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Archive for Sales And Use Tax Manufacturing Exemption

Important Sales Tax Issues Your CFO May Be Missing

Monika Miles And CFOs on Sales And Use tax

In our multi-state tax consulting practice in Silicon Valley, we often see that sales tax is an afterthought in companies’ finance departments. Many companies have net operating losses (NOLs) for income tax purposes, and they often don’t consider the ramifications of sales tax.

Further, many of our clients sell intangible products – like software, SaaS platforms or digitally downloaded information – and those items don’t SEEM to be taxable. Plus, in California most of those items do qualify for sales tax exemptions; but that’s not the case in all states.

As such, with an already long “to do” list, CFOs and corporate controllers may not put sales tax concerns on the front burner. In another blog post, we explained why it’s not a good idea for a company’s corporate controller to take on the burden of sales tax. In some organizations, however, these responsibilities fall to the CFO. This post explains why this likely isn’t the best option, either.

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Florida Sales & Use Tax Exemption For Manufacturing Is Broad

Aaron Giles - Sales And Use Tax In Florida

Florida sales and use tax law offers a great tax exemption for manufacturers.  There are actually several sections of the Statutes and Rules where the relevant Florida sales and use tax exemptions can be found.  When one combines the relevant Florida sales and use tax exemptions for manufacturers, their combination results in one of the broader exemptions for manufacturers in the U.S.

Fla. Admin. Code Ann.  §12A-1.063 provides the basis for a Florida sales and use tax exemption for industrial machinery and equipment purchases. In Florida, industrial machinery and equipment is defined as tangible personal property that has a depreciable life of three years or more and is a component or integral part of the manufacturing process. To qualify the manufacturer must be classified under a manufacturing North American Industry Classification System (“NAICS”) code (e.g. a code beginning with the two digits of 31, 32, or 33). Examples of qualifying machinery and equipment include: forklifts, conveyor belt systems, or machinery or equipment that shapes, cuts or forms the product being manufactured for sale.

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Should Your Business Begin Collecting Out Of State Sales Tax?

William Rogers, Sales And Use Tax Collection

You’ve probably heard about the recent U.S. Supreme Court decision allowing state and local governments to impose sales taxes on more out-of-state online sales. The ruling in South Dakota v. Wayfair, Inc. is welcome news for brick-and-mortar retailers, who felt previous rulings gave an unfair advantage to their online competitors. And state and local governments are pleased to potentially be able to collect more sales tax.

But for businesses with out-of-state online sales that haven’t had to collect sales tax from out-of-state customers in the past, the decision brings many questions and concerns.

What The Requirements Used To Be

Even before Wayfair, a state could require an out-of-state business to collect sales tax from its residents on online sales if the business had a “substantial nexus” — or connection — with the state. The nexus requirement is part of the Commerce Clause of the U.S. Constitution.

Previous Supreme Court rulings had found that a physical presence in a state (such as retail outlets, employees or property) was necessary to establish substantial nexus. As a result, some online retailers have already been collecting tax from out-of-state customers, while others have not had to.

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Determination Of Property’s Taxability For Michigan Sales And Use Tax

In Michigan sales and use tax law determining whether an item of tangible personal property remains tangible personal property or becomes a fixture affixed to real estate can significantly affect the taxability of the item in question. This determination may impact whether the taxpayer is considered a retailer or a contractor.

There are also several exemptions in Michigan sales and use tax law for purchases of tangible personal property that do not apply if the item is instead a fixture. The Michigan sales and use tax exemptions for both the agricultural industry and the industrial processing or manufacturing industry include such language.

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North Carolina Sales And Use Tax Exemptions For Manufacturers Revised Effective July 1, 2018

North Carolina sales and use tax law provides an exemption for sales of mill machinery, machinery parts and manufacturing accessories, however these items are subject to a 1% privilege tax with a maximum tax of $80 per article until June 30, 2018. The 1% privilege tax has been repealed effective June 30, 2018 by Senate Bill 257 from the 2017 Legislative Session.  Beginning July 1, 2018 purchases of qualifying mill machinery, machinery parts and manufacturing accessories will be exempt from both North Carolina sales and use tax as well as the privilege tax. Read more

Washington Sales And Use Tax Exemptions For Medical Products Purchased By Hospitals

Washington sales and use tax law considers hospitals and health care facilities to be the consumers of the medical supplies and equipment used in providing medical services to patients. The Washington sales and use tax exemptions that apply to certain purchases do so based upon the use of the item in question.

Prescription drugs for human consumption are exempt from Washington sales and use tax.  There is a three-pronged definition a substance must meet in order to be defined as a “drug” under Washington sales and use tax law.

First, it must be a substance that is listed in the official United States pharmacopoeia.  Second, it must be intended for use during the diagnosis, cure, mitigation, treatment or prevention of disease.  Third, the substance must affect the structure or function of the body.  Read more

California Sales Tax Exemption for Manufacturing and R&D Machinery and Equipment

Beginning July 1, 2014 manufacturers in California are eligible for a partial exemption from state sales and use tax. This California sales tax exemption for manufacturing and research and development machinery and equipment reduces the state sales tax by 4.1875% from July 1, 2014 through December 31, 2016. From January 1, 2017 through June 30, 2022 the state sales tax rate is reduced by 3.9375%. In order to qualify for this exemption the “qualified tangible personal property” must be purchased or leased by a “qualified person” and used in one of four ways:

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