Wednesday, February 22, 2012

New York recently enacted legislation, which is set to take effect on March 1, that provides a sales tax exemption for electronic news services and electronic periodicals. While New York taxes information services, this legislation makes it clear that services meeting the definition of either an electronic news services or electronic periodical are not subject to tax. There are multiple requirements built into the definition of an "electronic news service." First and foremost, an electronic news service is a service that has the predominant purpose of presenting news content and that is delivered, furnished or provided to, or accessed by, the purchaser electronically or digitally. Additionally, the services news content must (1) be prominently featured; (2) include general news that is accessible without the use of a search function; (3) be newly published or updated at least daily unless the service specifies some other interval; and (4) be predominantly written or produced by employees or by independent contractors engaged by the person providing the service or be purchased from contracted wire services. Similarly, an "electronic periodical" is a publication that is delivered, furnished or provided to, or accessed by, the purchaser electronically or digitally, and its content must meet several conditions. An electronic periodical's predominant purpose is the presentation of news content, which it prominently features, and that content must be predominantly written or produced by employees or by independent contractors engaged by the person providing the service or be purchased from contracted wire services. Furthermore, to qualify as an electronic periodical, the publication must be published at stated intervals, at least as frequently as four times a year, but no more than weekly. The exemption for electronic news services is subject to a cap, but the exemption for electronic periodicals is not capped. The Department of Taxation and Finance recently published guidance that explains the operation of the cap and clarifies circumstances in which an electronic periodical or news service is combined with other components and sold for a single price. See N.Y. Technical Memo. TSB-M-12(1)S (Dept. of Taxn. and Fin. Jan. 31, 2012)

Tuesday, February 21, 2012

The West Virginia State Tax Department recently issued guidance regarding the taxability of food and food products in the state (W. Va. Taxpayer Services Division Publications TSD-419 (Jan. 1., 2012)). As of January 1, 2012, West Virginia has lowered the tax rate for food. Items that fall within the definition of food and food products are now subject to sales tax at the recently reduced tax rate for food, which is 2%. Prior to 2012, West Virginia taxed food at a 3% rate. Prepared food items and items that do not otherwise fit within the definition of food and food products are subject to tax at the regular rate of 6%.

Monday, February 20, 2012

The Massachusetts Department of Revenue (DOR) recently issued a letter ruling discussing the taxability of pre-packaged salads sold in grocery stores (Mass. Ltr. Rul. No. 12-2 (Dept. of Revenue Feb. 8, 2012)). Massachusetts generally exempts sales of food products from sales tax. But, in contrast, Massachusetts taxes "meals" sold by restaurants. "Meals" are defined as "any food or beverages or both, prepared for human consumption and provided by a restaurant, where the food or beverage is intended for consumption on or off the restaurant premises, and includes food or beverages sold on a 'take out' or 'to go' basis, whether or not they are packaged or wrapped and whether or not they are taken from the premises of the restaurant." While grocery stores are not typically classified as restaurants, the DOR determined that "salads sold as a unit in a manner reasonably and commonly considered a meal such as on a plate or otherwise packaged as a meal," will be subject to tax as a "meal." In reaching this conclusion, the DOR reasoned that the pre-packaged salads constitute a "combination plate sold as a unit reasonably and commonly considered a meal."

Friday, February 17, 2012

The Missouri Department of Revenue recently issued a letter ruling regarding the taxability of face painting services performed at fairs and festivals (Mo. Ltr. Rul. No. LR 7007 (Dept. of Revenue Feb. 16, 2012)). Services are not subject to tax in Missouri unless they are specifically listed as taxable, and Missouri does not specifically include face painting in its list of taxable services. However, Missouri imposes sales tax on "fees paid to, or in, any place of amusement, entertainment or recreation, games and athletic events." Because fairs and festivals are considered places of amusement, a face painter who performs services for pay at fairs or festivals must charge and remit sales tax.

Thursday, February 16, 2012

The Missouri Department of Revenue (DOR) recently issued a letter ruling discussing the taxability of optional software support and maintenance agreements relating to pre-written (canned) software that is customized for specific customers' needs (Mo. Ltr. Rul. No. LR 6998 (Dept. of Revenue Jan. 23, 2012)). The services covered under those agreements included 24 hour customer service by phone, access to FAQs and other online support materials, service calls by trained technicians, and canned software program upgrades. The DOR explained that these agreements are subject to tax in two situations. First, if the original sale of the software was taxable (e.g., the sale of canned software delivered in a tangible format), then a maintenance agreement that includes canned software upgrades to that software is also taxable. This is presumably true even if the canned software upgrades are delivered electronically. Second, if the optional maintenance agreement includes canned software upgrades that are delivered in a tangible format, then it will be subject to tax. This is presumably true even if the original canned software was not subject to tax (e.g., the sale of canned software delivered electronically). In either event, if the amount attributable to the canned software upgrades is separately stated, then tax applies only to that amount and not to the amount attributable to services. If the amounts attributable to canned software upgrades and services are not separately stated, then tax is due on the entire lump-sum charge for the agreement.

Wednesday, February 15, 2012

The Missouri Department of Revenue has issued a letter ruling discussing the taxability of aircraft parts and accessories sold as part of installations and repairs (Mo. Ltr. Rul. No. LR 7002 (Dept. of Revenue Dec. 20, 2011)). The sale of materials, replacement parts, and equipment used directly in the "modification, replacement, repair, and maintenance of aircraft, aircraft power plants, and aircraft accessories," are specifically exempt from tax. This is true regardless of whether the charges for these services are separately stated on the customer's bill.

Tuesday, February 14, 2012

The Utah State Tax Commission recently amended Utah Administrative Rule 865-19S-32 to reflect the fact that fuel charges incurred during the rental or lease of motor vehicles are exempt from tax if the fuel charges are optional and separately stated on the invoice. Originally, the regulation stated only that the rental or leasing of motor vehicles is subject to tax.

Friday, February 10, 2012

The Illinois Department of Revenue recently issued a general information letter discussing the taxability of textbooks purchased by school districts and subsequently resold to students. (Ill. Gen. Info. Ltr. ST 12-0003-GIL (Dept. of Revenue Jan. 11, 2012)). School districts in Illinois that purchase and sell textbooks to their students must register as a retailer and charge and remit sales tax on those sales. According to the Illinois Department of Revenue, “when governmental units make sales that are not in direct performance of their governmental function, the sales are generally taxable.” This is to ensure that governmental entities do not have a competitive advantage when selling items that are also sold by other Illinois retailers. Thus, school districts may purchase these items tax-free using a resale certificate, but they cannot use their status as an exempt governmental entity to purchase items tax-free. However, a school district may rent textbooks to students tax-free, as Illinois imposes no tax on rental receipts.

Friday, February 10, 2012

The Illinois Department of Revenue (DOR) recently released a General Information Letter explaining the tax treatment of layaway service fees (Ill. Gen. Info. Ltr. ST 12-0007-GIL (Dept. of Revenue Jan. 31, 2012)). The letter addressed two different, but related service fees: a non-refundable layaway service fee charged to a customer by a retailer when the layaway service is initiated, and a layaway cancellation fee that is only charged to a customer when that customer has cancelled the layaway arrangement. The DOR stated that the non-refundable layaway service fee is subject to tax. Illinois views the layaway service fee as a cost of doing business that is subject to tax similar to “handling” charges. In the scenario discussed in the letter, if the customer chooses later to not purchase the item on layaway, all money paid on the item, including tax paid, is refunded (except for the initial non-refundable layaway service fee). At that point, any additional cancellation fee that the retailer charges its customers upon cancellation will not be subject to tax because the fee is only imposed if the sale of tangible personal property is not completed, so it is not a part of the cost of selling tangible personal property.

Wednesday, February 08, 2012

The Retail Industry Leaders Association (RILA) plans to spend much of 2012 encouraging Congress to consider two bipartisan bills aimed at providing greater sales tax equality between purchases made through online retailers and purchases made in-store. Senate bill 1832, the "Marketplace Fairness Act," and House resolution 3179, the "Marketplace Equity Act," aim to prevent online retailers from being exempt from state sales tax laws in regards to items purchased online where tax would normally apply. RILA believes that current sales tax exemptions for online retailers give them an "unfair advantage over local businesses."

Tuesday, February 07, 2012

The Iowa Department of Revenue recently clarified the tax treatment of Groupons purchased by Iowa residents. Groupon and other similar programs allow customers to purchase discounted deals that they can later use at local businesses. The Department stated that if the Groupon voucher that the customer presents states on its face the price paid by the customer to Groupon, tax will be collected on that amount rather than the full (non-discounted) price of the item purchased. For example, if the customer purchases $100 worth of clothing and presents the store with a Groupon voucher for $50, tax will only be collected by the store on the $50 face amount of the voucher. However, if the voucher does not state the price paid by the customer for the voucher, tax will be collected on the full price of the item(s) purchased. Using the same example, if the customer presents a voucher for the clothing that does not include the price paid on its face, the customer will be charged tax on the full price of the item, or $100.

Tuesday, February 07, 2012

The California Board of Equalization recently issued guidance regarding the taxability of interior designers. In California, interior designers must charge and remit sales tax on the sale of all tangible personal property sold to their customers, unless a specific exemption exists. Additionally, any fees charged to customers for professional services that are in connection with the sale of taxable tangible personal property will also be subject to tax. Fees for professional services that have no connection to the sale of taxable tangible personal property will be exempt from tax. Labor charges related to fabrication labor will be subject to tax, whereas repair or installation labor charges or charges for work performed on real estate will be exempt from tax. Additional information regarding specific interior design transactions can be found in California State Board of Equalization Information Publication Number 35.

Friday, February 03, 2012

The Missouri Department of Revenue recently issued a letter ruling discussing the taxability of construction services in the state. According to the ruling, installing protective plastic sheeting at construction sites is not subject to sales tax in Missouri. Contractors and subcontractors install plastic sheeting to protect items from being damaged during the construction process. Services performed in the state are generally not subject to tax unless specifically identified as taxable. Since plastic sheeting installation is not specifically identified, it will not be subject to tax. However, the plastic sheeting purchased by the contractor or subcontractor and consumed during the performance of the service will be subject to tax as tangible personal property. It is consumed as part of the non-taxable service and, therefore, does not qualify as a sale for resale.

Thursday, February 02, 2012

The New York Department of Taxation and Finance has published guidance to clarify recently enacted legislation providing sales tax exemptions for electronic news services and electronic periodicals. The legislation distinguishes between the two services; electronic news services provide the purchaser with daily updated news content, while electronic periodicals are published at least four times per year but no more than once a week. When the exemptions take effect, electronic news services will be exempt unless the subscription fee meets or exceeds a specified cap amount. The cap amount will be determined and posted annually by the Department. Electronic periodicals will also be exempt, but, unlike electronic news services, there will be no applicable cap amount for electronic periodicals. Additionally, information services, telephony and telegraphy, and telephone and telegraph services used by electronic news services in collecting and circulating news can also be purchased exempt from tax. These new provisions will take effect beginning March 1, 2012.

Thursday, January 19, 2012

In a recent Sales Tax Facts Newsletter, the Kentucky Department of Revenue explained the taxability of "deal-the-day" vouchers. In Kentucky, the sale of "deal-of-the-day" vouchers (such as those offered by Groupon or Living Social) for good or services will be treated as the sale of a gift card for sales and use tax purposes. Sales tax will not be charged on the sale of the voucher. However, sales tax is due on the total price of the product or service purchased using the voucher.

Thursday, December 22, 2011

The Utah State Tax Commission recently issued a private letter ruling addressing the taxability of PowerPoint presentations sold to Utah customers. Generally, the sale of tangible personal property or products delivered electronically are subject to sales and use tax in Utah. A Utah company creates PowerPoint presentations for their customers and then transfers the finished product to them either via a tangible medium or electronically. The Commission had to determine whether the true object of this transaction was obtaining the service (creating the PowerPoint presentation) or the sale of tangible personal property. The Commission found that the true object of the transaction was the sale of the finished PowerPoint presentation, not the sale of the service. Therefore, the sale is subject to tax as tangible personal property or property transferred electronically.

Wednesday, December 21, 2011

The Indiana Department of Revenue clarified its sales tax exemption for food and food ingredients in a recent Information Bulletin. Indiana exempts the sale of food and food ingredients for human consumption. The bulletin explains that this exemption applies to what is commonly referred to as "grocery food. " For purposes of the exemption, "food" is defined as substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and that are consumed for their taste or nutritional value. However, the term "food" does not include tobacco, alcoholic beverages, candy, dietary supplements, or soft drinks, so sales of those items are not exempt. The bulletin has lists of examples of exempt food items and taxable grocery items and candy.

Tuesday, November 22, 2011

The Virginia Department of Taxation recently issued a ruling that call tracking services are subject to the communications sales and use tax but not the retail sales and use tax. Call tracking collects information about the calling customers through the use of toll free numbers. Services are generally exempt from the retail sales and use tax in Virginia unless specifically identified as taxable. Since this service is not specifically identified and does not involve the exchange of tangible personal property, it is not subject to the retail sales and use tax. However, the Department of Taxation provides a non-exclusive list of communication services that are subject to the state communications sales and use tax and “800 services” are included on that list. The Department of Taxation has determined that call tracking services fall within the definition of “800 services” and are therefore subject to the communications sales and use tax.

Monday, November 21, 2011

Iowa recently enacted a sales tax refund for qualified biodiesel producers. Under this provision, a biodiesel producer will be able to claim a refund for all or a portion of sales and use tax paid in Iowa based on the amount of biodiesel produced. The refund becomes effective January 1, 2012 and will be available for the calendar years 2012 through 2014. In anticipation of this, the Iowa Department of Revenue has adopted a new regulation, Iowa Admin. Code r. 701—12.18, outlining how the Department will implement the refund; this regulation becomes effective December 7, 2011. In order to qualify for the refund, the producer must be engaged in the manufacture of biodiesel and registered with the United States Environmental Protection Agency as a manufacturer, the biodiesel must be for use in biodiesel blended fuel in accordance with Iowa Code section 214A.2, and the biodiesel must be produced in Iowa.

Saturday, November 19, 2011

West Virginia recently adopted new regulations concerning per se sales tax exemptions for construction contractors working for public service districts or government-owned water or sewer utilities. According to the new regulations, which take effect November 15, 2011, "purchases of services, machinery, supplies, or materials, except gasoline and special fuel, to be directly used or consumed in the construction, alteration, repair or improvement of a new or existing public utility structure or system by a contractor a subcontractor providing contracting services to a public utility are per se exempt from Consumers Sales and Service Tax and Use Tax." The exemption applies to purchases of tangible personal property that will remain on the construction site, rentals of construction equipment, and purchases made by subcontractors that would otherwise qualify for the exemption if purchased by the prime contractor. However, the exemption does not apply to purchases of property that will become property of the contractor or subcontractor and are removed from the construction site upon completion of the contract. Because the exemption is per se, no exemption certificate is required to claim it. Contractors and subcontractors may claim the exemption by either submitting a refund claim to the Tax Department or providing Form WV CST-286, "Special Contractors Exempt Purchases Certificate" when making qualifying purchases. The form must contain the public utility’s tax identification number.  

Monday, November 14, 2011

The Texas Comptroller’s Office has recently stated that firearm transfer fees are not taxable. Federal law requires that firearms purchased by an individual in Texas from an out-of-state vendor must be shipped to a Texas dealer for transfer to the purchaser. The Texas dealer may charge the purchaser a transfer fee to cover the cost of handling and paperwork. Because the gun is not purchased from the Texas dealer, the transfer fee does not represent a retail sale for sales tax purposes. Therefore, the transfer fee charged by the Texas dealer will not be subject to tax.

Friday, November 11, 2011

With a recently enacted sales tax exemption, Maine now exempts sales of all aircraft and repair parts for aircraft. Before the enactment of this exemption, which is found at Me. Rev. Stat. Ann. § 1760(88-A), Maine provided limited exemptions for sales to and use by nonresident owners, sales of certain jet aircraft, and sales of repair parts for use in an aircraft used by a scheduled airline. The new exemption applies to all aircraft (regardless of the type of propulsion) sold to or used by all persons (resident or nonresident; individual or corporation; purchaser or lessor). However, this exemption has a limited duration, as it was enacted specifically for the period of July 1, 2011 through June 30, 2015.

Thursday, October 13, 2011

On November 2, 2010, Massachusetts will face ballot Question 3, the “3% Sales Tax Relief Act”. If voters approve this measure, Massachusetts’ state sales and use tax rates will be reduced from 6.25 percent to 3 percent. If approved, this tax rate reduction would become effective January 1, 2011.

Monday, October 10, 2011

The Kansas Department of Revenue addressed the taxability of non-refundable layaway fees and layaway cancellation fees in a recently released private letter ruling. When a customer puts an item on layaway, the seller may require the customer to pay a non-refundable layaway fee as well as a down payment on the item. If the customer later cancels the layaway, the customer will be refunded their down payment along with any additional payments made, but the store may keep the non-refundable layaway fee and charge an additional layaway cancellation fee. Sales tax is charged on the selling price of the item placed on layaway only after the purchaser has paid for the item in full. If the layaway is cancelled, the non-refundable layaway fee and layaway cancellation fee are not subject to tax because a taxable retail sale was not made.

Friday, October 07, 2011

The South Carolina Department of Revenue recently issued a private letter ruling concerning loyalty points programs offered by telecommunications companies to their subscribers. These programs allow subscribers to accumulate points over a period of time and exchange them for discounts on phones and accessories. Property that is purchased at a discount using loyalty points is only taxable based on the actual sales price, not the retail value. For example, a cell phone that normally costs $200 but is purchased by a customer redeeming loyalty points for $175 is only subject to tax on the $175 paid by the customer. However, purchases of property for a nominal amount or greatly reduced sale price after a customer redeems their loyalty points will be considered promotional items withdrawn from inventory and used or consumed by the company. Thus, they will be taxable at the full retail value. For example, if a customer redeems their loyalty points to purchase a $200 cell phone for one cent, the cell phone will be deemed a promotional item and the retailer will be required to pay tax on the fair market value, $200.

Thursday, October 06, 2011

Rhode Island has significantly revised several provisions of its sales and use tax laws effective October 1, 2011. First, Rhode Island has narrowed its exemption for drugs, so that sales of over-the-counter drugs are now generally taxable. Second, Rhode Island has changed its tax treatment of prewritten software. Previously, electronically downloaded software was not taxable; under the new provisions, Rhode Island taxes sales of electronically downloaded software, including smart phone apps. Third, Rhode Island now taxes package tours and scenic and sightseeing transportation services, including boat tours, bus or trolley tours, train tours, and helicopter or airplane tours. Persons providing package tours or sightseeing transportation services are now considered to be retailers and are required to register with the state’s tax administrator. Finally, Rhode Island now includes sales of medical marijuana in the definition of “sales” that are subject to sales tax.

Thursday, October 06, 2011

The District of Columbia recently amended its sales tax laws to impose tax on security services. As of October 1, 2011, the District taxes armored car services, private investigation services, and security services. In addition, the tax rate for parking or storing motor vehicles or trailers has been increased from 12 percent to 18 percent.

Tuesday, September 27, 2011

Companies that have been certified by the North Dakota Department of Commerce as a "primary sector company" may purchase certain tangible personal property exempt from tax under the Primary Sector Development exemption. A "primary sector company" is defined as a company that, "through the employment of knowledge or labor adds volume to a product, process, or services which results in the creation of new wealth." When applying for the exemption, the business must include the following information: 1) the owner and location of the primary sector project; 2) a description of the project and why it qualifies for the exemption; 3) the estimated duration of the project; and 4) the estimated cost of the project and the portion of that cost that is applicable to materials. Property that is eligible for the exemption includes, but is not limited to: computer equipment and related software, monitor/display units, printers, optical readers, and telecommunications equipment.

Tuesday, September 20, 2011

The California Board of Equalization (“BOE”) officially agreed to TTR’s request to exempt blood containers without limitation. Previously, the BOE reasoned that blood containers were only exempt from tax when purchased by a blood bank. TTR presented clear and convincing evidence that this limitation was not contemplated by the California legislature or the plain language of the statute and related laws. After nearly a year of support and correspondence with the state, the BOE agreed with TTR’s position that blood containers are exempt from tax, even when purchased by someone other than a blood bank. TTR also presented a detailed listing of qualifying blood containers for the BOE’s approval. While the BOE agreed to extend the exemption to non-blood bank taxpayers, the BOE did limit the number of qualifying blood containers. In support of the limitation, the BOE presented fiscal information estimated at the time the blood container exemption law was created.

Thursday, September 15, 2011

The Texas Comptroller recently issued a ruling discussing the taxability of certain materials used in the construction of pharmaceutical biotechnology cleanrooms. Property that is necessary or that has been adapted to reduce contamination or to control airflow, temperature, humidity, chemical purity, or other environmental conditions or that otherwise qualifies as production machinery will be exempt from tax under Tex. Tax Code Sec. 151.318(b)(3) and (q-1). Property that falls within this exemption includes movable cleanroom partitions, lighting fixtures, piping used to move gas and liquids, and electrical supply and control equipment. Property that is used to construct permanent non-movable components of the cleanroom, such as walls, flooring, and roofing do not qualify for the exemption.

Friday, September 09, 2011

Beginning September 1, 2011, retailers who provide an item free of charge along with the required purchase of another taxable product may purchase the item to be provided free of charge without tax, as a sale for resale. For example, department store cosmetic counters often provide a free gift to the customer if they purchase a particular item. In this scenario, the free gift may be purchased by the retailer under the resale exemption.

Friday, September 09, 2011

Beginning September 1, 2011, the sales price of animal fat or vegetable oil that is sold, stored, used or consumed in Wisconsin for the purposes of being converted into motor vehicle fuel will be exempt from tax.

Friday, August 26, 2011

The Missouri Department of Revenue issued a letter ruling stating that sales of the Apple iPad and iPad 2 are exempt from tax during the annual sales tax holiday. The Department states that iPads fall within the definition of “personal computers” because they are “akin to a laptop and are used to perform functions traditionally associated with a personal computer.” However, the Department also noted that book readers that download off the internet do not fall within the definition of “personal computers” and are still subject to tax during the sales tax holiday.

Friday, August 19, 2011

The Tennessee Department of Revenue has issued a letter ruling stating that membership fees for physical fitness facilities are exempt from tax. Tenn. Code Ann. Sec. 67-6-330(a)(17)(A) specifically exempts fees paid to “any corporation or enterprise that offers, on a regular, full-time basis, services or facilities for the development or preservation of physical fitness through exercise or athletics.” Fees exempt from tax include membership fees, activation fees collected for photo identification cards, charges for guest passes, equipment charges, and fees charged for renting out physical fitness facilities. Fees charged by facilities that may be classified as “recreation clubs” or “health spas” will still be subject to Tennessee sales tax under Tenn. Code Ann. Sec. 67-6-212(a)(1).

Monday, August 15, 2011

Several amendments to Connecticut law that affect the application of sales tax became effective July 1, 2011. The exemption for nonprescription drugs and medicines, including dietary supplements, was repealed. See Conn. Gen. Stat. Ann. Sec. 12-412. In addition, the following services became subject to tax: certain waste removal services; motor vehicle storage services; valet parking provided at airports; motor vehicle parking towing and road services; motor vehicle storage services; pet grooming and boarding services; certain intrastate transportation services; services in connection with a cosmetic medical procedure; nail services; and spa services. See Conn. Gen. Stat. Ann. Sec. 12-407.

Wednesday, August 03, 2011

On August 1, Governor Deval Patrick signed a bill authorizing a sales tax holiday in Massachusetts to be held on August 13-14, 2011. Ordinarily, the Commonwealth imposes a 6.25% tax on retail sales. But during the two day sales tax holiday, retail sales for most items costing $2,500 or less will not be subject to sales and use taxes. The legislation creating the holiday excludes sales of cigarettes, cars, trucks, motorboats, and gas, so sales of those items will still be subject to tax.

Wednesday, July 20, 2011

The Kansas Department of Revenue recently added “picture messaging” and “push-to-talk” services to their list of taxable telecommunications services in a “Questions and Answers” document issued by the Department on July 18, 2011. Note that these services were not previously listed among the taxable telecommunications services outlined by the Department in Kansas Department of Revenue Information Guide EDU-65 (July 21, 2010). The Department urges telecommunications service providers who are uncertain about the taxability of new telecommunications services to request a letter ruling issued by the Department addressing the taxability of these services.

Wednesday, July 20, 2011

In a telephone call with TTR on July 13, 2011, the Kansas Department of Revenue clarified that the sales and use tax exemption for drugs dispensed pursuant to a prescription does in fact apply to sales to hospitals and other medical facilities. Although prior guidance supported this position, the 2010 Streamlined Sales Tax Taxability Matrix for Kansas lists sales of both over-the-counter drugs and prescription drugs to hospitals and other medical facilities as taxable. The Department confirmed that the SST Taxability Matrix is incorrect and that sales to hospitals of drugs that will be dispensed via prescription are exempt.

Friday, July 15, 2011

Missouri lawmakers have amended Mo. Rev. Stat. Sec. 144.030 so that certain over-the-counter drugs are now exempt from Missouri sales tax. In order to qualify for the exemption, the over-the-counter drug must be prescribed by a healthcare practitioner licensed to prescribe such items and it must meet certain FDA labeling requirements. Prior to this amendment, only drugs that were required by law to be dispensed through a prescription by a licensed healthcare practitioner were exempt from sales tax. The new exemption takes effect on August 28, 2011.

Friday, July 01, 2011

By enacting Assembly Bill 28X into law earlier this week, California has joined the growing ranks of states that require large out-of-state retailers to collect taxes on purchases that their California customers make over the Internet. This new law, effective immediately in California, is commonly referred to as an “Amazon Law” because of its impact on the large Internet retailer Amazon.com. Amazon immediately filed suit to prevent a similar law from taking effect in New York in 2008 (that litigation is still pending as earlier decisions are now on appeal.) California can require retailers to charge and collect tax on sales only if the retailer has a connection to California based on some physical presence in the state (“nexus”). Under California’s prior law, the tests for having nexus with the state were cast in more traditional “brick-and-mortar” terms of physical presence, so that a retailer had a presence in, and therefore a connection with, the state if the retailer had workers, warehouses, or offices located there. California’s new “Amazon Law,” broadens the test for finding nexus by expanding the definition of a “retailer engaged in business” in the state. Internet retailers that have (1) affiliate advertising agreements with California-based websites, and (2) revenue related to those affiliates that exceeds threshold amounts, are now deemed to be engaged in business in California and are subject to the state’s sales tax reporting requirements. More specifically, under the new law, an Internet retailer that enters into affiliate advertising agreements under which persons in California, for a commission or other consideration, directly or indirectly refer potential purchasers (whether by an Internet-based link, an Internet website, or otherwise) to the retailer are now classified as a “retailer engaged in business” in the state provided that (1) the total cumulative sales price from all sales by the retailer to California purchasers that are referred pursuant to these agreements is in excess of $10,000 within the preceding 12 months, and (2) that the retailer has cumulative sales of tangible personal property to purchasers in the state of over $500,000 within the preceding 12 months, except as otherwise specified.

Tuesday, May 10, 2011

Please join TTR at the 12th Annual TeleStrategies Conference in New Orleans, May 24-26. For more information, see http://www.telestrategies.com/tax/index.htm.

Monday, May 02, 2011

On April 27, Georgia Governor Nathan Deal signed House Bill 168 (HB 168) into law. The act, which is the latest in a series of legislative changes bringing Georgia's sales tax laws into conformity with the Streamlined Sales and Use Tax Agreement (SSUTA), makes several changes to the way Georgia treats drugs, certain medical equipment and supplies, and food for sales tax purposes. Prior to the enactment of HB 168, Georgia's sales tax exemption for prescription drugs applied to purchases of controlled substances or drugs that were "lawfully dispensed" only upon a prescription. The Georgia Department of Revenue (DOR) interpreted this language to apply only to sales made to, or on behalf of, a patient who holds a prescription, and not to bulk purchases made by hospitals. However, the enactment of HB 168 has modified the drug exemption language to exempt “drugs which are lawfully dispensable only by prescription…” (emphasis added). The DOR views this change in language as an expansion of the drug exemption, and now takes the position that the drug exemption applies to sales to hospitals as well as patients. (Note that the resale exemption has always been available for a hospital’s purchase of drugs to the extent such drugs are resold to patients.) HB 168 also addresses Georgia's exemptions for durable medical equipment and prosthetic devices. The previous statutory language stated that purchases of these items were exempt when "prescribed by a physician," but now the law states that such purchases are exempt when "sold or used pursuant to a prescription." This new language strengthens the DOR's position that these exemptions do not apply to bulk sales to hospitals. The act also limits the reach of the exemption for diabetic supplies. Under the new law, the only items that are exempt from tax when dispensed without a prescription are insulin syringes and blood glucose level measuring strips. Thus, sales of insulin, blood measuring devices, other monitoring equipment, or insulin delivery systems used exclusively by diabetics are no longer exempt unless they fall within one of the other medical exemptions. Finally, new language clarifies that the exemption for “food and food ingredients” does not apply when such items are sold for use in the operation of a business. In addition, dietary supplements are now excluded from the definition of "food and food ingredients," and are therefore subject to tax. 

Friday, April 29, 2011

In a recent policy letter, the Texas Comptroller’s office clarified the rule for determining if a business with a website hosted on servers located in the state has nexus. Texas imposes the overlapping duties of collecting and remitting sales tax on anyone who is "engaged in business in Texas." Texas regulations explain that a person is "engaged in business in Texas" if the person has "nexus" with Texas. Nexus means a "sufficient" contact with or activity within Texas, and the regulations state that a business that "derives receipts from a rental or lease of tangible personal property that is located in this state or owns or uses tangible personal property that is located in this state, including a computer server or software" has nexus in Texas. The Comptroller’s office recently stated that this rule is currently in flux, as the Comptroller is working to again revise the provision on using a server or software in the state. Elaborating on this, the Texas Comptroller explained that this provision was amended in 2010, and, since then, it has been interpreted more broadly than the Comptroller's office intended, so the Comptroller is working to amend the rule again. To clarify the Comptroller’s policy, the Comptroller’s office has provided a "safe harbor" for businesses whose websites are hosted on servers physically located in Texas. If the entirety of the business’s presence and activity in Texas is limited to (1) having ONLY a website on a third-party server in Texas (upon which the third-party provides all the functionality) and (2) delivering physical products into the state via third-party common carrier, then the business is not considered to be engaged in business in Texas. For more, see 34 Tex. Admin. Code Sec. 3.286 and Tex. Policy Letter Ruling No. 201103016L (Comptroller of Pub. Accounts Mar 24, 2011).

Thursday, April 14, 2011

Arkansas has joined the ranks of the growing number of states that require many Internet-based retailers to collect sales tax on purchases shipped into their state. With the enactment of Senate Bill 738, Arkansas's "Amazon Law" statutorily expands nexus to reach many web-only retailers who lack a traditional physical presence in Arkansas. It does so by creating two presumptions. First, an Internet-based seller that is affiliated (meaning it is part of the same controlled group of corporations) with a business that is subject to Arkansas's sales and use tax jurisdiction is presumed to be engaged in business in Arkansas, and is required to collect and remit Arkansas's sales tax. This is commonly known as "affiliate" nexus. Second, an Internet-based seller (without an affiliate in Arkansas) is presumed to be a retailer engaged in the selling tangible personal property in Arkansas if the seller enters into an agreement with an Arkansas resident (typically an Arkansas-based website) to provide referrals to the seller. Because these referrals can be generated by "clicking" on a website link to navigate to the seller's website, this is commonly referred to as "click-through" nexus. To trigger this second presumption, two conditions must be met: (1) Under the agreement, the Internet-based seller must pay the Arkansas resident a commission or some other consideration for referrals (whether by a link on an Internet website or otherwise) to the seller's website; and (2) The seller's cumulative gross receipts from sales to purchasers in Arkansas generated by such referrals must exceed $10,000 during the preceding twelve months. Colorado, Illinois, New York, North Carolina, and Rhode Island have all enacted similar "Amazon Laws."

Thursday, April 14, 2011

With the issuance of a recent General Information Letter (GIL), the Illinois Department of Revenue has summarized the principles it uses in determining whether a retailer has nexus in Illinois. When a retailer has nexus in Illinois, the retailer is subject to Illinois tax laws and, therefore, must collect and remit sales tax. Illinois divides retailers into three categories: (1) Illinois retailers--those who either accept purchase orders in Illinois or maintain an inventory in Illinois from which the retailer fills its Illinois orders; (2) retailers who maintain a place of business in Illinois; and (3) out-of-state retailers. The first two types or retailers, Illinois retailers and retailers who maintain a place of business in Illinois, have nexus in Illinois, but the third type—the out-of-state retailers—lack sufficient nexus with Illinois to be subject to its state tax laws. The key is the distinction between the second and third categories, or in other words, whether the retailer maintains a place of business in Illinois or is instead an out-of state retailer. Under both U.S. constitutional and Illinois law, this determination is a question of nexus, and, so, it turns on whether the retailer has a physical presence in Illinois. Physical presence is not limited to having a physical building in Illinois; instead, any type of physical presence in Illinois, including a retailer’s delivery and installation of its product on a repetitive basis, will trigger a finding that the retailer has nexus in Illinois. In addition, Illinois recently amended its law to expand nexus to reach many Internet-based retailers that lack a traditional physical presence in Illinois. This law, commonly referred to as an "Amazon Law,” becomes effective July 1, 2011.

Saturday, February 12, 2011

As states continue to struggle with revenue shortfalls, legislation is aimed at increasing an otherwise decreasing funding source; taxes. Interestingly, most states 'legally' require anyone who purchases goods online to self remit a sales tax (typically called a 'use tax') on their online purchases. However, very few individual consumers ever comply with this legal requirement. Due to the difficulty of self-compliance and inability to audit every resident of a state, lawmakers look toward those who are accustomed to collecting tax; businesses. This appears to be the path that Colorado is headed down. Assuming this law passes, and withstands scrutiny, this may be the first of many laws aimed at 'forced compliance' with laws passed long ago, but rarely followed.

Wednesday, January 05, 2011

Starting this weekend, Massachusetts residents will no longer have to pay the once-levied 6.25% sales tax on alcohol due to a voter-mandated repeal.

Wednesday, November 17, 2010

Turkeys beware. South Carolinian hunters, firearm collectors, aficionados and fans of shooting ranges will be enjoying a sales and use tax holiday over Thanksgiving weekend. For a 48-hour period beginning 12:01 am on Friday, November 26 to midnight on Saturday, November 27, all handguns, rifles and shotguns will have all sales and use taxes waived. This tax holiday will be applied to all rentals, as well.

Wednesday, October 27, 2010

In its quarterly filing with the Securities and Exchange Commission on Friday Morning October 22, 2010, Amazon stated that Texas issued an assessment for $269 million for uncollected sales tax. Texas is arguing that Amazon.com has nexus in their state (a distribution center in Irving,) but Amazon claims that the distribution center is actually owned by a subsidiary – Amazon.com KYDC LLC, which is based in Kentucky. The matter begins to look particularly gloomy for Amazon, as they purchased Woot this past June which, of course, is located just outside of Dallas, Texas.

Wednesday, October 20, 2010

On Washington’s November 2, 2010 ballot, residents will be voting on “Initiative 1107.” If Washingtonians favor this initiative, they will enjoy a reversal on the current 2 percent sale and use tax on bottled water, soft drinks, gum and candy. Opinions could be bittersweet with some arguing that abolishing the tax will cause drastic funding cuts to health care and education, and others declaring that the tax was bad policy from the start.

Wednesday, October 20, 2010

A 57 year old pizza restaurateur was spared a 7 year jail sentence for tax fraud on the condition that he pay back the owed $106 thousand as well as donate 12 sheet pizzas to a local mission every Tuesday for the next 52 weeks starting tonight.

Wednesday, October 06, 2010

Many New York shoppers enjoyed an exemption for clothing and shoes that cost less than $110.00 per item. However, on October 1st, 2010, New York’s clothing and shoe exemption will be temporarily put in the closet. New York decided to suspend the exemption on clothing and shoe purchases costing less than $110.00 until spring of 2011. New York plans to bring the exemption back over a two year period. The exemption will be reinstated April 1, 2011, but only for purchases less than $55.00. Things will return to normal on and after April 1, 2012, when the exemption will again apply to items purchased which are less than $110.00. Retailers don’t expect a decline in sales, but would appreciate having the state Legislature impose tax-free periods throughout certain parts of the year, to stimulate sales.

Wednesday, October 06, 2010

“Question 1” in a November 2010 Massachusetts ballot will determine whether or not the State will continue to charge excise tax on the sales of alcoholic beverages. Liquor stores in the state have argued that the 6.25 percent tax currently being charged has reduced their sales in Massachusetts from 10 to 40 percent in the last year, and therefore have proposed “Question 1” as an indirect initiated state statute. If the majority vote is “Yes,” it will be taken into effect as law January 1st, 2011.

Monday, August 30, 2010

The Governor is expected to sign a bill into law requiring businesses to provide notice to purchasers who don't pay sales tax on internet purchases that they have a requirement to self pay a use tax. If the law is signed, it will go into effect as of October 1, 2010. The new effort is expected to generate $30 million in new revenues for the state. According to Tony Mastin, Oklahoma Tax Commission administrator, the idea is to let online purchasers know "it's not a tax-free purchase even though the retailer is not collecting the tax.”

Friday, April 23, 2010

The Texas Court of Appeals determined that more information was needed when it decided to send the 7-Eleven, Inc. v. Combs case back to Trial Court in order to "resolve fact issues." By way of background: A decision was reached at the Trial Court level in Texas. This decision made it to the Appeals Court and they decided that no tax was due on 7-Eleven's purchases of software that went into inventory for shipment outside of Texas. The state pushed for a second look at the Appeals Court's decision, persuading the Appeals Court that they didn't have enough facts to make their decision - "that more information was needed." The Appeals Court agreed and ordered the case to be sent back to a Trial Court for more information. The fact that this case involves software resold by 7-Eleven is almost irrelevant for purposes of the Appeals Court decision to get more information. What is relevant is the exact piece of information the Court agreed was relevant: Whether 7-Eleven made use of the software in Texas before removing it from tax-free inventory.

Wednesday, April 21, 2010

If Senate Bill 6143 is signed by Washington's Governor, Chris Gregoire, taxpayers can expect limitations on the availability of bad debt credits or refunds. This legislation, if passed, would limit bad debt credits and refunds to the seller and the seller may not transfer or assign rights to bad debt credits or refunds. See Washington Special Notice 04/19/2010.

Tuesday, April 20, 2010

The news continues to speculate on the future of a U.S. based VAT (value added tax) or "national sales tax." While the future of such a tax is uncertain, an understanding of what may come to pass here in the U.S. is available by looking to our neighbors in Europe (and Asia, Canada, South America, etc.). Provided below is a description of the European-Based VAT system from TTR's International Tax Library: OVERVIEW & DIAGRAM The United Kingdom and its member European Union countries employ a system of tax known as a value added tax system or (VAT). This system differs from the United States tax system in many ways. Most notably, the VAT system taxes the transfer of taxable goods and services at every stage of getting a product to a retail customer. VAT applies to transactions from manufacturers to wholesalers and wholesalers to retailers and retailers to end user customers. The VAT system permits every buyer of taxable goods, except the end user customer, to take a credit against the tax already paid on purchases. This is known as an input tax credit. The following example illustrates the VAT system:   Sales Tax on Sales (10% Rate) Tax Credit (tax on sales less tax paid) Tax Remitted Miner 1000 100   100 Refinery 2000 200 200-100 100 Steel Factory 3000 300 300-200 100 Wholesaler 4000 400 400-300 100 Retailer 5000 500 500-400 100   Total Tax Remitted: 500 DESCRIPTION: Miner sells $1000 to Refinery. Refinery pays $1000, plus $100 tax. Miner remits $100 to UK. Refinery sells $2000 to Steel Factory. Steel Factory pays $2000, plus $200 tax. Refinery keeps $100 for the tax it paid to the Miner and remits $100 to UK. This process continues down the line. 1. Value Added Tax (VAT) - DETAILED DESCRIPTION VAT is what is known as a “multi-stage tax”. This means that taxes are levied at each point of sale all along the chain, finally ending with the consumer. At each point, the goods are taxed at their value at that point. As the goods increase in value through the chain, so does the taxable value, thus “value added” tax. During this process, each participant in the chain (except the final purchaser/consumer) is permitted to take a credit against the tax they already paid or an Input Tax Credit (ITC). This allows dealers/manufacturers along the chain to claim a credit for taxes paid on purchased goods used to manufacture or sell the product. Here’s an example (assuming a 10% tax rate): A smelter buys ore from a mine. The ore costs the smelter $1000. The smelter pays $1200; $1000 plus $200 in taxes. The smelter receives a tax invoice from the mine itemizing the tax paid of $200. The smelter spends $100 on equipment and tools used to smelt. The smelter sells the modified goods to a factory (end user or consumer) for $2000 plus $400 in taxes. The smelter provides the factory with a tax invoice itemizing the $400 paid by the factory to the smelter in taxes. Smelter’s Tax Consequence: The smelter received $400 from the end user/consumer (the factory). Before the smelter sends this money to the United Kingdom, the smelter is permitted to “keep” some of this money by using its Input Tax Credits to offset the amount due to the United Kingdom on this sale. The smelter is permitted to submit an Input Tax Credit for the $200 it paid in taxes initially. Therefore, the smelter deducts $200 from the total it must remit to the United Kingdom. Additionally, the smelter purchased $100 worth of equipment and tools and is permitted a credit for these purchases. Therefore, the smelter deducts another $100 from the total it must remit to the United Kingdom. At the end of the day, the smelter has $300 in available credits and received $400 from the factory. Therefore, the smelter may keep $300 from the factory and must remit $100 to the United Kingdom on this transaction. Transactions are subject to United Kingdom VAT only if the place of supply is within the VAT territory of the United Kingdom. Generally speaking, the place of supply for goods is the place where the goods are physically located at the time of supply. When goods are transported the place of supply will normally be the place where the transportation commences. Services are treated as being supplied at the place where the supplier is established. When the supplier has no establishment, the place of supply is where the supplier has his usual place of residence. In the United Kingdom this is known as the place where the supplier “belongs.”

Saturday, April 17, 2010

Software as a service is not a new concept. Provided below is a simple (though lengthy) definition of ASP or SaaS: DEFINITION (from TTR's Subscriber Website): Application Service Provider Software ("ASP" Software), also known as Software as a Service ("SaaS" - Pronounced Sass) is a transaction where a purchaser pays to use software over the internet under a limited license of use. What differentiates ASP software from traditional software sales or licenses is that the purchaser does not typically download or install any software on their computer or machine. Therefore there is no "real" transfer of tangible personal property or "download" of software. Instead, the software is merely "accessed" and "used" over the internet by the purchaser. Under this type of arrangement, the ASP software provider hosts the software on its equipment, often located outside the state of the purchaser or user and permits the purchaser to use the software under a limited license of use. ASP software transactions can take many forms, including, but not limited to access to software on a per use payment basis, hourly payment basis, or some other fixed/variable time usage basis. TAXATION: A handful of states have specific rules that address how to tax SaaS. Often though, taxing SaaS involves a review of applicable tax laws, facts and circumstances, and in some instances comes down to a business decision. Provided below are a few questions to assist with a tax decision: Where are the servers located that house the SaaS programs? Where are customers located? Does the state specifically address SaaS? How are services taxed? What services are taxed? How is software taxed? How is electronically delivered software taxed? How are information services taxed? Where is the server located? Where is the customer located? What does the contract permit a customer to access? What is the true object of the transaction (in states that use "true object" tests)?

Saturday, April 17, 2010

As competition increases between Kindle and Apple's iBooks platform, so is the pressure on Amazon and other online retailers to collect sales tax at the purchaser's location. Daily news feeds hit the internet about state and local governments in budget shortfalls due to decreasing sales tax dollars. While the details are technical and 'legal', the short version is that customers will pay sales tax on many purchases of online books in the future. It should be noted that this is not Amazon or other retailer's "decision", but legally required based on long standing sales tax laws.

Thursday, April 01, 2010

On March 1, 2010, Colorado permanently eliminated exemptions from sales and use tax on electronically delivered software and electricity used by manufacturers. Citing budget concerns, there were other exemption eliminations in areas of advertising and direct mail. Please visit the Colorado DOR website to learn more.

Thursday, April 01, 2010

While not final, Alabama has submitted a bill to eliminate the 4% state sales tax on groceries. The House Education Appropriations Committee approved the bill and it should go before the full House later this year.

Friday, March 26, 2010

In 2008, Indiana ruled that cutting guides sold by a manufacturer to a licensed practitioner for use in surgery were exempt from tax as orthopedic devices. Indiana reasoned that such sales were exempt from tax because "cutting guides are orthopedic devices prescribed by the surgeon who uses the device during surgery." Indiana has reversed this decision. Indiana now views a sale of cutting guides by a manufacturer to a licensed practitioner as a taxable consumption of tangible personal property. Indiana has now reasoned that "implicit in the exemption" is the requirement that possession of orthopedic devices must transfer to the patient. Since cutting guides are not transferred or 'used' by patients, but are instead used by a surgeon during surgery, sales of these medical devices are subject to tax.

Thursday, March 25, 2010

Virginia reasoned that the true object of training services is payment for a non taxable professional service. Therefore, all materials, meals and lodging sold along with training services are also not taxable as the purchase/sale of professional services. See http://www.policylibrary.tax.virginia.gov/OTP/Policy.nsf.

Thursday, March 25, 2010

Whatever your thoughts on the health care plan legislation that passed recently, everyone has to agree that it will cost money; Estimated at $950 billion over a ten year period. While there are several provisions that account for raising these funds, the excise tax on Medical Device Manufacturers and Pharmaceutical Industry represents a significant change in the U.S. tax landscape. Historically, sales tax was imposed and collected at the state level. With the exception of cross border transactions (international and interstate), the federal government left collection and imposition of sales tax for the states. "The Health Care Law changes all that..." Starting For sales that occur after December 31, 2010, a Federal Level Sales Tax will apply at a rate of 2.9% on all Medical Device sales in the U.S.

Wednesday, March 24, 2010

Washington recently signed into law an optional tax for localities to be used for: 1. "...the purpose of providing for the operation or delivery of chemical dependency or mental health treatment programs and services and for the operation or delivery of therapeutic court programs and services." Additionally, Washington provides for a partial set aside for criminal justice programs. "One-third of all money received under this section must be used solely for criminal justice purposes, fire protection purposes, or both. For the purposes of this subsection, "criminal justice purposes". A full text of the bill may be found: http://custom.statenet.com/trn-la/resources.cgi?ciq=trn&id=2009WAH3179&c...

Friday, March 19, 2010

Sales tax is due when purchasing/renting a portable toilet along with maintenance services in Rhode Island. Rhode Island determined that these services were of no value without the portable toilets and therefore were a part of the taxable rental of tangible personal property. Other states have addressed the taxability of portable waste collection containers (toilets); In late 2009, Georgia opted not to tax portable toilets, reversing its earlier year intention to tax these rentals/sales.

Thursday, March 18, 2010

California issued State Board of Equalization Publication 119 on March 1 walking through the taxability of maintenance agreements and warranties. Typically, an optional maintenance agreement is not subject to tax in California (software maintenance is an exception). Mandatory maintenance agreements are taxable so long as the underlying item that was sold was taxable as well. Further guidance may be found on the CA website or by contacting TTR at contact@ttrus.com.

Wednesday, March 10, 2010

The average sales tax rate in the US is now north of 8.5%. In addition to increased rates, in 2009 states reduced lookback periods for refunds, enacted legislation to increase the number of services that are subject to sales tax, and suspended many exemptions. The following states increased their sales tax rates: District of Columbia & North Carolina - over 600 local rates were increased in 2009.

Wednesday, March 10, 2010

Recent legislation aimed at online sellers (Amazon) in Colorado has set off a storm of discussions in as many as 15 other states. Colorado does not stand alone as three other states enacted similar legislation. We can expect more of the same as states continued to see decreases in revenues.

Wednesday, March 10, 2010

Wyoming House Bill 67 provides a sales tax exemption for most computer equipment purchased and used in the state by data processing centers.

Friday, February 12, 2010

Virginia is working a bill through the state legislature to gather what is perceived to be large amounts of lost revenue from online sales. While Virginia's taxing scheme under this legislation differs from others, it's target is the same: lost tax due to online sales.

Friday, January 29, 2010

Effective October 1, 2009, the definition of "soft drink" now includes tea (previously not included in the taxable category of soft drinks). Wisconsin has stated that purchases made before this date will not be subject to sales or subsequent use tax even in such use takes place after the effective date of this law change.

Wednesday, January 27, 2010

Columbia plans to increase its current 3% tax on beer to 14%.

Wednesday, January 27, 2010

Massachusetts approved a new 5% tax on satellite television providers. The new tax is part of the state's 2010 budget plan approved last summer. This tax is being challenged by the satellite industry because it is not also applied to cable television providers (who pay a 5% franchise fee to use public rights of way for burying cables). It should be noted that despite the apparent equality of the 5% tax and 5% franchise fee; the two are only the same in their rate. This tax raises several issues and questions.

Wednesday, January 27, 2010

Kentucky's legislature is in dialogue over imposing a sales tax on all services performed in the state. While it appears unlikely at this time, consideration of imposing sales tax on services would place Kentucky with a very few states that generally tax services (four at present; Hawaii, New Mexico, South Dakota, and West Virginia). As states' continue to face budget shortfalls, we have seen a significant increase in dialogue, proposed legislation, and "voter approved" bills to increase tax rates and expand the scope of transactions subject to sales tax.

Tuesday, December 15, 2009

The U.S. Supreme Court denied a request by Time Warner Telecommuncations to review whether Oregon's percentage-of-gross revenue fees are "taxes" as defined by Federal law. The Federal Court of Appeals (for the 9th Circuit) said they were unable to decide the case because the Oregon fees were "taxes" under Federal law. Time Warner Telecom of Oregon LLC v. Portland, U.S. Supreme Court, Dkt. 09-309, petition for certiorari denied December 14, 2009.

Friday, December 04, 2009

Section 552 of Speaker Nancy Pelosi’s Health Care Bill proposes to establish an excise tax in the amount of 2.5% on medical devices sold for use in the United States. The MDMA (Medical Device Manufacturers Association) reports that the cost to their industry would exceed $20 billion dollars over the next ten years and a sure halt in job creation.

Wednesday, November 04, 2009

Missouri decided to impose tax on Yoga based on recent court cases upholding the imposition of sales tax on services provided at fitness facilities. While Yoga is a fitness activity and there are many forms of Yoga, including versions that have no religious component; real questions are raised surrounding the legitimacy of sales tax for those versions of Yoga that are considered religious in nature. The Missouri Department of Revenue did state that it would evaluate different versions of Yoga on a case by case basis.

Tuesday, November 03, 2009

The Georgia Department of Revenue ("GA DOR") issued an Informational Bulletin SUT - 2009-10-28 in October of this year. The GA DOR is granting permission to take credits on returns in order to recover sales or use tax erroneously paid on purchases of manufacturing machinery and equipment. While no interest is permitted for these recoveries, taxpayers can enjoy a much more direct and certain recovery of taxes erroneously paid. Credits must start on tax returns filed in 2009.

Thursday, October 29, 2009

The New York Department of Taxation and Finance ("DOT") rejected a taxpayer's argument that injectible dermal fillers were exempt prosthetic devices. The DOT determined that sales of dermal fillers to practitioners in New York are taxable as Medical Supplies.

Thursday, October 29, 2009

With daily reports from local newspapers and online articles (occasionally national news) of reduced sales tax collections, it is no mystery why several state tax agencies are limiting or reducing the amount of tax recovery available. Missouri reduced the interest rate on sales tax refunds by a half a percent for the first quarter of 2010.

Thursday, October 29, 2009

With recent decisions from Illinois, Virginia, New Jersey and recent professional experiences with California, Florida, Tennessee and Texas; one thing is certain - it is not as easy to obtain a refund or credit as it used to be. More and more we are finding our clients waiting for or receiving negative responses from states on requests for tax recoveries. Even vendors, who in many cases are obligated to refund erroneously charged taxes, are dragging their feet citing the difficulty for them to recover the tax themselves. Tax Recovery Best Practices: - Regularly review your purchases for tax overpayments. - Do your homework - have detailed descriptions of exempt purchases and laws to support. - Insist on Vendor Issued Refunds (where possible) - Remember it was their error, not yours, that lead to the sales tax overpayment. Involve purchasing; often they can put pressure on the vendor that you as a tax professional can not. - Be understanding - Also remember that the vendor's tax department is not going to be happy - this doesn't make them "look good." Be polite - sales tax and billing system limitations don't always permit the easy administration of accurate billings. TTR provides comprehensive refund services and training surrounding refund claims.

Tuesday, October 27, 2009

Portland permits phone companies to do business in the city only after the companies register for and pay a franchise fee. This fee permits the phone companies the right to access Portland's right of ways (the areas where wires, etc. are buried in order to provide phone access to customers across the city). TW Telecom brought a suit to Federal court arguing that Portland unfairly administers its franchise fees on phone companies. It cited several instances where Portland subjectively permitted certain phone companies the right to reduce its franchise fee burden. Its case is based on a federal law (47 U.S.C. Sec. 253) that prohibits state or local governments from receiving compensation to public right of ways in a discriminatory manner. The Ninth Circuit Federal Court of Appeals did not rule in TW Telecom's favor - based on other issues involved in the case. TW is now asking the U.S. Supreme Court to review the case. TW's Argument: Portland requires all phone companies to pay a franchise fee. Portland is not consistent in its application of its franchise fee; more specifically, Portland permits certain phone companies the ability to deduct certain revenues from taxation while other phone companies have to pay more fees - TW argues that this is done in a discriminatory and unfair manner.

Tuesday, October 27, 2009

As of Jan. 1, 2010 Washington will not accept a resale certificate in order to exempt wholesale sales. The state now requires an application and issuance of a reseller permit before wholesale sales will be exempt from tax. Washington has made it clear that it will not permit sellers to obtain reseller permits after the fact - instead, Washington requires that reseller permits are obtained before a company is permitted to make tax-exempt wholesale purchases. To be clear - if you don't obtain a resellers permit before a wholesale transaction - Washington will collect tax twice - first when the wholesaler buys the product and second when they sell it. HOW DO YOU OBTAIN A PERMIT? http://dor.wa.gov/resellerpermit

Sunday, October 25, 2009

Illinois clarified its rules surrounding nexus in a recent response to a taxpayer.

Sunday, October 25, 2009

Earlier this year Georgia announced its intention to impose sales tax on portable toilet rentals within the state. As unusual as Georgia's announcement, its reversal of this earlier intention is even more curious. Fortunately for taxpayers, Georgia has stayed its decision to impose tax on portable toilet rentals.

Sunday, October 25, 2009

"Deal-makers may need to start budgeting for a special transaction tax if some members of Congress get their way. While such a tax is not expected to be passed anytime soon, it is one of the ideas being floated about on Capitol Hill these days as a way to raise money to fill the expanding hole in the federal budget. The tax could be levied on transactions ranging from over-the counter derivatives trades to large mergers. Its intent is to help curb excess speculation as well as a way to build revenue. The United States had a transaction tax from 1914 to 1966. The Revenue Act of 1914 levied a 0.2 percent tax on all sales or transfers of stock. In 1932, Congress more than doubled the tax to help overcome the budgetary challenges during the Great Depression. It was phased out in 1966 and has not been seriously considered as a revenue source until now." - New York Times