Industry News
State Tax Advisors receives the latest in legislative developments from CCH Internet Tax Research NetWork. Here are some recent headlines from their newsletter about important changes in state tax laws. To visit the CCH website and learn more, click here.
November 10, 2009
Attention: Wholesalers in Washington State
As of January 1, 2010, resale certificates are no longer valid. After December 31, retailers who buy products for resale must give you a copy of their permit or qualifying exemption certificate or you need to charge them sales tax.
A Streamlined Sales and Use Tax Agreement Exemption Certificate may be used by a WA registered seller and a Multistate Tax Commission exemption certificate can be used by out-of-state sellers that are not required to be registered in Washington.
For more information about this new Washington state law, go to http://dor.wa.gov/resellerpermit and click "Wholesalers".
October 14, 2009
Pennsylvania Gov. Edward Rendell has signed a tax bill that amends sales and use, personal income, corporate net income, capital stock and franchise, and cigarette taxes; imposes a new gross receipts tax on managed care organizations that are parties to Medicaid managed care contracts; and creates a tax amnesty program. The law modifies corporate net income tax net operating loss and apportionment provisions, implements accelerated remittance schedules for certain sales and use and withholding tax filers, slows the capital stock and franchise tax phaseout, reduces the total available amount of certain tax credits, increases the cigarette tax rate, and extends the cigarette tax to small cigars. Details of the legislation, including effective dates, were previously reported. (TAXDAY, 2009/10/12, S.14)
H.B. 1531, Laws 2009, effective as noted
August 17, 2009
All States-Sales and Use Tax: SST Panel Rejects States' Origin-Sourcing Interpretation, (Aug. 14, 2009)
A Streamlined Sales Tax (SST) panel rejected an interpretation sought by seven states that would have held the January 1, 2010, effective date in the SST Agreement for an origin-sourcing option is a "trigger," rather than a "sunset." (TAXDAY, 2009/08/04, S. 1) By a vote of 3-2, with one member absent, the Compliance Review and Interpretations Committee (CRIC) rejected the interpretation sought by Arizona, New Mexico, Ohio, Tennessee, Texas, Utah, Virginia, and the Virginia Association of Counties. SST Executive Director Scott Peterson told the CRIC members that, having rejected the requested interpretation, they must now explain in writing how they think the relevant provision should be interpreted and hold another vote on that alternative interpretation. The CRIC deferred any further action until their next meeting.
Background: In an attempt to resolve a long-running controversy, the SST Governing Board amended the Agreement in December 2007 to allow states to qualify for full membership under an origin-sourcing option, effective "on or after January 1, 2010, provided that at least five states which are not full member states on December 31, 2007" make the election to use origin sourcing and are otherwise in substantial compliance with the Agreement. It is now apparent there will not be five states in that position on January 1, 2010.
In response to questions about how to interpret the effective-date language, the seven states and the Virginia Association of Counties sought an interpretation holding that January 1, 2010, is the earliest date on which qualifying states can become full members (i.e. a "trigger") and not a deadline. Opponents of this interpretation, from the Business Advisory Council (BAC) and, apparently, among some existing member states, take the position that January 1, 2010, was intended as a deadline (i.e. a "sunset"), and that the origin-sourcing option will not be available after that date unless the board further amends the Agreement.
During a sometimes heated debate, BAC representatives argued that it was inappropriate for the CRIC to take this matter up now, given the expectation that the board will be debating this issue at its annual meeting in September in Oklahoma City. Supporters of hearing the matter responded that the CRIC is supposed to vet such interpretations and that any action it takes does not bind the board. Ultimately, although the CRIC did hold a vote, the requested interpretation was rejected.
Other action: The CRIC took three other votes during their conference call.
The CRIC voted 4-2 to approve an interpretation sought by Loren Chumley, KPMG, that the value of points, awarded employees as sales incentives and redeemable for merchandise at a reduced price, should be treated as a discount and excluded from the sales price of the merchandise.
The CRIC voted 5-0 not to accept a request to issue an interpretation sought by Denton Childs, Tyson Foods, Inc., related to how Arkansas amended its laws to impose use tax on services in order to conform to the Agreement's destination-based sourcing requirements. The CRIC members had reservations about how the request was drafted, and questions about exactly what they were being asked to determine.
The CRIC voted 5-0 to accept a request to issue an interpretation sought by James Tilton, Alex Lee, Inc., on whether Lucky Charms cereal should be taxed as "candy" because it "bundles" marshmallows (which fit the Agreement's definition of "candy") with oat pieces that contain flour (the presence of which excludes these pieces from the "candy" definition).
Peterson told the CRIC that his office has begun the process for the annual recertification of member states. He hopes to have completed the process for some states in time for the CRIC to begin its review at its next meeting in two weeks. At that time, Peterson also hopes to have prepared a schedule for the annual review process.
Meeting, Compliance Review and Interpretations Committee, August 13, 2009
California-Multiple Taxes: State Will Stop Issuing IOUs in September, (Aug. 17, 2009)
After stress testing cash projections from California's newly revised budget, State Controller John Chiang has determined that on September 4, 2009, the state can stop issuing IOUs, which the state has used for, among other things, various tax refunds. The September date is almost one month earlier than previously expected.
Previously, both the Franchise Tax Board (FTB) and the State Board of Equalization (BOE) had announced that they would accept IOUs as payments for taxes and fees they administered. (TAXDAY, 2009/07/23, S.1; TAXDAY, 2009/07/08, S.4)
Subscribers can view the controller's press release.
NOMOREIOU
Release, Office of California Controller John Chiang, August 13, 2009
North Dakota-Sales and Use Tax: SST Taxability Matrix, Certificate of Compliance Revised; Recertification Letter Issued, (Aug. 17, 2009)
The North Dakota Office of State Tax Commissioner has revised the state's Streamlined Sales and Use Tax (SST) taxability matrix and certificate of compliance, and has issued a recertification letter. The taxability matrix reflects the state's treatment of certain items defined in the Library of Definitions of the SST Agreement as amended through May 12, 2009. The certificate of compliance reflects the state's compliance with specified provisions of the SST Agreement as amended through May 12, 2009.
The recertification letter states that North Dakota remains in substantial compliance with the SST Agreement as of August 1, 2009, and discusses sales and use tax law changes made during the 2009 legislative session. The letter also notes that the tax commissioner's office is in the process of drafting rule changes that include the definition of "prepaid calling services." The rules should be in effect by January 1, 2010.
Oklahoma-Sales and Use Tax: SST Taxability Matrix, Certificate of Compliance Updated, (Aug. 17, 2009)
Oklahoma has updated its Streamlined Sales and Use Tax (SST) taxability matrix and certificate of compliance. Revisions to the matrix include new sections on the taxability of computer maintenance contracts and direct mail delivery charges. Revisions to the certificate of compliance include a new section on origin-based direct mail sourcing and additional responses to questions concerning sales tax holidays. The updated matrix and certificate of compliance are available on the SST Governing Board Web site at http://www.streamlinedsalestax.org/certificates%20of%20compliance.htm.
Taxability Matrix, Oklahoma Tax Commission, July 2009; Certificate of Compliance, Oklahoma Tax Commission, July 2009
Utah-Multiple Taxes: County Was Not Entitled to District Court Review, (Aug. 17, 2009)
The Utah Court of Appeals held in a property tax case that a county was not entitled to petition to the district court for relief from a decision of the Utah State Tax Commission. In the case, the commission had entered a final order, the property owners filed a petition for review with the Utah Supreme Court, the county filed a cross-petition for review, and then the county subsequently filed a petition for review in the district court. The property owners contended that the county was not entitled to request review in the district court after opting to participate in the appeal initiated before the supreme court. The district court dismissed the county's appeal, finding that the county had invoked the supreme court's jurisdiction with the cross-petition. The county sought review from the appellate court.
Utah statute states that an aggrieved party appearing before a county or the commission may petition for review in the district court, the supreme court, or the court of appeals. The appellate court interpreted the statute to mean that each party to a commission decision can appeal to the court of its choice, and that one party's filing of an appeal does not restrict other parties' avenues of appeal. However, the appellate court found that the county did not properly invoke the jurisdiction of the district court. Specifically, the appellate court declined to find that the county's cross-petition for review was not a "petition for judicial review" under the statute. As a result, the appellate court held that the county exercised its option to petition the supreme court for relief and was no longer able to petition the district court.
Subscribers can view the appellate court's decision.
wasatch081309
Wasatch County v. Tax Commission, Utah Court of Appeals, No. 20080732-CA, August 13, 2009
Vermont-Sales and Use Tax: SST Taxability Matrix, Certificate of Compliance Revised; Recertification Letter Issued, (Aug. 17, 2009)
The Vermont Department of Taxes has revised the state's Streamlined Sales and Use Tax (SST) taxability matrix and certificate of compliance, and has issued a recertification letter to the SST Governing Board. The taxability matrix reflects the state's treatment of certain items defined in the Library of Definitions of the SST Agreement as amended through May 12, 2009. The certificate of compliance reflects the state's compliance with specified provisions of the SST Agreement as amended through May 12, 2009.
The recertification letter states that Vermont is in full compliance with the SST Agreement, and that the letter is submitted with full knowledge of and in dispute of a petition for resolution filed with the SST Governing Board by the Business Advisory Council on July 13, 2009. The letter notes that Vermont administers all sales and use tax laws and regulations in full compliance with all provisions of the SST Agreement. The letter also notes that the department is in the process of amending its regulations to address the missing reference to "prepaid wireless calling service" and recent legislative changes to Vermont's tax laws.
[CCH Note: Vermont's treatment of prepaid wireless calling services was discussed during the SST Governing Board Meeting in Arlington, Virginia, on May 12, 2009. (TAXDAY, 2009/05/19, S.1) At that meeting, Fred Nicely, Council On State Taxation (COST), argued that Vermont's regulation on sourcing prepaid calling services does not include prepaid wireless calling services, as the Agreement requires. Susan Mesner, Vermont Department of Taxes, responded that the department will amend the regulation and, in the meantime, is administering it in accordance with the Agreement. The board voted 16-2 to uphold the Compliance Review and Interpretations Committee (CRIC) finding that Vermont is in compliance with the Agreement.]
Subscribers can view the taxability matrix, certificate of compliance, and recertification letter.
VT SST matrix 7-2009
VT SST certificate 7-2009
VT SST recertification letter 7-30-09
Taxability Matrix and Certificate of Compliance, Vermont Department of Taxes, July 2009; Recertification Letter, Vermont Department of Taxes, July 30, 2009
West Virginia-Sales and Use Tax: SST Certificate of Compliance Updated, (Aug. 17, 2009)
West Virginia has updated its Streamlined Sales and Use Tax (SST) certificate of compliance. Revisions include new sections on origin-based direct mail sourcing and prohibited replacement taxes. Additional responses are also provided with respect to sales tax holidays. The updated certificate is available on the SST Governing Board Web site at http://www.streamlinedsalestax.org/certificates%20of%20compliance.htm.
Certificate of Compliance, West Virginia State Tax Department, July 2009
August 10, 2009
Hawaii --Sales and Use Tax: Transitional Provisions for Transient Accommodations Tax Rate Increase Discussed
A Hawaii Department of Taxation announcement discusses transitional provisions for the transient accommodations tax rate increase enacted by Act 61 (S.B. 1111), Laws 2009. As previously reported (TAXDAY, 2009/05/12, S.14), the transient accommodations tax rate is increased from 7.25% to 8.25% from July 1, 2009, through June 30, 2010, and increases again from 8.25% to 9.25% from July 1, 2010, through June 30, 2015. Beginning July 1, 2015, the transient accommodations tax rate is scheduled to decrease to the current 7.25% rate.
Transient accommodations can be subject to different rates, depending on the timing of the payments received under the cash basis accounting method and on the outcome of the all events test under the accrual basis accounting method. Under the cash basis accounting method, gross proceeds from transient accommodations furnished before July 1, 2009, are subject to the 7.25% transient accommodations tax rate if payments are actually or constructively received before July 1, 2009. However, gross proceeds from the same transactions are subject to the 8.25% tax rate if the payments are actually or constructively received on or after July 1, 2009.
Under the accrual basis accounting method, gross proceeds from transactions occurring before July 1, 2009, are subject to the 7.25% tax rate if the right to receive such income is fixed under the all events test prior to July 1, 2009, but gross proceeds from these transactions are subject to the 8.25% transient accommodations tax rate if the right to receive the income is fixed under the all events test on or after July 1, 2009.
Any income taken into account under the taxpayer's method of accounting after July 1, 2009, is subject to the 8.25% transient accommodations tax rate. The same analysis applies when the rate increases to 9.25% on July 1, 2010, and again when the rate returns to 7.25% on June 30, 2015
Forms
Tax form books will not be reissued and revised forms are available at this time. The department will continue to accept a periodic Transient Accommodations Tax Return (Form TA-1), which lists 0.0725 in the rate column, after July 1, 2009, if:
-- the taxpayer changes the 0.0725 to 0.0825,
-- the taxpayer calculates the tax owed using 0.0825, and
-- the period covered by the return does not include more than one tax rate and ends on or before December 31, 2009.
Fiscal year taxpayers filing on a quarterly or semiannual basis where the period straddles two different tax rates must file the revised Form TA-1, which is available for download on the department's Web site at http://hawaii.gov/tax/.
For all other periods ending after December 31, 2009, taxpayers must use the revised Form TA-1. With regard to the Transient Accommodations Tax Annual Return and Reconciliation (Form TA-2), all calendar year and fiscal year filers with tax years ending after June 30, 2009, should use the revised multi-rate Form TA-2, which may also be downloaded from the department's Web site.
Announcement No. 2009-24, Hawaii Department of Taxation, August 5, 2009, ¶200-756
Louisiana --Sales and Use Tax: Exclusion Enacted for Nonprofits That Provide Housing to the Homeless
A Louisiana state and local sales and use tax exclusion is enacted for a temporary lodging facility operated by a nonprofit organization, as described, provided the facility is devoted exclusively to the temporary housing of certain homeless persons for periods no longer than 30 days. In order to be eligible, the housing must be offered to homeless transient persons whom the nonprofit determines to be financially unable to obtain lodging, as defined, and the lodging charge to such persons can be no more than $20 per day.
Act 456 (H.B. 9), Laws 2009, effective July 1, 2009
New Jersey --Sales and Use Tax: New Administrative and Procedural SST Conforming Rules Adopted
The New Jersey Division of Taxation has adopted a new chapter of administrative and procedural rules to conform to the Streamlined Sales Tax (SST) Agreement. The new rules contain the following: definitions, administration of exemptions, administration of tax returns, rules for remitting tax, certification of service providers and automated systems, registration of sellers, state review and approval of certified automated system software and certain liability relief, confidentiality and privacy protections under Model 1 (Model 1 refers to a seller that has selected a certified service provider as its agent to perform all the seller's sales and use tax functions, other than the seller's obligation to remit tax on its own purchases), and relief from certain liability for purchasers confidentiality and privacy protections under Model 1.
New York --Sales and Use Tax: No Quarterly Cents-Per-Gallon Rate Adjustments Necessary
The New York Department of Taxation and Finance has issued a notice regarding the adjustment of the state and local cents-per-gallon rates of New York sales and use taxes on certain motor fuel and diesel fuel (together, "qualified fuel").
The Commissioner of Taxation and Finance is required to establish an average price (not including sales tax or fuel excise tax) on motor fuel and diesel fuel during each quarter. Counties and cities that have elected a cents-per-gallon method of tax must multiply the average price by the local sales tax rate. If the result of this computation is less than the locality's effective cents-per-gallon rate, localities must drop their cents-per-gallon rate to the lower rate, rounded to the nearest cent. Adjustments to a cents-per-gallon rate due to a change in the average price must be published by the commissioner and will take effect on the first day of the next succeeding sales tax quarter.
The average price is also multiplied by the state percentage sales tax rate and the Metropolitan Commuter Transportation District (MCTD) percentage tax rate. If the result of this computation is a lower state or MCTD cents-per-gallon rate, the state or MCTD cents-per-gallon rate is also adjusted to the lower rate. The new rates would also take effect on the first day of the next succeeding sales tax quarter.
The commissioner has established the required average price applicable to the sales tax quarter beginning September 1, 2009. As a result, no local cents-per-gallon tax rate on qualified fuel is being adjusted effective September 1, 2009. Similarly, no adjustment is being made to either the state cents-per-gallon rate or the MCTD cents-per-gallon rate on qualified fuel effective September 1, 2009.
Important Notice N-09-15, New York Department of Taxation and Finance, August 7, 2009, ¶406-478
Oklahoma --Sales and Use Tax: Local Rate Changes Announced, Corrected
The following local sales and use tax rate changes take effect in Oklahoma on October 1, 2009:
-- Addington imposes a new use tax at a rate of 2%.
-- Savanna increases its sales and use tax rate from 3% to 5%.
-- Waukomis increases its sales and use tax rate from 3% to 4%.
-- West Siloam Springs increases its sales and use tax rate from 2.75% to 3.75%.
-- Washita County increases its sales and use tax rate from 1.125% to 1.875%. (A previous Tax Day story based on incorrect information reported that the rate would increase from 1.25% to 1.875% on October 1.)
Washington --Sales and Use Tax: Municipal Annexations Announced
The Washington Department of Revenue has issued a local sales and use tax notice announcing that the following municipalities have imposed annexations: Battle Ground, Clarkston (four annexations), Colville (two annexations), Cusick, Davenport, Eatonville, Ellensburg (two annexations), Enumclaw, Everett, Fife, Forks, Friday Harbor, Gig Harbor, Grand Coulee, Leavenworth (two annexations), Longview, Maple Valley, Moses Lake, North Bend, Oroville, Pasco, Port Orchard (two annexations), Prescott, Renton (three annexations), Ridgefield, Snohomish (two annexations), Snoqualmie (three annexations), Sumas, Sunnyside (16 annexations), Vancouver, and Wilber. The sales tax rates for businesses located within the annexed areas may be affected. The notice can be viewed on the department's Web site at http://dor.wa.gov/Content/FindTaxesAndRates/SalesAndUseTaxRates/Annexations_09_Q4.aspx.
Annexations Q4 2009, Washington Department of Revenue, August 7, 2009
Kansas --Sales and Use Tax: Guidance on Diplomatic Tax Exemption Program Revised
The Kansas Department of Revenue has revised its guidance on the application of sales, use, and transient guest taxes under the Diplomatic Tax Exemption Program when the purchaser presents to the retailer a tax exemption card issued by the U.S. Department of State, Office of Foreign Missions (OFM). Foreign missions and officials entitled to an exemption are issued the cards by the OFM. However, the cards are the not valid for exemption from Kansas sales or use taxes on vehicles, gasoline, telephones, or other utilities.
The program is based on reciprocal treaty agreements authorized by the federal constitution between certain foreign countries and the United States. Revisions to the guidance clarify that the program allows for an exemption from state and local sales and use taxes, transient guest taxes, and similar taxes generally charged when the sale is to eligible foreign officials and foreign missions on assignment in the United States.
July 27, 2009
Alabama --Sales and Use Tax: Revised Chart Shows Local Participation in 2009 Tax Holiday
The Alabama Department of Revenue has revised a chart that reflects the latest information concerning the counties and municipalities that have notified the department regarding their participation in the sales tax holiday being held from August 7 through August 9, 2009.
The updated chart reflects the participation by Clay County, Evergreen, Fairfield, Phil Campbell, and Russell County, which are only participating in 2009. However, Russell County has adopted the sales tax holiday on a "limited" basis because only a portion of its total sales and use tax levy is exempted.
The list of participating localities will be updated by the department as it receives information. The chart listing localities that have notified the department regarding their participation in the tax holiday can be found on the department's Web site at http://www.ador.state.al.us/salestax/STholiday.htm.Sales Tax Holiday Notice, Alabama Department of Revenue, July 2009
California --Multiple Taxes: Increased Withholding, Accelerated Estimated Tax Payments Included in Budget Deal
T he California Legislature passed two budget trailer bills as part of the budget deal negotiated between Gov. Arnold Schwarzenegger and legislative leaders that, if enacted, would increase personal income tax withholding, accelerate the installment payments for personal income and corporation franchise and income taxes, retroactively revise the estimated tax underpayment penalty to conform the application of withholding credits to the revised estimated tax installment percentages, generally conform to federal backup withholding provisions, and require qualified purchasers to register with the California State Board of Equalization (BOE) for purposes of reporting and paying use taxes.
Notably absent from the California budget agreement is the so-called Amazon proposal to create a presumption of nexus for online sellers for sales tax purposes under certain circumstances. The governor previously vetoed such a proposal (S.B. 17, Third Extraordinary Session, was vetoed by the governor on June 30, 2009).
Withholding
If enacted, A.B. 17, Fourth Extraordinary Session, would increase payroll withholding by 10%, effective for wages paid after October 31, 2009. Similarly, withholding on supplemental wages would increase from 6% to 6.6% effective for supplemental wages paid after October 31, 2009. For stock options and bonus payments that constitute wages paid after October 31, 2009, the withholding rate would increase from 9.3% 10.23%.
Estimated Tax Payments
A.B.x4 17, would also increase the second quarterly estimated tax payment from 30% to 40%, eliminate the third quarterly installment, and increase the fourth quarterly installment from 20% to 30%, applicable to installments due for each taxable year beginning after 2009. Adjustments would also be made to the installment percentages due in instances in which the estimated tax payment threshold is reached after the first quarterly installment due date.
Withholding Credits
Finally, A.B.x4 17 would revise the estimated tax underpayment penalty provision that credits the amount of withholding against the estimated tax payments due. Under current law, withholding payments are applied equally against the quarterly estimated tax payments. If enacted, this bill would revise the amount of withholding payments to be applied to the estimated tax payments due to reflect the applicable percentage of estimated tax payments required to be paid, as discussed above. Consequently, applicable to amounts withheld on wages beginning after 2008, withholding payments would be applied at 30%, 30%, 20%, and 20%, and beginning with the 2010 tax year, withholding payments will be credited quarterly at percentages equal to 30%, 40%, 0%, and 30%.
Backup Withholding
If enacted, A.B. 18, Fourth Extraordinary Session, would require payors to withhold 7% from specified reportable payments. This would generally conform to the federal backup withholding provisions. However, California's requirements would apply to rents, prizes and winnings, compensation for services, including bonuses, and other fixed or determinable annual or periodic gains, profits, and income, but would not apply to payments of interest and dividends or any release of loan funds made by a financial institution in the normal course of business. The California backup withholding provision would apply to payments made after 2009.
Finally the Franchise Tax Board (FTB) could require a payor of income to furnish the name, address, Social Security number, or other taxpayer identification of the recipient of such income for withholding purposes. Currently, a payor is only required to supply the name and address of the payee.
Use Tax
If enacted, A.B.x4 18 would also require a qualified purchaser to register with the BOE and provide the name under which the qualified purchaser transacts or intends to transact business, the location of the qualified purchaser's place or places of business, and other information as the BOE may require. Moreover, qualified purchasers would be required to file a return, along with their remittance of the amount of tax due, on or before April 15. A "qualified purchaser" would be defined as a person that meets all of the following conditions: (1) the person is not required to hold a seller's permit; (2) the person is not required to be registered, as specified; (3) the person is not a holder of a use tax direct payment permit, as described; (4) the person receives at least $100,000 in gross receipts from business operations per calendar year; and (5) the person is not otherwise registered with the BOE to report use tax. These provisions would be inapplicable to the purchase of a vehicle, vessel, or aircraft, as defined.
Massachusetts --Sales and Use Tax: Rate Change and Alcoholic Beverage Exemption Discussed
A Technical Information Release discusses recently enacted Massachusetts sales and use tax changes. Effective August 1, 2009, the sales and use tax rate is increased to 6.25%. The bracket schedule is repealed. Instead, tax must be computed to the third decimal place and rounded to the nearest whole cent, rounding up whenever the third decimal place is greater than four. The release explains transitional rules for applying the new rate to sales of utilities billed on a periodic basis, unconditional contracts, construction materials, and leases and rentals.
Effective August 1, 2009, the exemption for retail sales of alcoholic beverages is repealed. Any vendor that sells alcoholic beverages must register and file returns. Bars, restaurants, and stores claiming the resale exemption on purchases of alcoholic beverages for resale must provide resale certificates to their suppliers.
Technical Information Release 09-11, Massachusetts Department of Revenue, July 22, 2009, ¶401-250
Minnesota --Sales and Use Tax: 2009 Tax Law Changes Summarized; Workshops Announced
A Minnesota Department of Revenue release provides a summary of 2009 sales and use tax law changes. The changes include the increase in the state sales and use tax rate from 6.5% to 6.875% approved by voters at the November 2008 general election, and its effects on various transactions and the Minneapolis lodging tax; authorization for local taxes in Little Falls and Rochester; and changes in exemptions for government and nonprofit groups.
The release also announces the Minnesota Business Tax Education Program's 2009 fall sales tax workshops to be held in September, October, and November. The workshop topics include basic sales and use tax, border issues, contractors, and capital equipment/industrial production.
2009 Sales and Use Tax Law Changes, Minnesota Department of Revenue, July 2009, ¶203-493
Mississippi --Sales and Use Tax: Federal "Cash for Clunkers" Rebate Amount Not Taxable
A rebate amount received under the federal Car Allowance Rebate System (CARS), also known as the "Cash for Clunkers" program, will be treated as a trade-in allowance for purposes of Mississippi sales or use tax and will reduce the taxable portion of the sales price of the new vehicle. The estimated scrap value of the trade-in vehicle will also be treated as part of the trade-in allowance and will further reduce the taxable portion of the sales price of the new vehicle. Mississippi motor vehicle dealers will owe no sales tax on the payments received under the CARS program or on the scrap value payment received from the scrap dealer. Any administrative fee for handling the scrapping of the trade-in vehicle charged by the dealer to the customer will be subject to sales tax.
Federal CARS Program Details
Under the CARS program, a rebate of either $3,500 or $4,500 is allowed as a trade-in allowance for certain qualifying vehicles that are traded-in on the purchase of a qualifying new vehicle between July 1, 2009, and November 1, 2009. The federal government will issue the motor vehicle dealer a voucher for the rebate amount. The eligible trade-in vehicle must be scrapped, and the dealer must disclose to the buyer an estimate of the scrap value of the trade-in vehicle. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate.
Missouri --Sales and Use Tax: Convention Center Room Rentals Taxable, July 27, 2009
The taxpayer's receipts from rentals of rooms in its municipal convention center building are subject to Missouri sales tax under §144.020.1(6), RSMo, because the taxpayer regularly rents these rooms to the public.
Letter Ruling No. LR5714, Missouri Department of Revenue, June 16, 2009, ¶203-145
Other References: Explanations at ¶60-480
Missouri --Sales and Use Tax: Taxability of Aggregates Sold to Farmers Discussed, July 27, 2009
The taxpayer's sales of aggregates (i.e., lime screenings and river sand) to farmers as bedding for livestock are exempt from Missouri sales tax if the livestock are produced for food or fiber. The taxpayer should obtain and retain completed Sales/Use Tax Exemption Certificates (Form 149) from farmers purchasing aggregates for bedding to produce livestock for food or fiber. However, the taxpayer's sales of aggregates that are used by farmers as building materials for constructing new roads or improving muddy barnyards are not exempt from tax because no exemption applies.
Letter Ruling No. LR5750, Missouri Department of Revenue, June 16, 2009, ¶203-150
Other References: Explanations at ¶60-250
Utah --Sales and Use Tax: Taxability of Software-Related Services Revisited
The Utah State Tax Commission has amended a private letter ruling that discusses the application of Utah sales tax to a company's sale of a software-supported automobile dealership management service.
Under newly described facts, the commission found that a one-time set-up fee and a training fee charged customers with respect to the software were not taxable because they were optional and not "necessary to complete the sale" as described in the statutory definition of "purchase price." Evidence indicated that the services were not necessary to complete the sale because customers were not contractually obligated to purchase set-up or training and not all did, the services were separately stated on the invoices, the services could be provided by other companies, and the company provided customers with information on how to perform the services themselves.
Monthly licensing fees for software updates and fees charged to access the software were taxable as charges for services rendered in connection with the sale of prewritten software. This tax treatment held true regardless of where the customer was located. Custom programming fees charged to customize the software were not taxable because under Utah law, "prewritten computer software" does not include any modification or enhancement if the charges for these services are reasonable and separately stated. A fee for 24-hour telephone and Internet technical support was not taxable because it was not specifically listed in the statute that imposes sales and use tax, the support was provided for under a separate agreement, and the support did not relate to installing, upgrading, or enhancing prewritten software.
Private Letter Ruling, Opinion No. 08-002, Utah State Tax Commission, amended June 10, 2009, ¶400-623
Vermont --Multiple Taxes: Governor Appoints New Commissioner of Taxes, July 27, 2009
Vermont Gov. Jim Douglas has appointed Richard Westman of Cambridge to head the Department of Taxes. Westman, who represented the towns of Cambridge, Belvidere, and Waterville in the General Assembly for 27 years, will replace Tom Pelham as the commissioner of taxes.
The governor's press release regarding the appointment is available on his Web site at http://governor.vermont.gov/press-releases/press-releases.shtml.
Press Release, Vermont Gov. Jim Douglas, July 24, 2009
July 21, 2009
Arizona --Incorporation and Qualification: Electric Cooperative Corporations Required to File Annual Reports, July 22, 2009
Effective September 30, 2009, electric cooperative nonprofit membership corporations and nonprofit electric generation and transmission cooperative corporations incorporated in Arizona are required to file annual reports with the Arizona Corporation Commission.
Ch. 42 (H.B. 2199), Laws 2009, effective as noted
Connecticut --Sales and Use Tax: Certain Paving Contract Purchasers Eligible for Exemptions
Purchasers who will make a finished product, as specified, that is used to fulfill a paving contract are eligible for certain Connecticut sales and use tax exemptions. Such purchasers are eligible for exemptions on:
• gas and electricity used directly to make a finished product to be sold;
• materials, tools, and fuel (i.e., production materials) used directly in an industrial plant in making a finished product to be sold;
• machinery used directly in a manufacturing production process; and
• materials that are not otherwise exempt and are used or consumed in manufacturing tangible personal property to be sold.
The exemption for production materials (i.e., second exemption listed above) is inapplicable to sales made to a purchaser of materials that become an ingredient or component part of a finished product that is used by such purchaser to fulfill a paving contract.
Act 200 (S.B. 931), Laws 2009, effective July 8, 2009
South Carolina --Sales and Use Tax: Penalty Waiver Available for Durable Medical Equipment Retailers
In response to a recent South Carolina Supreme Court ruling that held that nebulizers, NIPPV, CPAP, BiPAP devices, and ventilators were subject to sales tax, the Department of Revenue has issued a notice explaining a penalty waiver for durable medical equipment retailers who failed to file and/or remit sales tax on such items. The penalty waiver will only be available from August 1, 2009 to August 31, 2009. Retailers must contact the department by phone or in writing by 5 p.m. on August 31, 2009. In writing to the department, the retailer should include its full name, address, telephone number, taxpayer identification numbers, retail sales license numbers, and point-of-contact for follow-up. There is no waiver for interest.
Those retailers who filed refund claims on sales tax paid on items covered by the underlying Administrative Law Court ruling will receive individual notice from the department. The Supreme Court decision, Home Medical Systems, Inc. v. South Carolina Department of Revenue, held that such devices as nebulizers, ventilators, NIPPV, CPAP, and BiPAP devices were not subject to the exemption for prosthetic devices because they did not replace a missing body part, only a missing function. This decision was discussed in a previous story. (TAXDAY, 2009/04/22, S.23)
Washington --Sales and Use Tax: Intrastate Direct Mail Sourced to Shipping Location, July 22, 2009
The Washington Department of Revenue reminds taxpayers that beginning July 26, 2009, sellers of direct mail that originates and is delivered to a location in Washington must collect sales tax based on the address from which it was shipped unless the purchaser provides a direct pay permit or a Streamlined Sales and Use Tax Agreement Certificate of Exemption. If the seller can document that a portion of the direct mail is delivered to a location outside Washington, no sales tax is required to be collected on that portion.
Special Notice, Washington Department of Revenue, July 2, 2009, ¶202-892
Wisconsin --Multiple Taxes: Third Party Access to My Tax Account Simplified, July 22, 2009
The process for third party access to the My Tax Account service for Wisconsin business tax registration renewal and for filing personal income tax withholding, sales and use tax, premier resort area tax, local exposition tax, and rental vehicle fee returns has been simplified for persons who do not have Internet access or an e-mail address. Clients without access to the Internet or who do not have an e-mail address can give their practitioner permission to access their business tax accounts on My Tax Account by signing the Authorization Form A-777a. In addition to the information required for online access (taxpayer ID type, taxpayer ID, and the customer's last name or business name), the practitioner will need the business tax type and authorization amount for clients using Authorization Form A-777a.
The Department of Revenue's news release regarding third party access can be viewed at http://www.dor.state.wi.us/taxpro/news/index.html.
Wisconsin --Multiple Taxes: Summaries of Recent Legislation Issued
The Wisconsin Department of Revenue has issued a tax bulletin containing summaries of recently enacted personal income, corporation franchise and income, sales and use, cigarette, and other tax changes. Among the topics covered in the bulletin are the following:
• decoupling from the federal domestic production activities deduction;
• updated Internal Revenue Code references;
• revised throwback provisions;
• disregarded entities;
• sales and use tax nexus definition;
• increased top income tax rate;
• revised capital gain exclusion; and
• increased cigarette and tobacco product tax rates.
Tax Bulletin No. 162, Wisconsin Department of Revenue, July 2009, ¶401-216
