Archive for Sales/Use Tax

Textbook Sales Tax Exemptions

New York and a few other states allow a sales tax exemption for college textbooks. That may be too broad of a statement – the exemption is for a college student buying a textbook noted on his/her course syllabus or a list from the college. It is not simple for the buyer or seller due to definitions, restrictions and recordkeeping.

While the exemption might sound like a great thing for students, and California often introduces proposals for such an exemption, it is not. There are better ways for legislatures to help college students including targeting relief to those who need it and not imposing extra work on third parties (booksellers) to handle the program.

What do you think? Read More

Written by | Posted in Sales/Use Tax

Lights, Camera, Action and Tax Cut! Spotlight on California’s Film Tax Credit Program

In a pivotal strategic effort to mitigate the exodus of filming to other states and countries, California lawmakers take aim to quadruple tax subsidies for location shooting to $400 million a year.

On Thursday, August 14th, Legislation was approved by the Senate Appropriations Committee with a 5-0 vote which would eliminate a controversial system in which film and television productions were awarded tax credits based upon a lottery system, regardless of the economic effect of the production. The bill, AB 1839, must still be approved by the full Senate and signed by Gov. Jerry Brown. However, legislative supporters indicate they are highly confident the measure will clear all remaining hurdles, saying there is widespread acknowledgment that California is quickly losing one of its signature Read More

Written by | Posted in Sales/Use Tax • Specialty Tax Incentives

Growing Marijuana Taxes In Colorado A Hit

RECEIPTIf you are late to the party, Colorado has fully legalized marijuana and in the first five months of legal retail sales, Colorado has sold a staggering $90 million worth of marijuana. We thought you may find it interesting to discover there are plenty of taxes attached to these sales. We recently received this receipt to our offices outlining all the taxes on the purchase of marijuana in Colorado. The Colorado Department of Revenue announced that the state earned $35 million in taxes, licensing and other fees from July 1, 2013 to June 30, 2014. The state collected nearly $5 million in taxes this June, an increase from the previous month. Governor John Hickenlooper expects sales to reach $1 Billion in the first fiscal year of legal marijuana. He also expects around $114 Million in taxes during this year. Colorado is proof that marijuana sales can benefit the state and generate revenue. We would greatly appreciate your comments regarding the taxes associated with this purchase.

Written by | Posted in Marijuana Taxes • Sales/Use Tax

California Oddity – Use Tax Exemption on Certain Foreign Purchases

There are many tax rules that might puzzle us as to why they are there. One I’d like to see repealed is the use tax exemption that a California resident gets if they bring back up to $800 of taxable goods from outside of the U.S. This exemption can be used every 30 days. The goods must be hand carried back. If they ship them, they owe use tax. If they buy the same goods while traveling in Delaware (where no sales tax would have been charged), they owe California use tax.

The exemption has been around since the 1990s. It is intended to match the federal duty exemption, but it does not match it. There are several special rules in the federal exemption. Also, the purpose of a duty exemption has no relationship to why you might want to have a use tax exemption. I’m not sure why you’d ever want a use tax exemption. Read More

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Internet Tax Freedom Act – Why Not Let It Expire?

On June 18, 2014, the House Judiciary Committee passed H.R. 3086 to make the Internet Freedom Act (ITFA) permanent. Otherwise, it expires on November 1, 2014. It has expired before. The main reason offered to extend it years ago was to help make sure the Internet grew. I think it would have grown even without the Internet Tax Freedom Act (ITFA). The ITFA is a federal prohibition on tax actions of state and local governments. The ITFA says that state and local governments cannot impose tax on Internet access fees. When enacted back in 1998 (P.L. 105-277), very few states even imposed such taxes and they were grandfathered in. The ITFA also prohibits discriminatory taxes on e-commerce. I think that existing laws, such as the commerce clause, already covered that prohibition.

So, basically, it prohibits state and local governments from doing something they likely Read More

Written by | Posted in Sales/Use Tax

Global Distributor Expands Micjo Decision

In 2012, an important case in favor of tobacco distributors was decided by a Florida appellate court. Technical tax issues aside, Micjo taught us that if a taxpayer does not agree with a department’s tax decision, then it should fight for its money that is not due. Since the Micjo ruling, many other tobacco distributors have been filing refunds and fighting tax assessments based on the appellate case. After filing several Micjo refund cases, we discovered another pro-tobacco distributor case was decided in Oregon that could take Micjo a step further. Logically, the case should apply to Florida and other states’ tobacco taxing laws. If correct, then tobacco distributors may be entitled to large refund claims.

Taking a step back, Micjo was decided in 2012 and it discussed the correct taxable base Read More

Written by | Posted in Sales/Use Tax • State And Local Tax (SALT)

Should Schools And Students Pay Sales Tax (or VAT)?

It might seem odd for a state school or any government agency to pay taxes. Generally, they are exempt from income and property taxes, but likely pay sales tax (or VAT if outside the US) on purchases. Students of the state schools also pay sales tax on taxable items they purchase from the school bookstore or for their education (such as books).

Isn’t this just a roundabout way for the state to be paying tax to itself? Would it be more efficient to exempt purchases of state schools and agencies from sales tax?

What reminded me of this issue was an article about a bill (HB 4165) introduced in Singapore to create a VAT exemption for goods and services purchased from schools. [“Bill filed to exempt goods sold in schools from VAT,” by Miranda, Business World Online, Read More

Written by | Posted in Sales/Use Tax • VAT

One Logical Way To Get Vendors To Collect Use Tax

For decades, states have sought ways to get remote (non-present) vendors to collect sales/use tax when they sell to customers in the state. States have been pushing Congress to provide assistance and many have enacted laws to broaden their nexus reach.

I’ve been researching, writing and testifying on this topic for many years. One of my suggestions has been to only let the state and its agencies purchase from vendors that are registered with the state to collect sales tax. That is, if a vendor wants to have the state or any of its agencies be a customer, it must register to collect sales/use tax.

Before California enacted its “Amazon law” in 2011, I always thought it was odd that my Read More

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Florida Department of Revenue Continues To Bully C-Store Industry

For the last three years, our firm has been relentless writing and warning any business that sells beer, liquor, and/or cigarettes, that the Florida Department of Revenue was coming. The onslaught of the industry all stemmed from a law change in 2011. With little support, a new law went into effect in Florida that required all wholesalers, manufacturers, and distributors of alcohol and tobacco to provide annual sales information the Florida DOR. Shockingly, some ABT retailers were purchasing multiples of gross sales of alcohol and tobacco alone. For example, the average Florida C-store purchased about $50,000 a month in ABT items alone but only reported gross sales of $20,000 for sales tax purposes. As predicted, we were told that approximately 200 audit notices were going out every three months (DR-846 – “desk audits” & DR-840 – “full audit notices”) and each of Read More

Written by | Posted in Audit • IRS • Sales/Use Tax • State And Local Tax (SALT) • Tax Fraud/Evasion/Crimes

Florida Welcomes Amazon!

This month, May 2014, Amazon was welcomed with open arms to the sunshine state. Florida should be happy by its theoretical increase as Amazon will begin charging, collecting and remitting tax in Florida. Sparking the collection agreement was the fact that Amazon has built two large distribution centers in Florida, which gives it the fatal sales tax nexus. For customers, this means that they will be charged the 6% state sales tax rate plus the local sales surtax rate, which can run between 0% and 1.5%.

As stated above, Amazon is building two fulfillment centers in Florida, creating more than 3,000 jobs. The locations will be on Florida’s west coast. Specifically, the centers will be just outside of Lakeland (East of Tampa and South of Orlando) and Ruskin (South East side of Hillsborough County). The project should also be a boom for the local economy and allow all Read More

Written by | Posted in Sales/Use Tax

Online Sales And Physical Presence Nexus

All of the energy and focus on the Marketplace Fairness Act (MFA) has lulled many online sellers into a false belief that they do not need to collect retail sales tax on their online sales until Congress takes action on the MFA. What many online sellers forget is that states can still require online sellers to collect retail sales tax if the online sellers have physical presence nexus in a state. Further, this physical presence nexus need not be necessarily connected with their online sales.

Recently, I have worked with a number of companies facing significant tax exposure for uncollected retail sales tax on their online sales. Although these sales are generated exclusively from customers developed over the Internet, these companies failed to recognize that physical presence of their employees or representatives pursuing wholesale sales Read More

Written by | Posted in Sales/Use Tax • State And Local Tax (SALT)

Lights, Camera, Action And Tax Cut!

Movie Production Incentives (hereinafter “MPIs”) are tax benefits offered on a state-by-state basis throughout the United States to entice, as applicable, in-state film production and post-production activities. The state-by-state legislative histories and policies driving MPIs are clearly aimed at increasing economic growth at the state and local levels through filmmaking and television production throughout the United States while curtailing the departure of movie production to other countries.

While the applicable qualifying production activities vary from state-to-state many common qualified production activities include, but are not limited to, feature films, television series, relocated television series, television pilots and television movies. Furthermore, the structure, type, and size of the incentives vary from state to state. Many MPIs include tax credits and Read More

Written by | Posted in Sales/Use Tax • Specialty Tax Incentives
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