Aaron Giles | TaxConnections

01 Aug 2024

Nebraska Sales Tax Exemptions For Manufacturers

The Nebraska sales tax exemption for manufacturers applies to businesses that are involved in fabricating, assembling, processing, refinishing, or refining activities. In addition to performing any of these necessary activities, 50% or more of the manufacturer’s revenue must be generated from the sale of products resulting from these activities. Any machinery and equipment the manufacturer intends to claim must also be used 50% or more of the time performing a “manufacturing” task. However, the machinery and equipment does not have to come into direct physical contact with the tangible personal property being produced for sale in order to be considered manufacturing machinery or equipment. If the machinery and equipment meet all these requirements, then the Nebraska sales tax exemption for manufacturers will apply.

In Nebraska, manufacturing means an “action, or series of actions, performed upon tangible personal property, either by hand or machine, which results in that tangible personal property being reduced or transformed into a different state, quality, form, property, or thing.” Manufacturing requires a physical change to the tangible personal property within the process and does not simply require an increase in the value of a product without a physical change to the item in question. See both Neb. Rev. Stat. Sec. 77-2701.47 and Neb. Admin. R. & Regs. Sec. 1-107.

When Does Manufacturing Begin and End in Nebraska?

The Nebraska sales tax exemption for manufacturers covers items that are used within the manufacturing process and excludes items that are used before manufacturing commences or post manufacturing. Based on the definition provided by the Nebraska Department of Revenue, manufacturing begins with “the storage of raw materials” and manufacturing ends “after finished goods are transported to a warehouse for storage.” For example, machinery and equipment involved in the receiving of raw materials or the removal of finished goods from storage for customer delivery are not considered part of the manufacturing process and fall outside the purview of this exemption.
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Written by Aaron Giles | Posted in TaxConnections

23 Feb 2024

Arizona Transaction Privilege Tax Exemption For Forklifts Used By Manufacturers

The Arizona Transaction Privilege Tax exemption for forklifts used by manufacturers has been clarified and expanded as a result of a recent ruling received by the sales tax consultants at Agile Consulting Group. Transaction Privilege Tax or TPT is to Arizona what Sales and Use Tax is to most other U.S. states. Transaction Privilege Tax is levied on sales of most goods and some services in the state of Arizona. However, there is an exemption in place for the manufacturing industry.

In a prior post, Agile has discussed the Arizona sales tax exemption for manufacturing. The exemption is outlined in Ariz. Rev. Stat. Ann. §42-5061(B)(1) and includes a number of different categories of purchases commonly made by manufacturers. One area where the Statutes and the Arizona Department of Revenue’s guidance has been lacking relates to forklifts, which are arguably one the most universally used types of machinery and equipment across all types of manufacturing operations regardless of the product being produced. In fact, no prior rulings or guidance have been provided regarding how the Arizona Department of Revenue suggests that the manufacturing exemption applies to forklift purchases, leases, repairs, as well as the fuel used to power these units.

Agile requested clarification of the Arizona Transaction Privilege Tax exemption for forklifts used by manufacturers in a ruling submitted to the Arizona Department of Revenue in June 2023. Additionally, our sales tax consultants argued for favorable tax treatment of these forklifts across twelve different scenarios for forklifts in use at a plant for one of our longstanding Arizona manufacturing clients. In the response Agile received from the Arizona Department of Revenue’s Taxpayer Services Section representative, we received encouraging news for all Arizona manufacturers that use forklifts within their manufacturing process.

The key takeaways from the ruling Agile received about the Arizona Transaction Privilege Tax exemption for forklifts used by manufacturers are:

Written by Aaron Giles | Posted in Arizona's Tax Climate • Sales/Use Tax • TaxConnections

15 Nov 2023

Michigan Sales Tax Exemption For Implants

The Michigan sales tax exemption for implants was expanded when the Michigan Governor signed into law Public Act #46 with an effective date of 3/3/2020. This law modified the definition of prosthetic devices that qualify for exemption when purchased by a Hospital, or Freestanding Surgical Outpatient Facilities that are licensed under Part 208 of Michigan’s Public Health Code. The tax professionals at Agile Consulting Group recently filed a request for a Technical Advice Letter to obtain additional clarification as to what will qualify for exemption.

Prosthetic Implant Exemption: Prior To March 2020 Law Change

Prior to this law change in March 2020, the Michigan sales tax exemption for implants was limited to purchases of prosthetic devices that were “resold” to patients of Hospitals and Freestanding Surgical Outpatient Facilities. Prosthetic devices are defined in Mich. Comp. Laws Ann. Sec. 205.51a(q) as a “replacement, corrective, or supportive device, other than contact lenses and dental prosthesis, dispensed pursuant to a prescription, including repair or replacement parts for that device worn on or in the body” that does one or more of the following:

Artificially replace a missing portion of the body;
Prevent or correct a physical deformity or malfunction of the body; or
Support a weak or deformed portion of the body.

The prior rule stated that implantable prosthetic devices were only “dispensed” when sold to a patient. Consequently, the implantable prosthetic devices needed to be administered contemporaneously with, or prior to, the transaction for which the exemption is claimed, rather than some future transaction for the exemption to apply. Michigan Letter Ruling 2019-2 offers a more detailed explanation of the exemption requirements prior to 3/3/2020.

Prosthetic Implant Exemption: After March 2020 Law Change

Written by Aaron Giles | Posted in Michigan

17 Aug 2023

Understanding Nexus Sales Tax Compliance

How do you know when you should collect sales tax? Do I have to collect sales taxes in states where I don’t have a physical presence? What is nexus, physical nexus, and economic nexus? In the wake of South Dakota v. Wayfair, the landscape for sales & use tax compliance has become more complex. A member of our team adapted our partner Avalara’s recent Understanding Where, When and Why Your Business has a Sales Tax Obligation webinar to give this quick guide to nexus compliance:

What’s Nexus? Starting With: Physical Nexus

A business is required to collect and remit sales taxes once the business has established nexus for sales taxes in a state. Prior to South Dakota v. Wayfair, physical presence (like buildings, facilities, or employees) in a state was the sole marker for sales tax obligations. Physical nexus is still important, and you can most easily think of physical nexus as anywhere your business has employees (including those “working from home”), buildings (including your home if you don’t have a formal office), or 1099 contractors that act in a sales/marketing role. While economic nexus, which we’ll discuss in a second, is important and more complicated, do not ignore where you have physical nexus! These states’ physical nexus compliance will require you to register and remit sales and use taxes.

Pro Tip: Travelling into a state for a conference where you’re making sales or soliciting customers can trigger physical nexus. This issue can be more complex as the size of the business gained, time spent in the state, and other factors can change whether we’d recommend registering, collecting, and remitting tax.

So, What Changed? Introducing: Economic Nexus

After South Dakota v. Wayfair, the Supreme Court made it legal for states to require businesses to collect and remit sales taxes if the business has enough of an economic presence in the state. While economic nexus compliance can be more complex, you can think of it most simply as the sales made based on the “ship to” address on your invoices. If you’re in IL and shipping candles to a customer in IA, you may have sufficient economic presence in IA to need to register for sales and use taxes and then to collect and remit those taxes. However, your business does not automatically trigger economic nexus by selling goods or services into a state. States have varying nexus compliance thresholds for how much economic activity triggers economic nexus. While the thresholds vary by state, many states have hovered around a common threshold of either 200 invoiced transactions or $100k in sales, whichever is hit first. More populous states like NY, CA, and TX have higher thresholds, but the 200 transactions/$100k rule is a good gut-check to see if your business is close enough to worry about triggering economic nexus. If you feel like you’re triggering nexus, have triggered nexus, or will do so this year, we’d recommend contacting one of our sales & use tax experts.
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Written by Aaron Giles | Posted in Sales Tax • Sales Tax Nexus

10 Aug 2023

Five States Without Sales Tax And Everything You Need To Know

What is Sales Tax?

If you are a business owner, manager or decision-maker, it is in your interest to understand the nuances of your state’s sales tax laws (or lack thereof). Sales tax is often referenced in mainstream media yet rarely explained. Nearly every state collects sales tax, typically between 4% and 10%.

The purpose of collecting sales tax is to generate revenue for government services. However, the fact that five states do not collect sales tax presents an opportunity for those living in and near those jurisdictions to buy items and services without paying a penny in sales tax. However, those who buy products and services in states that collect sales tax pay at the point of sale. The retailer then passes on the collected sales tax dollars to the state government.

Which States Don’t Have Sales Tax?

If you detest the idea of paying sales tax to the government for simply purchasing goods and services, you are not alone. Those who live in the vicinity of the five states that sell items/services tax free and plan on spending a significant amount of money, should recognize that it is in their interest to consider making a shopping trip to a sales tax-free state.

The states with no sales tax are as follows:

-Alaska

-Delaware

-Montana

-New Hampshire

-Oregon

Below, we provide an in-depth look at each of these states with no sales tax.
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Written by Aaron Giles | Posted in Sales Tax

30 Nov 2022

Florida Department Of Revenue Ruling On Sales And Use Tax

Know The Florida Facts Before You File Your Tax

There has been a longstanding Florida sales tax exemption for food, however that exemption was limited to specific categories and types of food and did not extend to all food sales. In a restaurant setting, all food purchases would be exempt from Florida sales and use tax because of the intent to resell the food to its customers. In healthcare facilities, as well as other types of facilities that provide food services to the individuals occupying them, the line of demarcation between who is the ultimate consumer of the food can be more complex. Agile Consulting Group’s sales tax consultants have received a ruling from the Florida Department of Revenue that entitles facilities that furnish meals to individuals housed within them to make non-taxable purchases of all food under an expanded interpretation of the Florida sales tax exemption for food.

Written by Aaron Giles | Posted in Florida • Sales/Use Tax

04 Oct 2022

Learn Sales Tax Exemptions In 50 States (Part 2 of 2 Part Blog Post)

Montana Sales And Use Tax Exemptions

The state of Montana has no sales tax at the state or local levels. It is one of five states in the U.S. that does not charge a state sales tax.

Nebraska Sales And Use Tax Exemptions

The state of Nebraska levies a 5.5% state sales tax on the retail sale, lease or rental of most goods and some services. Local jurisdictions impose additional sales taxes up to 2%. The range of total sales tax rates within the state of Nebraska is between 5.5% and 7.5%.

Use tax is also collected on the consumption, use or storage of goods in Nebraska if sales tax was not paid on the purchase of the goods. The use tax rate is the same as the sales tax rate. Returns are to be filed on or before the 25th day of the month following the month in which the purchases were made. For example, purchases made in the month of January should be reported to the state of Nebraska on or before February 25th.

Visit https://revenue.nebraska.gov/

Nevada Sales And Use Tax Exemptions

Written by Aaron Giles | Posted in Sales Tax Exemptions - 50 States

29 Sep 2022

Learn Sales Tax Exemptions In 50 States (Part I of 2 Part Blog Post)

Discover Sales Tax Exemptions In 50 States (Part I of 2 Part Blog Post)

Alabama Sales Tax Exemptions

Alabama levies a 4% state sales tax on all purchases of tangible personal property unless the transaction is specifically exempted. There are more than 200 city and county sales taxes imposed in addition to the 4% state sales tax rate. Alabama’s range of sales tax rates is between 4% and 11%.

The consumer’s use tax is imposed on tangible personal property brought into Alabama for storage, use, or consumption in the state when the seller did not collect seller’s use tax on the sale of the property. The tax rates due are the same rates as for sales tax. Returns are to be filed on or before the 20th day of the month following the month in which the purchases were made. For example, purchases made in the month of January should be reported to the state of Alabama on or before February 20th. For more information on Alabama sales tax exemptions visit
https://www.revenue.alabama.gov/sales-use/sales-tax/

Alaska Sales Tax Exemptions

The state of Alaska is one of five states in the U.S. that does not charge a state sales tax. At the local level over 100 municipalities do collect a sales tax, with rates ranging between 1% to 7.5%. For more information on Alaska sales tax exemptions please visit http://www.tax.alaska.gov/programs/programs/index.aspx?10002

Written by Aaron Giles | Posted in Sales Tax Exemptions - 50 States

24 Aug 2022

Nexus Compliance: How Do You Know When You Should Collect Sales Tax?

What’s nexus? Starting with: Physical Nexus

So, what changed? Introducing: Economic Nexus

Written by Aaron Giles | Posted in Sales Tax Collection

13 Jul 2022

Debunking Nexus Compliance – How Do You Know When To Collect Sales Tax?

How do you know when you should collect sales tax? Do I have to collect sales taxes in states where I don’t have a physical presence? What is nexus, physical nexus, and economic nexus? In the wake of South Dakota v. Wayfair, the landscape for sales & use tax compliance has become more complex. A member of our team adapted our software partner recent Understanding Where, When and Why Your Business has a Sales Tax Obligation webinar to give this quick guide to nexus compliance:

What’s nexus? Starting with: Physical Nexus

Written by Aaron Giles | Posted in Nexus Compliance

16 Mar 2022

Florida Sales Tax Compliance And Rates

Florida’s tax rates are mostly consistent across the board, but there are a couple of exceptions that are useful for one to keep in mind while filing taxes. Florida has a state-level tax rate of 6%, but when it comes to commercial rentals, the tax rate is .5% less. This makes the state-level tax rate on commercial rentals 5.5%. Florida sales tax compliance also imposes a 4% tax on amusement machines and a 6.95% tax on electricity.

Florida Sales Tax

There are four different types of filing frequencies for tax returns in Florida: monthly, quarterly, semi-annually, and annually. Make sure to mark your calendar for the 19^th of each month because that is the last day you can file your tax returns in Florida. If the 19th falls on a weekend or on a business holiday, then the deadline is changed to the first applicable business day before the 19^th. This is different than how most states deal with their return due dates. Usually, states will push the due date back to after the weekend or holiday. Keep that in mind, so you do not end up missing the due date because you thought you had a little bit of extra time. Please note that all payments must be made before 5pm EST of the due date to be considered on time.

Written by Aaron Giles | Posted in Sales Tax Compliance • Sales Tax Compliance Rates

23 Feb 2022

Sales Tax Audit Triggers Are Important To Know

When you receive a sales and use tax audit notice in the mail, it sparks worry, concern and anxiety. Frequently, the first question that comes to mind is “What triggered this sales and use tax audit?” Understanding the sales and use tax audit triggers or cause of the audit can help companies both prepare for the audit by predicting what the auditor will be looking for, as well as take steps to avoid sales and use tax audits in the future.

Similar to the IRS with income tax audits, states have systems, policies and procedures in place that help them to identify businesses to select for a sales and use tax audit. While each state’s methodology is different, there are some common reasons taxpayers are flagged for a sales and use tax audit.

12 Common Sales and Use Tax Audit Triggers

Our analysis of common sales and use tax audit triggers is based upon Agile Consulting Group’s 15 years’ worth of sales and use tax audit defense and representation services that we have provided to hundreds of taxpayers across the U.S. We have arranged these reasons in order of the likelihood of triggering a sales and use tax audit.

Trigger #1. Prior Sales And Use Tax Audit Liabilities

Written by Aaron Giles | Posted in Sales Tax Audit Triggers