Tag Archive for Jerry Donnini

Portable Toilets – What’s The True Object of The Transaction?

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It never ceases to amaze me, the wide variety of companies that state agencies attempt to extort money from. Most states impose a sales tax on the sale or rental of tangible personal property. But what happens when the sale is part tangible personal property, part service (“known to the sales and use tax attorney as a “mixed transaction”)? Is the entire transaction subject to tax? Many states take the incredibly helpful, “it depends” approach and look to an even more helpful “object of the transaction” test. In reality, it truly seems like state agencies and courts reach a conclusion and fill in the reasons later.

By way of brief background, since the mid-1900’s, when states enacted their first versions of a sales tax, many courts created this “object of the transaction” test. The test attempted to formulate what the customer was really buying, product vs service. If it was a service Read more

Florida Motor Fuel Tax Audits On The Rise

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Over the past few years the Florida Department of Revenue (“FDOR”) has launched several new campaigns. About 2 years ago, the DOR gained the ability to access the data tracking all tobacco and alcohol items sold to retailers. Armed with third party data, the FDOR did several thousands of audits on those that sold tobacco or alcohol items. With the downturn in the economy, times are tough for the State of Florida and they are launching a similar campaign against auto dealers using DMV records. It was also brought to our attention that the DOR is launching a new campaign by training its auditors for motor fuel tax audits as well.

Has the FDOR reached out to your company or your client’s company about a pending Florida Motor Audit? If you or your client already received the Florida Form DR-840 – Notice Read more

TaxConnections Worldwide Tax Blogs Awards 2014 – Top Twenty Tax Bloggers


Brian Mahany is the top of the list as the most prolific blogger on Worldwide Tax Blogs. Brian blogs on FATCA – The Single Worst Tax Law On the Books, Beanie Baby Founder Headed To Prison, How To Respond When Your Foreign Bank Asks About Your IRS Compliance, Restaurant Owners Beware-IRS Audits Can Lead To Immigration Charges. Brian is an expert on FATCA (Foreign Account Tax Compliance Act) and you can discover for yourselves how informative his blogs are for US citizens with offshore bank accounts. A new world is emerging for citizens with offshore bank accounts this year so stay tuned as Brian continues to share his knowledge with us. Having said that, a group of distinguished tax bloggers leads TaxConnections Worldwide Tax Blogs Top Twenty Tax Bloggers list this year and they all provide a different perspective on a wide variety of tax matters. Read more

Colorado Enacts Pot Tax

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Colorado clearly does not stick to the trends. Whether it is legalizing marijuana or attempting to get Northern Colorado to become the 51st state, Colorado has been all over the news during the past year. Recently, the state had on its ballot an interesting tax that stayed in line with Colorado’s unusual politics. Specifically, on November 5, 2013, Colorado voters passed the pot tax.

On its face, the tax appears to operate similar to somewhat steep excise tax. It appears that recreational marijuana sales will be subject to a 25% tax which goes into effect on January 1, 2014. Of the 25%, 15% will be allocated to public school construction projects and 10% will go to funding enforcement regulation on the retail pot sales. This excise tax, which is similar to tobacco and cigarette taxes, is in addition to 2.9% sales tax at the retail level. Read more

Extra! Extra! Maine Raises Revenue By Taxing Newspapers

TaxConnections Member and Blogger Ronald Marini posts about OVDPGoing back to the basics of a sales tax regime, sales tax is generally due on the sale of tangible personal property at retail in a state. Here, a newspaper is tangible property and as long as it is sold at retail within the state’s borders, then it is generally taxable. While it may seem counter intuitive, many states adhere to this general view and impose a sales tax newspaper. A few states, for public policy reasons, have determined that newspapers should be exempt, therefore, make an exception to the general rule and statutorily take newspapers out of the sales tax rule. Maine imposed a reduced sales tax of 5% on the sales of newspapers until recently.

In a recent, somewhat comical piece (comical from a state and local tax attorney’s perspective), Businessweek reported that Maine will begin taxing newspapers at the higher rate of 5.5% beginning in October, 2013. Although usually anti-tax, Gov. Paul LePage thought it was in the state’s best interest to lift the exemption on newspapers and magazines from 5 to 5.5%.

The tax will certainly raise revenue for the state but one can only wonder the governor’s true motive in increasing taxes. The Republican governor has been on record joking about blowing up the headquarters of the Portland Press Herald, Maine’s largest newspaper. When asked if this was a direct shot at newspapers, the governor responded that buying a newspaper is “like paying somebody to tell you lies.” Read more

States Offer Amnesty in Attempt to Collect Tax

TaxConnections Blogger John Dundon posts about accumulated adjustment accountsEach year, many states announce amnesty programs in an effort to incentivize taxpayers to pay state tax. Most programs, in one form or another, offer partial or full interest and penalty abatement if taxpayers pay back taxes owed. While the programs seem like a win for states in theory, as a state and local tax attorney, I can promise that such programs lead to problems. Auditors in the various states are told to close down improperly completed audits in an effort to get taxpayers in the amnesty program. This, in turn, leads to poorly conducted audits that must be protested and litigated. In short, state and local tax professionals in those states should be licking their chops for the bombardment of work that will likely ensue.

The most recent states to implement a version of an amnesty program are Arkansas, Connecticut, and Louisiana.

Arkansas’ amnesty program applies to franchise taxes and runs from September 1st through December 31st, 2013. In order to participate, taxpayers must submit all reports and forms and pay the computed tax to the state. If a taxpayer meets the requirement of the deal, then Arkansas will waive all interest and penalties for delinquent taxpayers.

Similarly, in Louisiana, a Tax Amnesty program went into effect on September 23rd, 2013. The Louisiana amnesty program is broader than Louisiana in that it covers most state and local taxes. Taxpayers only have until Read more

Massachusetts and Minnesota Take Step Back in Tech Taxes

TaxConnections Picture - Laptop1A host of problems have been created from a state and local tax perspective over the last few decades relating to sales tax on technology. Aside from the Amazon issue most are aware of, there has been a multi-state tax debate as to whether certain software charges are subject to sales tax. Under the traditional sales tax view, sales of tangible personal property are subject to sales tax. However, how is software, which may or may not be delivered in tangible form, taxed? Is it tangible personal property or tax exempt intangible information? Many states have adopted laws to capture software in the taxable base while other states depend on certain aspects of the software. Recently, Minnesota and Massachusetts have tackled different aspects of sales tax on technology.

On September 24, 2013, SAP Retail Inc. v. Comm’n of Revenue was decided. In the case, the software company not only provided taxable software products but also provided implementation services. The court was asked to address whether the consulting and implementation services were separate from the sale of the software itself, or if the services were so closely connected to the software sale that they were also taxable. Despite creative arguments on the side of the state, the court determined that the services were not fabrication services because the company did not furnish the items used to create the software. Moreover, the court determined that the consulting services were an independent and unrelated transaction because one could buy the software without the service of visa versa. Therefore, at least for now, consulting and implementation software services do not appear to be taxable in Minnesota. Read more

Judiciary Committee Releases Internet Sales Tax Principles

TaxConnections Blogger Jerry Donnini posts internet sales tax principlesReportedly relying on trade groups, taxpayers, industry, and state governments the House Judiciary Committee announced seven basic principles on remote sales tax collection. Chairman Goodlatte made the announcement to allegedly begin the discussion on the looming problem of Internet sales tax.

The seven basic principles, announced, are:

1. Tax Relief – Using the Internet should not create new or discriminatory taxes not faced in the offline world. Nor should any fresh precedent be created for other areas of interstate taxation by States.

2. Tech Neutrality – Brick & Mortar, Exclusively Online, and Brick & Click businesses should all be on equal footing. The sales tax compliance burden on online Internet sellers should not be less, but neither should it be greater than that on similarly situated offline businesses.

3. No Regulation Without Representation – Those who would bear state taxation, regulation and compliance burdens should have direct recourse to protest unfair, unwise or discriminatory rates and enforcement. Read more

Online Travel Company War Still Raging in Georgia

TaxConnections Blogger Jerry Donnini posts about online travel companiesMany states, including my home state of Florida, have been unbundling the online travel company mess from a tax perspective over the last few years. Like many state and local tax issues, states have been all over the map when it comes to the taxation of new technology-type transactions. In the online travel industry, companies like Orbitz, Expedia, and (“OTCs”) purchase rooms at a low rate and facilitate a deal with customers to rent them from the hotel. Like many businesses tend to do, the online travel company turns a profit in this transaction. The problem that has arisen is whether the state and its counties should collect tax on the price charged from the hotel to the OTC or the higher price charged from the OTC to the customer.

One of the few states that seem to have a final determination is Georgia. Georgia is one of the few states that had the issue go up the judicial ladder to its Supreme Court. Ultimately in City of Atlanta v., 710 SE 2d 766 (Ga 2011), the court ruled in favor of the city and determined that the bed tax applied to the higher amount. As an aside, many states have ruled exactly the opposite and it is worth pointing out that the counties, not the states, have been the aggressors in these cases.

After remaining dormant for a few years, the Georgia Supreme Court ruled that the case was still not closed. Apparently, in the opinion, the Georgia Supreme Court ruled in a footnote that the trial court did not rule on the city’s Read more

What Do I Do? Received Florida Sales and Use Tax Audit Notice – Part 3

TaxConnections Blogger Jerry Donnini post what to do for a Florida Sales and Use AuditPart 3: Audit Ends, What Do I Do?

A daunting reality sets in for many Florida taxpayers when the audit report is issued. To say the majority of Florida taxpayers under a Florida sales tax audit have a meltdown is an understatement. Many taxpayers and other Florida tax professionals believe that this is the end of the road for their journey to a sizeable tax bill. However, this is when our job as Florida tax attorneys really begins.

Upon the completion of a Florida tax audit, the Department of Revenue issues a notice of proposed assessment (“NOPA”). The NOPA is an important document for two reasons. First, it signals that the Florida sales tax auditor is done with the file at the local office and has sent it to Tallahassee. More importantly, if the Taxpayer or the Florida state tax professional does not know what to do, the NOPA means the company better act fast!

Pursuant to Florida law and the NOPA itself, the assessment becomes final in 60 days if it is not contested. This means that the Taxpayer or its CPA or attorney has two months to file a protest with Tallahassee. For those of you Read more

Illinois Responds to Prior Tobacco Tax Court Ruling

iStock_000013235100XSmallWhat is meant by a “cigarette” in Illinois? This question has been circulating through the tax community since December 2012. In August, 2013, it was reported that Illinois officially changed the definition of a “cigarette” and a “little cigar” for purposes of the Illinois tobacco tax regime. This is a major victory for tobacco products manufacturers and tobacco distributors in the state of Illinois.

As a starting point, Cigar Association of America v. Hamer, Cook County, 12 L 51033 was decided in December, 2012. That case was centered on a trade association arguing that Illinois’ definition of a cigarette was constitutionally invalid because it was too vague. In Illinois, a cigarette was defined as any roll containing tobacco that is suitable for smoking or if it met two of the following criteria: Read more

What Do I Do? Received Florida Sales and Use Tax Audit Notice – Part 2

TaxConnections Blogger Jerry Donnini post what to do for a Florida Sales and Use AuditPart 2 Common Pitfalls

There are several issues that often surface during the audit. Many of the issues that surface are that the client does not have records, the client does not have a complete or updated QuickBooks or accounting software file, or the client has collected and remitted the incorrect amount of tax.

The most common issue we face is the situation in which the Florida taxpayer does not have adequate records to do a complete audit. Based on many of our clients, Florida is an extremely dangerous place to live. Until I became a Florida sales and use tax attorney, I was not aware of the high number of floods, fires, earthquakes, tsunamis and other natural disasters that destroy all of a business’s records. On a serious note, many taxpayers believe that not having any records is the best way to escape tax liability. However, generally the opposite is true. The more records that are available, generally, the more we can do to explain discrepancies that arise during the audit. Therefore, we recommend that a Taxpayer does its very best to salvage as many records as possible for review even if they are extremely damaged due to mother nature. Read more