Archive for Sales/Use Tax

Texas Sales And Use Tax Rules For Construction-Related Services

Texas Sales And Use Tax Rules For Construction-Related Services

The Texas sales and use tax rules surrounding contractors and other construction-related work are incredibly complex. Additionally, the rules are structured to have broad application and thus impact many industries, including general construction, oil and gas related services, demolition, and more. The application of these rules is a fact-intensive undertaking and should be performed on a case-by-case basis, but I have outlined a basic overview of these rules below.

What is a “Contractor”?

The Texas Comptroller defines a “contractor” as a person who performs one or more of the following real property improvements and who, in making the improvement, incorporates tangible personal property into the real property being improved: [1]

“New Construction”

Building new improvements to residential or nonresidential real property; or
Completing any part of an uncompleted new structure that is an improvement to residential or nonresidential real property
“Scheduled and Periodic Maintenance”
Making improvements to real property as part of periodic and scheduled maintenance of nonresidential real property [2]
“Residential Repair & Remodel”
Repair, restoration, maintenance, or remodeling of residential real property
Work performed by a “contractor” also specifically includes the initial finish-out work to the interior or exterior of an improvement to real property [3], and the addition of new usable square footage to an existing building. [4]

Is Work Performed By a “Contractor” Subject to Sales Tax?
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Rentals Versus Services Under Texas Sales And Use Tax

Rentals Versus Services Under Texas Sales And Use Tax

One of the thorniest issues in Texas sales and use tax is the distinction between the rental of tangible personal property (which is subject to tax) and the provision of a service (which is only taxable if the service is taxable). This distinction not only affects the taxability of charges for the rental or service but also that of equipment that is purchased to provide the rental or service.

What’s a Rental?

The rental of tangible personal property in Texas is subject to sales or use tax.[1] A rental occurs when possession but not title to tangible personal property is transferred for consideration.[2] A person acquires possession of tangible personal property when that person acquires operational control over that property.[3] Operational control, in turn, means that the customer can use, control, or operate the tangible personal property.[4]

What are Taxable Services?

Only the following services are subject to Texas sales or use tax:
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2023 Court Cases And Decisions: Sales And Use Taxes

2023 Court Cases And Decisions: Sales And Use Taxes

The Geo Group, Inc. v. Hegar, No. 07-22-00005-CV (Tex. App.-Amarillo Jan. 23, 2023, no pet. hist.)—The Seventh Court of Appeals held that a company that owns and operates correctional and detention facilities under contracts with the state of Texas and the United States was not entitled to a sales tax refund due to the company’s purchases being exempt, affirming the trial court’s decision to that effect.

The company had argued that the detention and rehabilitation services that it provided are a quintessential governmental function, making the company an “instrumentality” of the state and federal governments and thereby rendering the company’s purchases exempt from sales or use tax under 34 Tex. Admin. Code 3.322(c) (Exempt Organizations).

The court of appeals noted that “instrumentality” isn’t defined in the Texas Administrative Code and the Black’s Law Dictionary defines “instrumentality” as: “1. A thing used to achieve an end or purpose. 2. A means or agency through which a function of another entity is accomplished, such as a branch of a governing body.”[1] Finding the first definition to be too broad to serve any purpose (virtually any independent contractor employed by the government could be an instrumentality under this definition), the court of appeals determined that the second definition of “instrumentality”— relating the term to “a branch of a governing body”—was more in harmony with the exemption in question.

The court of appeals found that while the company housed federal detainees and was required to comply with specific government regulations, the company was a distinct entity engaged in commercial for-profit activities, wasn’t controlled by the federal or state or federal government and didn’t contract exclusively with the federal or state government. For all of these reasons, the court of appeals held that the company wasn’t an instrumentality of the federal or state government that was exempt from sales or use tax.

Collections

Tax Liens
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Florida Department Of Revenue Ruling On Sales And Use Tax

AARON GILES - Know The Florida Facts Before You File Your 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.

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Shocking Court Cases In Texas: Franchise Tax, Sales & Use Tax, Miscellaneous Gross Receipts Tax, Beverage Tax

Shocking Court Cases In Texas: Franchise Tax, Sales & Use Tax, Miscellaneous Gross Receipts Tax, Beverage Tax

Court Cases

Franchise Tax

Apportionment

Conagra Brands, Inc. v. Hegar, No. 03-21-00111-CV (Tex. App.—Austin Aug 24, 2022, no pet. h.)—The Third Court of Appeals held that a taxpayer could not include gross receipts from certain securities in its apportionment-factor denominator for purposes of calculating its Texas franchise tax.[1]

  • The taxpayer in question was in the business of producing food products for sale to grocery stores, convenience stores and food service businesses. In order to mitigate the risks associated with potential fluctuations in the price of necessary components and raw materials, the taxpayer bought and sold commodity futures contracts.
  • The taxpayer argued that these securities were inventory for federal tax purposes and that the gross proceeds from the sale of these securities should be included in its apportionment factor denominator. On appeal, however, the taxpayer didn’t dispute the trial court’s finding that the securities weren’t inventory as defined in the Internal Revenue Code. Instead, the taxpayer argued that the securities were in substance inventory under the U.S. Supreme Court’s decision in Corn Products Refining Co. v. Comm’r, 350 U.S. 46 (1955).

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Maryland Tax And Business Climate

Maryland Tax And Business Climate

This month we travel to the birthplace of religious freedom in America, the mid-Atlantic state of Maryland. Formed by George Calvert in the early 17th Century, the state was intended as a refuge for persecuted Catholics from England. George Calvert was the first Lord of Baltimore and the first English proprietor of the then-Maryland colonial grant. Maryland was the seventh state to ratify the U.S. Constitution and played a pivotal role in the founding of Washington D.C., which was established on land donated by the state.

Maryland is defined by its abundant waterways and coastlines on the Chesapeake Bay and Atlantic Ocean. Its largest city, Baltimore, has a history as a major seaport, and is also home to such tourist attractions as the National Aquarium and the Maryland Science Center.

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Returns And Sales Tax: What Are Important Things To Know As A Business?

Returns And Sales Tax: What Are Important Things To Know As A Business?

Returns are inevitable when you sell a product, whether you are a brick-and-mortar business, an online retailer or both. According to a recent survey published by the National Retail Federation and Appriss Retail, retailers saw about 16.6% of total merchandise sold eventually returned in 2021, which is up from the 10.6% of total returns in 202o. Since you are bound to see returns as an e-commerce business, it is important to be aware of the sales tax refund obligation process.

It seems simple enough, right? You need to refund your customer the sales tax that you collected from them, so just claim a credit on your next sales tax return. Unfortunately, as with just about every area of sales tax, the answer is a little more complicated. Keep reading this article to learn more about your state’s requirements for refunds and sales tax.

How Many Returns Are We Talking About?

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Arizona: Determining Transaction Privilege/Use Tax Nexus

Arizonan Department Of Revenue Sales And Use Tax Nexus

Although commonly referred to as a sales tax, the Arizona transaction privilege tax (TPT) is actually a tax on a vendor for the privilege of doing business in the state. It is measured by the value of tangible personal property (TPP) sold by the vendor in Arizona. The vendor is liable for the tax, even though the vendor may pass on the tax to the consumer.

Use tax, which is a tax on any TPP bought from an out-of-state vendor that is stored, used or consumed in Arizona, and no tax was paid to the state of sale. The consumer is liable for use tax if TPP was purchased with no tax paid to the state of sale. If there is no nexus with the state, a vendor may collect use tax for the convenience of the customer.

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State Tax Issues Associated With Troubled Companies: Part Two- Sales and Use Taxes

State Tax Issues Associated With Troubled Companies: Part Two- Sales and Use Taxes

Sales taxes are often overlooked when a company is experiencing an economic crisis.  Given that some jurisdictions can have rates over 10%, this can be very costly at a time when a company can least afford this expense.  With the exception of bankruptcy situations, there are no “special” rules with regard to sales or use taxes when a company is experiencing financial difficulties.  So, how can a troubled company minimize their sales and use tax obligations?

The following highlights several areas that should be reviewed for possible opportunities.

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3 Important Sales Tax Predictions To Watch For In 2020

MONIKA MILES

The world of sales tax has changed a lot in the past year. Following the Supreme Court’s Wayfair decision, 2019 was the year most states began requiring businesses to collect and remit sales tax, and then began making marketplace facilitators (such as Amazon or eBay) responsible for collecting and remitting the taxes on sales that came through their marketplaces.

What changes can we expect to see this year? Keep reading for three predictions we believe are just around the corner.

3 Sales Tax Predictions For 2020
1. Smaller Retailers Will Depend On Marketplaces
As Greg Chapman, SVP of business development at Avalara explains, “We should expect traditional ecommerce providers to start working closely with marketplaces or offering more ‘Amazon-like’ experiences to stay relevant.”

The increase in online shopping coupled with confusing economic nexus laws make it even more appealing for very small businesses up to mid-sized companies to work with online marketplaces. In addition to facilitating sales in a process that’s more streamlined for customers, a lot of states have placed the burden of sales tax collection on the marketplace rather than the seller. This can greatly reduce the cost and risk of doing business online for companies struggling to navigate tricky taxability questions.
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Utah And Vermont State Sales And Use Tax

Aaron Giles

The state of Utah levies a 4.65% state sales tax on the retail sale, lease or rental of most goods and some services. Local jurisdictions impose additional sales taxes ranging between 1.3% and 3.4%. The range of total sales tax rates within the state of Utah is between 5.9% and 8.1%.

Use tax is also collected on the consumption, use or storage of goods in Utah 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 last 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 Utah on or before the last day of February.

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Maine, Maryland And Massachusetts State Sales And Use Tax

Aaron Giles States Sales And Use Tax- Maryland, Maine, Massachusetts

Maine State Sales And Use Tax

The state of Maine increased its state sales tax rate to 5.5% on Oct. 1, 2013. Taxes are levied on the retail sale, lease or rental of most goods. There are no local sales taxes in the state of Maine.

Use tax is due on all purchases brought into the state of Maine, unless specifically exempted. Use tax is due at the same rates as sales tax. Returns are to be filed on or before the 15th 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 Maine on or before February 15th.

For more information on Maine sales tax exemptions please visit the sites shown below.

Maine State Department of Revenue
Maine State Sales Tax Forms
Maine State Voluntary Disclosure Program

Maryland State Sales And Use Tax

The state of Maryland levies a 6% state sales tax rate on the retail sale, lease or rental of most goods. There are no local sales taxes in the state of Maryland.

Use tax is due on all purchases brought into the state of Maryland, unless specifically exempted. Use tax is due at the same rate as 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 Maryland on or before February 20th.

For more information on Maryland sales tax exemptions please visit the sites shown below.

Maryland State Comptroller
Maryland Sales And Use Tax Forms
Maryland State Business Tax Credits

Massachusetts State Sales And Use Tax

The state of Massachusetts levies a 6.25% state sales tax on the retail sale, lease or rental of most goods and some services. There are no local sales taxes in the state of Massachusetts.

Use tax is also collected on the consumption, use or storage of goods in Massachusetts 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 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 Massachusetts on or before February 20th.

For more information on Massachusetts sales tax exemptions please visit the sites shown below.

Massachusetts State Sales And Use Tax Guide

(This is part of the 50 States Sales And Use Tax Series)

Have a question? Contact Aaron Giles

 

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