Catalog Purchases Are Taxable in Nebraska The Nebraska Department of Revenue has issued a news release to remind taxpayer that if an internet retailer or catalog company does not collect the state and applicable local taxes, they are still responsible for paying the tax as consumer’s use tax. For items such as clothing, books, and wine that are delivered into Nebraska, consumer use tax is due on the sale price, including the delivery and handling charges. The consumer use tax should be reported on the Nebraska Individual Consumer’s Use Tax Return Form 3. The return for purchases made during 2009 is due January 25, 2010. (News Release, Nebraska Department of Revenue, December 2, 2009) (12/09) UtilitiesWashington Amends Rule on Motor Vehicle and Special Fuels Exemption The Washington Department of Revenue has amended its rule on motor vehicle and special fuels exemptions as they relate to public transportation benefit areas (PTBA), county owned ferries, and county ferry districts. The amendment provides exemptions from sales and use tax for motor vehicle fuel or special fuels that are purchased for use in passenger-only ferry vessels. Previously, the exemption for PBTAs was not limited to passenger-only ferries only. (WAC 458-20-126, Washington Department of Revenue, effective January 9, 2010) (12/09) |
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