Archive for Sales/Use Tax

Manufacturing Exemption From Sales And Use Tax

California State Board of Equalization Manufacturing Exemption from Sales and Use Tax is Scheduled to Begin in July, 2014

A law created by Governor Brown’s 2013 Economic Development Initiative allows certain businesses in manufacturing or in the fields of biotechnology or physical, engineering, and life sciences to purchase or lease manufacturing or research and development equipment at a reduced sales and use tax rate for purchases occurring on or after July 1, 2014. (See Assembly Bill 93 (Stats. 2013, Ch. 69) and Senate Bill 90 (Stats. 2013, Ch. 70); and Revenue & Taxation Code section 6377.1.) The California State Board of Equalization (BOE) will be the agency overseeing and implementing this manufacturing exemption. Read More

Written by | Posted in Sales/Use Tax

Australian Tax Office Targets Online Merchants

The Australian Tax Office (ATO) has announced that it will gather information from eBay Australia & New Zealand Pty Ltd about online sales transactions totaling $10,000 or more during the 2011-2012 and 2012-2013 tax years.

This data will be compared with the tax returns lodged by online traders as part of a new “online selling data matching program”. ATO Commissioner Chris Jordan says: “Our online selling data matching program helps us keep a level playing field for honest businesses. ”

Taxpayers whose returns do not reflect the income from their online trading may face penalty tax and interest charges. The harvesting of data is likely to be extended to other online auction and sales sites for 2013-2014 and later years. Read More

Written by | Posted in Audit • Australia/Oceania • Income Tax • Sales/Use Tax

Is Paying Sales Tax Online Avoidable?

It is difficult these days to read an article about sales tax without coming across issues with online companies such as Amazon. For those of you that do not spend most of your day hunting down interesting sales tax articles, please just take my word for it. In fact, before Congress right now is an attempt to nationalize sales tax collection by passing a law known as the Marketplace Fairness Act (MFA). This law would essentially cause most online retailers, like Amazon, to collect tax in every jurisdiction to which they sell. Not surprisingly, and despite the literally thousands of articles discussing the MFA and online sales tax collection, most consumers and many commentators still are not understanding how a sales tax works.

By way of background and for review for many of you, a sales and use tax work Read More

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Form Over Substance – Go For Two

Our firm receives questions on a regular basis from taxpayers and their CPA’s alike regarding businesses that provide both services and tangible personal property. In most states, tangible personal property is subject to sales tax while the sales of services is not. Alternatively, a similar question comes in with real property improvement contractors that sell some tangible personal property, some installation, and some real property contracts with installation. The question is even more pressing in the case in which the taxpayer is a real property improvement company that has significant sales to tax-exempt or governmental entities. The issue remains the same, how does the taxpayer exempt the service or minimize the sales tax ramifications in their business?

In this simple example, consider an interior design company. In most states the sale of Read More

Written by | Posted in Real Estate • Sales/Use Tax

North Carolina Department of Revenue Launches Trust Tax Recovery Program

On February 5, 2014, the North Carolina Department of Revenue (the “Department”) began its Trust Tax Recovery Program, which offers amnesty to qualifying companies owing collected but unpaid trust taxes. The Department describes trust taxes as those taxes paid by a customer to a seller or withheld from an employee, and held in trust by the business until filed and paid to the Department. This broad definition encompasses taxes owed on motor vehicle leases and rentals, sales and use taxes, scrap tire and white goods disposal taxes, and certain other withholdings. Also included are use taxes collected on a remote sale to an individual in North Carolina. Use tax liability for certain transactions where tax was not paid to a seller at the time of purchase is not within the definition of trust taxes, as the tax is not the possession of the seller. Read More

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

Are Shifts in Business Trends “Sales Tax” Driven?

In mid-January 2014, I came across an article in the Wall Street Journal discussing shopping trends over the holiday season. According to the Journal’s article, As Shoppers Skip the Mall, Stores Search for Fresh Lures, the shift to online shopping and away from the traditional brick-and-mortar was heavily price driven. Of course, other factors contributed such as convenience of shopping online and having a more defined mission when going to the store due to online research. However, the article suggested a “permanent” shift away from store showrooms and more to that of an online marketplace. Is it possible that a perceived sales tax savings is also contributing?

Irrespective of the rationale, the results of this year’s shopping trends analysis was staggering. Courtesy of ShopperTrak, a data firm, stores can monitor foot traffic by the use Read More

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North Carolina Benefits from Amazon Sales Tax Collection

As many people know, Amazon has been clashing with many states whether it should be required to charge, collect, and remit sales tax. Many states have taken the position that Amazon’s affiliates and distribution centers created the dreaded “nexus.” If an online retailer (or any company) has so-called “nexus” it is required to charge, collect, and remit tax in that state. With millions of dollars at stake, Amazon threatened to pull its affiliate programs in those states which, in turn, would cut tens of thousands of jobs. Fearful of huge job cuts in a struggling economy, many states allowed Amazon a grace period, permitting the company to continue its program and not collect sales tax for x number of years in the future. Once the grace period expired, then Amazon would have to charge, collect, and remit tax. In return, the state would keep its jobs as well as get more tax Read More

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

Energy Star Sales Tax Holiday Returns To Maryland February 15th

Maryland’s annual Shop Maryland Energy sales tax holiday begins at 12:01 a.m. February 15, 2014 and ends at 11:59 p.m. February 17, 2014. Now in its fifth year, the program allows for the waiver of the state’s 6% sales tax on qualified Energy Star appliances purchased in Maryland during this period. Energy Star products are those products designated as meeting or exceeding the Environmental Protection Agency’s efficiency requirements for the program.

The sales tax holiday applies to Energy Star labeled:

• Air conditioners,
• Washers and dryers, Read More

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Sales Tax Complexity Example – Colorado

Many local governments have sales tax in addition to the state’s sales tax. Tax rates likely vary among local entities. Thus, it is necessary to define that local jurisdiction. We might assume that should be easy because it would be based on the name of the city or the zip code – something easily known. But, that is not true, there are many areas where zip codes do not tie to the local sales tax rate.

Thanks to Karen Davis of T.M. Byxbee Company, P.C. in Connecticut for pointing out to me an example of the complexity that can exist in trying to determine the proper sales tax rate to charge. The Colorado Department of Revenue has a web tool where you can determine the local sales tax. For some of the jurisdictions though, you’ll also need a map to determine the rate. For example, here is the description provided for the city of Aurora Read More

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Marijuana And The Tax Law

It’s unlikely anyone missed the news stories about marijuana sales becoming legal on January 1, 2014 in Colorado. The Huffington Post reported on January 8, 2014 that sales in the first week were about $5 million. That also generated a lot of tax revenue for the state because Proposition AA* that Colorado voters passed in November 2013 allows for a 15% excise tax when unprocessed retail marijuana is sold by a cultivation facility to a retailer AND a 10% sales tax (on top of the normal Colorado sales tax of 2.9%) when the retailer sells the marijuana. That proposition suggested that $70 million would be generated annually with the first $40 million to be used for public school capital construction. Additional revenues would be used to enforce regulations on the retail marijuana industry and the balance for other needs (apparently at the discretion of the Read More

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

Delivery to Washington Customers in Company Owned Trucks Creates Nexus

Creating a not so Happy New Year for out-of-state taxpayers, the Court of Appeals for Division II found that Space Age Fuels, Inc. (Space Age) had nexus for Washington B&O tax based on the delivery of fuels to Washington customers in company owned trucks. Space Age Fuels, Inc. v. Washington, Docket No. 44195-1, Court of Appeals Division II (12/31/2013).

Space Age, a corporation maintaining its principal place of business in Oregon, operates a wholesale and retail fuel business. While all of its fuel stations are located in Oregon, Space Age had about 40 wholesale customers in Washington. The Washington customers would place an order via telephone, fax or email. Space Age quoted a price for fuel and a separate price for delivery of the fuel, which varied according to distance. Read More

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

Sales of Business Assets

Business assets are not capital assets but the sale my result in long-term capital gain if the asset has been held for more than one year. Under Code Section 1231, the net gain from sale of all Section 1231 assets is long-term capital gain, but there are two are two exceptions for depreciable property. (1) For personal property, under Section 1245, gain is ordinary income to the extent of any depreciation allowed or allowable (depreciation recapture). Allowable means that if the taxpayer could have taken depreciation on the asset but did not do so, then this amount must reduce the basis of the asset and is considered as ordinary income when the property is sold for a gain. (2) Under Section 1250, real property depreciated under an accelerated method is also treated as ordinary income. The amount of recapture depends on when the asset was placed in service and what depreciation method Read More

Written by | Posted in Property Tax • Sales/Use Tax • Tax Provision/Tax Reporting
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