Sales Tax News and Tips

The Sales Tax Institute reviews numerous sales tax publications to monitor state activity on various topics related to sales and use tax. A summary of selected, recent news items organized by topic can be obtained by choosing a category listed below.

The available summaries are not intended to represent a comprehensive listing of all law changes, court decisions, and helpful tips but are offered as a source of information of a general nature to aid you in staying current in the dynamic area of sales and use tax. By checking updates routinely, you may be alerted to an impending tax law change critical to your business. The information listed here is high level summary and background material. It omits many details and special rules, and cannot be regarded as legal or tax advice.

For more information, be sure to contact your tax advisor.

Some of the information sources monitored include: CCH State Tax Day, Sales and Use Tax Alert, State Tax Notes, Vertex, Inc. Reference Manuals, Westlaw, and other miscellaneous state tax newsletters and Department of Revenue notices.

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Washington Readopts Reseller Permit Rules Two sales and use tax emergency rules have been readopted by the Washington Department of Revenue. The rules explain the application process and eligibility requirements for reseller permits and the brief adjudicative proceedings for matters related to reseller permits. Beginning January 1, 2010, seller’s permits issued by the Department replace resale certificates as the documentation necessary to substantiate a wholesale transaction. (WAC 458-20-10201 and WAC 458-20-10202, Washington Department of Revenue, effective December 29, 2009) (01/10)

Ohio Explains Sourcing Changes The Ohio Department of Taxation explains the changes made to the way sales of tangible personal property and taxable services are sourced in an information release. Beginning January 1, 2010, vendors that previously switched to destination sourcing for delivery sales will now be required to source their sales to the location where the order is received rather than the delivery location. Remote sales, including mail order, telephone or online sales, by Ohio vendors to Ohio customers will also be sourced to the location where the order is received. Out-of-state vendors making sales to Ohio customers should source their sales to the location where the consumer receives the tangible personal property that was sold. The sale of taxable services should be sourced to the location where the consumer receives the service regardless if the service provider is located in or outside Ohio. No changes were made to the sourcing of lease transactions or direct pay permit holders.

Vendors that previously converted to destination sourcing and received compensation for making the change may be eligible for compensation for converting back to origin sourcing. Although the effective date for these changes is January 1, 2010, the Department of Taxation will not impose penalties on vendors that are required to change their method of sourcing, as long as these changes are made by April 1, 2010. Also, effective January 1, 2010, consumers that purchase tangible personal property and remit Ohio sales tax to the seller at either the rate applicable where the order was received or where the consumer received the tangible personal property, will not be liable for any additional Ohio sales or use tax on that transaction. (Sales and Use Tax: Information Release ST 2009-03, Ohio Department of Taxation, December 2009)
(01/10)

Alabama Amends Rule on Exemption for Governmental Entities, Purchases Made by Purchasing Agents The sales and use tax exemption rule on governmental entities and purchases made through purchasing agents has been amended. The rule is amended to include the ability to use Form ST:PAA-1, Purchasing Agent Appointment. This form will allow an exempt entity to appoint a purchasing agent to act on their behalf when making tax-exempt purchases. A contractor may also use this form to appoint subcontractors to make tax-exempt purchases on behalf of the exempt entity. (Rule 810-6-3-.69.02, Alabama Department of Revenue, effective January 5, 2010) (01/10)

California Releases New Publication on Voluntary Disclosure Programs The California State Board of Equalization has issued a publication to provide details on its in-state and out-of-state voluntary disclosure programs. The publication describes what the program is, the difference between the two programs, the eligibility requirements, how to apply and the benefits of the program. In addition, the publication discusses penalty waivers and how a taxpayer can request an opinion as to whether or not the BOE would approve their voluntary disclosure request without first revealing their identity. (BOE Publication 178, Voluntary Disclosure Program, California State Board of Equalization, December 2009) (01/10)

Connecticut Issues Reminder of Rate Decrease Cancellation In a press release, the Connecticut Department of Revenue Services reminds taxpayers that the sales and use tax rate will not decrease and will remain at 6%. Previously in September 2009, a law was passed to decrease the sales and use tax rate from 6% to 5.5%, beginning January 1, 2010. This rate decrease was contingent on the general fund's gross tax revenue not falling below 1% of the initial budget estimates. Consequently, the rate decrease has been cancelled because the tax revenue projections developed by the Office of Policy and Management, the Office of Fiscal Analysis, and the Office of the State Comptroller all show tax revenues falling below 1% of the initial estimates. (Press Release, Connecticut Department of Revenue Services, December 21, 2009) (01/10)

A Recent Case Impacts Sellers’ Use of the Resale Exclusion in Missouri The Missouri Department of Revenue has issued a release discussing the impact of the ICC Management, Inc. v. Director of Revenue case on the resale exclusion. In the case, the court ruled that ICC's purchases of food and consumables were not eligible for the resale exclusion and therefore, subject to sales tax. The court determined that since ICC's supply of food and consumables to inmates are not taxed due to the governmental sales exemption, then the rationale behind the resale exclusion (to avoid double taxation) does not apply. This change applies to all affected transactions occurring after September 1, 2009, the date the decision became final. (Release, Missouri Department of Revenue, December 23, 2009) (01/10)

Rhode Island Amends its EFT Regulation Rhode Island’s regulation relating to mandatory electronic funds transfer (EFT) payments for sales and use tax and personal income tax withholding has been amended. Beginning January 1, 2010, any person with an average monthly sales and use tax liability of $200 or more per month for the look back period, must make payments via EFT. Any taxpayer with 10 or more employees, over the course of the look-back period, is required to make the withholding tax payments via EFT. Taxpayers who are required to make payments by EFT may request a waiver from the EFT requirement if they can show good cause. The regulation provides some reasons that would be considered good cause for a waiver. (Reg. EFT 09-01, Rhode Island Division of Taxation, effective January 1, 2010) (12/09)

Special Session Bill on Internet Sales Dies in California Assembly Bill 27, which proposed to tax certain internet sales, died in the third session of the California Assembly. The bill would have amended the definition of a retailer to include any retailer who entered into an agreement with a California resident under which the resident, for a commission or other consideration, directly or indirectly refers potential customers of tangible personal property, whether by a link or an Internet Web site or otherwise, to the retailer. A similar bill, A.B. 178, was introduced on February 2, 2009 and is still pending. (A.B. 27, died at the desk, October 26, 2009; A.B. 178, introduced in the regular session by the California Assembly n February 2, 2009) (11/09)

District of Columbia Enacts Second FY 2010 Budget Support Emergency Act The District of Columbia has passed a second budget support act which repeals the previous one, but reenacts some of the repealed acts sales and use tax provisions. Beginning October 1, 2009 and ending September 30, 2012, the general sales and use tax rate will increase from 5.75% to 6%. The authorization to establish an amnesty program to allow taxpayers liable to pay certain taxes on returns or reports was also reenacted. The amnesty is allowed for tax periods ending prior to December 31, 2008 or December 31, 2009 if the program is established after December 31, 2009. In addition, the repeal of the District’s sales tax holidays provisions was reenacted. (Act 18-207 (D.C.B. 18-443), Laws 2009, effective October 15, 2009, for a 90-day period that expires January 13, 2010) (11/09)

Louisiana Explains Immovable Property In an informational bulletin, the Louisiana Department of Revenue explains how Act 442 of the Regular Session of the Louisiana Legislature changes the definition of “tangible personal property” to exclude certain property. The Act provides that the term “tangible personal property” shall not include any property that would have been considered immovable property prior to the enactment of Act 632 on July 1, 2008 by the 2008 Louisiana Legislature. Act 632 defines component parts of immovable property as things attached to a building, such as doors, shutters, gutters, cabinetry, plumbing, heating, cooling, electrical and similar systems, or things that are attached to a construction other than a building and attached to such a degree that they cannot be removed without substantial damage to themselves or to the building or other construction. As a result, the purchase, lease, and repair of immovable property shall be excluded from sales tax. In addition, the exclusion shall be applied retroactively and is applicable to all transactions occurring on or after July 1, 2008. (Revenue Information Bulletin No. 09-036, Louisiana Department of Revenue, October 15, 2009) (11/09)

Connecticut Summarizes 2009 Legislative Changes, Including Possible Rate Decrease The Connecticut Department of Revenue Services issued a special notice discussing sales and use tax changes resulting from the 2009 regular and June special sessions. Effective January 1, 2010, there will be a decrease in the sales and use tax rate to 5.5% contingent on the cumulative monthly financial statements. There will also be an increase in the new seller's permit from $50 to $100 beginning October 1, 2009. If a seller's permit is suspended or revoked, the fee for a reissued seller's permit is also increased from $50 to $100. Effective July 8, 2009, exemptions for gas, electricity, machinery, materials, tools, and fuel are amended to make persons that make finished products (for example asphalt) used to fulfill a paving contract eligible for them when they are purchased to make the product. (Special Notice 2009(6), Connecticut Department of Revenue Services, October 19, 2009) (11/09)

North Carolina Discusses Additional .25% Rate Increase The North Carolina Department of Revenue has issued a notice announcing the state sales and use tax rate has been increased from 5.5% to 5.75%, effective October 1, 2009. Local rates, however, decrease from 2.25% to 2% in all counties except Alexander, Catawba, Cumberland, Haywood, Martin, Pitt, Sampson, and Surry where the county rate decreases from 2.5% to 2.25%. Mecklenburg County continues to impose an additional 0.5% Transit rate. The third one-half cent local tax, previously reduced to 0.25% under Article 44, will decrease to zero. The combined State and local rate will continue to be 7.75% in ninety-one counties, 8% in Alexander, Catawba, Cumberland, Haywood, Martin, Pitt, Sampson, and Surry Counties and 8.25% in Mecklenburg County. For purposes of determining the applicable rate of tax, a sale is considered to be consummated when the item is delivered to the purchaser. Therefore, the rate of tax due is generally the rate in effect when delivery of property occurs. (Important Notice 10-09, North Carolina Department of Revenue, October 2009) (10/09)

Delaware Temporarily Increases Gross Receipts Tax Rates Many Delaware gross receipts tax rates, such as those applicable to manufactures, wholesalers, and retailers, are temporarily increased for taxable periods beginning after December 31, 2009 through December 31, 2013. (H.B. 289, Laws 2009, effective as noted above) (10/09)

New Registration and Reporting Requirements in California California has issued a news release and special notice informing taxpayers that the new use tax registration and reporting law requires all "qualified purchasers" to register with the BOE and report and pay use tax. A qualified purchaser is a business that meets all of the following tests: 1) is not required to hold a seller’s permit with the BOE; 2) is not required to be registered or otherwise register with the BOE; 3) is not a holder of a use tax direct payment permit; and 4) receives at least $100,000 in gross receipts per year from business operations. The BOE has identified nearly 200,000 businesses that meet the definition of a “qualified purchaser” and is notifying them of their registration requirement. However, even if a business is not contacted by the BOE, any business that meets the requirement is still responsible for registering with the BOE to report and pay use tax. Under existing law, those businesses who do not meet the $100,000 gross receipts threshold are still required to report and pay use tax; they just do not have the mandatory obligation to register with the BOE for that purpose.

The return for 2009, along with payment, is due by April 15, 2010. The BOE is also asking businesses to report purchases for 2007 and 2008. The new provisions of this bill do not change the due date for use tax liabilities from prior years. Therefore, returns for purchases made in 2007 and 2008 were due January 31, 2008 and January 31, 2009, respectively. Penalty and interest applies to payments received after the due date of each return period. (Special Notice L-232, California State Board of Equalization, September 2009 and News Release 84-09-G, California State Board of Equalization, September 8, 2009)
(09/09)

Kiosks and Sellers with Multiple Stores in Texas Discussed Kiosks and Sellers with Multiple Stores are Discussed in Texas Texas issued a notice on Senate Bill 636, which amends the definition of a “place of business” and changes how retailers who operate multiple places of business in Texas should collect local sales taxes.

SB 636 provides that a “kiosk” is not a place of business for local sales and use tax purposes. A kiosk is defined as a small stand-alone area or structure that is used solely to display merchandise or to submit orders for taxable items from a data entry device, or both, but at which taxable items are not available for immediate delivery to a customer; and that is located entirely within a location that is a place of business of another retailer, such as a department store or shopping mall. A kiosk does not include booths, stalls or similar structures that are not located within a place of business of another retailer; any location where inventory is available for immediate transfer to customers (over-the-counter sales); or temporary locations operated in this state for the purpose of receiving orders for taxable items if the retailer does not operate another place of business in Texas.

Previously, local sales tax collected on delivery sales by a seller with more than one place of business in Texas was determined by the place of business from which the items were shipped, not the location where the order was received. Now, when a purchaser places an order in person, retailers should collect local sales tax based on the location of the place of business where the order is received rather than the place of business from which the item is shipped. When the order is not placed in person i.e. over the internet, by telephone, or mail, retailers should continue to collect local sales tax based on the “ship from” location on all delivery sales of taxable items that are shipped from a place of business in Texas.

Warehouses, that are places of business of a retailer, are temporarily excluded from this change if the retailer has an existing economic development agreement with the municipality or county in which the warehouse is located that was entered into before Jan. 1, 2009. To be eligible for the exclusion, the county or municipality must provide the Comptroller’s office certain information before September 1, 2009. This exclusion expires September 1, 2014. (Notice Regarding S.B. 636, Texas Comptroller of Public Accounts, August 7, 2009, released August 12, 2009)
(09/09)

New York City/State Allows for Unified Program A revised Statement of Audit Procedure (“SAP”) has been issued by the New York City Department of Finance, discussing the Unified Program associated with the Voluntary Disclosure and Compliance Program (“VDCP”). The unified program allows taxpayers that are delinquent for both New York State and New York City taxes to make one request to participate in both VDCPs without making separate requests for each jurisdiction. As part of the program, New York City will conform to New York State procedures, including those requiring taxpayers to identify themselves on their application. The taxpayer will receive one agreement detailing the terms of both jurisdictions, and an authorized employee from each jurisdiction will sign the agreement. All requests to participate in the Unified Program must be made with New York State Department of Taxation and Finance. (Statement of Audit Procedure PP-2009-1rev., New York City Department of Finance) (09/09)

Connecticut Governor Allows Budget Bill to Become Law Without Signature – includes Rate Decrease and Amnesty Program On August 31, 2009, Governor Jodi Rell announced that she would allow the budget bill to become law without her signature with the exception of certain line-item vetoes. The bill is scheduled to become law on September 8, 2009. Among the passed items in the bill was a decrease in the sales and use tax rate. The rate will be decreased from 6% to 5.5%, effective January 1, 2010. This rate decrease is contingent upon meeting certain revenue projections. In addition, the fee for a seller’s permit will increase from $50 to $100 beginning October 1, 2009. Another item passed in the bill was a provision to establish a tax settlement initiative program. The bill requires the Department of Revenue to conduct this amnesty program during the period of October 1, 2009 and December 31, 2009, inclusive. The program will allow eligible taxpayers to pay any outstanding taxes from prior periods in exchange for a waiver of all civil penalties and fifty percent of the interest due. (H.B. 6802, passed by the Connecticut General Assembly on August 31, 2009) (09/09)

California Amends Sales for Resale Regulation A California sales and use tax regulation discussing sales for resale has been amended to clarify the proper use of qualified resale certificate. The amendments provide that the acceptable resale designation on a purchase order is not limited to the phrase, “for resale” and may include other similar terminology. The amendments also provides that a purchase order where the applicable amount of tax is shown as $0 or is left blank will not be accepted as designating that the property is purchased for resale, unless the purchase order also includes the phrase “for resale” or other similar terminology (Reg. 1668, California State Board of Equalization, effective August 29, 2009). (09/09)

District of Columbia Increase Sales Tax Rate and Authorizes Amnesty Program There were several changes included in the District of Columbia’s Budget Support Emergency Act of 2009. Beginning October 1, 2009 and ending September 30, 2012, the general sales and use tax rate will increase from 5.75% to 6%. Also included was the Tax Compliance Emergency Act of 2009 which authorizes the Chief Financial Officer to establish an amnesty program to allow taxpayers liable to pay certain taxes on returns or reports. No dates have been set. The August tax holiday provision was repealed by the Sales Tax Applicability Act of 2009. (Act 18-187 (D.C.B. 18-409), Laws 2009, approved August 26, 2009, effective for a 90-day period expiring November 24, 2009) (09/09)

Partial Refund Allowed for Merchandise Returned for Less Than Original Purchase Price in New York Partial Refund Allowed for Merchandise Returned for Less Than Original Purchase Price in New York (08/09)

Amendments to New York Voluntary Disclosure and Compliance Program Effective April 7, 2009, New York’s Chapter 57 of the Laws of 2009 amended the provisions of the Voluntary Disclosure and Compliance (“VDC”) program. The New York State Department of Taxation and Finance has issued an informational statement stating that the amendment provides that the Tax Department is permitted to disclose any return or report filed by a taxpayer under the VDC program to the Secretary of the Treasure of the United States, his or her delegates (including the Internal Revenue Service (IRS)), or the proper tax officer of any state or city. Prior to the amendment, the law allowed for the disclosure of returns and reports filed under the VDC program to another agency only if the taxpayer failed to comply with the terms of a voluntary disclosure and compliance agreement. The amendment does not apply to any other information obtained from a taxpayer during the voluntary disclosure process, including the taxpayer’s actual disclosure under the VDC program, and only applies to returns or reports filed under the VDC program on or after the effective date. (TSB-M-09(6)I, TSB-M-09(6)C, TSB-M-9(5)M, TSB-M-09(1)R, TSB-M-09(5)S, Office of Tax Policy Analysis, New York Department of Taxation and Finance) (08/09)

North Carolina Temporarily Increases Sales and Use Tax Rate North Carolina Governor Bev Perdue has signed a budget that temporarily increases the general state sales and use tax rate from 4.5% to 5.5%. The 1% increase will be applicable to sales made on or after September 1, 2009 and before July 1, 2011. (S.B. 202, Laws 2009, effective as noted) (08/09)

Florida Will Collect Administrative Collection Processing Fee Beginning September 2009 Starting September 1, 2009, the Florida Department of Revenue will impose an administrative collection processing fee on various outstanding Department administered and collected taxes, including sales and use taxes. The fee will be equal to 10% of the total amount of the tax, penalty, and interest owed, or $10 per collection event, whichever is greater. A collection event happens any time a taxpayer fails to timely file a complete return or timely pay the full amount of tax reported on a return or assessed during audit. This fee will apply to debt from collection events that are more than 90 days old and debt that remains outstanding for longer than 90 days after initial notification. (Tax Information Publication, No. 09ADM-02, Florida Department of Revenue, June 11, 2009) (08/09)

Texas Provides Online Sales Tax Rate Locator The Texas Comptroller has provided a new Web tool which displays the correct sales tax rate in effect for most business addresses in Texas. This Sales Tax Rate Locator is designed to help consumers and businesses understand which of the more than 1,400 city, county, transit system and special purpose district sales tax rates should be charged at a given business location.

The Sales Tax Rate Locator is available at http://ecpa.cpa.state.tx.us/atj/addresslookup.jsp. (News Release, Texas Comptroller of Public Accounts, June 3, 2009)
(08/09)

Colorado Vendor’s Service Fee Temporarily Eliminated The Colorado vendor’s service fee, which is a portion of the sales tax collected that is retained by the vendor to cover expenses relating to collecting and remitting the tax, has been suspended from July 1, 2009, through June 30, 2011. If the September 2010 Legislative Council Staff’s forecast indicates sufficient revenue to fund a 6% increase in General Fund spending for fiscal year 2010-2011, the vendor’s service fee will return to 3.33% on January 1, 2011. Interest and penalties will be waived until August 1, 2009 for remittance errors made due to this change in the vendor’s fee.

Previously, the fee was reduced from 3.33% to 1.35% until January 1, 2012. Due to this new fee elimination, the 1.35% rate is only effective from March 1, 2009, through June 30, 2009. (S.B. 275, Laws 2009, effective May 18, 2009, and applicable as noted above)
(08/09)

State Tax Commission Reorganized in Mississippi The Mississippi State Tax Commission has been reorganized under new legislation. The Department of Revenue will now handle administrative functions. A newly established independent Board of Tax Appeals will now have authority over administrative appeals effective July 1, 2010. The Board of Tax Appeals will not be subject in any way to the supervision or control of the Department of Revenue. It will consist of three members, including a chairman and two associate members, who will be appointed by the Governor, along with approval by the Senate. The Board will have the power to adopt, amend, or repeal rules and regulations necessary to implement its duties.

Except for those powers and duties devolved upon the Board of Tax Appeals, the newly created office of Commissioner of Revenue, acting through the Department of Revenue, will exercise those powers and duties formerly assigned to the State Tax Commission. In addition to the reorganization of the State Tax Commission, the legislation also increases the statutory notice period for appealing assessments from thirty to sixty days, as well as the time period to pay certain tax assessments and damages. Also under this new legislation, surety bonds, which are required to be accompanied upon taxpayer appeal from an order of the Board of Tax Appeals, will be reduced from twice the amount in dispute to half the amount in dispute. (S.B. 2712, Laws 2009, effective as noted).
(08/09)

Virginia Revises Tax Payment Schedule for Certain Dealers and Direct Pay Permit Holders Effective May 31, 2010, sales and use taxes collected by dealers and direct pay permit holders with annual sales of or in excess of $12 million must be filed and remitted monthly by the 20th day of each (current) month. Beginning in June 2010, all eligible taxpayers must file a return showing the gross sales, gross proceeds, or cost price arising from all taxable transactions for the first fifteen days of the current month and for the last fifteen days of the prior month. All applicable taxes arising from these transactions must be remitted at the time of transmittance. Failure to make a full and timely payment will subject the taxpayer to a penalty of 6% of the amount of the tax underpayment, as well as all applicable interest.

Total taxable sales or purchases are to be computed without regard to the number of certificates of registration held by the taxpayer. However, these provisions do not apply to taxpayers who are only required to file the Consumer’s Use Tax Return, Form ST-7.

Any sales and use tax exemptions arising from purchases of production, distribution, and other internet-access equipment made by internet service providers must be handled as refund requests made to the Tax Commissioner. (Ch. 781 (H.B. 1600), Laws 2009, effective April 8, 2009, applicable as noted)
(08/09)

Washington Resale Certificate to Be Replaced by Seller’s Permit Effective January 1, 2010, Washington’s self-issued resale certificates will be replaced with seller’s permits issued by the Department of Revenue. The aim of this replacement is to increase compliance and reduce misuse of the certificates, especially in the construction industry which purportedly is responsible for 40 percent of unpaid Washington sales taxes.

Businesses that are not automatically issued permits may apply directly to the Department beginning September 2009. Seller’s permits will be valid for 2-4 years, depending on the date a business registered with the department. However, the permits issued to the construction industry will only be valid for 12 months and must be applied for on a separate application that specifies the materials and labor purchased. (Replacing Resale Certificates with Sellers’ Permits to Curb Abuse, Generate More Than $100 Million Annually, Washington State Department of Revenue, May 19, 2009)
(08/09)

Massachusetts Increases State Sales Tax Rate by 1.25% Massachusetts has recently enacted legislature that increased the general sales and use tax rate from 5 to 6.25 percent, effective August 1, 2009. The Commissioner of Revenue may adopt reasonable transition rules to apply the increased sales and use tax rate to situations including but not limited to 1) the purchase of building materials and supplies to be used in construction, reconstruction, alternation, remolding, or repair of any building or structure as part of a contract entered into prior to the rate increase or entered into within 60 days after the rate increase if the contract is pursuant to a bid that was required to be submitted prior to the effective date; 2) unconditional written contracts for the sale of taxable tangible personal property entered into before the effective date but delivered not later than 90 days after the effective date; or 3) periodic bills for taxable services that include periods before and after the effective date. In the above rules 1 and 2, the increased tax rate would not apply to rentals or leases of tangible personal property. (H.B. 4129 (Ch. 27), approved (in part) by the Governor, 6/26/09) (07/09)

Connecticut Provides Guidance on Proper Use of Resale Certificates The Connecticut Department of Revenue Services has issued an informational publication concerning the proper use of resale certificates. The gross receipts from the sale of a taxable item or service are subject to sales tax unless the purchaser issues a properly completed resale or exemption certificate to the retailer at the time of the sale. Retailers must keep a copy for their records. The publication discusses who may issue resale certificates, what information must be included on a resale certificate, and the retailer’s responsibility in accepting resale certificates.

Retailers may only accept resale certificates in good faith from the issuer. Resale certificates may be issued for one purchase or may be issued as a blanket certificate for a continuing line of purchases. Connecticut resale certificates should have the tax identification number from the issuer’s state of business or, if none, the Federal Employer Identification Number. If an issuer is not required to have a Connecticut Sales and Use Tax Permit, the issuer should attach a statement to the resale certificate stating that the issuer is not required to have a Connecticut Sales and Use Tax Permit because it is not making sales in Connecticut or making sales that are otherwise subject to Connecticut sales and use taxes (Informational Publication 2009 (15), Connecticut Department of Revenue Services, April 8, 2009).
(07/09)

Kansas Reduces the Discount Rate for Colorado Retailers to Zero In a revenue notice, Kansas announced that the discount rate extended to Colorado retailers for collecting and remitting Kansas compensating use tax will be reduced to 0% beginning with returns filed on or after July 1, 2009. This came as a result of Colorado announcing a reduction in its discount rate to zero for Colorado retailers as well as Kansas retailers who collect and remit Colorado compensating use tax. (Notice 09-08, Kansas Department of Revenue, June 26, 2009) (07/09)

North Carolina Trial Court Incorrectly Applied Inappropriate Standard of Review A North Carolina trial court incorrectly applied a de novo standard of review to overturn the Tax Review Board and Assistant Secretary of Revenue’s determination that a taxpayer was not a charitable organization, and therefore was not entitled to a sales and use tax refund. The decision reached by the trial court was based on its independent fact-finding done during the review of the agency’s decision, which is inconsistent with the applicable standard of review and is a misapplication of governing law. Since the trial court did not have the authority to disregard or supplement the administrative agency’s factual determinations, its application of a de novo standard of review was erroneous and necessitates remand for further proceedings in the lower court. (In the Matter of: The Denial of NC Idea’s Refund of Sales and Use Tax for the Period January 1, 2003 through June 30, 2003 by the Secretary of Revenue of North Carolina, North Carolina Court of Appeals, No. COA08-561, April 21, 2009) (06/09)

Temporary Elimination of Vendor Allowance in Colorado Colorado legislation temporarily eliminates the ability of any vendor to retain any amount of state sales tax revenues to compensate for the vendor’s expenses incurred to collect and remit from July 1, 2009 through June 30, 2010. Vendors, however, will not be liable for interest and penalties imposed as a result of an error made due to the change of the vendor fee on any returns prior to August 1, 2009 (S.B. 275, Laws 2009, effective May 18, 2009). (06/09)

Minnesota Revokes Revenue Notice Regarding Exemption Certificates A Minnesota revenue notice on exemption certificates has been revoked because there is already a statute that specifically provides the content and form of allowable exemption certificates, as well as the means of identification that are allowed when the purchaser does not have a Minnesota tax identification number. (Revenue Notice No. 09-06, Minnesota Department of Revenue, June 15, 2009) (06/09)

Certain Voluntary Disclosure Agreements to be Honored in New Jersey The New Jersey Division of Taxation has issued a notice informing taxpayers of the new terms and condition of the voluntary disclosure program effective at the close of the 2009 amnesty program, which is June 15, 2009. However, the state will still honor the current terms and conditions for agreements that were entered into prior to May 4, 2009, as long as they are fully executed by June 15, 2009.

The Voluntary Disclosure Program is a means for taxpayers who realize that their activities create nexus for New Jersey state tax purposes to come forward and file the appropriate returns, registration materials, and pay outstanding tax liabilities. A significant change to the program is that the look-back period will change from four years (three years, plus the current year) to seven years (six years, plus the current year). In order to be eligible, taxpayers must not have had any previous contact with the Division or any of its agents, be willing to pay all outstanding tax liabilities, and file the appropriate returns within a reasonable period (60 days). When applying for the program, the state will still allow the taxpayer to remain anonymous pending an agreement. In exchange, the Division will waive the late filing penalties and criminal penalties. A non-abateable penalty of 5% for not taking advantage of the 2009 amnesty program will be imposed. In addition the 5% late payment penalty will be imposed in all instances, along with statutory interest. (Press Release, State of new Jersey Department of the Treasury, Division of Taxation, June 5, 2009)
(06/09)

Nevada Increases Local School Support Tax by .35% A revenue bill has been passed by the Nevada Legislature that will temporarily increase the combined sales and use tax rate by imposing an additional Local School Support Tax of 0.35%. This increase will be imposed on every county in the State for the period July 1, 2009 through June 30, 2011. (S.B. 429, as passed by the Nevada Legislature on May 22, 2009) (06/09)

Kansas Amends Limitation Period for Refunds and Credits Kansas legislation amends the limitation period for sales tax refund and credit claims. Under old legislation, no refund or credit was allowed after a three year period from the due date of the return, unless the taxpayer filed a claim before the end of the period. Under amended legislation, taxpayers must file a claim within one year of the return due date to be eligible to receive a refund or credit (Senate Sub. For Sub. For H.B. 2365, Laws 2009, effective upon publication in the Kansas Register). (06/09)

Florida Reduces Electronic Filing Threshold Florida has amended its rules on electronic filing requirements and lowered the thresholds. The amended rules states that any taxpayer that pays certain taxes, surtaxes, surcharges, and fees, including corporate income, sales and use, and communications, must file electronically if the amount of tax due is greater than $20,000. Previously, the threshold for these taxes was $30,000, with the exception of the communications tax, which was $50,000. In addition to this threshold, taxpayers who are required to file their federal income tax return electronically are required to file their Florida corporate income tax returns electronically as well. (Rules 12-24.001, 12-24.002, 12-24.003, 12-24.004, 12-24.005, 12-24.007, 12-24.008, 12-24.009, 12-24.010, and 12-24.011, Florida Department of Revenue, effective June 1, 2009) (06/09)

Puerto Rico Reseller Exemptions- Sales and Use Tax Provisions On March 9, 2009, Act No. 7 was enacted with various changes to the Puerto Rico Internal Revenue Code of 1994. Under this act, exemptions for purchases of inventory to be sold have been eliminated. However, the exemption for items to be used in manufacturing activities has remained the same. Furthermore, the reseller can now claim a credit for the sales and use tax paid on the inventory sold. If a credit cannot be used right away it can be carried over until exhausted. Originally the provision was set to be applied on April 1, 2009; however, Act No. 15 extended the application of this provision until June 1, 2009. Senate Bill 874 has made the technical amendments that the above provisions failed to do by 1) reinstating a reseller exemption to parties with gross sales in excess of $500.000; 2) creating a new municipal exemption when the person is not eligible for the aforementioned re-seller exemption; and 3) commencing the provision on November 1, 2009. Further rules and regulations apply. (Commonwealth of Puerto Rico Department of the Treasury) (06/09)

Puerto Rico Sales and Use Tax Filing Date Requirements Changed On March 9, 2009, Act No. 7 was enacted with various changes to the Puerto Rico Internal Revenue Code of 1994. The Sales and Use Tax filing date has been changed from the 20th to the 10th following the close of the month and accordingly the deposit date changed as well. Under Act No. 7, the provision was supposed to begin April 1, 2009, but has been extended its application until filings for the month of June 2009 (due on July 10, 2009). The July 10, 2009 commencement date should also apply for municipal SUT filings. (Commonwealth of Puerto Rico Department of the Treasury) (06/09)

Fixed Price Contracts Not Exempt From California 1% State Rate Increase California has issued a supplemental special notice informing taxpayers that fixed price contracts and lease agreements are not exempt from the 1% increase. This is true even if they were entered into before the April 1, 2009 effective date. So, if you incorrectly collected sales or use tax based on a lower rate, you will still owe the additional 1% tax. However, fixed price contracts and lease agreements entered into prior to the starting date of a new district tax are exempt from the district tax increase. (Supplement to Special Notices: New Tax rates to Take Effect April 1, 2009, and Sales and Use Tax Rate Increases on April 1, 2009 California State Board of Equalization, April 2009) (04/09)

Tax Holidays

District of Columbia Repeals its Back-to-School Tax Holiday In a move to increase revenues, legislation has been enacted in D.C. to repeal the August 2009 sales tax holiday. In earlier years the tax holiday provided a nine day exemption from the 5.75 percent sales tax on purchase of clothing, accessories, shoes and school supplies for $100 or less. Nothing has been said about the status of the other sales tax holiday at the end of 2009. (News Release, District of Columbia Office of Tax and Revenue, July 20, 2009) (07/09)

Florida Legislature Does Not Provide 2009 Sales Tax Holiday Due to budget restrictions, Florida did not pass legislation that would provide a sales tax holiday relief period for back-to-school supplies. Nor did the State pass any bills that would allow a sales tax holiday for hurricane preparedness. The failed sales tax suspension would have allowed residents to purchase items such as clothing, wallets, or bags $50 or less tax free during the month of August. This is the third time in the past ten years Florida did not pass such legislation (H.B. 815 Died in Economic Development Policy Committee on Saturday, May 02, 2009). (07/09)

Concrete Manufacturer Vehicles Liable for Michigan Use Tax The Michigan Department of Treasury found a concrete manufacturer liable for use tax on the use of pump trucks, tanker trailers, and a Smith trailer. The vehicles were not being used to mix and agitate materials at a plant or job site; instead, the tanker trailers and the Smith trailer were only used to transport cement powder and sand and gravel to the batch plant. Furthermore, the pump trucks transported concrete from the concrete mixer trucks to the job sites and no new material was added directly to the pump trucks for mixing. The pump trucks only agitated the materials, and thus, like the trailers, were taxable for Michigan use tax. (Hunderman & Sons Redi-Mix, Inc. v. Michigan Department of Treasury, Michigan Tax Tribunal, No. 342101) (06/09)

A Law Authorizing Tax Holidays in South Carolina was Held Unconstitutional The South Carolina Supreme Court determined that Act No. 338, which provided sales tax holidays for energy efficient products, handguns, and rifles, was unconstitutional. In addition to the sales tax holidays, there was also a provision that related to motor fuel terminals. The Act was deemed unconstitutional because it violated the one subject rule in the South Carolina constitution, which states that every act can only relate to one subject. (The American Petroleum Institute v. South Carolina Department of Revenue, South Carolina Supreme Court, May 4, 2009) (06/09)

2009 Tax Holidays Chart updated regularly:Click here for chart (11/08)

Advertising

Entire Charge Taxable When Printing Charges Taxable in Florida when not Separately-Stated A taxpayer's charges to contributing firms to participate in the publication of financial/legal books were determined to be taxable for sales tax purposes. The books, which are distributed to the contributing firms free of charge, are considered promotional goods. The sale of advertising services is exempt in Florida, but the sale of promotional goods is not exempt. Therefore, when an advertising agency sells promotional goods along with exempt items or services, the taxable items must be separately-stated in order for the exempt items to receive the exemption. In this transaction, the taxpayer did not separately state the printing charges. As a result, the entire charge to the contributing firms was found subject to Florida sales tax. (Technical Assistance Advisement, No. 09A-052, Florida Department of Revenue, October 9, 2009) (12/09)

Washington Sources Intrastate Direct Mail to the Shipping Location Washington has issued a special notice on the sourcing rule changes for direct mail sellers. Effective July 26, 2009, sellers of direct mail originating in Washington and delivered to another location within Washington collect sales tax based on the address from which the direct mail is shipped, unless the purchaser provides a direct pay permit or SSUTA exemption certificate claiming "direct mail." If the seller can document that any portion of the direct mail is delivered outside Washington, the seller is not required to collect Washington's sales tax on that portion. (Special Notice, Washington Department of Revenue, July 2, 2009) (09/09)

Out-of-State Company’s Sales of Direct Marketing Materials Not Taxable in Virginia An out-of-state preparer and seller of direct marketing materials was found not liable for Virginia sales and use tax because its customers do not exercise any right or power over the materials in Virginia, and therefore do not use or consume the materials in the State. Further, the transactions are sales made in interstate commerce because title or possession to the materials passes to the purchaser outside of Virginia and no use of the materials is made in Virginia. (Ruling of Commissioner, P.D. 09-3, Virginia Department of Taxation, February 4, 2009) (06/09)

New Mexico Discusses Taxability of Broadcast and Online Television Advertisements Receipts from a cable and satellite television network’s sales of broadcast time to out-of-state advertisers are deductible from gross receipts for tax purposes. However, gross receipts tax is due on receipts from sales of broadcast time to advertisers located in New Mexico. Additionally, sales of online advertising time sold to national and regional advertisers by employees located outside of the state qualify as statutorily exempt sales of services performed outside of New Mexico, provided the website used is on a server located outside the state and the product of the service is not initially used in the state. (Ruling No. 455-08-1, December 31, 2008) (06/09)

Amnesty

Pennsylvania DOR Issues 2010 Amnesty Guidelines Pennsylvania has issued rules and guidelines for its upcoming tax amnesty program. The 2010 Tax Amnesty will apply to any taxes administered by the Department of Revenue and will run from April 26, 2010 to June 18, 2010. To participate, taxpayers will need to file an online Amnesty return, file all delinquent tax returns and make the required payment within the Amnesty Period. All penalties and one-half of the interest due will be waived. The periods eligible are those where a known or unknown delinquency exists as of June 30, 2009. At the conclusion of the Amnesty Period, a 5% non-participation penalty will be imposed on all un-paid tax, penalty and interest not paid in full during the Amnesty Period. (2010 Tax Amnesty Program Guidelines, Pennsylvania Department of Revenue, December 5, 2009) (12/09)

New York Legislature Passes Amnesty Measure On December 2, 2009, the New York legislature passed a tax amnesty measure to authorize an accounts receivable discount program. This program will allow eligible taxpayers to pay outstanding taxes, fees, or surcharges imposed by the state. This measure has been sent to Governor David A. Paterson for his signature. Under the accounts receivable discount program, fifty percent of the penalties will be waived for eligible tax liabilities issued after December 31, 2003 and on or before December 31, 2006. For tax liabilities issued on or before December 31, 2003, eighty percent of the penalties will be waived. It is expected that the limited forgiveness period would take place in the last quarter of 2009-10. (A.B. 21, Laws 2009, Fourth Special Session; Fact Sheet: $2.7 Billion Enacted Deficit Reduction Legislation, Office of New York Gov. David Paterson, December 3, 2009) (12/09)

Massachusetts Authorizes an Amnesty Program The Massachusetts Governor signed legislation to implement a two-month tax amnesty program that is set to end no later than June 30, 2010. All penalties, in which the Commissioner has sole authority, will be waived provided the taxpayer files returns and makes payments as required by the tax amnesty program. Amnesty shall not apply to those penalties which the commissioner would not have the sole authority to waive including, but not limited to, fuel taxes administered under the International Fuel Tax Agreement or under the local option portions of taxes or excises collected for the benefit of cities, towns or state governmental authorities. The Commissioner will determine the scope of the program, including the particular tax types and periods covered, including any limited look-back period for unfiled returns. The amnesty program will not apply to taxpayers who were the subject of a tax-related criminal investigation or prosecution before the start date of the amnesty program. Any taxpayer who was eligible for the amnesty program, but failed to come forward before June 30, 2010 will, in addition to all other penalties, be subject to an additional penalty of $500. (Ch. 166 (H.B. 4359), Laws 2009, effective November 24, 2009) (12/09)

Pennsylvania Enacts Tax Amnesty for 2010 The Pennsylvania Department of Revenue has announced dates for its 2010 tax amnesty program. The tax amnesty period from will run from April 26 to June 18, 2010. During this time, the Pennsylvania Department of Revenue will waive all penalties and one-half of the interest for anyone who pays their delinquent state taxes. The amnesty will be applicable to any taxes administered by the Department that are delinquent as of June 30, 2009. (Pennsylvania Department of Revenue website) (11/09)

Virginia Issues Guidelines for the Tax Amnesty Program Virginia has issued rules and guidelines for its upcoming tax amnesty program. The 2009 Virginia Tax Amnesty program will run from October 7, 2009 to December 5, 2009 and will generally apply to any taxes administered or collected by the Virginia Department of Taxation. Penalties and one-half interest will be waived for all eligible amnesty tax assessments and delinquent return liabilities provided full payment of the tax and one-half interest is made. In order to qualify, tax bills must be related to an amnesty eligible tax type and period and have an assessment date on or before July 9, 2009, while returns must be applicable to an eligible tax type and period. With respect to amnesty eligible bills with an assessment date on or before July 9, 2009, payments must be postmarked by December 5, 2009. For delinquent tax returns, taxpayers are required to file by December 5, 2009 all relevant tax returns and associated documentation, and pay the tax and one-half of the interest that’s due by December 5, 2009, or within 30 days of the date the assessment was issued, whichever is later. The Department has also noted that if delinquent taxpayers do not pay their tax bill by December 5, 2009, they will be charged full interest and an additional 20 percent penalty for late taxes. (Ruling of Commissioner, P.D. 09-40, Virginia Department of Taxation, September 28, 2009; Press Release, Office of Virginia Gov. Tim Kaine, September 28, 2009) (09/09)

New Orleans Offers Sales Tax Amnesty Program The City of New Orleans is offering a sales tax amnesty program that will run from October 1, 2009 through December 4, 2009. The program will allow businesses to come forward and pay their tax liabilities without any late penalties. The program also offers a 50 percent reduction in interest. Businesses that owe overdue sales, use, hotel/motel, parking, alcoholic beverage, mayoralty and occupational license taxes are eligible to participate (Sales Tax Amnesty Program, Bureau of Revenue, http://www.cityofno.com/pg-94-26-sales-tax-amnesty-program.aspx, September 9, 2009) (09/09)

Wisconsin SST Amnesty Program Enacted As part of Wisconsin’s membership in the Streamlined Sales and Use Tax Agreement, Wisconsin will offer a sales tax amnesty program for qualifying businesses that currently are not registered to collect and remit sales and use tax. The Wisconsin amnesty period runs from July 1, 2009 to September 30, 2010. To qualify, businesses must voluntarily register (between the above dates) to collect and remit Wisconsin sales tax, as well as sales tax for all other states that have been members of the SST Agreement for at least 36 months. Businesses that meet the eligibility requirements and register for the program will not be required to remit Wisconsin sales and use tax on sales made prior to registration for the amnesty program. The program does not apply to any sales and use tax that a person owes as a purchaser. Businesses are eligible for the program unless one or more of the following apply: 1) currently registered to collect Wisconsin sales tax; 2) registered to collect Wisconsin sales tax at any time during the past 12 months; 3) received an audit notice, unless the audit and all related appeals are resolved; and/or 4) committed or been involved in fraud or intentional misrepresentation. Additional rules and regulations apply. (Wisconsin offers Streamlined Sales Tax amnesty program, Wisconsin Department of Revenue) (08/09)

Louisiana Sets Dates for Tax Amnesty Program The Louisiana Tax Delinquency Act of 2009, which establishes a tax amnesty program, is set to run from September 1, 2009 through October 31, 2009. The amnesty program will apply to all taxes administered by the Department with the exception of motor fuel taxes and waive all penalties and half of the interest due. This amnesty will be applicable to taxes that became due on or after July 1, 2001 and before January 1, 2009, taxes due prior to January 1, 2009 for which LDR has issued a billing notice or demand for payment on or after July 1, 2001 and before May 31, 2009, taxes for which the taxpayer and LDR have entered into an agreement to suspend the running of prescription until December 31, 2009, or taxes due on or before July 1, 2001, but were ineligible for an earlier amnesty program due to having a matter in civil litigation. A taxpayer qualifies for the amnesty program if they failed to file a tax return or report; failed to report all income or all tax, interest and penalties that were due; claimed incorrect credits or deductions; misrepresented or omitted any tax due; or are under audit or in administrative or judicial litigation. (Tax Topics, Louisiana Department of Revenue, July 14, 2009) (07/09)

Delaware Authorizes a Voluntary Tax Compliance Initiative The Delaware Division of Revenue has been authorized to establish a voluntary tax compliance initiative that will run from September 1, 2009 to October 30, 2009. This initiative is for tax liabilities due before January 1, 2009 and will apply to corporate and personal income, gross receipts, use, gift, lodging, estate, realty transfer, public utilities, income on estates and trusts tax, occupational license fees and tax, contractors’ license fees and tax, manufacturers’ license fees and tax, retail and wholesale merchants’ license fees and tax, and tobacco product license fees and tax. Penalties and interest will be waived if the taxpayer pays the outstanding tax during the initiative period or enters into a payment plan that is paid by June 30, 2010.

The Division will not assess any tax, penalty or interest for any voluntary tax returns filed under the initiative for periods before January 1, 2004. Sections related to the 50% limitation on the penalty for failure to file timely returns and the 75% limitation on the penalty for any fraudulent returns have been removed beginning December 31, 2009. Also effective December 31, 2009, the period for which interest accrues on an amended return has been changed to 46 days after the receipts of the amended tax return instead of 46 days after the original return was filed, which could have been three years earlier. (H.B. 268, laws 2009, effective as noted) (07/09)

Vermont Announces Amnesty Program Dates Vermont has approved a six week amnesty program beginning July 20, 2009 and ending August 31, 2009. During this time, certain tax penalties may be waived upon payment of the tax and interest due, without the need for proof of reasonable cause or the absence of willful neglect. The amnesty program will apply to any tax type and any periods for which the due date of the return was before January 26, 2009, but will not apply to those penalties in which the commissioner would not have the sole authority to waive .(Highlights of 2009 Tax Legislation, Vermont Department of Taxes, June 11, 2009). (06/09)

Hawaii Announces Amnesty Program The Hawaii Department of Taxation is offering a “Tax Fresh Start Program” to taxpayers who owe eligible taxes for any taxable period ending on or before December 31, 2007. The program, effective May 27, 2009 through June 26, 2009, covers all taxes administered by the Department and is available to eligible taxpayers who have failed to file a return for a taxable period, or have underreported tax due on a previously filed return. The program offers a 50% reduction in interest, waived penalties, and potentially avoiding referral for criminal prosecution. Taxpayers are not be eligible for the program if they are currently under audit by the Department or the federal government, currently under criminal investigation or litigation, or if they are currently in the Department’s collection program. Taxpayers who are not eligible for a certain tax types may still be eligible for others. (News Release, Hawaii Department of Taxation, May 27, 2009). (06/09)

City of Colorado Springs Enacts Tax Amnesty Program Beginning May 12, 2009 and ending August 14, 2009, the City of Colorado Springs is offering a Tax Amnesty Program that provides an opportunity for businesses within the City to voluntarily pay any past due sales, use, lodgers, auto rental, bicycle and movie admission tax liabilities without penalties and with reduced interest. During this period, interest will be assessed at 6%, instead of the normal 18%. All businesses and individuals who have failed to file a return or have underreported the tax on a previously filed return for any period ending on or before March 31, 2009 are eligible for the program, even if the taxpayer is currently under audit. Taxpayers are not eligible if they have already entered into a written agreement with the City or have accepted a settlement offer. (News Release, City of Colorado Springs, May 11, 2009) (06/09)

New Jersey Enacts Rules to Implement Amnesty Program New rules have been adopted for New Jersey’s tax amnesty program. The amnesty program will begin May 4, 2009 and end June 15, 2009. The amnesty will apply for all taxes administered and collected by the Division of Taxation for returns due on or after January 1, 2002 and prior to February 1, 2009. Eligible taxpayers will have to pay the amount of tax owed and one-half of the balance of interest that is due as of May 1, 2009, without and penalties or referral recovery fees. Any taxpayer under criminal investigation or charge for a state tax matter, as certified by a county prosecutor or by the Attorney General, will not be eligible for the Amnesty. If an eligible taxpayer fails to pay the tax during the amnesty period, an additional 5% penalty will be imposed. This penalty will not be waived or abated and is in addition to any other penalties, interest, or other collection costs as authorized by law. (N.J.A.C. 18:39-1.1 ~1.8, New Jersey Division of taxation, effective March 26, 2009) (04/09)

Computers/Software

Texas Discusses Server Housing and Network Management Services The Texas Comptroller discusses the taxability of charges made by a taxpayer who provides its customers a secure location within a building (a “co-location space”) to store the customer's equipment or to utilize as a disaster workforce and recovery back-up facility.

The letter discusses the taxability of recurring, managed, and other services provided by the taxpayer including: (1) leasing rack or cabinet space to customers for customer-owned servers; (2) electricity charges; (3) cross-connection and bandwidth services; (4) monitoring network equipment; (5) repair, remodel, restoration, or maintenance of tangible personal property and the installation of monitoring software; (6) installation of fiber optic and copper cabling and power strips; (7) unpacking, moving, and installation of customer's equipment; (8) tracing and labeling of data and power cables; (9) powering down equipment and then powering it up again; (10) installation of software patches and software modifications; (11) troubleshooting equipment or databases; (12) tape rotation and storage; (13) migration consultation and design and moving services; (14) different types of backup and storage services; (15) purchase and installation of software used to backup customer's data; (16) shipping and receiving services; (17) physical inspection of customer's space (Letter No. 200908438L, Texas Comptroller of Public Accounts, August 3, 2009)
(01/10)

Missouri Discusses the Taxability of Computer Purchases by Firm Headquartered In-State A taxpayer that operated as an architectural, engineering, and consulting firm was allowed to claim the benefit of the sales tax exemption provided by Section 144.030.2(28). The section provides an exemption on purchases of computers, computer software and computer security systems by architectural or engineering firms headquartered in Missouri. In addition to having two physical locations that serve as places of business for its corporate headquarters, the taxpayer also has five offices in Missouri. The taxpayer’s facilities are integrated through central management and direction, common usage of resources and uniform professional practice. As a result, the taxpayer is entitled to claim the exemption set forth in Section 144.030.2(28), when making purchases of computers, computer software and computer security systems for its own use. (Letter Ruling No. LR5934, Missouri Department of Revenue, October 7, 2009) (12/09)

New York Discusses the Taxability of Software Licenses and Services The New York Commissioner recently determined that a taxpayer’s sale of software licenses are subject to New York sales and use tax. The taxpayer licenses software that is further customized to meet the needs of the customer. The separately-stated customizations charges are billed to the customer as performed instead of spread out over the licensing period. Since, prewritten computer software is included within the definition of tangible personal property, the Taxpayer’s sale of the license to use its basic software is subject to sales tax to the extent the software is used in New York. If the locations in which the customer will use the software are both in and out of New York, the Taxpayer should collect tax based on the portion of the taxable receipts attributable to the customer's use in New York.

The Taxpayer's license of the software remains taxable, regardless of any modifications or customizations made by the Taxpayer. If there is a reasonable, separately-stated charge for customization of the basic program, the charge for the modification will not constitute a receipt from the sale of prewritten software and will not be subject to tax when performed for and sold to the customer who initially requested the custom modification. However, subsequent sales of the modified software to other purchasers would be subject to tax as the sale of prewritten software.

The Taxpayer also provides software support, which includes defect fixes, software updates, training and helpdesk support. Fees for software updates and patches to fix defects are subject to sales tax as the sale of prewritten software. Training and support fees are exempt from tax as long as they are separately-stated and reasonable. On the other hand, if a lump sum charge is made to a customer that includes training and support, or if the separate charge for training and support does not reasonably reflect the value of these items, then the entire charge will be taxable. Other software-related services are also discussed. (TSB-A-09(41)S, New York Commissioner of Taxation and Finance, September 22, 2009)
(11/09)

Licensing of Customized Software Not Subject to Tax in Florida A taxpayer’s sale of customized software was determined to be service transaction that is not subject to Florida sales and use tax. Custom software represents software in which the vendor, at the customer's request, modifies or alters a prepackaged program to the customer's specification. The software is still viewed as a custom service transaction even when the taxpayer provides the customized software after the termination of a hosting agreement. Therefore, the licensing of the taxpayer's software is not subject to Florida sales tax as the sale of tangible personal property. (Technical Assistance Advisement, No. 09A-044, Florida Department of Revenue, September 2, 2009, released October 2009) (10/09)

Texas Exempts Software Transferred to Out-of-State Franchise Stores A taxpayer, who operates retail convenience stores (company stores) and franchises others to third parties (franchise stores), was entitled to a partial refund of sales tax paid on its purchase of financial software for its out-of-state stores. The taxpayer contended that the software was used to provide the franchise stores data processing services like payroll and should therefore qualify for the resale exemption. The Court agreed that the transfer of the software to the franchise stores would qualify for the resale exemption because a “sale for resale” includes the sale of tangible personal property to a purchaser who acquires the property for the purpose of transferring it as an integral part of a taxable service. The State argued that the taxpayer should not be allowed the resale exemption because the taxpayer cannot derive any direct benefit and must show evidence that tax was actually charged to the franchise stores. Both arguments were rejected because the resale exemption statute does not restrict a taxpayer from obtaining benefit when tangible personal property is transferred as an integral part of a taxable service. In addition, the statute does not require that the reseller actually collect sales tax on the taxable item, noting the resale transactions that occur between contractors and the federal government.

As far as the software transferred to company stores out-of-state, neither the state nor the taxpayer was granted a summary judgment in its favor. Both parties were unable to establish what happened to the software between the time it was removed from the tax-free inventory to the time it was installed in an out-of-state location. Evidence that the software was eventually installed out-of-state was not proof that it was never used in Texas. Therefore, this portion of the case was remanded to the trail court for further proceedings. (7-Eleven, Inc v. Combs, Texas Court of Appeals, Third District, No. 03-08-00212-CGV, August 31, 2009)
(10/09)

Sale of Hosted Software Without Tangible Component Not Taxable in Missouri A letter ruling issued by the Missouri Department of Revenue determined that an out-of-state corporation’s sales of hosted software of which no component is delivered in a tangible format was not subject to Missouri sales tax.

The taxpayer sells software systems to automate the trading process for sell-side equity firms engaged in securities transactions. The taxpayer hosts the software application in its data centers and provides the software to its customers as a managed service. The monthly managed access fee charged for the communications connection to taxpayer’s data centers is subject to sales tax because it meets the definition of a taxable telecommunications service. The routers and other equipment that the taxpayer provides to its Missouri customers at no additional charge are subject to sales or use tax because the taxpayer is considered using the equipment in Missouri since they retain title to the property. Since the sale of the hosted software is not subject to sales tax, the mandatory charges for deployment and support services as well as market data fees and pass-through market charges are also not taxable when sold as part of the initial sale of the software.

In the cases where the taxpayer installs the software on its customer's computer system by means of a "load and leave" transaction in which no tangible format of the software is left with the customer, the hosted software is subject to tax. In addition, any mandatory service charges (e.g., deployment charges) in a "load and leave" transaction will also be subject to sales tax. (Letter Ruling No. LR5753, Missouri Department of Revenue, July 16, 2009)
(09/09)

Kansas Discusses Taxability of Software Access Charges A private letter ruling issued by the Kansas Department of Revenue determined the taxability of monthly fees charged by a California corporation to a customer in Kansas to access and use pre-written computer software located on a server in California. Since Kansas does not impose a tax on charges for electronic access to information on a server located out-of-state, the California corporation’s charges are not subject to Kansas sales or use tax. (Private Letter Ruling No. P-2009-005, Kansas Department of Revenue, June 26, 2009) (09/09)

Utah Discusses Software-Supported Services The Utah State Tax Commission has revisited a private letter ruling that discusses the application of Utah sales tax to a corporation’s sale of a software-supported automobile dealer management service and associated services. Although the original letter ruling found the associated services to be taxable, the newly described facts indicate that set-up and training fees charged to customers are not taxable. Since the services are separately-stated on the invoice, optional to the client, and because some clients utilize other companies for these services or use the instructions provided by the seller to perform the services themselves, they are not “necessary to complete the sale”, and,, therefore, should not be included in the purchase price.

The Tax Commission determined that separately-stated custom programming and forms programming fees charged to customize the software are not taxable, because such charges are not included in the definition of “prewritten software”. Separately contracted for support fees were also found to not be taxable because they are not among the specifically enumerated taxable services, and because the support fees did not relate to installing, enhancing, or upgrading prewritten computer software.

However, since the Tax Commission still holds that the software-supported automobile dealer management service is “prewritten software”, it denied the corporation’s request to rule that application service fees and monthly licensing fees to access the software-supported service were also not taxable. (Private Letter Ruling, Opinion No. 08-002, Utah State Tax Commission, amended July 10, 2009)
(08/09)

Electronically-Delivered Prewritten Software Not Taxable in Virginia The Tax Commissioner of Virginia has reversed a sales and use tax auditor’s determination that tax was due on a software developer’s charges for prewritten software that was electronically delivered to the customer. Virginia code provides an exemption for electronically-delivered prewritten software, provided that at a minimum, the sales invoice, contract, or other sales agreement expressly certifies the electronic delivery of the software and that no tangible medium for that software has been or is to be furnished to the customer. The Statement of Work of the contract entered into by the software developer and its customer expressly stated that the software would be delivered electronically. Further, the software developer furnished an email that was sent to the customer stating that the software files were uploaded to a public file transfer protocol (FTP) server for download, which is a common method for downloading or transferring data from one computer to another over the internet. Although the software maintenance and support terms set out in a schedule attached to the contract stated that supported methods of electronic transfer include CD-ROMS or diskettes, this language does not apply to the software at issue because these maintenance terms were not integrated into the contract’s Statement of Work. Therefore, the Statement of Work was sufficient to establish that the software was intended for electronic delivery, and the furnished email shows that this intention was carried out. (Ruling of Commissioner, P.D. 09-83, Virginia Department of Taxation, May 28, 2009) (08/09)

Kansas Discusses the Taxability of Computer Maintenance Agreements In a letter ruling, Kansas discusses the tax treatment of computer software maintenance agreements. The ruling is effective January 1, 2009 and replaces and supersedes all prior advice, revenue rulings, and other rulings that have been issued regarding this matter. Mandatory computer software agreements for canned (prewritten) software are treated as part of the software sale and, thus, subject to Kansas sales or use tax. Any separately-stated charges for technical support services are also taxable. Optional maintenance agreements, whether sold separately, by a third party, or in conjunction with the sale of canned (prewritten) software are characterized as 50% taxable software in a bundled transaction in which the taxable and nontaxable products are not separately itemized on the invoice or billing document. When charges for technical support are separately-stated or when the agreement clearly states that only technical support services will be furnished, such charges are not taxable. A charge for an upgrade from a “basic” to a “premium” maintenance agreement is not subject to sales tax if the agreement clearly states that the upgrade is for technical support services. If not, the upgrade will be taxable at 50%. Charges for upgrades and enhancements for canned software are taxable, whether separately-stated or not. Mandatory and optional maintenance agreements for custom software are not taxable. (Revenue Ruling 19-2009-01, Kansas Department of Revenue, June 2, 2009) (06/09)

Kentucky Legislation Updates SST Conformity - Digital Products Kentucky Governor, Steve Beshear, has signed Streamlined Sales and Use Tax (SST) Agreement legislation that conforms to the Agreement’s definitions for digital products, effective July 1, 2009. The legislation maintains Kentucky’s application of sales and use taxes on sales and uses of digital products regardless of whether the purchaser has the right to permanently use the goods, its right to access or retain the property is not permanent, or its right of use is conditioned upon continued payment. Definition of terms and amendments to definition of terms such as “sale,” “use,” “purchase,” and “retailer” related to digital products have also been defined in the legislation. Furthermore, sourcing and bundling rules related to the sale of digital products are included. Additional regulations and rules apply. (H.B. 347, Laws 2009, effective July 1, 2009) (06/09)

Software Developed for Internal Use but Sold in Bulk Sale Taxable in New York The New York Division of Tax Appeals upheld a decision stating that a legal document storage company’s sale of a self-developed software program intended solely for self-use was a taxable sale of tangible personal property when transferred as part of a bulk sale of all of the company’s assets. New York defines pre-written software as all software that is not designed and developed to the specifications of a specific purchaser, which indicates that both canned and custom software may be considered pre-written. Therefore, although the software was certainly customized, it had not been designed and developed to the specifications of the bulk sale purchaser and consequently, was pre-written. Further, as clarified in a Technical Service Bureau Memorandum, software loses its identity as exempt software designed and developed for a specific purchaser when it is sold as part of a bulk sale. (Xerox Corp., New York Division of Tax Appeals, Administrative Law Judge Unit, DTA Nos. 821914 and 821915, April 23, 2009) (06/09)

Construction

Louisiana Department of Revenue Ceases Issuing Contractor Certifications The Louisiana Department of Revenue reminded taxpayers that the Contractor Registration Program will no longer issue new certifications beginning January 1, 2010. The Department will no longer certify the residency of contractors performing jobs in Louisiana or issue certificates for jobs performed by nonresident contractors. In addition, nonresident contractors will no longer be required to pay the ten-dollar application fee per contract or post a bond. Also beginning January 1, 2010, resident contractors are not required to renew their certifications. Jobs performed by nonresident contractors certified prior to January 1, 2010 should continue to Louisiana law as it relates to nonresident contractors. Furthermore, every resident or nonresident contractor performing jobs in Louisiana must register for Louisiana general sales tax as well as any other applicable taxes like income or withholding. (Revenue Information Bulletin No. 09-057, Louisiana Department of Revenue, December 29, 2009) (01/10)

Nebraska Explains the Taxability of Contractor Purchases The Nebraska Department of Revenue has issued a contractor taxability checklist which provides the taxability of a contractor’s purchase of services as well as materials, consumables, and equipment. In addition, the checklist gives details on how option 1, 2, and 3 contractors should pay or collect tax on building material or fixtures and which forms to use. (Construction Contractor Taxability Check List, Nebraska Department of Revenue, September 30, 2009) (12/09)

Floor Coverings Purchased by Installer for Exempt Entities Deemed Taxable in Minnesota A taxpayer, that sells and installs carpets and floor coverings, was found liable for use tax on its purchases of materials for contracts with exempt entities. Under the contracts in question, the taxpayer would purchase the materials and install them for the exempt entities. Therefore, it was the Commissioner’s position that the taxpayer was acting as a contractor when it installed the carpeting and responsible for use tax on the materials being installed in the absence of a properly executed purchasing agent agreement. Minnesota law provides that if the exempt entity purchases materials directly, that purchase is exempt from taxation, but a purchase by a contractor for use in an improvement to the tax exempt entity's real property is taxable.

The only way in which purchases by a contractor or subcontractor would be exempt from sales tax would be if there is a written contract, separate from the contract for installation, in which the contractor is appointed the purchasing agent and title and responsibility for the materials remains with the exempt entity. In addition, the construction contract can not be a lump sum contract or similar type of contract with a guaranteed maximum price covering both materials and labor.” A contractor may be appointed a purchasing agent only if the exempt entity initially advertises separate bids for material and labor. (Neil’s Floor Covering, Inc. v. Commissioner of Revenue, Minnesota Tax Court, No. 8016, October 20, 2009)
(12/09)

Purchases by Missouri Contractor Do Not Qualify for Resale Exemption The Missouri Supreme Court has affirmed the Director of Revenue’s audit determination that a private jail facility operator’s purchases of inmate consumables pursuant to contracts with municipalities are subject to sales and use taxes. The jail operator argued that it is reselling the consumables to the municipalities, and is therefore eligible for a resale exemption because it factors the cost of the consumables into the fee it charges the municipalities. However, since the municipalities are exempt entities, the jail operator does not charge sales tax when the consumables are transferred. Since the underlying reasoning behind the exemption is to avoid double taxation, the operator’s purchases are not eligible for the resale exemption because allowing such would result in avoiding taxation even once. (ICC Management Inc. v. Director of Revenue, No. SC89559, Mo. Sup. Ct. 6/16/09) (08/09)

Contractor’s Purchases From Out-of-State Vendors Taxable in New York A carpet and flooring company and its owners were liable for New York use tax on purchases of materials and supplies from out-of-state vendors which were incorporated into capital improvements for customers in New York. The company argued that the purchases were strictly for resale to third parties. However, since the company was acting as a contractor, it was deemed to be the ultimate user of the materials purchased, therefore resulting in a retail sale subject to sales and use tax (Darcey, New York Division of Tax Appeals, Administrative Law Judge Unit, DTA Nos. 820079 and 820080, Februrary 26, 2009). (07/09)

Nebraska Amends Regulations Relating to Contractors) The Nebraska Department of Revenue has amended three sales and use tax regulations dealing with contractors. Effective February 22, 2009, non-resident contractors only need to register contracts with the Department if the total contract price or compensation is greater than $10,000. Additionally, no bonds or other securities need to be executed and filed for contracts of $10,000 or less. Finally, contractors who have chosen Option 1 as their method of determining tax due on building materials are only required to collect tax from their customers on the separately stated selling price of the building materials. (Sales and Use Tax Regulations 8-003, 8-004, and 9-009, Nebraska Department of Revenue, effective February 22, 2009) (06/09)

Construction of Above-Ground Steam Pipeline Constitutes Capital Improvement in New York The New York Commissioner of Taxation and Finance issued an advisory opinion declaring that the construction of a taxpayer’s custom-engineered steam pipeline constituted a capital improvement for New York sales and use tax purposes. The pipeline was designed to deliver steam from the taxpayer’s energy plant to their customer’s property. The pipeline qualifies as a capital improvement because it satisfies all requirements of the definition. First, the pipeline is permanently attached to the taxpayer’s foundation, thus adding value to the real property. Second, the steel support structure is permanently attached to the foundation and removal would cause damage to the real property and to the pipeline itself. Finally, it is intended to be a permanent installation since it was built by the taxpayer on its own land (TSB-A-09(7), New York Commissioner of Taxation and Finance, January 30, 2009). (06/09)

Credits and Incentives

Missouri Discusses the Taxability of Equipment and Food Used in Pharmaceutical Research The Missouri Department of Revenue recently determined that a taxpayer’s purchase of laboratory and medical monitoring equipment were exempt from sales and use tax. The taxpayer conducts contract research for pharmaceutical companies through a variety of studies that require special laboratory and medical monitoring equipment. Some of the studies require the study participants to be housed and provided food in accord with the testing protocols established by the pharmaceutical companies. Since the equipment is being used or consumed directly and exclusively in the research and development of prescription pharmaceuticals consumed by humans, it may be purchased exempt from sales tax. However, the food and food serving products purchased for study participants may not be purchased exempt from sales tax because they are not used directly or exclusively in the research and development of prescription pharmaceuticals consumed by humans. (Letter Ruling No. LR5848, Missouri Department of Revenue, August 20, 2009) (10/09)

Healthcare

South Carolina Explains Exemptions for Medicines and Medical Supplies The South Carolina Department of Revenue has issued an updated revenue ruling on the exemptions for certain medicines, prosthetic devices and medical supplies. The ruling explains how exemptions are applied for these items, including:

(a) prescription medicine and prosthetic devices, therapeutic radiopharmaceuticals used to treat rheumatoid arthritis, cancer, lymphoma, leukemia, or related diseases, including prescription medicines used to relieve the effects of any such treatment;

(b) hypodermic needles, insulin, alcohol swabs, blood sugar testing strips, monolet lancets, dextrometer supplies, blood glucose meters, and other similar diabetic supplies sold to diabetics under the authorization and direction of a physician;

(c) prescription drugs dispensed to Medicare Part A patients residing in a nursing home are not considered sales to the nursing home and are not subject to the sales tax;

(c) prescription and over-the-counter medicines and medical supplies, including diabetic supplies, diabetic diagnostic equipment, and diabetic testing equipment, sold to a free health care clinic; and

(e) durable medical equipment and related supplies as defined under federal and state Medicaid and Medicare laws. (Revenue Ruling 10-2, South Carolina Department of Revenue, January 12, 2010)
(01/10)

Missouri Discusses the Taxability of Insulin Pumps and Home Blood Glucose Testing Products An out-of-state company selling durable medical equipment and supplies was not subject to sales tax on its sales of insulin pumps. Missouri law provides and exemption for sales of insulin and sales of prosthetic or orthopedic devices. The insulin pump is a prosthetic device because it replaces a part of the function of an inoperative or malfunctioning pancreas by continuously releasing insulin into the body, like the pancreas would. Accordingly, sales of insulin pumps are exempt from tax.

The company’s sales of home blood glucose testing products and pump supplies are subject to sales tax when they are paid for by the company’s customer or an insurance company. The exemption for insulin, orthopedic, and prosthetic devices does not apply to home blood glucose testing products or pump supplies because they are not specifically identified as exempt or excluded from tax. On the other hand, sales of home blood glucose testing products and pump supplies are not subject to sales tax when paid for by Medicare or Medicaid when they are billed for such supplies by the company and pays the company directly for such supplies. Any amounts not paid by Medicare or Medicaid, such as co-payments, are subject to tax. (Letter Ruling No. LR6003, Missouri Department of Revenue, November 24, 2009)

(01/10)

Free Flu Vaccines are Taxable in Iowa In a policy letter, the Iowa Department of Revenue determined that the free distributions of flu vaccines are subject to Iowa sales and use tax. The taxpayer was considering a campaign to provide free flu vaccinations, which do not require a prescription, to uninsured persons. The vaccine would be purchased outside of Iowa for subsequent use in Iowa. Therefore, it was determined that this flu vaccine distribution would be a use “incident to ownership” in this state and taxable in the initial instance under Iowa law. It was also noted that the vaccine is not a prescription drug and would not be exempt from Iowa sales and use tax. (Policy Letter No. 09300051, Iowa Department of Revenue, August 17, 2009) (10/09)

Internet

New Mexico Rules on Taxability of In-Flight Internet Access The New Mexico Taxation and Revenue Department issued guidance regarding fees collected for use of wireless internet access while aboard an aircraft. The state claimed that providing internet services was a taxable service and, therefore, gross receipts tax would apply to the charges. Since the company providing the service maintained communication towers in New Mexico, it was deemed to have nexus. The portion of the service subject to tax should be equal to the time that the flight is in New Mexico territory or airspace when the flight arrives or departs in New Mexico. If the flight does not arrive or depart in New Mexico, the services are not subject to gross receipts tax. (New Mexico Taxation and Revenue Department, Ruling No. 401-09-2, March 9, 2009.) (06/09)

Leasing

New York Discusses the Taxability of Food Container Rentals and Related Charges The New York Tax Commissioner has determined that a taxpayers’ rental fees and related charges for reusable food containers to farmers were not exempt from New York sales and use tax. In the opinion, the taxpayer contended that the rental should be exempt because the farmers use the containers to ship produce to the farmers’ customers. New York law does exempt containers if they are used by a vendor to package tangible personal property for sale and the container is actually transferred by the vendor to the purchaser. However, in this situation, the farmers are obligated to return the containers back to the taxpayer. Therefore, the containers are not actually transferred to the customers and the rental fees are subject to New York sales and use tax. The pallet and delivery charges are also subject to tax because they are components of the rental receipts and cannot be deducted. If the taxpayer delivers containers to a farmer at a point outside New York and the farmer is a resident of this State and brings the container into this State for use here, then the farmer's use of the containers in New York would be subject to state and local use tax, including pallet and delivery charges, unless otherwise exempt.

In addition, any deposits on tangible personal property rented or leased will not be considered a taxable receipt unless it is not refunded by the taxpayer. Since the taxpayer leases containers to its customers, its purchases of containers will qualify for the resale exclusion and will not be subject to sales and use tax, provided the containers are purchased exclusively for resale or re-rental. (TSB-A-09(34)S, New York Commissioner of Taxation and Finance, August 19, 2009)
(09/09)

Florida Determines Amount of Exemption On Multiple Use Property When a lease involves multiple use of real property, partially taxable and partially exempt, the Department will determine which portion of the total rental charge is exempt from the tax. This determination will be done a on a case-by-case basis, using the lease or license and any other information that may be available. Once the total taxable portion of the property is determined, the Department will divide that by the total area to come up with a taxable percentage to be multiplied by the total rent. (Technical Assistance Advisement, No. 09A-032, Florida Department of Revenue, July 1, 2009, released August 2009) (09/09)

Washington Includes Property Tax Charged in Selling Price Taxpayers who lease tangible personal property in Washington and are charged for property taxes by the leasing agent must also pay retail sales tax on the property tax charged. Personal property taxes are considered nondeductible from gross proceeds of sales and therefore, subject to sales tax. (Tax Topics, Washington Department of Revenue, June 9, 2009) (06/09)

Manufacturing

Recycling Business Could Not Claim Manufacturing Exemption in Indiana A waste disposal and recycling business did not qualify for the manufacturing exemption on its purchases. The taxpayer claimed it qualified for the exemption because its recycling activities (sorts, sizes, cleans, and/or bales, cubes, or bundles these recycling materials) resulted in a new, more marketable product. However, the Department determined that the taxpayer did not add new parts to the articles; in most cases, the taxpayer merely separated and “repackaged” the items. It was also noted that the taxpayer starts with scrap paper, plastic, and glass and then ends with scrap paper, plastic, and glass. (Letter of Findings No. 09-0014, Indiana Department of Revenue, December 23, 2009) (01/10)

Recycling Activity Not Eligible for Manufacturing Exemption in Indiana The Indiana Department of Revenue found a taxpayer’s purchases of tangible personal property did not qualify for the manufacturing activity. The taxpayer disassembles articles for the scrap components to sell them to scrap buyers. The state found that the taxpayer does not add new parts to the articles being disassembled, but instead removes parts and separates them into groupings. As a result, the state determined that this recycling activity did not constitute manufacturing since no new article is produced. (Letter of Findings No. 09-0311, Indiana Department of Revenue, November 25, 2009) (12/09)

Georgia Adopts a New Manufacturing Machinery and Equipment Rule The Georgia Department of Revenue has adopted a sales and use tax rule that relates to exemptions for manufacturing machinery and equipment. This new rule provides and exemption from sales tax for machinery and equipment, including repair and replacements parts, necessary and integral to the manufacture of tangible personal property in a manufacturing facility. The rule is effective December 9, 2009 and will apply to transactions that occur on or after January 1, 2009.

Under the new rule, the definition of "manufacture of tangible personal property" is amended to be used synonymously with "manufacturing" and means a manufacturing operation, series of continuous manufacturing operations, or series of integrated manufacturing operations, engaged in at a manufacturing plant or among manufacturing plants to change, process, transform, or convert industrial materials by physical or chemical means into articles of tangible personal property for sale, or further manufacturing, that have a different form, configuration, utility, composition, or character. The definition of “packaging operation” was also amended under the new rule. It is defined as bagging, boxing, crating, canning, containerizing, cutting, measuring, weighing, wrapping, labeling, palletizing, or other similar processes necessary to prepare or package manufactured products in a manner suitable for sale or delivery to customers as finished goods, or suitable for the transport of work in process within or among manufacturing plants for further manufacturing, and the movement of such finished goods or work in process to a storage or distribution area within a manufacturing plant. (Reg. Sec. 560-12-2-.62, Georgia Department of Revenue, effective and applicable as noted)
(12/09)

Mississippi Discussed the Reduced rate for Farm Tractors and Implements The Mississippi State Tax Commission has issued a notice concerning the 1.5% reduced state sales tax rate on purchases of farm tractors, farm implements and parts and labor for agricultural purposes beginning July 1, 2009. A farm tractor is defined as self-propelled equipment which performs no farm function other than to move, draw or furnish power to other implements which may be attached. A farm implement is a complete unit that performs a specialized mechanical function and is identifiable as a specific piece of equipment that is ordinarily and customarily used on a farm. All parts and labor purchased for the maintenance and/or repair of farm tractors and implements are also subject to the reduced 1½% rate of sales tax. If a tractor is purchased for non-agricultural purposes, it is subject to the full 7% rate of sales tax.

Farmers purchasing farm tractors, farm implements and parts and labor for the maintenance and/or repair of farm tractors and farm implements are required to provide copies of their completed and notarized Farmer’s Affidavit to each vendor to be eligible for the reduced rate. The Farmer’s Affidavit expires December 31 of each year, and a new Farmer’s Affidavit should be completed each following year and provided to each vendor. Auction companies selling farm tractors, implements and parts at the reduced 1.5% rate are required to obtain a copy of a notarized Farmer’s Affidavit from the customer to validate charging the reduced rate. (Notice 72-09-006, Mississippi State Tax Commission, September 24, 2009, released October 2009)
(11/09)

Purchases of Packaging Used to Secure Yarn is Exempt in North Carolina A yarn manufacturer’s purchase of packaging material used to deliver yarn to its customers was found exempt from North Carolina sales and use tax. To ship its cones of yarn to customers, the taxpayer uses a “yarn pak” which is returned to the taxpayer for recycling and reuse. After the cones of yarn are packed into the yarn pak, the taxpayer typically wraps it in “shrink wrap,” overlapping the edges of the bottom and top pallets as well as the dividers. Although, the shrink wrap is not part of the yarn pak and is not necessary to hold the yarn pak together, it does provide a protective barrier against dust and moisture during shipping.

The North Carolina statute provides an exemption for a container that is used as packaging by the owner of the container or another person to enclose tangible personal property for delivery to a purchaser of the property and is required to be returned to its owner for reuse. However, the Department argued that the plain language of the statute only exempts containers that enclose tangible personal property and the yarn paks did not completely enclose the yarn cones. In order to accept the Departments position that a container must “completely” or “fully” enclose property, the Court would have to add language to the statute, which it has no power to do. Therefore, it was determined that the taxpayer’s purchase of the yarn paks did qualify for the exemption from sales and use tax. (Parkdale America, LLC v. Hinton, North Carolina Court of Appeals, No. COA09-10, October 6, 2009)
(10/09)

Testing and Recertification Activity Did Not Qualify for Manufacturing in Indiana Recently, the Indiana Department of Revenue determined that a taxpayer’s testing and recertification activities did not qualify for a manufacturing exemption. The taxpayer, who tests and recertifies used gas cylinders for its customers pursuant to federal regulatory requirements, contended that it was a remanufacturer of used gas cylinders and therefore was entitled to a manufacturing exemption. Upon arrival of the cylinders, the taxpayer performs a visual inspection and the cylinders that pass inspection are recertified. The Department concluded that although this recertification process is complex, it does not substantially change the existing cylinders. In addition to this, the work performed on the cylinders was contemplated as a normal part of the life cycle of the existing cylinders. As a result the taxpayer was found not to be a remanufacturer of used gas cylinders and therefore, not entitled to any manufacturing exemptions. (Letter of Findings, Indiana Department of Revenue, September 30, 2009) (10/09)

Texas Aircraft used for Agricultural Operations Exempt Texas has clarified changes relating to exemptions from sales and use tax for certain aircraft, including related machinery and equipment. Effective September 1, 2009, machinery and equipment exclusively used in an agricultural aircraft operation, as defined by 14 C.F.R. Section 137.3, are exempt from sales and use tax. Aircraft are exempt from sales and use tax if sold to a person for use exclusively in connection with an agricultural purpose and used for: 1) predator control; 2) wildlife or livestock capture; 3) wildlife or livestock surveys; 4) census counts of wildlife or livestock; 5) animal or plant health inspection services; 6) crop dusting, pollination, or seeding; or 7) repair, remodeling, and maintenance services. To qualify for the exemption, an aircraft must be used exclusively in connection with an agricultural purpose – met if 95% of the use is for the purposes listed above. Travel of less than 30 miles each way to a location to perform one of the listed services does not disqualify an aircraft from the exemption. A person who claims the exemption must maintain and make available to the comptroller flight records for all uses of the aircraft. (S.B. 958, Laws 2009, effective September 1, 2009) (09/09)

Indiana Finds That Farm's Forklift Was Taxable The Indiana Department of Revenue has found that a farmer's use of a forklift did not qualify it for the agricultural exemption. The farmer contested an audit finding with the argument that the forklift was used for agricultural purposes and was, therefore, exempt from tax. The Department of Revenue denied this argument due to the fact that the forklift did not have "direct use in the production process" as required by the agricultural exemption. The forklift was used for moving containers of seeds and harvested watermelons, which the department ruled to be pre-production and post production activities. (Letter of Findings No. 09-0090, Indiana Department of Revenue, July 29, 2009) (09/09)

Texas Decides Charges for Manufacturer’s Solid Waste Disposal Were Taxable The Texas Court of Appeals has upheld a District Court’s decision that a plastic closure manufacturer was not entitled to a refund of sales tax paid on charges for removal and disposal of waste from its plant. The manufacturer paid a single charge for the disposal of commingled manufacturing waste, discarded wrapping and packaging materials, and office and cafeteria waste. The relative amounts contributed by each category was not differentiated or documented. Although subsequent tests of the composition of the waste stream indicated that at least 95% of the solid waste removed would qualify for exempt industrial waste removal and disposal, the manufacturer did not adequately document with “books and records” the composition of the waste stream during the periods at issue.

Although the applicable rules can be constructed in the manufacturer’s favor to imply that all of these wastes are industrial waste, the Court could not conclude that the Comptroller’s more limited construction was plainly erroneous, inconsistent, or exceeded her authority, especially since she has “exclusive jurisdiction” to interpret the statutory definitions of taxable services. (Southern Plastics, Inc. v. Combs, Texas Court of Appeals, Third District, No. 03-08-00149-CV, July 1, 2009)
(09/09)

Kansas Court of Appeals Denies Judgment in Integrated Plant Theory Case The Kansas State Court of Tax Appeals has denied the Kansas Department of Revenue’s request for summary judgment in response to a cement manufacturer’s appeal of the Department’s final written determination denying the manufacturer’s refund request of sales tax paid on purchases of repair parts for equipment used to transport limestone. The Department argued that the manufacturer engaged in two distinct business operations: 1) limestone evacuation in and around a quarry and 2) cement manufacturing that begins when crushing activities commence at hammermill machines. The Department reasoned that this precluded the repair parts from the manufacturing exemption because they were not used in an integrated production operation by a manufacturing or processing plant or facility, as required by the “integrated plant” statutes.

However, the “integrated plant” statutes specifically state that machinery and equipment are considered an integral part of the integrated production operation when used to receive, transport, convey, handle, treat or store raw materials in preparation of its placement on the production line. The Court failed to find as a matter of law that the equipment in question was not used in an integrated production operation because the Department failed to show that the activities performed did not qualify as the activities enumerated in the statute. Further, the Department failed to prove that the equipment was not used primarily by and at the manufacturer’s single, fixed location, since the quarry and cement manufacturing operations are conducted on adjacent property owned by the manufacturer. The fact that the excavation-related activities are performed on a portion of the manufacturer’s premises where additional processing does not occur is not relevant to the determination of the plant’s boundaries.
(08/09)

Illinois Extends Graphic Arts Exemption and Manufacturer’s Purchase Credit The Illinois retailer’s occupation (sales) tax, service occupation tax, use tax, and service use tax exemption for graphic arts machinery and equipment, including repair and replacement parts, used primarily in the production of graphic arts has been extended from its automatic sunset date of July 30, 2009 to August 30, 2014. The corresponding Manufacturer’s Purchase Credit (MPC) earned on purchases of graphic arts and manufacturing machinery and equipment has also been extended to August 30, 2014.

The definition of “graphic arts production” has been revised to mean the production of tangible personal property for wholesale, retail sale, or lease by means of printing through the processes described in enumerated Groups and Subsectors of the North American Industry Classification System. Further, language has been added to specifically include persons engaged primarily in the business of printing or publishing newspapers or magazines that qualify as newsprint and ink by using the processes described in the Groups 511110-511199 of Subsector 511. (P.A. 96-116 (S.B. 1691), Laws 2009, effective July 31, 2009)
(08/09)

Delaware Wholesaler Tax on Auto Manufacturer Constitutional The Delaware Supreme Court found that the wholesalers’ gross receipts tax applied on an out-of-state auto manufacturer’s receipts resulting from vehicles delivered in Delaware did not violate the Commerce Clause of the U.S. Constitution. The Court concluded that the tax satisfied the test articulated by the U.S. Supreme Court in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977). Delaware’s wholesalers’ gross receipts tax did not pose a risk of multiple taxation because it only applied to sales of property physically delivered in Delaware. Only in Delaware did the delivery of taxed goods occur, and only Delaware had jurisdiction to tax this activity. Therefore, as in the Tyler Pipe Industries v. Washington State Department of Revenue, 483 U.S. 232 (1987) case, the tax was not “out of all appropriate proportion to the business transacted” in the state, and thus the Court found the tax was fairly apportioned. Furthermore, the tax did not discriminate again interstate commerce, as the Superior Court explained, the Wholesalers' Tax "treats any wholesaler engaged in wholesaling in Delaware the same. All must pay a tax on the gross receipts of the wholesaling activity without regard to where or how the goods were manufactured or assembled." (Ford Motor Co. v. Director of Revenue, Delaware Supreme Court) (06/09)

Arkansas Manufacturing Exemption Amended Arkansas has amended its sales and use tax exemption to clarify that a partial replacement of manufacturing machinery and equipment which improves manufacturing efficiency is exempt. Machinery and equipment used directly in the manufacturing process include: molds, frames, cavities, and forms that determine the physical characteristic of a product or its packaging material at any stage in the manufacturing process. Dies, tools, and devices attached to or part of a unit of machinery that determine the physical characteristics of the product or its packaging material at any stage of the manufacturing process also qualify for the exemption. In addition, the exemption covers any testing equipment used to measure the quality of the product at any stage of the manufacturing process (Act. 1208 {S.B. 770}, Laws 2009, effective April 7, 2009). (06/09)

Taxability of Farm Trailers Discussed in Tennessee The Tennessee Attorney General has issued an opinion concerning the taxability of farm trailers. Trailers purchased by famers may be exempt from sales and use tax if used on a farm more than 50% of the time for the purpose of producing agricultural products, which includes the use of the trailers to transport farm commodities and production supplies to and from the field. Not included, however, is the use of farm trailers to transport commodities and supplies to and from the point of storage or sale (Opinion No. 09-57, Tennessee Attorney General, April 16, 2009). (06/09)

Kentucky Manufacturer’s Purchase of Machinery Meets Requirements for Tax Exemption The Kentucky Board of Tax Appeals has determined that machinery purchased to be used directly in the manufacturing process by a manufacturer and retailer of German meats and sausages in order to expand its operations to include wholesale production is exempt from sales and use tax. Since the new machinery was installed next door to the retail operation, the two operations were found to be substantially segregated from each other. Further, since the retail operation continued to use the same machinery used prior to the purchase, the new machinery was determined to be purchased for a “new and expanded industry”, not to replace the machinery used in the retail operation. Therefore, the manufacturer’s purchase of the machinery meets all of the requirements for exemption from sales and use tax. (German Cuisine, LLC v. Commonwealth of Kentucky Finance and Administration Cabinet, Department of Revenue, Kentucky Board of Tax Appeals, File No. K07-R-03 (Order No. K-20214), February 5, 2009) (06/09)

Nexus

Out-of-State Company’s Drop Shipment Sales Not Taxable in New Mexico A taxpayer, drop ships tangible personal property to its New Mexico customers, was not liable for New Mexico gross receipts because it did not have nexus in New Mexico. The taxpayer’s sales agreement with its customers provides that the transfer of title, ownership and risk of loss from the taxpayer’s out-of-state location occurs when the taxpayer has received a purchase order from the customer and the customer has received the property. As a result, the property is briefly owned by the taxpayer, even though the taxpayer never takes physical possession of the property in New Mexico. This brief ownership of the property was not considered sufficient ownership of property in New Mexico to establish nexus since there was no physical possession of the property. For that reason, the taxpayer may have gross receipts from selling property in New Mexico, but it does not have nexus and is not liable for gross receipts tax.

Furthermore, the taxpayer is not liable for compensating tax on its drop shipment sales because they are sales of property in New Mexico rather than sales made outside this state. It was also noted that if the taxpayer’s vendor has nexus with New Mexico, the vendor's gross receipts are subject to gross receipts tax unless a statutory deduction or exemption applies to a transaction. However, the vendor does not incur a New Mexico compensating tax liability because it is selling tangible personal property rather than using it in New Mexico. (Ruling No. 401-09-5, December 3, 2009)
(01/10)

Use of Independent Consultant Does not Create Nexus in Florida The Florida Department of Revenue found that a taxpayer’s use of an independent consultant in Florida did not create nexus for Florida sales and use tax. The taxpayer is a limited liability company that makes interstate sales of general merchandise through the mail to customers located in Florida and other states. Florida law provides that a dealer who makes mail order sales must collect and remit Florida tax on such sales, when the dealer has agents in this state “who solicit business or transact business on behalf of the dealer.” Generally, the “transaction of business” on behalf of the dealer includes activities that further “the taxpayer's ability to establish and maintain a market in this state”. However, the taxpayer claimed that it no longer maintains any place of business, inventory, or other property in Florida. In addition, the taxpayer does not have any employees, agents, or representatives in Florida soliciting sales orders or conducting any other business activities on behalf of taxpayer.

The Department would deem the following activities by a dealer's representative or agent to create sales and use tax nexus: 1) the solicitation of orders; 2) the sale or acceptance of orders; 3) the acceptance of payments; 4) the delivery of merchandise; 5) the service of merchandise; or 6) the representation of the dealer in Florida through some other means. In this situation, the independent consultant provides services to the taxpayer’s personnel at its corporate headquarters and does not help the taxpayer develop a market for its products in Florida. Additionally, the consultant does not interact with the taxpayer's customers or vendors and any work that the consultant performs in Florida on the taxpayer's process improvement projects is invisible to the taxpayer's customers. Therefore, since the consultant’s activities do not constitute any of the activities described above, the taxpayer is not obligated to collect and remit Florida tax on its mail order sales of tangible personal property, due to the use of this consultant. (Technical Assistance Advisement, No. 09A-058, Florida Department of Revenue, November 9, 2009)
(12/09)

Related Seller Was Not Required to Register in Utah In a private letter ruling, the Utah State Tax Commission found that an out-of-state “nexus seller” would not create nexus for an out-of-state “related seller”. In the letter, the nexus seller has an office in Utah as well as employees to support and service its Utah customers. The related seller does not have any retail stores or employees, engage in any Utah activities, or own or lease any real property in Utah. Under these facts, the Commission found that the related seller does not meet Utah’s statutory definition of a retailer engaged in business. On the other hand, since the related seller is an affiliate, further analysis had to be done to determine if the related seller had affiliate nexus instead. The nexus seller was a web-based provider of e-commerce services and did provide the related seller with certain business services for its backend infrastructure, including content delivery network and storage services. However, these services were not provided in Utah. It was therefore determined that the related seller does not have affiliate nexus in Utah based on the types of services performed as long as those services are not directly related to establishing or maintaining a market in Utah for new or existing customers. (Private Letter Ruling, Opinion No. 09-008, Utah State Tax Commission, July 28, 2009) (10/09)

North Carolina Governor Signs Budget that Includes Amazon Provision North Carolina Governor Bev Purdue has signed a budget bill that passes the Amazon provision related to nexus. This provision states that a retailer is presumed to be soliciting or transacting business in North Carolina if the retailer enters into an agreement with a resident of this State under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet Web site or otherwise, to the retailer. This presumption applies only if the cumulative gross receipts from sales by the retailer to purchasers in this State who are referred to the retailer by all residents with this type of agreement with the retailer is in excess of ten thousand dollars ($10,000) during the preceding four quarterly periods. (S.B. 202, Laws 2009, effective as noted) (08/09)

Virginia Rules Third-Party Installation Services Did Not Cause Nexus A seller of storage systems located outside of Virginia was not required to register for Virginia sales and income tax as the result of installation services provided by a third party. The Virginia Department of Taxation found that the nexus requirements were not met for the seller of the storage systems as the retailer never had a physical presence in the state. The installers of the system were a true third party who received the installation materials from a distributor and then performed the installation independently of the retailer. (Ruling of Commissioner, P.D. 09-44, Virginia Department of Taxation, April 27, 2009) (08/09)

Out-Of-State Vendor Selling in Missouri Creates Nexus The Missouri Department of Revenue issued a Letter Ruling stating that the sales of an out-of-state business are subject to Missouri use tax because its activities established nexus with Missouri. The company is an out-of-state vendor that sells tangible personal property to customers and resellers within Missouri. The company’s activities within the state include:
1) holding seminars and meetings with resellers in Missouri to educate them about the taxpayer’s products so that the resellers can sell the products to customers in Missouri;
2) providing order forms at the seminars to the resellers to promote and sell its products at special discounted rates; and
3) compensating the resellers for making such sales to customers.
The above activities result in nexus with Missouri and requires the business to collect and remit use tax on the sales of its products. If the company’s sales to its resellers are for resale by its resellers, the company should obtain a signed resale certificate from its resellers and not collect use tax on such sales. Additional rules and regulations apply. (Letter Ruling No. LR5552, Missouri Department of Revenue)
(08/09)

Connecticut Legislation that Would Have Taxed Certain Internet Sales Dies in Committee Senate Bill 806, which would have required every person making sales of tangible personal property or services through an independent contractor or other representative in Connecticut through an agreement under which the resident, for a consideration, directly or indirectly refers potential customers via a link on an Internet web site or otherwise died in committee. (S.B. 806 died in the committee on Revenue, Finance, and Bonding on June 2, 2009) (08/09)

New York Expands Definition of Sales Tax Vendor Effective June 1, 2009, the definition of a sales tax vendor in New York has been amended to include, under certain circumstances, remote sellers of taxable property and services that are affiliated with a business located in the state. Previously, an in-state business could cause an out-of-state business to be classified as a sales tax vendor if, among other activities, it engaged in solicitation on behalf of the remote seller. The new definition expands the types of activities engaged in by the in-state vendor that cause an out-of-state vendor to be considered a sales tax vendor if one of the companies owns, directly or indirectly, more than 5% of the other or if the same person or affiliated group of persons owns, directly or indirectly, more than 5% of both companies.

If the companies meet the new definition of “affiliated”, and the in-state company either I) uses the same a trademark, service mark, or trade name; or II) engages in activities in New York that benefit the remote seller in its development or maintenance of a market in the state, to the extent that those activities satisfy the nexus requirement of the United States Constitution, the remote vendor must register for sales tax purposes. Condition II will be met if either direct or indirect ownership exceeds 50% and the in-state business engages in activities such as referring customers, accepting orders or returns, fulfilling orders, distributing or displaying advertisements, handling distribution or warehousing, or performing repair services. If direct or indirect ownership interest exceeds 5%, but is less than 50%, the department will evaluate the nature and extent of the activities performed by the New York affiliate and the extent of the actual direct or indirect control exercised by the owner to determine if the remote seller is a vendor. (TSB-M-09(3)S, Office of Tax Policy Analysis, New York Department of Taxation and Finance, May 6, 2009)
(08/09)

California Governor Schwarzenegger Vetoes “Amazon” Nexus Provisions Governor Schwarzenegger vetoed a majority vote tax increase passed by the California legislature after Overstock.com announced that it would pull its affiliate advertising from the State. California lawmakers had proposed a tax on affiliate advertising similar to New York’s “Amazon” laws. The new laws would have changed the definition of “retailer engaging in business in this state” to include any retailer entering into an agreement with a resident of California under which the resident, for a commission or other consideration, directly or indirectly refers potential customers of tangible personal property via a link on its website or otherwise to the retailer. Governor Schwarzenegger stressed his commitment to not raising taxes and his fight to keep and create jobs in California. Overstock.com will continue to do business with affiliates in California (Press Release, Governor Schwarzenegger Remains Committed to No New Taxes, Announces Overstock.com Will Continue to do Business in California (July 1, 2009). (07/09)

Nexus Presumption Bill Vetoed by Governor in Hawaii House Bill 1405, that would have enacted a nexus presumption for retailers that enter into an agreement with a resident, under which the resident, for a commission or other consideration, directly or indirectly refers potential customers to the seller, has been vetoed by Hawaii Governor Linda Lingle. In her statement of objections, the governor noted that the bill’s content violates the Hawaii State Constitution which provides that each law shall embrace but one subject, which shall be expressed in its title. In addition, the governor mentioned that this bill would be harmful to the state’s current economic situation because some of the online companies, including Audible.com and Zappos.com, have already warned their Hawaii affiliates that they will terminate their relationships if this bill is passed. (H.B. 1405, vetoed by Hawaii Gov. Linda Lingle on July 1, 2009; News Release and Statement of Objections to House Bill No. 1405, Hawaii Gov. Linda Lingle, July 1, 2009) (07/09)

New York Enacts Budget with Expanded Definition of “Vendor” As part of the 2009-10 enacted New York budget package, a new clause was added to the tax law that includes an affiliate nexus provision. This clause, effective June 1, 2009, expands the definition of a “vendor” to include seller’s of taxable tangible personal property and services if either 1) an affiliated in-state vendor uses the same trademarks, service marks, or trade names as the seller; or 2) an affiliated person engages in activities in New York that benefit the seller in its development or maintenance of a market for its goods or services in the state, provided those activities are sufficient to satisfy the nexus requirements of the U.S. Constitution. (Ch. 57 (A.B. 157), Laws 2009, effective June 1, 2009) (07/09)

Connecticut Teachers Are Not Representatives and Do Not Create Nexus for Out-Of-State Bookseller The Superior Court of Connecticut has overturned the Commissioner of Revenue Services’ decision that school teachers who distribute catalogs and books to students and take student orders are “representatives” who participate in an in-state “sales force” to sell, deliver, and take orders to generate revenue on behalf of an out-of-state company that sells books exclusively to schools. Although the teachers fulfill a crucial administrative role for the bookseller, this function does not elevate the teachers to the level of a “sales force” because the decision to participate in the bookseller’s program remains with the teacher, the teachers may act as customers and purchase books for their own use, and the bonus points given to the teachers as their only form of compensation are for classroom use only and stay with the classroom, not the teacher. Since it is determined that the teachers are not representatives of the bookseller, their administrative activities do not establish nexus for the bookseller. (Scholastic Book Clubs, Inc. v. Commissioner of Revenue Services, Connecticut Superior Court, Nos. CV07 4013027 S and CV 07 4013028 S, April 9, 2009) (07/09)

Rhode Island Enacts its Version of the Amazon Provision Effective June 30, 2009 Rhode Island has amended it’s definition of a retailer to include a retailer who enters into an agreement with a resident, under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by link on an internet web site, or otherwise, to the seller. This presumption will only apply if the cumulative gross receipts from sales by the retailer to customers in the state who were referred by these resident solicitors are in excess of $5,000 during the preceding four quarterly periods ending on the last day of March, June, September, and December. The presumption can be rebutted by proof that the resident solicitor did not engage in any solicitation that would satisfy the U.S. Constitution during such four quarterly periods. (H.B. 5983, Laws 2009, effective as noted) (07/09)

Online Retailers Targeted by North Carolina Legislation A bill that would enact a presumption of nexus for certain online retailers and extend the sales and use tax to digital products has been introduced in the North Carolina Senate on March 9, 2009. The legislation is basically identical to the Amazon law that was enacted by New York in 2008. A presumption that an online retailer is soliciting business in the state, for sales and use tax purposes, would be created if an in-state entity refers customers to the retailer by a link on a Web site in return for a commission or other consideration. As in New York law, the presumption under the North Carolina bill would only apply when the retailer’s cumulative gross receipts from sales to customers referred to the retailer by in-state entities exceed $10,000 in the preceding year. However, the presumption could be rebutted by proof that the in-state entity did not engage in any solicitation in the state on the retailer’s behalf that would meet the nexus requirement. The North Carolina legislation would also extend the general state sales and use tax rate to the sales price of an audio or audiovisual work, a book, and computer software that is delivered or accessed electronically and would be subject to sales and use taxes if sold in a tangible form. Further rules and regulations apply. (S.B. 487, introduced in the North Carolina Senate on March 9, 2009, and referred to the Senate Committee on Finance on March 10, 2009) (06/09)

Telemarketing Nexus Discussed in Utah In a private letter ruling, an out-of-state telemarketing firm, with its sole call center in Utah, was determined to have nexus. The Commissioner also concluded that the firm’s clients, who actually sold the service and maintenance contracts, had nexus as well. The telemarketing firm contended that it did not have nexus because its sole activity was solicitation by e-mail and telephone from the call center in Utah. However, the Commissioner found that the taxpayer’s activities were not just limited to solicitation. The maintenance of a call center in Utah also requires either owning or leasing real property, registering with the Department of Commerce, as well as hiring employees. As a result, the combination of both activities was sufficient to create nexus for the firm. The firm also insisted that nexus was not created for its clients because the firm’s solicitation did not establish and maintain a market for the out-of-state clients. This was also denied because the firm is acting as an agent or independent contractor by soliciting sales. In Utah, an agent or independent contractor with nexus acting on behalf of a seller creates taxable nexus for the seller. (Private Letter Ruling, Opinion No. 08-006, Utah State Tax Commission, released May 2009) (06/09)

New York Supreme Court Dismisses Amazon's Challenge on New Provision Amazon.com’s lawsuit challenging New York’s new statutory provision concerning Internet retailers has been dismissed. Under the new Commission-Agreement Provision that Governor Paterson signed into law, retailers that solicit business by entering into an agreement with a resident of the state, for a commission or other consideration, that directly or indirectly refer potential customers, whether by link on an internet website, and the receipts from these referrals is in excess of $10,000, must collect and remit New York sales tax. Amazon filed suit against the State alleging that the provision violated the Commerce Clause because it imposes tax collection obligations on out-of-state entities that have no substantial nexus with New York. Amazon also contended that it violated the Due Process Clause because it effectively created an irrebuttable presumption of ‘solicitation’ and is overly broad and vague. Amazon further contended that it violated the Equal Protection Clause because it intentionally targeted Amazon.

While the New York Supreme Court held that even accepting all of the facts alleged by Amazon to be true, the Court held that there was no basis upon which Amazon could prevail. Therefore, the Court dismissed Amazon’s arguments and the lawsuit for failure to state a cause of action. The State of New York stated that the “neutral” Commission Agreement simply obligates out-of-state sellers to shoulder their fair-share of the tax-collection burden when using New Yorkers to earn profit from other New Yorkers. (Amazon.com LLC v. New York Department of Taxation and Finance, New York Supreme Court, New York County, Index No. 601247/08, January 12, 2009)
(03/09)

Retail

Illinois Clarifies Rate of Tax on Bakery Items The Illinois Department of Revenue has issued a letter ruling that clarifies which rate of tax should be used by a bakery that sells both food which has been prepared for immediate consumption and grocery-type items and also provides facilities for on-premises consumption. Bakery items prepared by the bakery can be taxed at the lower rate if the area for on-premises consumption is physically separated or otherwise distinguishable from the area where food not for immediate consumption is sold and the retailer has a separate means of recording and accounting for collection of receipts from sales of both high and low rate foods.

The Department generally defines “physically separated” as separated or divided by a tangible barrier. An eat-in-area that is partially isolated from the general sales area of a store by the arrangement of display cases, service counters, or stub walls would qualify as “physically separated.” The second factor, separate means of recording and accounting for collection, would include cash registers that separately identify high rate and low rate sales, separate cash registers, or any other method by which the tax on high and low rate sales are recorded at the time of collection. (Private Letter Ruling, ST 09-0011-PLR, Illinois Department of Revenue, December 7, 2009)
(02/10)

California has Revised its Publication that Addresses the Taxability of Combination Packages and Gift-Wrapping The California State Board of Equalization has revised its publication on gift-wrapping charges to include the taxability of gift packages with a combination of food and nonfood items. Gift packages that contain only food, such as cheese, crackers, or fruit, are generally exempt from tax. However, it may be necessary to determine the taxable portion of a package if nonfood products are included in the gift basket.

For “combined” packages where records verify the cost of the individual items in the package and the retail price of the nonfood product is more than 10 percent of the retail value of the entire package, not including the container, you must separate the retail value of the nonfood products. The tax should be based on the retail sales price of the nonfood products, not including the value of the container. On the other hand, if you do not have records to verify the cost of the individual items (combination package preassembled from your supplier) and the retail value of the nonfood product exceeds 10 percent of the retail price of the entire package, not including the container, you must calculate the tax based on the retail sales price of the entire package, including the value of the container. The sales price of a combination package is nontaxable if the retail value of the nonfood products is 10 percent or less than the total value of the contents (not including the container) and the container's retail value is 50 percent or less of the entire package value.

Generally sales tax does not apply to gift-wrapping charges for products sold in a nontaxable transaction. However, if you gift-wrap items that you did not sell or items that are taxable, all of your gift-wrapping charges—including charges for labor—are taxable. Certain gift-wrapping supplies like wrapping paper, tape, gift boxes, and tissue may be purchased using a resale certificate if they become a physical part of the packages you wrap. (BOE Publication 106, Combination Packages and Gift-Wrapping, California State Board of Equalization, December 2009)
(02/10)

Minnesota Amends its Rules Regarding Food, Sales to Exempt Entities The Minnesota Department of Revenue has amended its rules on food, drinks, and meals; sales to exempt entities; and charitable, religious, and educational organizations. These amendments are temporary and will expire in November 2011.

The rule for food, drinks, and meals will now apply to prepared food, candy, and soft drinks. In addition, retailers of prepared food, candy, or soft drinks, including but not limited to restaurants and fast food establishments, must pay the tax on all purchases of equipment and products used or consumed in the business, including fixtures and reusable items such as linens, flatware, glassware, and towels. References to “meal and lunches” were changed to “prepared food, candy, and soft drinks” and the definition of “meals and lunches” was removed.

The rule on meals, admissions and lodging to exempt entities was changed to prepared food, candy, or soft drinks, or the furnishing of lodging to governmental entity, hospital, surgical center, or nonprofit organization. Under this rule, no sales and use tax exemption is allowed for meals, admissions, prepared food, candy, or soft drinks purchased by, or lodging furnished to, governmental entities, hospitals and surgical centers, or nonprofit organizations even if the entity is billed directly and pays directly for such services. This exclusion does not apply to the federal government, its agencies, and instrumentalities that purchase meals and prepared food, candy, soft drinks, or lodging directly.

(Minnesota State Register, Vol. 34, No. 20; Rules 8130.4700, 8130.5700, and 8130.6200, Minnesota Department of Revenue, effective as noted)
(01/10)

Wisconsin Revises its Tax Publication on Digital Goods The Wisconsin Department of Revenue has revised its publication regarding the sales and use tax treatment of digital goods, specifically, newspapers and other news or information products. The sections that discuss digital books also had some small changes. In addition to explaining the taxability of digital goods, the publication gives details on seller's permits and use tax registration certificates, filing returns and paying tax, definitions, sourcing, and exemptions. (Publication No. 240, Wisconsin Department of Revenue, October 2009) (12/09)

Internet and Catalog Purchases Are Taxable in Nebraska The Nebraska Department of Revenue has issued a news release to remind taxpayer that if an internet retailer or catalog company does not collect the state and applicable local taxes, they are still responsible for paying the tax as consumer’s use tax. For items such as clothing, books, and wine that are delivered into Nebraska, consumer use tax is due on the sale price, including the delivery and handling charges. The consumer use tax should be reported on the Nebraska Individual Consumer’s Use Tax Return Form 3. The return for purchases made during 2009 is due January 25, 2010. (News Release, Nebraska Department of Revenue, December 2, 2009) (12/09)

Beverages Sold with Bartending Services are Meals in Massachusetts A liquor store, who sometimes delivers beverages to a customer and also provides related bartending services, was found subject to Massachusetts sales/meals tax. The store contended that it is not a restaurant and is not making sales of “meals” subject to sales/meals tax. The statutory definition of a restaurant includes caterers and any establishment where food or beverages are provided for a charge, regardless of who owns or operates the establishment. The argument that sales of alcohol alone are not considered meals was denied because a meal is defined as any food or beverage, or both. Since there is no agency relationship between the store and the customer, the question of whether the customer or caterer owns the meal at the time of sale is irrelevant. In addition, the taxable sales price includes fees for bartending and set-up, whether or not separately stated. (Letter Ruling 09-8, Massachusetts Department of Revenue, November 30, 2009)

(12/09)

Sales by an Out-of-State Piano Vendor Deemed Taxable in Missouri An out-of-state piano vendor’s sales to Missouri customers were found subject to Missouri use tax. When sales are approved and finalized outside Missouri, they are not subject to sales tax. However, the sales are subject to Missouri use tax in cases when the vendor delivers the pianos and organs directly to the customer in Missouri. Missouri use tax is imposed for the privilege of storing, using or consuming any article of tangible personal property within the state. In addition, the vendor should collect the local use tax rate in effect where the piano or organ is first delivered in Missouri. (Letter Ruling No. LR5930, Missouri Department of Revenue, October 23, 2009) (12/09)

Missouri Discusses the Taxability of Countertop Sales and Installations An out-of-state retailer was found liable for Missouri sales and use tax on its sales of uninstalled countertops. Conversely, the taxpayer was not required to collect tax on its sales of installed countertops to Missouri customers. The taxpayer sells home improvement products, such as countertops, both uninstalled and installed. Since an uninstalled countertop is tangible personal property, the taxpayer should collect sales tax on its sale to a Missouri customer. For the installed countertop sales, the fabrication and installation is subcontracted to other companies (Missouri supplier and out-of-state supplier). The suppliers bill the taxpayer for the fabrication and installation of the countertops. Therefore, the taxpayer is a contractor making improvements to the real property and should not collect sales tax from the customer. However, when the taxpayer subcontracts the installation to the third party suppliers, they are considered the final user of the countertop prior to it becoming part of the real property. As the final user of the item, the suppliers should self-remit sales or use tax on their cost of materials to manufacture and install the countertop. (Letter Ruling No. LR5820, Missouri Department of Revenue, August 7, 2009) (11/09)

Ohio Adopts Rule on Negative Equity in Vehicles Sales The Ohio Department of Taxation has adopted a regulation on the tax treatment of negative equity in a vehicle sales transaction. "Negative equity" is a term applied when a motor vehicle purchaser is trading in a vehicle with a current value that is less than the amount owed on the existing loan for that vehicle. For example, a customer trades in a motor vehicle to a dealer in connection with the purchase of another vehicle. The dealer allows a $4,000 trade-in credit towards the purchase of the second vehicle, but the customer still owes $7,000 on the existing loan. The negative equity amount is $3,000.

The manner in which the trade-in allowance, negative equity, or loan payoff amount is displayed on the retail buyer's agreement determines if it is part of the total vehicle price paid for the newly-acquired vehicle and subject to sales tax. If the negative equity amount is included by the dealer in the total vehicle price, it will be included in the base on which sales tax must be charged. If it is not included in the total vehicle price, the negative equity amount will not be included in the calculation of sales tax. In order to exclude the negative equity from the tax base, it may be shown as an additional amount due to a third party (perhaps financed) after the computation of the total vehicle price. The regulation also provides examples of the application of Ohio sales and use tax to sales of motor vehicles when the purchaser is trading in a vehicle with negative equity. (OAC 5703-9-36, Ohio Department of Taxation, effective October 25, 2009)
(11/09)

Missouri Private Jail Liable for Tax Due on Purchases of Consumables Provided to Inmates In a Missouri court case, a private jail operator's purchases of consumables (soap, meals and clothing) that were provided to inmates pursuant to contracts with municipalities were found taxable. The court found that in order to be eligible for the resale exemption the items purchased by the taxpayer had to subsequently be subject to a taxable sale at retail. The taxpayer argued that its purchases were eligible for the resale exemption because it purchased those products for resale to the municipalities that sent inmates to its jail facility. However, since the tax-exempt governmental entities were not required to pay sales tax on the consumable goods, an exemption from sales tax was not allowed. In addition, the taxpayer did not meet the statutory definition of a "seller," which also precluded it from the resale exemption. As a result of this court decision, the Missouri Department of Revenue has proposed an interpretation to implement this decision. At this time, it is unclear whether this interpretation will become a rule. This decision raises significant issues for all Missouri taxpayers who purchase items for resale, including raw materials, if they make sales to exempt customers. (ICC Management, Inc. v. Director of Revenue, Missouri Supreme Court, No. SC89559, June 16, 2009) (11/09)

Texas Discusses Aircraft Trade-Ins The Texas Comptroller indicated that an aircraft transaction that qualifies as a tax free exchange exempt from federal taxation under IRC- Section 1031 does not impact the taxability of a transaction for Texas sales and use tax. The sale or lease of an aircraft by a dealer engaged in business in Texas is subject to Texas state and local sales tax based on the total consideration paid for the aircraft. The total consideration may be adjusted for the value of a trade-in if (1) the title to the trade-in (aircraft) must pass to the seller of the new aircraft; (2) the aircraft being traded in must be separately identified to the purchaser of the new aircraft on an invoice, billing, sales slip or ticket, or contract; and (3) the seller's books and records must reflect the acceptance of the trade-in, the credit allowance for the trade-in, and the sale of the trade-in to a third party. (Letter No. 200903447L, Texas Comptroller of Public Accounts, March 30, 2009, received September 2009) (10/09)

Aircraft Repair, Maintenance, and Replacement Items Exempt in Illinois Illinois has amended its laws to include an exemption for aircraft repair, maintenance, and replacement items. Specifically, materials, parts, equipment, components, and furnishings incorporated into or upon an aircraft as part of the modification, refurbishment, completion, replacement, repair, or maintenance of the aircraft are exempt from Illinois retailers’ occupation tax, service occupation tax, use tax, and service use tax, beginning January 1, 2010. Consumable supplies, such as adhesive, tape, sandpaper, general purpose lubricants, cleaning solution, latex gloves, and protective films are also eligible for the exemption. Items used in modifying, replacing, repairing, and maintaining aircraft engines or power plants, however, are not eligible.

The exemption applies only to those organizations that (1) hold an Air Agency Certificate and are empowered to operate an approved repair station by the Federal Aviation Administration, (2) have a Class IV Rating, and (3) conduct operations in accordance with Part 145 of the Federal Aviation Regulations. Aircraft operated by a commercial air carrier providing scheduled passenger air service pursuant to authority issued under Part 121 or Part 129 of the Federal Aviation Regulations are not eligible for the exemption (P.A. 96-759 {S.B. 450}, Laws 2009, effective as noted)
(09/09)

West Virginia Adopts Taxation of Vehicles Legislation Effective July 1, 2009, the West Virginia Department of Transportation, Division of Motor Vehicles, enacted legislative regulations establishing the imposition of a 5% sales tax on vehicles prior to the issuance of a certificate of title. The division will collect the sales tax prior to issuing a title, regardless of whether the applicant has paid a similar sales or privilege tax on the vehicle in any other jurisdiction. The only exception applies to a new resident (person or business entity) establishing domicile in West Virginia is exempt from paying the tax on vehicles titled previously in the former state. The sales tax on applications for title on a vehicle purchased from a dealer either in-state or out-of-state is based on the purchase price minus any applicable trade-in vehicle: note: 1) the trade in vehicle must be titled in West Virginia; and 2) rebates received after the sale do not reduce the taxable purchase price. Furthermore, the sales tax does not apply to transfer of ownership without consideration (i.e. gifts, donations, or an inheritance).

The minimum taxable value of a vehicle is $500, irrespective of the indicated actual sale price on either the application for title, the back of the title or a notarized bill of sale. An exemption does apply when the vehicle is branded reconstructed or salvaged, Class T utility trailers, motorboats under 16 feet, welfare to work or similar type program vehicles, assembled vehicles and trailers, Class R travel campers, and older vehicles no longer included in editions of nationally distributed and recognized vehicle value guides. (Reg. Secs. 91-9-1 – 91-9-3, West Virginia Department of Transportation)
(09/09)

Illinois Discusses Rate Hike on Candy, Grooming Products, and Soft Drinks Illinois has released and information bulletin explaining the change in tax bases for certain classes of merchandise. Effective September 1, 2009, these items will be taxed at the general state rate of 6.25%.

For Illinois taxing purposes, candy is defined as the preparation of sugar, honey, or other natural or artificial sweeteners, in combination with chocolate, fruits, nuts or other ingredients, or flavorings in the form of bars, drops, or pieces. Examples of candy include chocolate bars, yogurt or chocolate covered fruit or nuts, honey coated nuts, caramel popcorn, lollipops, snack mixes containing yogurt or chocolate, breath mints, and gum. Items excluded from the definition of candy are those that contain flour or require refrigeration, such as chocolate covered cookies, yogurt covered pretzels, “candy” that contains flour, plain dried fruits, and nuts with no added sweeteners. A retailer can check the ingredients label or package to determine if an item qualifies as candy.

Personal grooming and hygiene products for humans are taxed at the general state rate regardless if they make a medicinal claim, unless sold as a result of a prescription. These products include body soap and cleansers, shampoo, toothpaste, mouthwash, antiperspirant, and suntan lotion and screens.

The definition of “soft drink” has changed to mean any non-alcoholic beverage containing natural or artificial sweeteners. This includes soda, sport or energy drinks, sweetened tea, waters containing natural or artificial sweeteners, beverages containing 50 percent or less fruit or vegetable juice, and all other preparations commonly known as soft drinks. “Soft drink” does not include any beverage containing milk or milk products, soy, rice or similar milk substitutes, unsweetened teas, drinks with greater than 50 percent of vegetable or fruit juice by volume, and carbonated or uncarbonated water that contains no natural or artificial sweeteners. These will still be taxed as food (reduced rate).

The change in the definition of “soft drink” does affect the Chicago Soft Drink Tax in that the “soft drinks” previously identified as moving from the reduced rate to general state rate will now be subject to the Chicago Soft Drink Tax. (Informational Bulletin FY 2010-01, Illinois Department of Revenue, July 2009)
(09/09)

New Hampshire Tire Seller Not Liable for Tax in Massachusetts The Massachusetts Supreme Court reversed a decision made by the Appellate Tax Board and ruled that a New Hampshire tire seller was not liable for Massachusetts sales tax on sales made to Massachusetts residents in New Hampshire. The Department argued that due to the seller’s knowledge of the customers’ residence, the seller should have known the tires would be used in Massachusetts and, therefore, should have collected sales tax. After a review of a vendor’s liability for use tax, the Court denied the Commissioner’s arguments because the language in Massachusetts statute does not allow for the presumption of use that the Commissioner seeks to impose. Accordingly, the Appellate Tax Board’s decision was reversed. The court mentioned that the Legislature may, of course, enact such a presumption, but in the absence of any such statutory authorization, it is error to rely on a presumption that tires sold to a Massachusetts resident outside the Commonwealth were actually used in the Commonwealth. (Town Fair Tire Centers, Inc v. Commissioner of Revenue, Massachusetts Supreme Judicial Court, No. SJC-10360, August 25, 2009) (09/09)

Utah Finds Exempt Organization Could Not Recover Taxes Reimbursed to Employees A Utah university sought clarification on the exempt purchase of goods by employees at point of sale. When employees made these purchases, they were charged sales tax. The university would reimburse employees for the sales tax paid. The university requested a refund of these reimbursed amounts as they were a 501(c)3 organization and were exempt from sales tax. The state found that the university was not eligible for a refund as the sales were not "made to" a charitable institution, as the applicable statute states. The sales were made to the employees of the university, who made the payments for the sales, even though they were for university use. (Private Letter Ruling, Opinion No. 08-014, Utah State Tax Commission, April 7, 2009) (09/09)

Texas Discusses School Fundraising and Sales by School Organizations The Texas Comptroller of Public Accounts has released a publication detailing the taxability of sales made by schools and school organizations. The publication states that "school districts, public schools, qualified exempt private schools and bona fide chapters within a qualifying school" are eligible to make tax free sales on two days each calendar year. The school and a qualifying chapter, such as a yearbook club, can make tax free sales on two days, which do not have to occur at the same time. For example, the school can make sales of merchandise on a day and the yearbook club can make sales of yearbooks on another, and each club will have one additional day to make tax free sales. The publication details the types of clubs and sales which would be subject to these rules and can be found on the website of the Texas Comptroller of Public Accounts. (Publication 94-183, Texas Comptroller of Public Accounts, July 2009) (09/09)

Trade-In Credit Not Excluded from Sales Price in Florida Florida has issued a technical Assistance Advisement stating that store credits issued in cards or paper form for use on a subsequent purchase are not excluded from Florida sales and use tax. The taxpayer believed that the trade-ins are taken at the time of sale as required in the Florida statute. However, it was determined that a subsequent purchase assumes that at the time of the trade-in, the customer has not identified, nor possessed, tangible personal property. Therefore, the future sale has not been executed at the time of the trade-in when the cards or paper credits are issued. It was further noted that the trade-in credits are analogous to a gift certificate or cash equivalent which is included in the sales price subject to tax. (Technical Assistance Advisement, No. 09A-038, Florida Department of Revenue, July 21, 2009) (09/09)

Texas Amends Taxation of Motor Vehicle Gifts Effective September 1, 2009, the $10 tax imposed on the recipient of a gift of a motor vehicle only applies if 1) the gift is received from the recipient’s spouse, parent, stepparent, grandparent, grandchild, child, stepchild, sibling, guardian, or a decedent’s estate; or 2) the recipient is exempt from federal income taxation as an exempt organization that will use the vehicle for the organization’s purposes. All other transactions in which a motor vehicle is transferred without payment of consideration do not qualify as gifts and will be treated as ordinary sales.

Also effective September 1, 2009, the principal parties involved in the transference of a motor vehicle as a gift must make a notarized joint statement describing the nature of the transaction and the relationship between the parties. (H.B. 2654, Laws 2009, effective September 1, 2009)
(09/09)

Taxability of Cell Phone Discounts/Giveaways Varies by States States vary on the treatment of cellular telephones and equipment when sold below cost and contingent on the purchase of airtime from a retailer or an independent carrier. It is a common practice for retailers to sell cellular phones for a significant discount with a contract for cellular phone services. Selling the phone at a significantly discounted price may constitute a sale at the reduced price or tax may be due on the normal retail value or the cost of the item sold. For example, Alabama and Illinois tax the cellular phone at the discount price, while California requires tax to be paid on the normal retail price if below 50% of the cost. Texas requires tax be paid on the cost of the item if the sales price is less than 25% of the dealer’s acquisition cost. In Massachusetts, an item transferred from a vendor to a customer for a nominal consideration or substantially below cost is considered, for sales tax purposes, a promotional item. Items sold at 50% or less of the vendor’s cost are considered substantially below cost. However, situations such as fire sales, going-out-of-a-business sales, and clearance sales may not meet this presumption. (06/09)

Transfer in Connection with a Merger is Not Taxable in Pennsylvania A transfer of delivery trucks at the time of a merger was nor subject to Pennsylvania sales and use tax. The transfer did not involve any consideration, which is a requirement in the definition of a sale at retail. Therefore, the Court ruled that the trucks were transferred by operation of law, as defined in the law governing corporate mergers, and not a transaction where a consideration was agreed upon. (Legal Letter Ruling No. SUT-04-017, Pennsylvania Department of Revenue, may 17, 2004 (reissued May 18, 2009) (06/09)

Vermont Supreme Court Rules on Movie Snacks A movie theatre in Vermont has contested an audit assessment that included the classification of the theatre as an "eating and drinking establishment" and assessments on sales of popcorn and nacho chips. The taxpayer argued that popcorn and nacho chips were excluded from the Vermont meals and rooms tax and that the theatre would not qualify as an "eating and drinking establishment" as they primarily sold packaged food. The court ruled against the taxpayer, finding that the exemption of popcorn and nachos was intended to apply only to packaged food and not prepared and warmed food. The law defining "eating and drinking establishments" was also found to be broad enough to include the taxpayer's theatre. It is also of note that the taxpayer was collecting taxes on non-bottled beverages, hot dogs and soft pretzels sold at their concession stands during the audit period. (Eurowest Cinemas, LLC v. Vermont Department of Taxes, Vermont Supreme Court, No. 2008-087, January 13, 2009) (06/09)

Virginia Modifies Occasional Sale Exemption for Nonprofit Organizations Virginia has modified its occasional sale exemption for nonprofit organizations that are eligible for an exemption on its purchases and otherwise eligible for the occasional sale exemption. The amendment states that the nonprofit organization will be exempt on its sales of 1) food, prepared food and meals, and 2) tickets to events that include the provision of food, prepared food and meals, so long as such sales take place on less than 24 occasions in a calendar year. (Ch. 338 (H.B. 1779), Laws 2009, effective July 1, 2009) (06/09)

Food Sold by Pennsylvania Church During Community Festival Taxable A reissue of a 2004 Letter Ruling clarifies that sales of food or beverages by a church are generally exempt from taxation, provided the sales are in the ordinary course of the church’s activities, such as a sale to church members by a church organization in connection with a church function. However, if the church sells food and beverages to the general public in competition with other organizations or businesses selling similar taxable items, the church is operating an unrelated business and must collect sales tax. Therefore, a church who sells food and beverages from their premises adjacent to a community’s fall festival, in competition with vendors selling similar food and beverages and collecting tax, is required to collect sales tax. (Legal Letter Ruling No. SUT-04-011, Pennsylvania Department of Revenue, February 19, 2004 (reissued February 20, 2009) (06/09)

Illinois Clarifies Auto Rebates and Dealer Incentives The Illinois Department of Revenue has amended an Illinois retailers’ tax regulation to clarify the sales tax treatment of automobile rebates and dealer incentives. For example, if a dealer accepts a manufacturer’s rebate provided by a customer as part of the payment for the purchase of an automobile or other type of vehicle, the amount of the reimbursement or payment paid by the manufacturer to the dealer is part of the taxable gross receipts received by the dealer. For dealer incentives, effective for sales made on and after July 1, 2008, the tax treatment depends upon whether the dealer receives a payment from a source other than the purchaser that is conditioned upon the retail sale of an automobile. If a dealer receives a payment as an incentive, the amount of that reimbursement or payment is part of the taxable gross receipts received by the dealer for the sale of that automobile. However, if a dealer receives payment in exchange for the purchase of an automobile from a supplier or manufacturer, and that payment is not conditioned upon the sale of that automobile to a retail customer, the amount of that payment is not part of the taxable gross receipts received the by the dealer for the retail sale of that automobile. Examples of various types of automobile rebates and dealer incentives are provided in the amendment. Additional rules and regulations apply. (86 III. Adm. Code 130.2125, Illinois Department of Revenue) (06/09)

West Virginia Instructs Vendors to Collect Tax on Delivery Charges West Virginia has issued a notice informing vendors that they must collect consumer sales and service tax on the total cost of delivery services, including postage and handling fees, beginning October 1, 2009. The prior policy held that actual reimbursement for freight charges paid on behalf of customers to common carriers were not subject to tax. This new requirement conforms to the Streamline Sales and Use Tax Agreement, to which West Virginia is a member. The agreement defines delivery charges as charges by the seller of personal property or services including, but not limited to, transportation, shipping, postage, handling, crating, and packing. In addition, the Streamline Act does not allow a deduction for delivery charges in its definition of sales price. (Administrative Notice 2009-20, West Virginia State Tax Department, May 11, 2009) (06/09)

Services

Caterer’s Rental of Audiovisual Equipment Taxable in New York The New York Supreme Court, Appellate Division, determined that a catering business should have paid sales tax on its rental of audiovisual equipment. Since the petitioner did not rent the equipment to anyone other than its catering customers, the rerental of the equipment is purely incidental to the primary purpose of the business and not a rerental that would qualify for the resale exemption. (21 Club, Inc. v. Tax Appeals Tribunal, New York Supreme Court, Appellate Division, Third Judicial Department, No. 505992, January 7, 2010) (01/10)

Lighting Design Services Taxable in New York An advisory opinion determined a taxpayer’s lighting design services were subject to New York sales tax. The taxpayer performs these services as a subconsultant to architects and engineers and occasionally, the actual building owner. New York imposes sales tax on the sale of interior decorating and designing services (whether or not in conjunction with the sale of tangible personal property), by anyone, including interior decorators and designers, architects or engineers. However, New York does provide an exclusion from tax for services that consist of the practice of architecture or engineering, if they are performed by a licensed architect or engineer. This exclusion applies to a licensed architects or engineers sale of architectural or engineering services and not their purchases of design services. Therefore, the taxpayer’s sale of interior design services to architects or engineers do not qualify for the resale exclusion because the architects and engineers are not themselves selling a design service subject to sales tax. The incorporation of the taxpayer's design work into the architect's or engineer's own signed and sealed designs has no bearing on the taxability of taxpayer's service. The exclusion also does not apply because the taxpayer is performing design services and none of its employees are licensed architects or engineers. The Department also determined that the taxpayer’s sale of design services to the building owners who hire an architect or engineer separately were also subject to sales tax. The incorporation of the taxpayer's design work into the design performed by an architect or engineer does not affect the taxability of Petitioner's service.

It was also noted that New York City sales tax does not apply to interior decorating and designing services. Therefore, the charges for the taxpayer's services delivered in New York City are subject to New York State sales tax (including the tax imposed on behalf of the Metropolitan Commuter Transportation District), but are not subject to New York City sales tax. Interior decorating and design services are subject to State and local sales taxes outside of New York City. (TSB-A-09(61)S, New York Commissioner of Taxation and Finance, October 15, 2009, released January 2010)
(01/10)

Professional Employer Organization Services Not Taxable in Pennsylvania A Professional Employer Organization’s (PEO) charges for providing certain human resources-related services (PEO Services) to clients through the placement the clients' employees on the payroll of the PEO were found not subject to Pennsylvania sales and use tax. Pennsylvania imposes sales tax on “help supply services,” which are defined as supplying temporary help on the payroll of the supplying entity that is under the supervision of the business to which help is furnished. However, the PEO’s services are performed solely by PEO's own employees, and the PEO, not the clients, supervise the employees providing the PEO Services. In addition, the PEO does not provide help, i.e., personnel, to any of its clients nor does it have a supply of potential employees to recommend to a client. (All Staffing, Inc. v. Pennsylvania, Pennsylvania Commonwealth Court, No. 325 F.R. 2006, January 5, 2010) (01/10)

Entry Fee to Museum Taxable in Florida In a technical assistance advisement, the Florida Department of Revenue determined that payments made by museum patrons to a museum (the taxpayer) for the privilege of entering exhibits are subject to sales and use tax absent any applicable exemptions. In this situation, the exemption allowed for events sponsored by universities does not apply because the exhibits are not the result of exclusive faculty and student talent. In addition, the taxpayer is not allowed the exemption for sponsoring exhibits so long as it assumed 100 percent of the risk of the venture because this exemption was repealed July 1, 2009. (Technical Assistance Advisement, No. 09A-061, Florida Department of Revenue, November 23, 2009) (01/10)

Web-Based Reports Delivered to Customers in New York are Subject to New York Sales Tax A taxpayer sale of a web-based report that allows retailers, shopping centers, and real estate developers to assess the potential success of specific retail brands for a given location was found subject to New York sales tax. The sale of information services, including the services of collecting, compiling or analyzing information and furnishing reports (excluding the furnishing of information which is personal or individual in nature and which is not or may not be substantially incorporated in reports furnished to other persons) is subject to sales tax. Generally, if a common database is used to generate reports, the information sold is taxable even though the reports may be customized to meet the specific needs of customers. In this situation, although the report about a potential tenant for a specific site location may seem to constitute information that is personal or individual in nature, the demographic information delivered by the taxpayer is common data base information that is available to and offered to any other person requesting information about potential tenants (which may include the same tenants that were suggested to the first requestor). Therefore, the charges by the taxpayer to for its reports constitute taxable information services when delivered in New York. For sourcing purposes, it is the point of delivery that determines the imposition of tax. Services are taxed based upon the location to which they are delivered notwithstanding that the service may have been performed elsewhere. The reports delivered to the customer in New York are subject to sales tax regardless of whether the site location that is the subject matter of the report is within or without the state. (TSB-A-09(55)S, New York Commissioner of Taxation and Finance, December 7, 2009) (01/10)

Maine Expands Its Services Tax Base Maine Revenue Services has issued an information bulletin announcing the application of sales and use tax on certain specified services beginning January 1, 2010. Sales and use tax will now apply to certain amusement, entertainment, and recreations services such as admission fees to entertainment venues and performances. In addition, sales and use tax will apply to the following types of services: Installation, repair, and maintenance services; personal property services; and transportation and courier services. For further information, see General Information Bulletin No. 99. (General Information Bulletin No. 99, Maine Revenue Services, September 12, 2009, effective as noted) (10/09)

Charges for Deliveries Made by Common Carrier Taxable in Alabama In an administrative law decision, a taxpayer’s charges for deliveries made by common carrier were determined to be taxable. The Taxpayer charged its customers a delivery fee on the sand, gravel, and similar products that it sells. The common carrier used by the Taxpayer to deliver the goods is also owned by the same individuals. Alabama law provides that a common carrier is deemed to be the agent of the seller. Consequently, if goods are delivered by common carrier, the sale is not closed until the common carrier finishes delivery of the goods to the customer. Therefore, the delivery charges are a part of the sale and subject to Alabama sales and use tax. However, the law further provides that transportation charges paid to a common carrier are not a part of the taxable selling price if billed as a separate item to and paid by the purchaser. The Court ruled that in this case, the common carrier was clearly acting as agent for the Taxpayer when it delivered the goods to the Taxpayer's customers and as such, the delivery fees charged by the Taxpayer constituted a part of the sales subject to tax. The exception noted also does not apply because while the Taxpayer billed the transportation charges to its customers as a separate item, the Taxpayer did not pay the common carrier for hauling the goods. (Alabama Rock, LLC v. Alabama Department of Revenue, Alabama Department of Revenue, Administrative Law Decision, No. S. 09-255, September 11, 2009) (10/09)

Utah Provides Clarification on Sourcing The Utah State Tax Commission has revised its tax publication related to the sourcing of taxable sales in the state. The publication now clarifies that the retail sale of taxable services in Utah, when the seller sells, leases, or rents any tangible personal property (including products transferred electronically), should be sourced to the seller's fixed place of business or the customer's location depending on the seller's preference. If the seller does not have a fixed place of business, (vending machine operators, mobile tool companies, etc.), the seller should source the sale to the location where the sale took place. For sales at special events (fairs, swap meets, etc.), the event location should be used for sourcing purposes. In addition, retail sales of a taxable service where the seller does not sell, lease or rent any tangible personal property (including products transferred electronically), should be sourced to the customer's location. (Publication 25, Utah State Tax Commission, June 2009) (10/09)

Separately Stated Minimum Load Charges Exempt in Virginia A brick manufacturer’s minimum load charges were exempt from Virginia sales and use tax because they were separately-stated. The manufacturer uses a third party trucking company for deliveries to customers. The trucking company charges on a full load basis no matter how much brick is actually carried. Because of the rising cost of shipping and fuel, the trucking company’s charges were usually higher than the amount of freight. To recover the difference, the manufacturer charges a minimum load charge. The minimum load charges are add-on transportation or delivery charges, not handling charges or other taxable services in connection with a sale (Ruling of Commissioner, P.D. 09-76, Virginia Department of Taxation, May 26, 2009). (09/09)

Missouri Discusses Taxability of Personal Training Fees Fees paid directly to personal trainers from customers for training services received are not subject to Missouri sales and use tax. However, fees paid by personal trainers to fitness centers for use of the facility are subject to sales and use tax. Fees that fitness centers charge their members for personal training services are also taxable. Under Missouri law, a fitness center is considered a place of amusement, and any fees paid to it, including for personal training, are subject to tax under Section 144.020.1(2) (Letter Ruling No. LR5806, Missouri Department of Revenue, July 24, 2009). (09/09)

Temporary Help Services Not Taxable in Wisconsin The State of Wisconsin Tax Appeals Commission found that the temporary help services provided by a taxpayer were not subject to Wisconsin sales tax. The taxpayer provides its clients workers with a wide range of skills who work under the direction and control of those clients. The taxpayer pays the wages of the workers it places and also pays for withholding taxes, other payroll expenses and, in some circumstances, certain fringe benefits. In addition, the taxpayer does not contract to provide certain outcomes or results, supply tools or equipment for its workers, or train its employees to provide a particular outcome. The Department of Revenue argued the “look through” position which states that when a worker placed by the taxpayer performs a task which would be taxable if provided as part of a taxable service, then the taxpayers’ gross receipts related to that task are subject to the sales tax. On the other hand, the taxpayer contended that temporary help services are not one of the services enumerated under Wisconsin law and provided several claims in support of this. Additionally, the taxpayer was audited three previous times and was not issued a similar assessment. The Commission found that Department's approach goes against the rule of construction that taxes may only be imposed by clear and express language, with all doubts and ambiguities resolved in favor of the taxpayer. It was also mentioned that "temporary help services" are not listed as a taxable service, and that such services are distinguishable from the services enumerated in the Wisconsin statutes. (Manpower Inc. v. Wisconsin Department of Revenue, Wisconsin Tax Appeals Commission, No. 05-S-046, August 12, 2009 (09/09)

Alabama Rules on Taxability of Paint Used on Government Aircraft The Alabama Department of Revenue has ruled on a taxpayer's claim that paint used on government aircraft was not subject to sales and use tax. The Department of Revenue disagreed with the taxpayer's claim that the paint used on an aircraft was for corrosion protection and, therefore, qualified as a part installed on the aircraft. The definition of "parts and pieces" cited by the taxpayer related to parts used in the repair of an automobile. Another definition in the same regulation stated that painting was a service and that any materials consumed in the performance of the painting service were subject to use tax payable by the party performing the service. The taxpayer was responsible for the use tax based on these definitions. (Helispec LLC v. Alabama Department of Revenue, Alabama Department of Revenue Administrative Law Division, No. S. 08-661, July 24, 2009) (09/09)

Tennessee Court Rules on Exemption for Contract Employees The Tennessee Court of Appeals addressed a taxpayer's challenge to the Department of Revenue on an assessment of sales taxes assessed on technical staffing services. The taxpayer is in the business of providing information technology professionals to clients for use in software programming. The Tennessee Department of Revenue determined under audit that this transaction qualified as the "sale" of taxable computer software. The court found that the software programmers acted as agents of the clients that they were assigned to and had limited contact with the staffing firm after their initial placement. Due to the nature of their relationship with the client, they contractors were subject to the "in-house" exemption which exempts custom software written by employees of the company using the software. (Teksystems, Inc. v. Farr, Tennessee Court of Appeals, May 11, 2009) (07/09)

Utah Sellers Permitted to Elect Location of Certain Service Transactions Utah has passed legislation to amend the Sales and Use Tax Act relating to determining the location of the sale, lease, or rental of a service transaction if the receipt of an order and the receipt of tangible personal property or a product transferred electronically take place within the state. Under the new provisions, a seller may elect to determine the location of a service transaction that is conducted in such a way that is subject to the bill. (H.B. 58, Laws 2009, effective July 1, 2009) (06/09)

Nebraska Explains Taxability of Laundries and Dry Cleaners The Nebraska Department of Revenue has issued an information guide on the taxability of laundry and dry cleaning services. Alteration and repair services are taxable; thus, laundry and dry cleaning service providers who offer these services must hold a Nebraska sales tax permit. The purchase of equipment, products, and supplies used to provide laundry and dry cleaning services are taxable, as well as the retail sales of products, such as dryer sheets and soap. The correct tax rate on all taxable transactions is determined upon where the items are delivered. Cleaning, storage, pressing, and restoration services are not subject to Nebraska sales tax (Information Guide 6-480-2009, Nebraska Sales and Use Tax Guide for Laundries and Dry Cleaners, Nebraska Department of Revenue, March 16, 2009). (06/09)

Florida Taxability of Set Up and Delivery Fees Set up fees charged to a customer by a taxpayer, who sells and rents equipment, were subject to Florida sales and use tax. When a set up fee is included as part of the charge for delivery, the lump sum amount for the delivery and set up is also subject to tax. Delivery charges for rented equipment were also taxable, since the taxpayer’s sales agreement and invoices did not specify whether the customer had an option regarding the delivery. Conversely, delivery charges for sold equipment were not taxable when the sales agreement provided that the stated price was F.O.B. at the taxpayer’s company location and delivery charges were separately stated. (Techincal Assistance Advisement, No. 09A-018, Florida Department of Revenue, April 3, 2009). (06/09)

North Carolina Taxes Were Not Underpaid by Online Travel Companies The U.S. District Court found that online travel companies (“OTCs”) did not underpay North Carolina local occupancy taxes. It was agreed that they are not hotel operators for purposes of the state sales tax. North Carolina sales tax is only applicable to operators of hotels and the local occupancy tax may be assessed only against gross receipts as determined from the standpoint of an operating hotel. Although the local occupancy tax is imposed upon certain amounts (gross receipts), the state sales tax is imposed upon specific classes of retailers, including operators of hotels and similar types of businesses. As such, the U.S. District Court found the scope of the local occupancy tax is expressly limited by the state sales tax. In addition, the local occupancy tax applies only to the hotel’s gross receipts (the room price charged by the hotels themselves). The OTCs are required to collect and remit taxes only on the discount price they charge the participating hotels and not the marked-up price that the consumers pay to the OTCs. Since the online travel companies had not underpaid their local occupancy taxes and there was no legal injury to Pitt County, the county had no standing to file suit, the county lacked jurisdiction over the county’s claim and the county’s suit was dismissed. (Pitt County v. Hotels.Com L.P., United States District Court for the Eastern District of North Carolina, Eastern Division, No. 4:06-CV-30-BO) (06/09)

Simplified Sales Tax

SST Conformity Legislation Introduced in Virginia The Virginia Senate has introduced legislation to conform Virginia laws to the Streamlined Sales and Use Tax Agreement, effective July 1, 2011. Previous sessions have failed to pass this legislation. (S.B. 340, as introduced in the Virginia Senate on January 13, 2010) (01/10)

Nevada Adopts SST Rules The Nevada Tax Commission has adopted regulations that conform to the Streamlined Sales and Use Tax Agreement laws. These regulatory changes included the following:

definitions for drug, prosthetic device, and “prepared food intended for immediate consumption have been amended;

- a revision to explain what types of delivery charges are taxable;
- an amendment to the rule on florist delivery charges
- an exception for the taxability of custom computer software;
- the taxability of prewritten computer software maintenance contracts have been added;
- the revision of rules relating to the tax on leases or rentals of tangible personal property and on the sale of such property for lease or rental; and
- various changes regarding the administration of exemptions from sales and use taxes.

(Reg. Secs. 104-09, 105-09, and 106-09; Nevada Department of Taxation, effective November 25, 2009)
(01/10)

SST Panel Releases Report on 2009 Compliance of Member States The SST Compliance Review and Interpretations Committee (CRIC) has issued a report on its annual recertification review of member states. All states except Indiana and Iowa were found to be in compliance. The SST Governing Board will review the CRIC’s report and recommendations at their December 17 teleconference meeting. (2009 Compliance Review Report, SST Compliance Review and Interpretations Committee, December 4, 2009) (12/09)

Vermont Discusses the Sourcing of Wireless Prepaid Calling Services The Vermont Department of Taxes noted that Vermont sources the sale of wireless prepaid calling sources in accordance with Section 310 of the Streamlined Sales and Use Tax Agreement. Section 314, subsection (C)(3) says that the sourcing for wireless prepaid calling services will follow the sourcing rules of section 310. It also states that the rule provided in Section 310, subsection (A)(5) shall include as an option the location associated with the mobile telephone number. (Streamlined Sales Tax, Vermont Department of Taxes, November 2009) (12/09)

Hawaii SST Non-Conformity - Bill Vetoed Hawaii Governor Linda Lingle has vetoed Senate Bill 1678, which would have conformed Hawaii general excise tax laws with the Streamlined Sales and Use Tax Agreement. Although the Senate voted 23-2 to override the veto, the House of Representatives declined to override the veto; thereby, making the veto stand. The bill would have moved certain tax rates to new chapters (i.e. 0.5% tax on wholesale transactions); added a new chapter on the taxation of imports of property, services, and contracting; and eliminated the tax on businesses owned by disabled persons. Furthermore, the legislation would have provided for destination-based sourcing and amnesty. (S.B. 1678, vetoed by Hawaii Gov. Linda Lingle on July 15, 2009; Telephone Conversation, Hawaii Legislative Reference Bureau, July 16, 2009) (08/09)

Software Industry Interpretation of License Upgrade Rejected by SST Panel During a Compliance Review and Interpretations Committee (CRIC) of the SST Governing Board teleconference, an interpretation request sought by a representative of the software industry was rejected. The Software Finance and Tax Executive Council (SoFTEC) sought a ruling that a software license upgrade (as opposed to an upgrade of the software itself) does not constitute “tangible personal property” or “computer software” where the only thing delivered to the purchaser is an alphanumeric code. Mark Nebergall, on behalf of SoFTEC, argued that providing enhanced license rights is intangible personal property. He differentiated this from a software upgrade that allows the software to cause the computer onto which it is loaded to perform more or different functions. Members of CRIC, and representatives of other states argued that it was contrary to the position currently taken in many states; it hid the true nature of the transaction, and would facilitate tax reduction strategies. Ultimately, the committee members voted unanimously to reject the proposed SoFTEC interpretation. They found that “computer software” as defined in the Agreement would in fact constitute a software license upgrade as described in proposed interpretation. (Teleconference, Compliance Review and Interpretations Committee) (07/09)

Ohio Enacts SST Origin Sourcing Provisions Legislation intended to standardize Ohio sales and use tax law to the Streamlined Sales and Use Tax (SST) Agreement origin sourcing provisions has been signed by Governor Ted Strickland. The SST Governing Board adopted the origin sourcing legislation at its December 2007 meeting; thereby, making all vendors use origin sourcing for all intrastate sales beginning January 1, 2010.
The sourcing amendments included in Ohio legislation, H.B. 429, Laws 2008, adopt destination-based sourcing for interstate sales and, effective January 1, 2010, adopt uniform origin sourcing for intrastate sales. Vendors using origin sourcing must formulate a record-keeping method that records the location where the order is received for calculating sales tax. Furthermore, an order is received at the location where a vendor initially receives all information necessary to determine whether the order can be accepted, and not where the order may be subsequently accepted and/or completed, effective January 1, 2010. On or after July 1, 2009, vendors who are required to convert from destination sourcing to origin sourcing for intrastate sales are allowed a one-time payment to assist in complying with the origin sourcing requirements. The bill applies additional sourcing amendments, such as eliminating, effective January 1, 2010, provisions allowing sellers with less than $500,000 of delivery sales within Ohio to collect the use tax at a rate equal to the sum of the state sales tax and lowest piggyback” tax. In addition, the bill amends tax liabilities for both delivery charges and consumer protection. Ohio will continue to be an associate member of the SST Agreement until July 1, 2009. In order to maintain its membership, Ohio must reapply for membership in the Agreement under the new Agreement criteria. If Ohio is approved, it would be an associate member until full membership is triggered – once five state meet the requirements for sourcing sales on an origin basis under the new amendments, but no sooner than January 1, 2010. (H.B. 429, Laws 2008)
(05/09)

Telecommunications

Wyoming Clarifies Telecommunications Services Sourcing The sourcing rules for ancillary services and prepaid wireless calling services are clarified in a policy statement issued by the Wyoming Department of Revenue. The sourcing rules for these two services were left out of the telecommunications sourcing rules adopted by the legislature in the 2006 Budget Session. Therefore, until these services can be added to the Wyoming Statutes by the legislature, it will be the intent and practice of the Department of Revenue to source these two services in accordance with the Streamlined Sales and Use Tax Agreement, as stated below.

The sale of “Ancillary Services” shall be sourced to the primary place of use by the customer. The statement also defines the phrase “Place of Primary Use.”

The sale of a “Prepaid calling service and prepaid wireless calling service shall be sourced in accordance with the Department's general sourcing rules. In the case of the sale of a prepaid wireless calling service, the sale may be sourced as an option to the location associated with the wireless phone number. (Policy Statement on Sourcing of Specific Telecommunications Services, Wyoming Department of Revenue, November 30, 2009)
(12/09)

Mandatory Charges Related to Telecommunication Services are Taxable in Missouri The Regulatory Cost Recovery Charge, the Federal Universal Service Charge, and the Municipal Gross Receipts Surcharge collected by a telephone company are mandatory charges subject to state and local sales tax. These charges and the tax are included on the billing statement so the telephone company can recover its cost for providing telecommunication services. Since the charges and tax are direct costs of the telephone company and not the customer, they are also included in the basic rate subject to tax. (Letter Ruling No. LR5980, Missouri Department of Revenue, October 30, 2009) (12/09)

South Dakota Amends Provisions Governing Imposition of Tax on Telecommunications Services and Ancillary Services Effective July 1, 2009, South Dakota amends taxation provisions to specifically apply the state’s tax on gross receipts to all intrastate, interstate, and international telecommunications services that originate and terminate in South Dakota, or that originate or terminate in the State if also billed to a South Dakota service address. Additionally, a new privilege tax of 4% will be applied to the use of “ancillary services”, which are defined as services associated with or incidental to the provision of telecommunications services, such as detailed billing, directory assistance, vertical assistance, and voice mail services, which are defined in the bill. (H.B. 101, Laws 2009, effective as noted above)
(06/09)

Use Tax

Connecticut Issues Individual Use Tax Guidance The Connecticut Department of Revenue has issued a new informational publication that answers commonly asked questions about Connecticut use tax. This publication modifies and supersedes Informational Publication 2007(27), Q & A on the Connecticut Individual Use Tax. The new publication discusses various topics including: who must pay use tax, what kinds of goods or services are subject to use tax, exemptions available, how to report use tax liabilities, purchases made for use in the trade or business, purchases made from an out-of-state mail-order company, television shopping channel, or over the Internet, use tax filing requirements for motor vehicles, snowmobiles, vessels, and aircraft, and the penalties and interest for not paying the use tax. (Informational Publication 2009(33), Connecticut Department of Revenue Services, December 29, 2009) (01/10)

Utilities

Washington Amends Rule on Motor Vehicle and Special Fuels Exemption The Washington Department of Revenue has amended its rule on motor vehicle and special fuels exemptions as they relate to public transportation benefit areas (PTBA), county owned ferries, and county ferry districts. The amendment provides exemptions from sales and use tax for motor vehicle fuel or special fuels that are purchased for use in passenger-only ferry vessels. Previously, the exemption for PBTAs was not limited to passenger-only ferries only. (WAC 458-20-126, Washington Department of Revenue, effective January 9, 2010) (12/09)

Maryland Expands Solar Energy Equipment Exemption Equipment that is installed to use solar energy to generate electricity to be used in a structure, supplied to the electric grid, or to provide hot water for use in a structure is exempt from Maryland sales and use tax and property tax (Ch. 574 {S.B. 621}, Laws 2009, effective July 1, 2009). (06/09)

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Do you have questions on the taxability for sales and use taxes of Manufacturing related items? All your questions are answered in Yetter Consulting President Diane Yetter's new book 2009 Multistate Guide to Sales and Use Tax: Manufacturing

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Pennsylvania DOR Issues 2010 Amnesty Guidelines

New York Legislature Passes Amnesty Measure

Massachusetts Authorizes an Amnesty Program

Special Session Bill on Internet Sales Dies in California Assembly

District of Columbia Enacts Second FY 2010 Budget Support Emergency Act

Connecticut Summarizes 2009 Legislative Changes, Including Possible Rate Decrease

Virginia Issues Guidelines for the Tax Amnesty Program

2009 Tax Holidays Chart