CCHGroup.com   Members   Support  
1 2 3 4 Previous Next

The SALT Minds Blog

59 Posts authored by: Marlia Berg

Wolters Kluwer announced in a press release that its CCH Mobile app has won the prestigious 2014 SIIA Software CODiE Award in the Best Enterprise Mobile Application category. The SIIA CODiE Awards are the premier award for the software and information industries, and have been recognizing product excellence for 29 years.

 

CCH Mobile app provides anytime, anywhere mobile access and answers on-the-go. It is a convenient gateway for users of Wolters Kluwer's IntelliConnect®  research platform that includes customized Tracker News, Practice Tools, and CCH Smart Charts.

 

Additional features of CCH Mobile app include voice command and read-back ability; personalized home screen and content pages; offline access capability; and on-the-spot emails.

The Hawaii Senate has passed, in a 25-0 vote, legislation that would require a repeal provision to be included in any legislation that establishes a new tax expenditure, expands an existing tax expenditure, or extends the repeal date of an existing tax expenditure. Under the legislation, S.B. 2153, "tax expenditure" would be defined as a credit, deduction, exclusion, exemption, or any other tax benefit provided under state law.

 

The bill would also require legislation creating, expanding, or extending tax expenditures to include recapture provisions and measurable goals and objectives, as well as a requirement for an evaluation or study that could potentially create additional information reporting requirements for taxpayers that benefit from a tax expenditure.

 

Under S.B. 2153 as passed by the Senate, the Hawaii Department of Taxation would be required to submit a report on tax expenditures to the Legislature in odd-numbered years. The department's report would be required to include

 

* a detailed description of each tax expenditure;

 

* the statutory authority for each tax expenditure;

 

* the purpose and original intent of each tax expenditure;

 

* the actual or estimated revenue loss for each tax expenditure in the most recent fiscal year; and

 

* a determination of whether each tax expenditure has successfully achieved its intended purpose.

 

If enacted as passed by the Senate, the legislation would not take effect until July 1, 2017, to give the Department of Taxation time to begin capturing and analyzing data for purposes of the legislation.

In a letter to Craig Johnson, Executive Director of the Streamlined Sales Tax (SST) Governing Board, Bradley P. George, Senior Director of Tax for Papa Murphy’s International, LLC, proposed new language for the "prepared food" definition that is part of the SST Agreement. The proposed new language would state that prepared food does not include "other foods requiring substantial additional preparation time by the buyer before the food reaches a consumable state."

 

George's letter also states: "We understand that in the past the Committee has been concerned about issues created by exemption language tied to further preparation by the consumer -- fearing that trivial acts like brushing with butter or sprinkling with a topping would be argued as "further preparation", creating an exemption argument. We feel that preparation time is a critical element that could be utilized by the Committee to provide clarity around the exemption for the take-n-bake pizza product type - while sufficiently narrowing the scope of the exemption."

 

The SST Governing Board continues to receive numerous emails and letters (posted here) from take and bake pizza proprietors and customers advocating for take and bake pizzas to be excluded from the definition of "prepared food" and asking that the pizzas not be subject to sales tax. 

 

Many of the emails and letters contain essentially the same six "talking points":

 

(1) Take-and-Bake pizza is not ready to eat when they are purchased by the consumer.

 

(2) Take-and-Bake pizza is not heated during its preparation at the store or sold to the consumer in a cooked state.

 

(3) This pizza contains raw dough, which must be cooked by the consumer before consuming.

 

(4) The pizza takes approximately 30 minutes of preparation, effort by the consumer. Off-site preparation involves pre-heating an oven, baking the pizza per instructions included, waiting for it to cool and slicing it for consumption. The preparation is more than trivial.

 

(5) Take-and-Bake pizza must be consumed off-premises from the store where it was purchased.

 

(6) Take-and-Bake pizza is eligible for EBT (food stamps). While most restaurants are ineligible, Papa Murphy’s Take 'N' Bake Pizza qualifies under the Food and Nutrition Act of 2008.

 

A couple of the emails noted that 35% or 40% of their take and bake pizzas were sold to EBT customers. Several emails noted that take and bake pizzas are essentially no different from frozen pizzas that are purchased from a grocery store. 

 

So far, only the Wisconsin Department of Revenue (WI DOR) has proposed that take and bake pizzas be considered prepared food. This proposal appears in an interpretation request submitted to the SST Governing Board's Compliance Review and Interpretations Committee (CRIC).  The interpretation request was submitted jointly by David Steines, WI DOR, and Mike Herold, CliftonLarsonAllen, LLP. Herold requested an exclusion of take and bake pizzas from the definition of "prepared food."

 

In the interpretation request, the WI DOR states that there "is no exclusion from the definition of prepared food for additional preparation required by the seller. The take and bake pizza does not require cooking per the food code since it contains no egg or raw meat or seafood."  However, George's letter notes that "fresh toppings and dough, such as we use, can become contaminated and lead to illness if our cooking guidelines, which include baking, are not followed. Basically, there is more to be concerned with than what can be transmitted to the consumer via eggs and raw animal foods."

 

The CRIC is scheduled to hold a conference call on the matter at 10 a.m. Central Time on October 17, 2013. Interested persons can call 303-586-4497 and use passcode 420648 to participate in the call.

 

Several states are holding back-to-school sales tax holidays in late July and August this year. Items that will be exempt from sales tax during the holidays vary from clothing, footwear, and school supplies to computers and related equipment. Many states exclude clothing and footwear accessories, as well as athletic and protective clothing and footwear, from their tax holidays.

 

South Carolina's sales tax holiday appears to be one of the most generous, exempting clothing, computers, software, printers, and other items with no price limit.  Louisiana will exempt the first $2,500 of the sales price of most noncommercial purchases during its tax holiday. In addition, Missouri will exempt computers and computer peripherals up to $3,500; North Carolina will exempt computers with a sales price of $3,500 or less; Tennessee will exempt computers with a sales price of $1,500 or less per item; and New Mexico will exempt computers with a sales price of $1,000 or less per item.

 

Massachusetts, which has held tax holidays for the past few years, currently has proposed legislation pending that, if enacted, would establish a sales tax holiday to be held on August 10 and 11, 2013. As currently proposed, the Massachusetts tax holiday would apply to nonbusiness retail sales of tangible personal property with a price of $2,500 or less per item, but would not apply to sales of telecommunications, tobacco products, gas, steam, electricity, motor vehicles, motorboats, or meals.

 

Here are the details for the states that are holding a back-to-school sales tax holiday in 2013. 

 

Alabama, August 2-4: The tax holiday applies to clothing (excluding accessories and protective or recreational equipment) with a sales price of $100 or less per item; single purchases with a sales price of $750 or less of computers, computer software, and school computer equipment; noncommercial purchases of school supplies, school art supplies, and school instructional materials with a sales price of $50 or less per item; and noncommercial book purchases with a sales price of $30 of less per book.

 

Arkansas, August 3-4: The tax holiday applies to clothing items under $100, clothing accessories and equipment under $50, school art supplies, school instructional materials, and school supplies.

 

Connecticut, August 18-24: The tax holiday applies to clothing and footwear costing less than $300 per item. The tax holiday does not apply to athletic or protective clothing or footwear, jewelry, handbags, luggage, umbrellas, wallets, watches, or similar items.

 

Florida, August 2-4: The tax holiday applies to clothing with a sales price of $75 or less per item; school supplies with a sales price of $15 or less per item; and personal computers and related accessories with a sales price of $750 or less purchased for noncommercial use. The holiday does not apply to sales made within a theme park, entertainment complex, public lodging establishment, or airport.

 

Georgia, Aug. 9-10: The tax holiday applies to clothing and footwear with a sales price of $100 or less per article or pair (excluding accessories); single purchases for noncommercial use of $1,000 or less of personal computers and related accessories; and general school supplies priced at up to $20 per item.

 

Iowa, August 2-3: The tax holiday applies to clothing and footwear with a sales price of less than $100 per item. The tax holiday does not apply to clothing and footwear accessories, rentals, or athletic and protective clothing and footwear.

 

Louisiana, August 2-3: The tax holiday applies to the first $2,500 of the sales price of noncommercial purchases (not leases) of items of tangible personal property except for vehicles and meals. The tax holiday does not apply to local taxes, but St. Charles Parish will waive its local sales tax during the same weekend as the state holiday.

 

Maryland,  August 11-17: The tax holiday applies to items of clothing (excluding  accessories) and footwear with a taxable price of $100 or less.

 

Mississippi, July 26-27: The tax holiday applies to clothing and footwear with a sales price under $100 per item. The tax holiday does not apply to clothing or footwear accessories, rentals, skis, swim fins, or skates.

 

Missouri, August 2-4: The tax holiday applies to noncommercial purchases of clothing (excluding accessories) with a taxable value of $100 or less per item; school supplies up to $50 per purchase; computer software with a taxable value of $350 or less; and computers and computer peripherals up to $3,500. Localities may opt out. If less than 2% of a retailer's merchandise qualifies, the retailer must offer a tax refund in lieu of the tax holiday.

 

New Mexico, August 2-4: The tax holiday applies to footwear and clothing (excluding accessories and athletic or protective clothing) with a sales price of less than $100 per item; school supplies with a sales price of less than $30 per item; computers with a sales price of $1,000 or less per item; computer peripherals with a sales price of $500 or less per item; book bags, backpacks, maps, and globes with a sales price less than $100 per item; and handheld calculators with a sales price of less than $200 per item. Retailers are not required to participate in New Mexico's tax holiday.

 

North Carolina, August 2-4: The tax holiday applies to clothing and school supplies with a sales price of $100 or less per item; school instructional materials with a sales price of $300 of less per item; sport/recreational equipment with a sales price of $50 or less per item; computers with a sales price of $3,500 or less; and computer supplies with a sales price of $250 or less per item. The tax holiday does not apply to clothing accessories, any item sold for use in a trade or business, educational software, furniture, luggage, stereo equipment, DVD players and similar equipment, or protective equipment.

 

Oklahoma, August 2-4: The tax holiday applies to items of clothing and footwear with a sales price of less than $100.  The tax holiday does not apply to clothing and footwear accessories, rentals, or athletic and protective clothing and footwear.

 

South Carolina, August 2-4: The tax holiday applies to clothing (excluding rentals), clothing accessories, footwear, school supplies, computers, printers, printer supplies, computer software, bath wash clothes, bed linens, pillows, bath towels, shower curtains, and bath rugs.

 

Tennessee, August 2-4: The tax holiday applies to clothing (excluding accessories), school supplies, and school art supplies with a sales price of $100 or less per item; and computers with a sales price of $1,500 or less per item.

 

Texas, August 9-11: The tax holiday applies to clothing and footwear, school supplies, and school backpacks with a sales price of less than $100 per item. The tax holiday does not apply to clothing and footwear accessories, athletic or  protective clothing or footwear, or clothing or footwear rentals.

 

Virginia, August 2-4: The tax holiday applies to clothing and footwear with a selling price of $100 or less per item and school supplies with a selling price of $20 or less per item.

 

Have fun shopping!

The U.S. Senate voted 69-27 on May 6 to pass S. 743, the Marketplace Fairness Act of 2013. If enacted as passed by the Senate, the bill would give states that are full members of the Streamlined Sales and Use Tax (SST) Agreement, and states that meet certain minimun simplification requirements, the authority to require collection of their sales and use taxes by remote sellers that have gross annual receipts in total remote sales in the United States exceeding $1 milllion in the preceding calendar year. The bill now goes to the House, where it has an uncertain future.

 

The minimum simplification requirements the non-SST states must meet include:

 

- having a single entity responsible for administration, return processing, and audits of remote sales;

- a single audit of a remote seller for all taxing jurisdictions located within a state;

- a single sales tax return for remote sellers;

- a uniform tax base;

- generally sourcing remote sales to the location where the product or service is received by the purchaser;

- providing information regarding the taxability of products and services;

- providing a rates and boundaries database;

- providing free tax calculation and filing software;

- certification procedures for certified service providers (CSPs);

- having certain relief of liability provisions in place; and

- providing 90 days notice of rate changes. 

 

The Streamlined Sales Tax Governing Board, Inc. is preparing its Central Registration System to handle the registration of vendors for states that are not members of the SST Agreement, but that meet the minimum simplification requirements, as well as for the SST member states it currrently handles. The Governing Board's Federal Legislation Implementation Committee has posted documents that include a draft analysis of the Marketplace Fairness Act (as introduced) as well as minutes from recent meetings.

As Carol Kokinis-Graves of CCH recently reported, the California State Board of Equalization (BOE) has unanimously decided to sponsor legislation that would create a sales and use tax exemption for drugs and medicines used, supplied, or sold by licensed veterinarians, government-run animal shelters, or nonprofit animal welfare organizations, according to a BOE news release.

 

Currently, veterinarians must pay California sales or use tax on their purchases of drugs and medicines they administer and prescribe for the treatment of animals, but may pass the tax on pet owners.

 

"I am gratified that my colleagues on the Board have joined me in supporting this legislation that will encourage pet owners to purchase these medications directly from their veterinarians," said BOE Chairman Jerome E. Horton. "This exemption will negate any perceived deal pet owners believe they might be getting by purchasing prescriptions for their pets online, where the safety of their pets might be compromised."

The Minnesota Department of Revenue (DOR) has performed a Suits index calculation  for Gov. Mark Dayton's tax reform proposals for fiscal years 2014-2015 and determined that the governor's overall tax reform package is progressive with a Suits index close to +0.10. The calculation was based on the department's 2011 Tax Incidence Study in which the department determined that the Suits index was regressive at -0.060 in 2008.

 

Named for economist Daniel B. Suits (according to Wikipedia), the DOR explains that the Suits index measures whether the tax burden as a share of household income:

 

- generally increases with income (i.e, a progressive tax system with a positive Suits index),

 

- is the same for high income households as for low income households (i.e, a proportional tax system with a Suits index of zero), or

 

- generally falls with income (i.e, a regressive tax system with a negative Suits index).

 

The DOR also calculated the Suits index separately for the governor's personal income tax proposal to create a new fourth tier rate, as well as the governor's  property tax rebate proposal, sales tax rate reduction and tax base expansion proposals, and cigarette excise tax and tobacco products tax increase proposals.

 

Personal Income Tax – New Fourth Tier Rate

 

As Cathy Agdeppa of CCH reported, Gov. Dayton proposes to create a new 4th tier personal income tax bracket for upper incomes at a rate of 9.85%. The proposed new rate would apply to the top 2% wage earners -- taxpayers with income above $250,000 for married joint filers, $125,000 for married separate filers, $150,000 for single filers, and $200,000 for head of household filers. 

 

The DOR notes that, if this new tier were enacted for 2008, the Suits index for this part of the governor’s proposal would have been +0.874. Thus, such a tax increase would be highly progressive and would account for a large proportion of the net tax increase.

 

Property Tax – Rebates

 

As Edward Bryant of CCH reported, the governor recommends an additional $500 property tax rebate for Minnesota homesteads.

 

According to the DOR, if the rebate proposal were enacted in 2008, the Suits index for the proposal would have been +0.348. "Taken alone, it would have cut the total tax burden by 5.2% for the first 8 deciles combined, by 3.6% for the 9th decile, and by 1.6% for the top decile. The proposed rebate is not only very progressive but also large, at over $700 million per year," the DOR said.

 

Sales and Use Tax – Rate Reduction and Base Expansion

 

Gov. Dayton recommends reducing the state sales and use tax rate from 6.875% to 5.5% and expanding the sales tax base to include all services, except specifically exempt services. Adjustments to the sales tax base would include applying the sales tax to:

 

- click-through nexus sales, digital goods, direct satellite services, and remote access software;

 

- selected goods and consumer services, including clothing on items over $100, admissions and memberships, over-the-counter drugs, personal care services and instruction, legal, accounting, and auto and other repair services; and

 

- business services, such as legal, accounting, architecture, specialized design, computer, management consulting, advertising, employment, and business support services.

 

In addition, the governor recommends repealing exemptions for selected items such as telecommunications equipment, court reporter documents, advertising materials and publications.

 

The DOR states that, by its best estimate, the Suits index for the governor's sales tax proposals is -0.192 for state sales tax and -0.215 for local sales taxes. Thus, the net impact of the changes is regressive, as expected. The governor's proposals would increase the state sales tax by nearly $1.5 billion per year and would increase the local sales tax by roughly $300 million (this includes a 0.25% transit tax in a seven-county metro area).

 

 

Cigarette and Tobacco Taxes – Rate Increases

 

 

As CCH's Edward Bryant reported, Gov. Dayton proposes to increase the cigarette excise tax from $0.48 per pack to $1.42 per pack; when combined with Minnesota's health impact fee, the total cigarette excise tax and fee would increase from $1.23 per pack to $2.17 per pack. In addition, the governor proposes to increase the tobacco products tax from 35% of the wholesale price to 55% of the wholesale price; when combined with Minnesota's health impact fee, the total tobacco products tax and fee would increase from 70% of the wholesale price to 90% of the wholesale price.

 

The DOR states that the Suits index for the $150 million tax increase is similar to that estimated in a previous study, at  -0.582 in 2008.

 

"The bottom line is that the fourth tier tax increase and the homeowner property tax rebates are both very progressive and large enough to more than offset the impact of the more regressive portions of the full proposal," the DOR said. 

 

Online travel companies (OTCs) that sell hotel room accommodations in Hawaii owe the Aloha state approximately $150 million in taxes and interest, according to a news release issued by the Hawaii Department of the Attorney General.

 

The OTCs, which include Expedia, Hotels.com, Hotwire, Orbitz, Travelocity, and Priceline, are subject to Hawaii's general excise tax, but not the transient accommodations tax, under a summary judgment ruling issued by Hawaii Tax Appeal Court Judge Gary W.B. Chang on January 11, 2013. The unpaid taxes cover the period from 2000 through 2011.

 

Hawaii Gov. Neil Abercrombie praised the judge's ruling, saying he made it a top priority after discovering that the previous administration did not pursue the taxes. "I asked the Attorney General and the Tax Director to aggressively and relentlessly go after these taxes that were due and owing. The court’s ruling shows that we were right to pursue this," Abercrombie said.

 

According to the release, Judge Chang ruled that the general excise tax, known as the GET, is a privilege tax and emphasized the broad nature of the tax. Hawaii Attorney General David Louie said he was very pleased that the judge recognized that the GET "casts a wide and tight net and that these taxes are owed and should be paid."

 

Hawaii Director of Taxation Frederick Pablo was also pleased. "The court correctly identified the GET as a tax that is imposed on almost all economic activity, including electronic commerce, such as the sale of Hawaii hotel rooms," Pablo said.

 

The Streamlined Sales Tax Governing Board's Compliance Review and Interpretations Committee (CRIC) this week began its annual review of member states' compliance with the Streamlined Sales and Use Tax (SST) Agreement. The committee's review meeting schedule is accelerated this year, so there will generally be two meetings a week on Tuesdays and Thursdays from now until November 15.

 

The meetings are held at 10 a.m. Central time, and interested persons can call 1-303-586-4497 and use the pass code 420648#.  The scheduled meeting dates are October 16, 18, 23, and 25, and November 6, 8, 13, and 15. CRIC meeting materials, including the annual review spreadsheet and member states' responses to issues brought up in the spreadsheet, are available on the Governing Board's website here.

 

During the first compliance review meeting on October 16, the committee unanimously found Arkansas, Iowa, Kansas, and North Dakota to be in compliance with the SST Agreement. North Carolina's compliance was also discussed, but a vote on that state was deferred to provide more time to review and resolve an issue involving direct mail sourcing.

 

While the annual review spreadsheet noted that some states (Indiana, Iowa, North Dakota, Washington, and Wisconsin) do not define "over-the-counter drugs" or "grooming and hygiene products" in their statutes while they provide an exemption for grooming and hygiene products sold with a prescription, Iowa and North Dakota resolved this issue to the satisfaction of the committee by adding a comment on their taxability matrix to clarify that grooming and hygiene products sold with a prescription are exempt. It was also suggested by SST staff member Pam Cook, and committee members agreed, that a line could be added on next year’s taxability matrix to separate out grooming and hygiene products sold with a prescription from those sold without a prescription, rather than requiring changes in the states’ laws.

As Carol Kokinis-Graves of CCH has reported, beginning Saturday September 15, more online retailers will be expected to register for and collect California use tax. Under the state's click-through and affiliate nexus law, Ch. 313 (A.B. 155), Laws 2011, new provisions expanding the types of retailers that are considered to be engaged in business in California, and have substantial nexus with California, will take effect this weekend because federal remote seller legislation was not enacted by July 31. 

 

California's use tax requirements will apply to any out-of-state retailer that has, in the preceding 12 months, made sales to California consumers of tangible personal property totaling more than $1 million and made more than $10,000 in sales that were referred to the retailer by an in-state affiliate pursuant to an agreement that meets certain qualifications  "Retailer" also includes an entity affiliated with a retailer within the meaning of IRC Sec. 1504.

 

The requirements will also apply to any retailer that is a member of a commonly controlled group and a member of a combined reporting group that includes another member of the retailer’s commonly controlled group that, pursuant to an agreement with or in cooperation with the retailer, performs services in California in connection with tangible personal property to be sold by the retailer. Such services include the design and development of tangible personal property sold by the retailer and the solicitation of sales of tangible personal property on behalf of the retailer.

 

The California State Board of Equalization (BOE) continues to add information regarding compliance with the nexus law on its websiteFor instance, the BOE explains in BOE-232 that the nexus provision does not apply if a retailer can demonstrate that all of the persons with whom the retailer has qualified affiliate agreements did not directly or indirectly solicit potential customers for the retailer in California.  BOE-232 also includes a form for the annual certification of no solicitation.

 

Also, the BOE's Special Notice L-324 advises retailers that are not already registered with the BOE to register for a use tax permit on "eReg," the BOE’s online electronic registration service.  Special Notice L-324 also notes that, under existing law before and after September 15, 2012, a retailer is considered engaged in business in California and required to register with the BOE to collect California use tax if the retailer: (1) maintains, occupies, or uses a place of business in California; (2) has persons operating in California under its authority for the purpose of selling, delivering, installing, assembling, or taking orders for tangible personal property; or (3) derives rentals from the lease of tangible personal property situated in California.

Despite a technical error in an application for an initiative serial number, Arizona voters will be able to decide in November whether to permanently extend a 1% transaction privilege (sales) tax increase. The tax increase was initially approved as a temporary measure by Arizona voters and became effective on June 1, 2010. If voters decide not to extend the tax increase, the rate will drop from 6.6% to 5.6% on June 1, 2013. 

 

A three-justice panel of the Arizona Supreme Court issued an order in the case of Pedersen v. Bennett, No. CV-12-0260-AP/EL, on August 14, 2012, holding that supporters of Proposition 204, the initiative to extend the tax increase to fund education and infrastructure improvements, have substantially complied with the requirement that an application for an initiative serial number must set forth the text of the proposed law. The court's order noted that Proposition 204 supporters mistakenly submitted two different versions of the proposed law to the Secretary of State: the paper application was missing 15 lines of text on the 12th of 15 pages, while the application submitted on a compact disc had the complete text of the proposed law. The order also indicated that the court will issue an opinion explaining the order.

 

Although Arizona Gov. Jan Brewer supported a temporary sales tax increase in 2010, she promised in her 2012 State of the State address  that the one-cent tax increase will end in 2013.

The Wisconsin Department of Revenue has decided not to tax so-called "Deal of the Day" vouchers at the time the voucher is sold. Instead, Wisconsin sales and use tax applies when the voucher is redeemed by the merchant providing the goods or services. The department reasoned that the sale of a voucher is a nontaxable sale of an intangible right. The department applied the same reasoning to discounted certificates.

 

The department guidance on discounted certificates and product vouchers, issued in a set of tax releases with its quarterly Tax Bulletin, comes as a workgroup for the Streamlined Sales Tax Governing Board, Inc., is still undecided on how to treat the daily deal voucher transactions. Craig Johnson, the department's representative on the workgroup, had said during a recent workgroup meeting that Wisconsin was prepared to issue guidance that basically followed the Tennessee proposal, which was favored by members of the business community at a recent SST Governing Board meeting.

 

Under a typical scenario involving  "Deal of the Day" vouchers such as those sold by Groupon and LivingSocial, a merchant enters into an agreement with a deal company to have the deal company sell vouchers that may be redeemed for a particular good or service that is furnished by the merchant to the holder of the voucher. The retailer can identify the amount for which the certificate or voucher was sold to the customer.

 

For Wisconsin tax purposes, when the customer redeems the voucher for particular goods or services, a sale of those goods or services has occurred and the tax will apply to the sales price of the voucher if the goods or services being sold are taxable. The merchant who accepts the voucher is the retailer of the goods or services because the merchant is the person actually transferring the goods or services to the purchaser.

 

The merchant is liable for tax on the basis of the sales price of the voucher, provided the good or service represented by the voucher is taxable. The merchant's sales price of the goods or services sold using the voucher includes all consideration received by the merchant for the sale, without deduction for any expenses incurred by the merchant and paid to the deal company for its services of advertising and selling the vouchers.

 

The department also noted that this determination does not apply to sales of digital codes; admissions to time-sensitive events such as sporting events, concerts, and other events; or gift certificates sold directly by the retailer.

 

Several states will be holding back-to-school sales tax holidays in late July and August this year. Items that will be exempt from sales tax during the holidays vary from clothing and school supplies to computers and related equipment.

 

Louisiana's tax holiday appears to be one of the most generous, exempting the first $2,500 of the sales price of most noncommercial purchases. South Carolina will exempt numerous items with no price limit. Missouri and North Carolina will exempt computers with a sales price of up to $3,500; Tennessee will exempt computers with a sales price of up to $1,500; and Georgia and New Mexico will exempt computers with a sales price of up to $1,000. 

 

Massachusetts, which has held tax holidays for the past few years, currently has proposed legislation that would establish a tax holiday to be held on August 11 and 12, 2012, if it is enacted. As currently proposed, the tax holiday would apply to nonbusiness sales of tangible personal property with a sales price of $2,500 or less per item, excluding telecommunications, tobacco products, gas, steam, electricity, motor vehicles, motorboats, and meals.

 

Here are the details for the states that are holding a back-to-school holiday this year. 

 

Alabama, August 3-5: The tax holiday applies to clothing, but not accessories or protective or recreational equipment, with a sales price of $100 or less per item; single purchases with a sales price of $750 or less of computers, computer software, and school computer equipment; noncommercial purchases of school supplies, school art supplies, and school instructional materials with a sales price of $50 or less per item; and noncommercial book purchases with a sales price of $30 of less per book.

 

Arkansas, August 4-5: The tax holiday applies to clothing and footwear items costing under $100; clothing accessories or equipment costing under $50, excluding protective equipment and sport or recreational equipment; school art supplies; school instructional materials; and school supplies.

 

Connecticut, August 19-25: The tax holiday applies to clothing and footwear costing less than $300 per item, but does not apply to accessories or to athletic or protective items.

 

Florida, August 3-5: The tax holiday applies to clothing selling for $75 or less per item and school supplies selling for $15 or less per item.

 

Georgia, August 10-11: The tax holiday applies to clothing and footwear with a sales price of $100 or less per item/pair, excluding accessories; single purchases for noncommercial use of personal computers and related accessories with a sales price of $1,000 or less; and general school supplies priced at up to $20 per item.

 

Iowa, August 3-4: The tax holiday applies to clothing and footwear purchases (not rentals) with a sales price of less than $100 per item, but does not apply to accessories or to athletic or protective items.

 

Louisiana, August 3-4: The tax holiday applies to the first $2,500 of the sales price of noncommercial purchases (not leases) of items of tangible personal property, but does not apply to vehicles or meals. The holiday does not apply to local taxes; however, St. Charles Parish will waive its local Louisiana sales tax during the same weekend as the state holiday.

 

Maryland, August 12-18:The tax holiday applies to items of clothing, not including accessories, and footwear with a taxable price of $100 or less.

 

Mississippi, July 27-28: The tax holiday applies to clothing and footwear purchases (not rentals) with a sales price under $100 per item, but does not apply to accessories, skis, swim fins, or skates.

 

Missouri, August 3-5: The tax holiday applies to noncommercial purchases of clothing, but not accessories, with a taxable value of $100 or less per item; school supplies not exceeding $50 per purchase; computer software with a taxable value of $350 or less; and retail sales of computers and computer peripherals not exceeding $3,500. Localities may opt out of the tax holiday. If less than 2% of a retailer's merchandise qualifies, the retailer must offer a tax refund instead of a  tax holiday.

 

New Mexico, August 3-5: The tax holiday applies to footwear and clothing, not including accessories or athletic or protective clothing, with a sales price of less than $100 per item; school supplies; computers with a sales price of $1,000 or less per item; and computer peripherals with a sales price of $500 or less per item. Retailers are not required to participate in the tax holiday.

 

North Carolina, August 3-5: The tax holiday applies to clothing, not including  accessories or protective equipment, and school supplies with a sales price of $100 or less per item; school instructional materials with a sales price of $300 or less per item; sport and recreational equipment with a sales price of $50 or less per item; computers with a sales price of $3,500 or less; and computer supplies with a sales price of $250 or less per item.

 

Oklahoma, August 3-5: The tax holiday applies to items of clothing and footwear purchases (not rentals) with a sales price of less than $100, but does not apply to accessories or special clothing or footwear primarily designed for athletic or protective use.

 

South Carolina, August 3-5: The tax holiday applies to clothing purchases (not rentals), clothing accessories, footwear, school supplies, computers, printers, printer supplies, computer software, bath wash clothes, bed linens, pillows, bath towels, shower curtains, and bath rugs.

 

Tennessee, August 3-5: The tax holiday applies to clothing but not accessories, school supplies, and school art supplies with a sales price of $100 or less per item, and to computers with a sales price of $1,500 or less per item.

 

Texas, August 17-19: The tax holiday applies to clothing and footwear purchases (not rentals) and school backpacks for elementary and secondary school students with a sales price of less than $100 per item, but does not apply to accessories or to athletic or protective clothing or footwear.

 

Virginia, August 3-5: The tax holiday applies to clothing and footwear with a selling price of $100 or less per item and to school supplies with a selling price of $20 or less per item.

 

Happy Shopping!

 

As Julie Minor, Jennifer Troyer, and Patty McDermott of CCH recently reported, Rhode Island Gov. Lincoln Chafee has signed a budget bill  for the fiscal year ending June 30, 2013, that establishes a 75-day tax amnesty program. The bill also expands the sales and use tax base to include pet care services and taxi, limo, bus, and other ground transportation services; eliminates the tax on package tour and scenic and sightseeing transportation services; limits the sales and use tax exemption for clothing; enacts an income tax credit for musical and theatrical productions; amends the motion picture production credit; increases the cigarette tax; and makes other changes. 

 

Tax Amnesty

 

Rhode Island's tax amnesty program will run from September 1, 2012, to November 15, 2012, and will apply to any taxable period ending on or before December 31, 2011. During the program period, taxpayers who apply for amnesty and pay all taxes and interest due, or enter into an installment payment agreement for reasons of financial hardship, will have their penalties waived and will not be subject to civil or criminal prosecution for the taxes covered under the program. In addition, these taxpayers will have their interest reduced by 25% for periods covered by the amnesty program. 

 

Amnesty is available for taxable periods for which a bill or notice of deficiency determination has been sent and taxable periods in which an audit has been completed but not yet billed. Amnesty is not available to taxpayers who are under any criminal investigation or are a party to a pending civil or criminal proceeding for tax fraud.

 

The legislation appropriates $300,000 for the Division of Taxation to carry out the amnesty program.

 

Taxation of Services

 

Effective October 1, 2012, pet care services, excluding veterinary and testing laboratory services, will be subject to sales and use tax. In addition, sales and use tax will be imposed on taxicab services, including taxi dispatchers; limousine services; other road transportation services, including charter bus service; and all other transit and ground passenger transportation.

 

Rhode Island's sales and use tax on package tour and scenic and sightseeing transportation services, which has only been in effect since October 1, 2011, is repealed effective July 1, 2012.

 

 

Clothing Exemption

 

Beginning October 1, 2012, the sales and use tax exemption for clothing and footwear is limited to items of clothing and footwear with a sales price of up to $250. This exemption does not apply to clothing accessories or equipment, or to special clothing or footwear primarily designed for athletic activity or protective use.

 

The legislation provides that, in "recognition of the work being performed by the Streamlined Sales and Use Tax Governing Board," the $250 limitation on the clothing exemption will be eliminated if a federal law is enacted that requires remote sellers to collect tax. The limitation would be eliminated beginning on the first day of the first state fiscal quarter following the change in federal law.

 

Credit for Musical and Theatrical Productions

 

From July 1, 2012, through June 30, 2019, a credit against income, franchise, gross premiums, bank, and public service corporation taxes is available for musical and theatrical productions. In finding and declaring that Rhode Island's priority is to "reduce the state's unemployment rate by stimulating new industries that have large employment growth potential by providing tax incentives and other means[,]" the General Assembly found that incentives should be created for the arts and entertainment industry, and created the music and theatrical productions credit "for the purpose of stimulating the local economy and reducing unemployment in Rhode Island."

 

The credit is equal to 25% of the total production and performance expenditures and transportation expenditures. Expenditures for design, construction and operation, including sets, special and visual effects, costumes, wardrobes, make-up, accessories, costs associated with sound, lighting, staging, and payroll qualify for the credit. Advertising and public relations expenditures, facility expenses, rentals, per diems, and accommodations are also eligible for the credit. State funds, state loans, and state guaranteed loans cannot be used to qualify for the credit.

 

The maximum credit per taxpayer is $5 million, and the minimum production budget required is $100,000. The credit may be carried forward for three years, and may be assigned or transferred. Also, if a pass-through entity earns the credit, it may be passed through to the owners. If a consolidated tax return is filed, only the corporation that qualified for the credit can use it on the consolidated return. Any recapture of the credit for ineligible costs will be pursued only against the applicant, and not against any assignee, transferee, or seller.

 

Applications for initial certification of the credit must be submitted to the Rhode Island Film & TV Office. After the theater production is completed, an application for final certification must be submitted to the Film & TV Office along with a cost report and an accountant's certification.

 

Motion Picture Production Credit

 

Beginning July 1, 2012, documentary productions are eligible for the motion picture production credit. A "documentary production" is a nonfiction production intended for educational or commercial distribution that may require out-of-state principal photography. A documentary production also qualifies as a "motion picture" for purposes of the credit.

 

The motion picture production credit definition of "primary locations" is expanded to allow motion picture productions to be eligible for the credit if they spend at least 51% of the motion picture's final production budget in Rhode Island and employ at least five individuals in the state. For documentary productions, the "primary locations" of the film, which must be in Rhode Island to qualify for the credit, also include the location of at least 51% of the film's total production days, including pre-production and post-production locations, as well as the locations where at least 51% of the motion picture principal photography days are filmed. 

 

Also, the motion picture production credit is scheduled to sunset on June 30, 2019; the minimum total production budget required for the credit is reduced from $300,000 to $100,000; and the maximum credit per taxpayer is $5 million. Previously, the maximum credit per taxpayer was the total production budget.  Furthermore, state funds, state loans, and state guaranteed loans cannot be used to qualify for the credit.

 

The Division of Taxation will issue a certification of the credit amount within 90 days after the division receives a motion picture production company's final certification and cost report. To claim the credit, this certification must be attached to the claimant's tax return.

 

Cigarette Tax

 

Beginning July 1, 2012, the Rhode Island cigarette tax rate is increased from $3.46 per pack of 20 cigarettes to $3.50 per pack of 20. In addition, a floor stock tax of 2 mills per cigarette is imposed on all cigarettes held by retailers and stamps held by distributors at 12:01 a.m. on July 1, 2012. A floor stock tax return must be filed by July 10, 2012.

 

 

As Julie Minor of CCH recently reported, Ohio and Utah may soon become full members of the Streamlined Sales and Use Tax Agreement. The Streamlined Sales Tax Governing Board voted during its May meeting to amend the Agreement to allow states with origin-based sourcing rules for intrastate sales to become full members of the Agreement. Currently, Ohio and Utah are associate members because of their origin sourcing provisions. Prior to the amendment, the Agreement required full member states to apply destination sourcing rules to intrastate as well as interstate sales. Full membership for Ohio and Utah is not automatic, however. The states must submit applications and be found in substantial compliance with the Agreement before they can become full members. The board plans to meet on June 29 to vote on full membership, which is expected to take effect on October 1, 2012.

 

In addition to allowing states with origin sourcing of intrastate sales to become full members, the board also voted in a new provision in the Agreement to create a Local Government Advisory Council to advise it on matters related to the administration of the Agreement if the issue specifically relates to local governments.

 

Federal Remote Seller Legislation

 

The SST governing board was also updated on progress made in efforts to lobby  Congress to pass federal remote seller legislation. There are currently two bills, the Marketplace Fairness Act in the Senate and the Marketplace Equity Act in the House. Joan Wagnon, FedTax, said it appears that enough votes exist in the House to get the legislation enacted. Proponents are currently looking for the right "vehicle" bill for the legislation.

 

Deal of the Day Vouchers

 

While presented with two different proposed rules regarding "Deal of the Day" vouchers, the governing board declined to adopt either rule. Over the past several months, an SST State and Local Advisory Council workgroup surveyed the states, held conference calls, and crafted the two proposals—one put forward by Sherry Hathaway of the Tennessee Department of Revenue and one by Ellen Thompson of the Nebraska Department of Revenue. The matter was referred back to the SLAC for further consideration.

 

Under the Tennessee proposal, for vouchers sold for less than their stated face value, tax would apply upon redemption to the price paid by the consumer for the voucher, and the difference between the price paid by the consumer and the face value of the voucher would be treated as a cash discount, which is excluded from the Agreement's definition of "sales price."

 

The Nebraska proposal would generally allow states to keep their current policies in choosing between three options: (1) apply tax to the face value of the voucher; (2) apply tax to the price paid by the consumer; or (3) distinguish between vouchers with a stated face value (taxed on the face value) and vouchers with no stated face value redeemable for a specific product or service (taxed on the price paid by the consumer). Nebraska's proposal would require states to disclose which option they follow in the SST taxability matrix.

Filter Blog

By author: By date:
By tag: