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Sales Tax News and Tips |
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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. SearchTo search all items by keyword or jurisdiction, please visit our news search page. New Items for August 2010Administrative/Rate ChangesWashington Adopts Rules on Nexus Standards, Single Factor Receipts Apportionment Effective June 1, 2010, four new rules have been adopted by the Washington Department of Revenue to implement legislative changes regarding business and occupation (B&O) tax nexus and apportionment. The legislation (Ch.23 (S.B. 6143), Laws 2010, 1st Special Session) established new nexus standards and single factor receipts apportionment for apportionable activities. 1) WAC 458-20-19401 (Minimum Nexus Thresholds for Apportionable Activities): Explains that B&O taxes may not be imposed on a business unless that business has substantial nexus with Washington. Also describes the minimum nexus thresholds for the B&O taxation of apportionable activities. 2) WAC 458-20-19402 (Single Factor Receipts Apportionment – Generally): Establishes a new apportionment method for businesses engaged in apportionable activities and that have nexus with Washington. This rule does not apply to the apportionment of income of financial institutions taxable under RCW 82.04290, which is governed by WAC 458-20-19404, nor the receipt of royalty income from granting the right to use intangible property under WAC 458-20-19403. 3) WAC 458-20-19403 (Single Factor Receipts Apportionment – Royalties): Explains how gross income from royalties must be apportioned when the business receives royalty payments from both within and outside the state. 4) WAC 458-20-19404 (Financial Institutions – Income Apportionment): Explains how gross income from engaging in business as a financial institution is apportioned when the financial institution engages in business both within and outside the state. Additional rules and regulations apply. (WAC 458-20-19401, -19402, -19403, and -19404, Washington Department of Revenue, adopted on an emergency basis effective June 2, 2010) (06/10) Veterans’ Organization Exemption Enacted in Maryland As of July 1, 2010, sales to a nationally-organized and recognized organizations of U.S. armed services veterans are exempt from Maryland sales and use tax. The exemption also applies to an auxiliary of the organization or one of its units, if the organization is exempt under IRC Section 501( c)(4) (H.B. 203/S.B. 237, Laws 2010, effective as noted above). (06/10) New York Refund Claim May be Amended after Statute of Limitations Expires A New York State advisory opinion concluded that a taxpayer may amend New York sales tax refund claims, by reducing the amounts of the refunds claimed, after the statute of limitations period has expired. The only difference between the original claims and the amended claims is the reduction in the amount of refund claimed. The original claims and amended claims arise from the same transactions but the amended claims would cover a reduced number of these transactions. The advisory opinion also noted that this conclusion should not be construed as necessarily extending to an amended refund claim that is larger than the original refund claim. (TSB-A-10(21)S, New York Commissioner of Taxation and Finance, May 6, 2010) (06/10) Mississippi Delays Accelerated Tax Payment Threshold Increase An increase in the amount of average monthly tax liability which triggers the requirement for early payment of Mississippi sales and use taxes has been delayed until July 1, 2012 by Mississippi House Bill 1059. Originally slated to being in 2010, a taxpayer having an average monthly sales and/or use tax liability of at least $50,000 (currently $20,000) for the preceding calendar year must make an estimated payment of its sales and/or use tax liability for the month of June no later than June 25 each year. The payment must be equal to at least 75% of the taxpayer’s estimated sales and/or use tax liability for June of the current calendar year or the taxpayer’s sales and/or use tax liability for June of the preceding calendar year. As this change will take effect in July 1, 2012, the first payment using the new threshold amount will be due June 25, 2013. The taxpayer will not need to include taxes due on credit sales for which the taxpayer has not received payment before June 20. Additional rules and regulations apply. (H.B. 1059, Laws 2010, effective May 21, 2010) (06/10) Kansas Requires Sales and Use Electronic Filing As a result of Senate Bill 430, the Kansas Department of Revenue (KDOR) has released a notice announcing that businesses will be required to electronically file returns for retailer’s sales, compensating use, and withholding tax, effective July 1, 2010. To ensure a smooth transition for Kansas businesses the KDOR will continue to provide paper forms as needed through September 30, 2010. After September 30, 2010, KDOR will no longer have printed paper forms available. Kansas Enacts Tax Rate Increase Kansas Governor Mark Parkinson has signed House Bill 2360 enacting the increase to the state’s retailers’ sales and compensating use tax rate from 5.3% to 6.3%, effective July 1, 2010. The Kansas Department of Revenue has recently revised a state and local rate change notice to reflect this rate increase. (H.B. 2360, Laws 2010, effective July 1, 2010; Press Release, Kansas Gov. Mark Parkinson, May 27, 2010; Information Guide No. EDU-96, Kansas Department of Revenue, June 2, 2010) (06/10) Georgia Governor Signs Bill Authorizing 1% Special District Transportation Taxes Georgia Governor Sonny Perdue recently signed legislation creating the Transportation Investment Act of 2010. The legislation allows voters in twelve new special districts to decide on a one-percent, ten year, regional sales tax for all types of transportation improvements. “Regional roundtables” are created in each special tax districts that decide on the projects to be funded. These special district transportation sales and use taxes will not apply to amounts over the first $5,000 of any motor vehicle purchase or lease, transactions to which a sales or use tax exemption applies (however, the tax will apply to sales and uses of food and beverages for off-premises human consumption), the sale or use of any type of fuel used for off-road heavy-duty equipment, off road farm or agricultural equipment, or locomotives, and several other items. The bill generally takes effect on June 2, 2010 (H.B. 277, Laws 2010, effective as noted, Press Release, Georgia Gov. Sonny Perdue, June 2, 2010). (06/10) Kansas Legislation Conforms to SST Agreement changes Senate Bill 430, effective upon publication in the Kansas Register, conforms Kansas provisions with the recent changes to the Streamlined Sales and Use Tax (SST) Agreement. Specifically, the legislation replaces provisions governing direct mail sourcing with and without a direct pay permit with provisions governing advertising and promotional direct mail and other direct mail. S.B. 430 defines advertising and promotional direct mail as printed material that meets the definition of direct mail for which the primary purpose is to attract public attention to a product, person, business or organization, or to attempt to sell, popularize, or secure financial support for a product, person, business, or organization. A purchaser of advertising or promotional direct mail can provide the seller with 1) a direct pay permit; 2) an exemption certificate or other statement approved, authorized, or accepted by the secretary claiming direct mail; or 3) information showing the jurisdiction to which the advertising and promotional direct mail is to be delivered to recipients. Other direct mail has also been updated by S.B. 430 to be defined as any direct mail that is not advertising and promotional direct mail, regardless of whether such advertising and promotional direct mail is included in the same mailing. A purchaser of other direct mail may provide the seller with 1) a direct pay permit, or 2) an exemption certificate, or other statement approved, authorized, or accepted by the secretary claiming direct mail. Treatment of Sales for Resale Modified in Missouri Enacted Missouri legislation clarifies the sales tax treatment for sales for resale. Purchases of tangible personal property or services for resale are exempt if the subsequent sale is any of the following: subject to tax in Missouri or another state, for resale, excluded from tax, subject to tax but exempt, or exempt in another state where the subsequent sale occurs. Two exceptions to the general rule are created for charges for admission or seating accommodations at places of amusement, entertainment, or recreation, and for charges for rooms, meals and drinks. In the case of the two exceptions, operators of such places must remit tax on the gross receipts received by such operators, and subsequent sales will not be subject to tax if they are an arm’s length transaction for fair market value with an unaffiliated entity. The purchase of tangible personal property by a taxpayer will not be considered to be for resale if such property is used or consumed by the taxpayer in providing a service on which tax is not imposed, except for purchases made in fulfillment of any obligation under a defense contract with the U.S. government. (S.B. 928, Laws 2010, effective May 12, 2010). (05/10) Amazon Challenges North Carolina DOR’s Request for Customer Information Amazon.com LLC ("Amazon") has filed a complaint for declaratory relief alleging that its compliance with the North Carolina Department of Revenue’s demand for personally identifiable information about its customers would violate the First Amendment rights of Amazon and its customers. As part of the DOR’s audit of Amazon’s compliance with state sales and use tax laws, Amazon has provided the DOR with each transaction’s order ID number, the city, county, and zip code to which the item was shipped, the total price for the transaction, and the Amazon standard product code for each item, which the DOR can use to immediately find on Amazon’s website a full description of every product purchased by a North Carolina customer. In addition to this information, the DOR is requesting the name and address of every North Carolina customer who purchased or received goods in these transactions, and has stated its plans to serve Amazon an administrative summons and summary contempt proceeding if the information is not supplied. Maine Amends Definition of Sales Price and Exemptions The Governor of Maine has signed a bill that amends the definition of “sales price” to exclude the price received for labor or services used in installing, applying, or repairing the property sold, as long as the price is separately stated. This will not take effect, however, if the 2009 tax reform legislation is rejected by voters at the June 8, 2010 election. If the change is approved, it will apply retroactively beginning January 1, 2009. Additionally, any amount charged for the disposal of used tires is removed from the definition of “sales price” retroactively, effective January 1, 2009, regardless of the outcome of the election. (L.D. 1540 (H.P. 1084), Laws 2010, effective 90 days from the adjournment of the Second Regular Session and applicable as noted) (04/10) Colorado State Law Regarding Tax Refund Appeals Superseded Local Requirements The Colorado Supreme Court has decided that the Executive Director of the Colorado Department of Revenue had jurisdiction to hear a taxpayer’s appeal of two towns’ denial of use tax refund requests. Although the towns’ municipal codes required that the taxpayer submit to both an informal and a formal hearing, the State’s statutes governing use tax refund appeal processes limited the towns to only be able to conduct informal hearings. Further, the taxpayer’s appeal to the Executive Director was proper because the taxpayer waited the required 90-day statutory waiting period after its requests for issuance of formal decisions by the towns were ignored. (MDC Holdings, Inc. v. Town of Parker, Colorado Supreme Court, No. 08SC972, February 8, 2010) (04/10) Nebraska Releases Guide on Illegal Advertising Referring to Sales Tax The Nebraska Department of Revenue has issued an information guide reminding retailers that Nebraska law prohibits retailers from advertising or implying in any way that the sales tax will be assumed or absorbed by the retailer or not added to the selling price. Retailer are required to pass on to their customers the full amount of the sales tax, which must be stated on the customer’s invoice and collected as an item separate and district from the sales price. Examples of prohibited language include “Tax-Free Sale”, “Pay No Sales Tax”, “Purchases Will Be Discounted By the Amount of the Sales Tax”, “Sales Tax Stimulus Sale”, “We Will Pay Your Sales Tax”, and “Tax Credit Sale”. Retailers may contact the Department prior to conducting an advertising campaign to ensure the advertisement does not violate any statuary provisions. (Information Guide 6-493-2010, Unlawful Advertisements Referring To Sales Tax, Nebraska Department of Revenue, March 22, 2010) (04/10) Director/Vice-President Not Responsible for New York Sales Tax Due A taxpayer’s position as a Director and Vice-President of a bankrupt telecommunications company did not make her accountable for the company’s outstanding sales tax liability because she was found to not be a person under a duty to collect and remit unpaid taxes. Despite her position as an officer, she did not have sufficient control or authority over the company’s operations to necessitate this responsibility. This was demonstrated by the taxpayer’s lack of management responsibilities, attendance at board meetings, and inability to sign checks or tax returns on behalf of the company. (Mitchell, New York Division of Tax Appeals, Administrative Law Judge Unit, DTA No. 822072, February 25, 2010) (04/10) Washington Rate Change Rule Amended Effective April 23, 2010, the Washington Department of Revenue has amended a rule that provides specific guidance for the effect of sales tax rate changes for persons performing retail services such as repairing property and construction buildings. The amended rule includes guidance on contracts, sales agreements, and installment sales made prior to the effective date of the rate change. A sales and use tax rate increase applies to the first billing period starting on or after the effective date of the increase, and a sales and use tax decrease applies to bills rendered on or after the effective date of the decrease. Furthermore, the requirement that taxpayers filing returns on a cash basis must make an accounts receivable adjustments at the time of a rate changes has been removed. Additional regulations may apply. (WAC 458-20-235, Washington Department of Revenue, effective April 23, 2010) (04/10) Updated Utah Publication Provides Guidance on Penalty and Interest Waiver The Utah State Tax Commission has revised and reissued and informational publication that provides guidance on the taxes it administers. Included in the publication are the procedures for requesting a waiver of tax penalties or interest and the types of circumstances that may constitute reasonable cause for a waiver. (Publication 17, Utah State Tax Commission, February 2010) (04/10) California Updates Offer in Compromise Publication The California State Board of Equalization (BOE) has updated guidance regarding its Offer in Compromise Program for the taxes and fees it administers. An offer in compromise is a proposal to pay BOE an amount that is less than the full tax or fee liability due. If the taxpayer makes an offer and the BOE accepts it, the taxpayer will no longer be liable for the full amount due and the BOE will release any related tax liens as provided by the terms and conditions relative to the taxpayer’s offer. The Offer in Compromise Program provides a payment alternative for both individuals and businesses that cannot pay their tax or fee liability in full. The updated publication provides information on application, procedure, and evaluation of offers made. (BOE Publication 56, Offer in Compromise, California State Board of Equalization, March 2010) (04/10) New York Posts Delinquent Taxpayers on Department’s Website The New York Department of Taxation and Finance has begun posting the State’s top 250 business and top 250 individual tax debtors. This effort is intended to recover delinquent corporate franchise, personal income, sales and use, and withholding tax liabilities. The lists will be updated monthly (Release, Office of New York Gov. David Paterson, March 5, 2010). (03/10) California Registration Requirements Added to Regulation California legislation enacted in 2009 that imposes registration requirements on qualified purchasers for use tax purposes has been added to Regulation 1699, Permits. Clarification that the provisions refer to seller’s permits has also been added to the regulation. (Regulation 1699, California State Board of Equalization, effective March 17, 2010) (03/10) Oklahoma Posting Delinquent Taxpayers Online As of November 1, 2009, the Oklahoma Tax Commission will maintain a list of all persons who owe more than $25,000 in interest, penalties, fees, costs and taxes on their website. The 100 largest delinquent accounts are featured on a special page. If a taxpayer has entered into a pay plan with the Tax Commission, or is protected by a bankruptcy stay, their name will not appear on the website. Taxpayers will receive written notice that their name is being added to the list at least 90 days prior to being added to the public list. (Oklahoma S.B 318, Enacted June 1, 2009) (03/10) West Virginia Rules Corporate Officer Was Not Liable The West Virginia Office of Tax Appeals found that the former corporate officer of a company was not personally liable for consumers' sales and service tax and assessment tax as he was not a "responsible person" for assessment purposes. The former corporate officer incorporated and acted as the president until giving control of the company to other family members. The court found that he had left the business 10 years prior to the assessment period and it was his son who had signed and filed the incorrect tax returns. As a result of this, the previous owner was found not to be a "responsible person" and could not be imposed with the outstanding tax liability. (Decision Nos. 09-002 & 09-003 W, West Virginia Office of Tax Appeals, February 3, 2010) (03/10) Governor Opposes Tax Increases and Amnesty Program In a recent State of the State address, Mississippi Gov. Haley Barbour expressed that he does not support state tax increases nor tax amnesty programs as solutions to current budget issues. Alternatively, the governor called for a small increase in the Tax Commission budget for collecting unpaid taxes owed to the state (2010 State of the State Address, Mississippi Gov. Haley Barbour, January 18, 2010). (02/10) Wisconsin Discusses Change in Treatment of Drop Shipment Sales Effective October 1, 2009, a manufacturer or other seller may accept an exemption certificate claiming resale from an out-of-state purchaser even when the manufacturer or other seller is directed to ship the product to a consumer in Wisconsin and the out-of-state purchaser does not have a Wisconsin seller’s permit or Wisconsin use tax registration certificate. Prior to October 1, 2009, a manufacturer or other seller could not have accepted an exemption certificate claiming resale from an out-of-state business not holding a Wisconsin seller’s permit or use tax certificate, if the manufacturer or other seller delivered the product to a consumer in Wisconsin. This rule was repealed so Wisconsin's sales and use tax laws would conform to the requirements of the Streamlined Sales and Use Tax Agreement (SSUTA). (Drop Shipment Sales—Change in Wisconsin Sales and Use Tax Treatment, Wisconsin Department of Revenue, January 19, 2010) (02/10) West Virginia Revises Publication Discussing Voluntary Disclosure Procedures In the revised publication, the West Virginia Department of Revenue explains a Voluntary Disclosure Agreement as an opportunity for qualified businesses and individuals to come forward and comply with State tax laws in exchange for a waiver of civil or criminal penalties or prosecution. Additionally, the State may agree to limit the number of returns to be filed, waive penalties, or not audit, assess or demand payment of taxes prior to the look-back period. Although the look-back period is determined by the specifics of the case, it is generally no less than three years. To request an Agreement, the a written, dated request must be made that includes the type of business, activities conducted generally and specifically in West Virginia, types of taxes to be disclosed and those currently being filed, and the relief sought. 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. Tax Holidays2010 Tax Holidays Chart updated regularly:Click here for chart (08/10) Florida Issues FAQs on 2010 Sales Tax Holiday The Florida Department of Revenue has offered clarification on this year’s sales tax holiday, taking place from August 13 through August 15, 2010. New and used books with a selling price of $50 or less qualify for the sales tax exemption. Newspapers, magazines, periodicals and audio books do not qualify for the tax exemption. Other items that qualify for the exemption are clothing, footwear and accessories (with a cap of $50 per item) and certain school supplies (with a cap of $10 per item). In all cases, if the item price exceeds the exemption cap the entire amount is taxable not just the excess. In addition, if an exempt item is bundled and sold with a taxable item, the entire amount is taxable. (2010 Sales Tax Holiday Frequently Asked Questions and Answers, Florida Department of Revenue, August 1, 2010). (08/10) (08/10) Massachusetts Sales Tax Holiday Enacted Massachusetts Gov. Deval Patrick has signed a bill that provides for a sales tax holiday effective August 14 and August 15, 2010. Many non-business retail items with a selling price of $2500 or less are exempt from sales and use tax. Non-qualifying items include motor vehicles, motorboats, meals, telecommunications services, gas, steam, electricity, tobacco products and items with a selling price exceeding $2500. When the price of a single item exceeds $2500, sales or use tax is due on the entire price charged, not on the excess amount over $2500. If multiple items are purchased at the same time, there is no limit on the amount of tax-free purchases an individual can make, so long as each item is less than $2500. Sales tax will not be charged on beer, wine and alcohol purchased for off-premise consumption during the tax holiday. The sales tax exemption applies to items bought for personal use only. Purchases by businesses and purchases by individuals for business use are still subject to tax. (Technical Information Release 10-10, Massachusetts Department of Revenue, August 5, 2010). (08/10) (08/10) Illinois Enacts Back-to-School Sales Tax Holiday Illinois has enacted a sales tax holiday effective August 6 through August 15, 2010 applying to qualifying school supplies, clothing and footwear. The state retailer’s sales and use tax rate will be reduced from 6.25% to 1.25% on qualifying items. The sales tax that retailers will collect will be the current rate minus 5%. Clothing items and footwear must have a retail value of less than $100. There is no ceiling on school supplies. (P.A. 96-1012 (S.B. 3658), Laws 2010, effective July 7, 2010) or (Informational Bulletin FY 2010-17, Illinois State Tax Reporter) (7/10) (07/10) Advertising Utah Clarifies Taxability of Public Relations, Media, And Web Design Services A private letter ruling was issued by the Utah State Tax Commission in response to a taxpayer’s questions concerning sales and use tax treatment of various charges associated with public relations, advertising and marketing. Direct Mail Sellers Informed with Recipient Location Must Collect Utah Tax Effective July 1, 2010, if a seller of advertising and promotional direct mail receives information indicating the locations of the recipients to which the advertising and promotional direct mail is delivered, the seller must collect and remit sales and use tax to the Utah commission in accordance with the information the purchaser provides. (H.B. 349, Laws 2010, effective July 1, 2010) (04/10) AmnestyIllinois Business Tax Amnesty Enacted Illinois has enacted additional legislation that requires the Department of Revenue to establish a use tax amnesty program that will apply to all taxpayers including businesses. The Department will offer taxpayers an amnesty period that will run from October 1, 2010, through November 8, 2010. Interest and penalties will be waived for taxpayers who pay all tax liabilities due for any taxable period ending after June 30, 2002, and prior to July 1, 2009. The Department will not seek civil or criminal prosecution for any taxpayer who is granted amnesty during the eligible tax period. Taxpayers with eligible liabilities who do not participate in the amnesty program will be charged double the amount of interest or penalties that would otherwise apply. (P.A. 96-1435 (S.B. 377), Laws 2010, effective August 16, 2010). (8/10) (08/10) Illinois Individual Tax Amnesty Enacted Illinois has enacted legislation requiring the Department of Revenue to establish a use tax amnesty program for the period January 1, 2011, through October 15, 2011, for individual taxpayers. Under the amnesty program, individuals will not be held liable for interest or penalties or subject to civil or criminal prosecution upon the payment of eligible taxes due for any taxable period ending after June 30, 2004, and before January 1, 2011, subject to certain limitations. New Mexico Amnesty Program Enacted. The New Mexico Taxation and Revenue Department has enacted a temporary tax amnesty program allowing individuals and businesses to avoid paying penalties and interest on any unreported or unassessed taxes due before January 1, 2010. The amnesty period runs from June 7, 2010 to September 30, 2010. Taxpayers who sign an amnesty agreement within that period will not be assessed penalties. In addition, they will not have to pay interest on the tax assessment if the tax due is paid within 180 days. Additional information is available at http://www.taxrelief.newmexico.gov/index.html (Release, New Mexico Taxation and Revenue Department, June 7, 2010). (07/10) Florida Releases Amnesty Details The Florida Department of Revenue has issued detailed information concerning the tax amnesty program running from July 1, 2010 to September 30, 2010. Tax amnesty applies to state and local option tax liabilities that were due before July 1, 2010. Penalties and 50% of interest due will be waived for taxpayers who are reporting a tax liability previously unknown to the Department or who are responding to a Letter of Inquiry, self-audit or self-analysis. Penalties and 25% of interest due will be waived for taxpayers who are responding to a bill, delinquency, audit, or other assessment issued by the Department. Eligible taxes include, but are not limited to, sales and use tax, communications services tax, estate tax, and motor fuel tax. A complete list of eligible and non-eligible taxes, along with participant eligibility requirements can be found on the Florida Department of Revenue’s website (Facts About Florida’s Tax Amnesty, Florida Department of Revenue, June 11, 2010). Florida Amnesty Program Enacted The Florida Department of Revenue will develop and implement an amnesty program for taxpayers subject to various state and local taxes, including, corporate income, sales and use, severance, estate, and intangible personal property taxes. The program will run from July 1, 2010 to September 30, 2010. Eligible taxpayers must file the forms and other documentation specified by the Department of Revenue, including returns, full payment of tax due, interest, and the administrative collection processing fee. The amnesty program is a one-time opportunity for eligible taxpayers to satisfy their tax liabilities and avoid criminal prosecution, penalties, and in some cases, interest due. Any taxpayer which has entered into a settlement of liability for state or local option taxes before July 1, 2010, whether or not full and complete payment of the settlement amount has been made, is not eligible to participate in the amnesty program. However, taxpayers who may be under audit, inquiry, examination, or civil investigation initiated by the department may participate in the program and pay the full amount of the tax due, plus 75 percent of the interest. Taxpayers who make initial contact with the Department pursuant to the amnesty program will pay the full amount of the tax due and 50 percent of the amount of interest due. Additional rules and regulations may apply. (Ch. 2010-166 (H.B. 5801), Laws 2010, effective May 28, 2010) (06/10) Internet Transactions Resolution Program Announced in North Carolina In collaboration with e-commerce retailers, the North Carolina Department of Revenue has developed the Internet Transactions Resolution Program. Participants may resolve their prior tax liability by registering for sales and use tax and agreeing to collect and remit those taxes for four years, beginning September 1, 2010. Any retailer that failed to register for sales and use tax as a result of operating an affiliate program in North Carolina at any time is eligible to participate. The Department will not assess tax, penalties or interest for periods prior to September 1, 2010 for retailers that successfully complete the program. Also, the Department will not obtain consumer information from the retailer to collect a tax liability for the period prior to September 1, 2010. The program begins on April 23, 2010. Eligible retailers must submit an election to participate by June 30, 2010. A resolution agreement must be signed by both the retailer and the Department by August 31, 2010 Internet Transactions Resolution Program, North Carolina Department of Revenue, April 23 , 2010). (06/10) Nevada Approves Tax Amnesty The Governor of Nevada has signed a bill that authorizes a tax amnesty program that will run from July 1, 2010 through October 1, 2010 for taxes, fees, and assessments that are delinquent as of July 1, 2010. All interest and penalties will be waived for taxpayers who file a request for relief with the department and pay the unpaid liability in full by October 1, 2010. Specific rules regarding the amnesty program have not yet been announced. (Ch. 10 (A.B. 6), Laws 2010, Special Session, effective May 1, 2010. (05/10) Maine Announces Amnesty Initiatives Maine has announced two tax amnesty initiatives that will run from September 1, 2010 through November 30, 2010. Under the “short-term initiative” 95% of penalties will be waived on taxes assessed as of December 31, 2009. Under the “five-year initiative”, 95% of penalties and interest will be waived on taxes assessed as of June 30, 2005. Participation in the initiatives is conditioned upon the taxpayer’s agreement to forgo or withdraw a protest, administrative or judicial proceeding, or refund claim relating to liabilities paid under the initiatives. Additionally, to be eligible, a tax payer must properly complete a file a 2010 tax initiative application, pay all tax, interest, and penalties, and not have criminal action or collection by warrant or civil action pending. (L.D. 1671 (H.P. 1183), Laws 2010, effective March 31, 2010) (04/10) Governor Opposes Tax Increases and Amnesty Program In a recent State of the State address, Mississippi Gov. Haley Barbour expressed that he does not support state tax increases nor tax amnesty programs as solutions to current budget issues. Alternatively, the governor called for a small increase in the Tax Commission budget for collecting unpaid taxes owed to the state (2010 State of the State Address, Mississippi Gov. Haley Barbour, January 18, 2010). (02/10) Computers/SoftwareExemption for Computer Data Centers Enacted in Washington Washington passed legislation which allows a sales and use tax exemption for the sales of eligible server equipment to be installed in qualifying computer data centers. To be eligible, a computer data center must be located in a rural county, have at least twenty thousand square feet dedicated to housing working servers, and have commenced construction between March 31, 2010 and July 1, 2011. Eligible server equipment includes original server equipment installed in an eligible computer data center on or after April 1, 2010 as well as replacement server equipment installed before April 1, 2018. Replacement servers only qualify if replacing originally qualified servers. A qualifying business must establish within six years that is has increased employment in a computer data center by a minimum of thirty-five family wage jobs from the date it became operational. Other rules apply. The exemption takes effect on April 1, 2010 and expires on April 1, 2018 (Ch. 1 (S.B. 6789), Laws 2010, 1st Special Session, effective April 1, 2010). (05/10) Nebraska Amends Advantage Act to include Data Centers and Sales of Electronically-Delivered Systems The Nebraska Advantage Act has been amended to include the research, development, and maintenance of a data center as an investment eligible for the sales and use, income, and personal property tax incentives available under the Act. For purposes of the legislation, a data center means a group of computers, supporting equipment, and other organized assembly of hardware or software in one or more interrelated physical locations that is designed to centralize the storage, management, or dissemination of data or information. Further, the sale of electronically-delivered software development systems, product testing services, computer and other system design, or licensing of technology now qualify as eligible investment activities, regardless of where the computer storing the software or data is located, provided certain conditions are met. (L.B. 918, Laws 2010, effective three months after adjournment of the 2010 Legislature) (05/10) Colorado Issues Emergency Regulation Explaining Taxation of Multiple Points of Use Software In response to Colorado’s recent elimination of the exemption for electronically-delivered software, an emergency regulation has been issued that explains, among other things, the taxation of standardized software that is concurrently available for use in multiple jurisdictions. If the purchaser knows at the time of purchase the software is Multiple Point of Use (MPU) Software, he or she should present the seller with a MPU Exemption Certificate. Upon receiving the MPU Exemption Certificate, the seller is relieved of all obligations to collect, pay, or remit tax, and the burden is on the purchaser to apportion, pay and remit the tax and submit a copy of the certificate to the Colorado DOR. Electronically Delivered Products and Remotely Accessed Software, Materials, and Media Taxable in Louisiana In a recent revenue ruling, Louisiana stated that all products delivered electronically to equipment located within the State, including computer software and applications, stored media, and entertainment media and products are considered tangible personal property, and are therefore subject to sales, use, or lease tax. Similarly, remotely accessed software, information materials, and entertainment products or media are taxable transactions when the access requires payment or consideration in any form. This applies whether accessed one-time or as part of a subscription, and regardless of if the item can be only be viewed or if it is downloaded. Further, any consideration paid for electronic receipt or access to data, materials, media, information, or other form of communication that is converted to readable, usable, or viewable form by software or browsers installed on hardware located in Louisiana is also subject to sales, use or lease tax. (Revenue Ruling No. 10-001, Louisiana Department of Revenue, March 23, 2010) (04/10) Receptionist Software Accessed From Web Site Is Taxable in Indiana A taxpayer’s purchase of licenses of software that handled various office management duties commonly performed by a receptionist and accessed through the software vendor’s website was found under audit to be taxable as prewritten software because the software was not custom and is available to anyone who pays for access. Since the taxpayer must interface with the vendor’s servers to access the software, it claimed it had not purchased a tangible asset and had instead merely accessed a website for a fee. Although the taxpayer came to this conclusion by relying on an earlier Letter of Findings, the Department rejected this claim because the facts of the instant case were substantially different from the case discussed in the letter of finding. However, the Department did abate the ten percent negligence penalty because it agreed that the taxpayer had a reasonable cause to believe it was not required to pay sales or use tax when it purchased the licenses. (Letter of Findings No. 09-0656, Indiana Department of Revenue, March 24, 2010) (04/10) North Carolina Provides Guidance Regarding Taxability of Computer Software The North Carolina Department of Revenue has issued a notice discussing enacted legislation concerning the taxability of computer software. Effective January 1 ,2010, the sale at retail and the use, storage, or consumption of computer software that meets the following requirements is exempt from tax: (1) software that is designed to run on an enterprise server operating system; (2) software that is sold to a person who operates a datacenter and is used within the datacenter; (3) software that is sold to a person who provides cable service, telecommunications service, or video programming and is used to provide ancillary service, cable service, Internet access service, telecommunications service, or video programming. Prior to January 1, 2010, computer software delivered electronically or by load and leave was exempt from sales and use tax. Also effective January 1, 2010, computer software or digital property that becomes a component part of other computer software of digital property that is offered for sale or of a service that is offered for sale is exempt. Custom computer software and the portion of prewritten computer software that is modified or enhanced if the modification or enhancement is designed and developed to the specifications of a specific purchaser and the charges for the modification or enhancement are separately stated continue to be exempt. Prewritten computer software or licenses purchased by consumers for personal use are taxable (Important Notice: Computer Software, North Carolina Department of Revenue, February 2010). (04/10) Nebraska Web Site Design and Hosting are Exempt Retail sales of Web site design, development, and hosting by a Web site service provider are not subject to tax in Nebraska unless the Web site design is transferred to the customer on a tangible storage medium. If the Web site design is retained by the service provider for hosting, or electronically transferred to either a third party hosting entity or to the customer, the charges are exempt. Furthermore, Web site hosting by a service provider is not taxable because it is not one of the statutorily enumerated services subject to tax in Nebraska. (Revenue Ruling 01-10-2, Nebraska Department of Revenue, March 1, 2010) (04/10) ConstructionNebraska Construction Contractor Taxability Guide Updated On April 2, 2010, an updated sales and use tax checklist for construction contractors was released by the Nebraska Department of Revenue. The checklist describes the forms and the processes by which option 1, 2 and 3 contractors pay or collect sales tax on building materials and fixtures. The tax status of purchases by contractors of certain services and tangible personal property is also described on the checklist. (Construction Contractor Taxability Check List, Nebraska Department of Revenue, February 2010, released April 2, 2010) (04/10) Virginia Countertop Sales and Installation are Taxable A Virginia taxpayer disputed its classification on an audit as a real property contractor and maintained that it is a retailer of countertops, regardless of whether or not it installs the countertops. According to the Virginia Tax Commissioner, the countertop sold and installed by the taxpayer became real property upon installation, and therefore, the taxpayer was correctly classified as a real property contractor. Its sales and installations of granite and marble countertops were subject to retail sales and use tax. Furthermore, the Commissioner ruled that that the machinery, tools, and supplies used to fabricate the countertops were also subject to tax. Generally, tools and supplies used to install tangible personal property are taxable at the time of purchase, whether the installed property remains tangible or becomes real property after installation. (Ruling of Commissioner, P.D. 10-20, Virginia Department of Taxation, March 26, 2010) (04/10) Credits and IncentivesWashington’s Tax Incentives for the Aluminum Industry Extended The State of Washington has extended the sunset date of business and occupation (B&O) and sales and use tax incentives for the aluminum industry to January 1, 2017. The incentives were originally set to expire on January 1, 2012. The incentives include a reduction in the B&O tax rate for manufacturers of aluminum, a B&O property tax credit equal to property taxes paid on an aluminum smelter, a sales and use tax credit against the state tax on construction materials and personal property incorporated into an aluminum smelter, and for labor and services performed on property and buildings at a smelter, and an exemption for the brokered natural gas use tax on natural or manufactured gas by an aluminum smelter. These incentives will be reviewed by the Joint Legislative Audit and Review Committee in 2015. (Ch. 2 (H.B. 2672), laws 2010, 1st Special Session, effective date contingent on sine die of 1st Special Session or no later than July 13, 2010; House Bull Report, March 2010 (04/10) LeasingHawaii Rental Receipts Not Taxable for Agent According to a Hawaii Letter Ruling, a real property rental agent’s receipts of rental deposits and payments that were forwarded to the real property owners were considered income of the owners, and therefore the agent was not liable for Hawaii general excise tax on such receipts. Furthermore, the amounts the agent withheld from rental receipts in order to pay expenses on behalf of the owners were not income of the agent. Amounts the agent received from the owners in reimbursement for expenses of owners paid by the agent were exempt reimbursements under common law and statute HRS 237-20. The Department of Taxation made no determination of whether an agency relationship existed between the company requesting the ruling and the real property owners. The above determination was solely based on the requestor’s representation that it was an agent for the real property owners. (Letter Ruling No. 2010-06, Hawaii Department of Taxation, March 23, 2010) (04/10) Truck Rental Business’ Payments to Dealers Not Subject to Florida Tax A truck rental business’ commission payments to dealers who rented trucks and equipment to customers were found to be not subject to Florida sales tax because the taxpayer did not have use, access, or control over the dealer’s real property, the dealer had sole discretion as to where to locate the trucks and equipment, the trucks and equipment did not reside on a set amount of space, and the taxpayer did not have a right to enter the dealer’s locations to reclaim property. Further, although the commission payments are made up of a variety of factors (such as safety, maintenance, customer complaints, etc), the payments are essentially tied to the amount of the time the trucks and equipment are rented out by the dealer and not located on the dealer’s property; if the trucks and equipment do not leave the dealer’s location, the dealer will not receive a commission. Because of these factors, the taxpayer was found to not be leasing or being granted a license for the use of the dealer’s real property, and therefore its payments to the dealer are not subject to sales tax. (Technical Assistance Advisement, No. 10A-005, Florida Department of Revenue, February 10, 2010) (04/10) Minnesota Revenue Notice Modified to Consider One-Time Rental of Laundered Items as Linen Supply Service A 1992 Minnesota Revenue Ruling has been modified to state that effective February 22, 2010, the renting and furnishing of laundered items on a one-time basis is considered a linen supply service, instead of a rental of tangible personal property. Since Minnesota Statutes provide an exemption for materials used in providing laundry and dry cleaning services, such as solvents, detergents, plastic bags, and hangers, the materials used or consumed in the provision of the one-time service, including materials used to launder or maintain the items being rented or furnished, are now exempt. (Modification of Revenue Notice No. 92-24, Minnesota Department of Revenue, February 22, 2010) (04/10) Online Travel Companies Not Liable for New Mexico Local Occupancy Tax on Mark-Up The U.S. District Court for the District of New Mexico found that online travel companies were not liable for city-imposed additional New Mexico lodging tax on the difference between the total price of a hotel room collected from customers and the lower discounted room rate that the travel companies negotiated with the hotel operators. Since the travel companies had previously been ruled not to be vendors, and because the relevant city ordinance states that the tax is imposed on gross taxable rent paid to vendors, the city-level tax should only be assessed on the wholesale room rate paid by the travel companies to the hotel operators. Additionally, the city failed to prove that the travel companies were trustees of any unpaid charged taxes, or that they fraudulently concealed information. (City of Gallup, New Mexico v. Hotels.com, L.P., United States District Court, District of New Mexico, No. CV 07-644 JC/RLP, March 1, 2010) (04/10) Manufacturing Incentives for Aircraft Repair Stations, Clean Fuel Vehicles, Certain Manufacturing Facilities Extended in Washington Washington has extended the 0.2904% business and occupation tax rate for Federal Aviation Regulation part 145 certified repair stations from July 1, 2011 to July 1, 2024. The legislation also extends, through December 31, 2015, the sales and use tax exemption for sales of new passenger cars, light duty trucks, and medium duty passenger vehicles, that are exclusively powered by a clean alternative fuel. The exemption is expanded to include sales of qualifying used passenger cars, light duty trucks, and medium duty passenger vehicles that have been modified after their initial purchase to be exclusively powered by a clean alternative fuel. Qualifying used vehicles must be a part of a fleet of at least five vehicles, owned by the same person, have an odometer reading of less than thirty thousand miles, be less than two years past their original date of manufacture, and sold for the first time after modification. Ohio Manufacturer Qualified for Direct Marketing Exemption An Ohio automobile manufacturer’s business activities qualified for the direct marketing exemption and were, therefore, exempt from sales and use tax on items used in the storing, handling, transporting, and mailing of inventory. The manufacturer’s activities qualified as direct marketing because its customers fell within the statutory definition of “consumer” which does not exclude persons who purchase items for resale. It should be noted, however, that the manufacturer’s customer service department used certain items that were deemed taxable because it could be proven that they were used in storing, transporting, mailing, or handling inventory. (Freudenberg NOK General Partnership v. Wilkins, Ohio Board of Tax Appeals, No. 2006-K-1556, April 13, 2010) (05/10) Michigan Steel Manufacturer’s Conveyor System Exempt A Michigan steel manufacturer’s material handling conveyor system qualified for the industrial processing exemption from Michigan use tax. The exemption applied to production material handling because once the transportation of raw materials was initialized by the preliminary movement of the pellets from storage on to the hopper conveyors, the process of moving the pellets to the blast furnaces was continuous and part of the industrial process. During the audit period, the industrial processing statute was ambiguous, but was later amended to clarify that production material handling falls within the definition of industrial processing. Furthermore, a Department of Treasury rule had specifically cited production material handling as an example of an industrial processing activity. (Rouge Steel Company v. Department of Treasury, Michigan Tax Tribunal, No. 315388, November 30, 2009, release April 2010) (05/10) Washington’s Tax Incentives for the Aluminum Industry Extended The State of Washington has extended the sunset date of business and occupation (B&O) and sales and use tax incentives for the aluminum industry to January 1, 2017. The incentives were originally set to expire on January 1, 2012. The incentives include a reduction in the B&O tax rate for manufacturers of aluminum, a B&O property tax credit equal to property taxes paid on an aluminum smelter, a sales and use tax credit against the state tax on construction materials and personal property incorporated into an aluminum smelter, and for labor and services performed on property and buildings at a smelter, and an exemption for the brokered natural gas use tax on natural or manufactured gas by an aluminum smelter. These incentives will be reviewed by the Joint Legislative Audit and Review Committee in 2015. (Ch. 2 (H.B. 2672), laws 2010, 1st Special Session, effective date contingent on sine die of 1st Special Session or no later than July 13, 2010; House Bull Report, March 2010 (04/10) Publisher Not Eligible for Refund of Florida Sales and Use Tax A newspaper publisher and commercial printer failed to demonstrate eligibility for a sales and use tax exemption for industrial machinery and equipment used in expanding manufacturing facilities to increase productive output by at least 10%. To reach the 10% requirement, the publisher erroneously counted custom and circulation inserts separately from newspaper. Since the exemption states that component parts of a newspaper, like the inserts, are not to be treated separately for tax purposes, the publisher was not entitled to a refund of sales and use tax paid. (Times Publishing, Co. v. Department of Revenue, Florida Department of Revenue, DOAH Case Nos. 08-3938 and 08-3939 (DOR 10-01-FOF), February 11, 2010. (04/10) Nebraska Retail Sales of Wood and Corn Used as Fuel are Exempt The Nebraska Department of Revenue has released a revenue ruling confirming that the sale or purchase of wood or corn for use as an energy source are exempt from sales and use taxes. The following conditions must be met to qualify for the exemption: 1) more than 50% of the wood or corn sold or purchased is used or directly consumed in manufacturing, processing, refining, the generation of electricity, irrigation or farming, or by any hospital, and 2) the purchaser gives the seller a completed Nebraska Energy Source Exempt Sale Certificate. Additional regulation and rules may apply. (Revenue Ruling 01-10-1, Nebraska Department of Revenue, February 22, 2010) (04/10) Restaurant Equipment Does Not Qualify for Manufacturing Exemption in Missouri A Missouri restaurant’s purchases of equipment used in the restaurant’s operations were not exempt from Missouri state sales and use tax as manufacturing equipment under Section 144.054, RSMo. To qualify for the manufacturing exemption, equipment must be used or consumed in the manufacturing process. Missouri takes the position that a restaurant does not manufacture products, but is in the business of selling and merchandising food and drinks, therefore not eligible of the manufacturing exemption (Letter Ruling No. LR5609, Missouri Department of Revenue, April 20, 2009) (03/10) Wyoming Manufacturing Exemption Extended The Wyoming sales and use tax exemption for the sale or lease of machinery used directly and predominantly in manufacturing tangible personal property has been extended from its original discontinuance date of December 31, 2010 to December 31, 2011 (Ch. 33 (H.B. 49), Laws 2010, effective March 4, 2010, and as noted). (03/10) MiscellaneousNew Jersey Imposes Admissions Surcharge The New Jersey Division of Taxation authorized municipalities to impose a 5% surcharge of each admission charge to a major place of amusement that is subject to New Jersey sales tax, effective April 1, 2010. The surcharge must be separately stated on any bill, receipt, invoice or similar document provided to the patron. Guidance on the surcharge has been provided by the Division, including definitions, registration and exemption information, and filing and payment requirements. (News Release, New Jersey Division of Taxation, March 30, 2010) (04/10) NexusCalifornia Legislation Would Require Notification to Online Purchasers If enacted, recently passed California legislation would require retailers, who are not required to collect use tax, to provide notification on their retail Internet Web site or catalogue that tax is imposed on the storage, use, or other consumption in California of tangible personal property purchased from the retailer that is not exempt, and is required to be paid by the purchaser. Amendments to the bill over the last few months have eliminated but then returned the rebuttable presumption that any retailer that is part of a controlled group of corporations, and that controlled group of corporations has a component member that is a retailer engaged in business in California, is presumed to be a retailer engaged in business in the State. The original bill included a provision that requires every person who is not registered with the California Board of Equalization (BOE), who sells tangible personal property, the storage, use, or other consumption of which is subject to use tax, to file a use tax report with the BOE. However, at this time, this provision has been eliminated. If passed, this bill would be effective January 1, 2011. (A.B. 2078, passed by the California Assembly on May 6, 2010, Amended June 16, 2010 and June 24, 2010). (08/10) (08/10) Colorado Nexus Presumption Bill Enacted Governor Bill Ritter signed a bill, effective March 1, 2010, that imposes a sales tax collection responsibility on out-of-state remote retailers that do not collect Colorado sales tax. The nexus presumption bill applies to any retailer that is part of a corporate group that includes another retailer with a physical presence in Colorado. As a result, the out-of-state retailer is presumed to effectively be doing business in Colorado. Out-of-state retailers can challenge the presumption by proving that the Colorado retailer (who is part of the same corporate group) did not solicit on their behalf. Affected retailers must notify Colorado purchasers that sales or use tax is due on their purchases and that a sales or use tax return must be filed. Failure to provide notification could result in a penalty of $5 for each failure. The retailer must also notify Colorado customers by January 31 of the year following purchases that sales or use tax is due. The bill authorizes the Colorado Department of Revenue to require out-of-state retailers to submit annual statements summarizing purchases made by Colorado residents. EMERGENCY REGULATION 39-21-112.3.5 was also promulgated by the Department of Revenue further detailing the requirements and the language required to be included on each invoice. (H.B. 1193, Laws 2010, EMERGENCY REGULATION 39-21-112.3.5 ) (08/10) Oklahoma Passes Nexus Presumption Bill The governor of Oklahoma has signed HB 2359 effective June 9, 2010 which amends the definition of retailer to include remote retailers who are owned by a retailer maintaining a place of business in Oklahoma if the local retailers hols a substantial interest (greater than 10% ownership) and the local retailer sells the same or substantially similar line of products as the remote retailer using the same or substantially similar name. Other specific provisions apply that could establish nexus and therefore a collection responsibility on the remote seller. Additionally, the bill requires remote retailers that are not required to collect tax in Oklahoma to provide notice to customers that use tax applies to the purchases. Retailers are prohibited from advertising that sales tax does not apply to the purchases. The Oklahoma Tax Commission is working on a draft of an emergency rule that would dictate how certain internet and catalog retailers give notice of use tax requirement to customers in Oklahoma. If the retailer does not provide an invoice, a confirmation e-mail containing the notice would be considered sufficient. Online auction websites would also be affected by the proposed rule. The rule’s requirements would not apply to retailers with total Oklahoma gross sales of less than $100,000 in the prior year and the reasonable expectation of less than $100,000 in sales in the current year. The requirements outlined in the proposed rule would not take effect until an emergency or permanent administrative rule is passed. (HB 2359, Press Release, Oklahoma Tax Commission, June 30, 2010) (08/10) Amazon Challenges North Carolina DOR’s Request for Customer Information Amazon.com LLC ("Amazon") has filed a complaint for declaratory relief alleging that its compliance with the North Carolina Department of Revenue’s demand for personally identifiable information about its customers would violate the First Amendment rights of Amazon and its customers. As part of the DOR’s audit of Amazon’s compliance with state sales and use tax laws, Amazon has provided the DOR with each transaction’s order ID number, the city, county, and zip code to which the item was shipped, the total price for the transaction, and the Amazon standard product code for each item, which the DOR can use to immediately find on Amazon’s website a full description of every product purchased by a North Carolina customer. In addition to this information, the DOR is requesting the name and address of every North Carolina customer who purchased or received goods in these transactions, and has stated its plans to serve Amazon an administrative summons and summary contempt proceeding if the information is not supplied. Washington Insurance Company Created Nexus for Affiliated Mail Order Pharmacy The Washington Department of Revenue has determined that business and occupation tax is due on an out-of-state mail order pharmacy’s sales to an in-state affiliated insurance company’s benefit plan subscribers. The insurance company’s and/or its representatives distributed brochures containing information about the benefits of ordering from the pharmacy to subscribers, contained descriptive information and a link to the pharmacy’s’ website on its website, and enabled subscribers to order drugs from the pharmacy from within its secure site. Although the pharmacy claimed that the insurance company’s actions were done solely to establish and maintain a market for its health plans and that it is not performing services on behalf of the pharmacy at the pharmacy’s direction and control, as evidenced by a written agreement between the two corporations, the court determined that an agency or representative relationship was created based on the practice of the parties. Since the in-state affiliate acted as an agent or representative engaged in establishing or maintaining a market in Washington for the out-of-state pharmacy, the pharmacy was found to have substantial nexus with the State. (Tax Determination No. 08-015ER, Washington Department of Revenue, March 25, 2010) (04/10) Persons Subcontracting With the State of Illinois Must Collect and Remit Illinois Use Tax Effective July 1, 2010, all persons entering into a contract or subcontract with an Illinois State Agency, and all affiliates of the person, must collect and remit Illinois use tax on all sales into the state of tangible personal property. This requirement applies even if the person or affiliate does not meet the definition of “retailer maintaining a place of business within the state”. Prior to July 1, 2010, this rule only applied to contracts, not subcontracts. (S.B. 51 and S.B. 1732, Laws 2009, effective as noted above). (03/10) RetailFood Sold at New York Sports Stadium by Group of Related Restaurant Entities Taxable In a recent Advisory Opinion, the New York Commissioner of Taxation and Finance determined that unheated food sold by a corporation that provides food products to sports facilities and other large-scale entertainment venues to an unrelated Concessioner are taxable because entities related to the producer and are part of the same Restaurant Group provide catering and food management services related to the food on behalf of the producer. New York Tax Law imposes sales tax on sales of food or drink where the vendor serves or assists in serving, cooks, heats, or provides other services with relation to the food or drink. Although the food producer did not itself provide services in the Stadium beyond delivery, its related entity’s employees did provide such services and, therefore, the charges for the prepared food provided to the Concessioner are taxable. (TSB-A-10(12)S, New York Commissioner of Taxation and Finance, April 5, 2010) (05/10) Treatment of Sales for Resale Modified in Missouri Enacted Missouri legislation clarifies the sales tax treatment for sales for resale. Purchases of tangible personal property or services for resale are exempt if the subsequent sale is any of the following: subject to tax in Missouri or another state, for resale, excluded from tax, subject to tax but exempt, or exempt in another state where the subsequent sale occurs. Two exceptions to the general rule are created for charges for admission or seating accommodations at places of amusement, entertainment, or recreation, and for charges for rooms, meals and drinks. In the case of the two exceptions, operators of such places must remit tax on the gross receipts received by such operators, and subsequent sales will not be subject to tax if they are an arm’s length transaction for fair market value with an unaffiliated entity. The purchase of tangible personal property by a taxpayer will not be considered to be for resale if such property is used or consumed by the taxpayer in providing a service on which tax is not imposed, except for purchases made in fulfillment of any obligation under a defense contract with the U.S. government. (S.B. 928, Laws 2010, effective May 12, 2010). (05/10) Aircraft Subject to Florida Use Tax An aircraft that was purchased and repaired in California more than six months to its use in Florida will be subject to Florida use tax because the taxpayer purchased the aircraft with the intent to base and use the aircraft in Florida. The taxpayer stated that the aircraft should be exempt from use tax because Florida law provides that an aircraft purchased outside the state and used in another state for six months or more prior to the time it is brought into Florida is presumed to be exempt as purchased for use outside of Florida. However, the taxpayer had indicated that the aircraft was intended to be used in Florida at the time of purchase, including that the aircraft would be flown to and be based in Florida following the repair and restoration work to render the aircraft serviceable. Any presumption that the aircraft was purchased for use outside Florida was rebutted with the taxpayer’s stated intent to base the aircraft in Florida following the repair and restoration work. (Technical Assistance Advisement, No. 10A-006, Florida Department of Revenue, February 10, 2010, released May 2010) Wisconsin Supreme Court Upholds Symphony Orchestra Tickets as Taxable The Wisconsin Supreme Court has upheld the Court of Appeals’ determination that sales of tickets to classical, pop, and youth concerts are taxable because they are considered to be primarily entertainment in nature, not educational. Although the court recognized that learning was a component of attending the concerts and that the orchestra’s mission statement and certain activities were directed at educating the public in order to develop a greater appreciation for music, the court ultimately determined that most attendees viewed the event as a form of entertainment, which was highlighted in the orchestra’s promotional materials. Further, the orchestra’s optional pre and post-concert lectures and written materials about the music performed at certain concerts did not transform the performances into primarily educational events. (Milwaukee Symphony Orchestra, Inc. v. Wisconsin Department of Revenue, Wisconsin Supreme Court, No. 2008AP1684, May 5, 2010) (05/10) Food Products Sold From Farmers’ Markets Exempt in Mississippi Effective April 1, 2010, food products that are grown, made or processed in Mississippi and sold from farmers’ markets that have been certified by the Mississippi Department of Agriculture and Commerce are exempt from Mississippi sales and use tax (H.B. 1566, Laws 2010, effective as noted). (05/10) Signs Sold, but Not Installed, are Taxable in Florida When a taxpayer sells a sign for delivery or customer pick-up, but is not responsible for the installation of the sign, the sale constitutes a taxable sale of tangible personal property. The taxpayer should collect tax or an exemption certificate from the customer. The taxpayer does not owe use tax on the fabricated cost of the sign because materials and labor are considered to be purchased for incorporation into the sign for resale. When the taxpayer is responsible for the installation of the sign, either through employees or subcontractors, the taxpayer is the ultimate consumer of the materials incorporated into the sign and only owes use tax on the fabricated cost of the sign. In this situation, sales tax should not be charged to or collected from the customer. (Technical Assistance Advisement, No. 10A-001, Florida Department of Revenue, February 23, 2010) (05/10) Nebraska Releases Guide on Illegal Advertising Referring to Sales Tax The Nebraska Department of Revenue has issued an information guide reminding retailers that Nebraska law prohibits retailers from advertising or implying in any way that the sales tax will be assumed or absorbed by the retailer or not added to the selling price. Retailer are required to pass on to their customers the full amount of the sales tax, which must be stated on the customer’s invoice and collected as an item separate and district from the sales price. Examples of prohibited language include “Tax-Free Sale”, “Pay No Sales Tax”, “Purchases Will Be Discounted By the Amount of the Sales Tax”, “Sales Tax Stimulus Sale”, “We Will Pay Your Sales Tax”, and “Tax Credit Sale”. Retailers may contact the Department prior to conducting an advertising campaign to ensure the advertisement does not violate any statuary provisions. (Information Guide 6-493-2010, Unlawful Advertisements Referring To Sales Tax, Nebraska Department of Revenue, March 22, 2010) (04/10) Wisconsin Discusses Change in Treatment of Drop Shipment Sales Effective October 1, 2009, a manufacturer or other seller may accept an exemption certificate claiming resale from an out-of-state purchaser even when the manufacturer or other seller is directed to ship the product to a consumer in Wisconsin and the out-of-state purchaser does not have a Wisconsin seller’s permit or Wisconsin use tax registration certificate. Prior to October 1, 2009, a manufacturer or other seller could not have accepted an exemption certificate claiming resale from an out-of-state business not holding a Wisconsin seller’s permit or use tax certificate, if the manufacturer or other seller delivered the product to a consumer in Wisconsin. This rule was repealed so Wisconsin's sales and use tax laws would conform to the requirements of the Streamlined Sales and Use Tax Agreement (SSUTA). (Drop Shipment Sales—Change in Wisconsin Sales and Use Tax Treatment, Wisconsin Department of Revenue, January 19, 2010) (02/10) 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. Services New York Exempts Litigation Support Services The New York Department of Taxation and Finance has issued an Advisory Opinion concluding that a company’s litigation support service is not subject to New York sales tax imposed on information services. Although it is considered an information service because it includes analyzing, compiling, and organizing customer information, the service does more that merely recast or reformat the customer’s information in that it adds to intelligence contained in the original documents. The company’s litigation support services are considered to be personal and individual in nature, and therefore not subject to New York State and local sales tax on information services. Furthermore, the taxpayer organizes and analyzes the customer’s own documents and does not provide the original documents, or the analysis, compilation, or organization, to any party other than the customer. The fact that the customer, in the context of a litigation discovery process, may provide the original documents to a third party does not change this result, because neither the taxpayer nor the customer is providing the information furnished by the taxpayer to others or incorporating the same into reports furnished to others. CDs Provided with Non-Taxable Missouri Services Exempt A printing company’s charges for scanning and imaging customer documents onto CDs for distribution to its customers were services not subject to Missouri sales tax. The true object of the transaction was not to obtain the CDs, but to obtain access to the customer’s own documents in a paperless format. The CD was merely a medium of transmission for the intangible product and incidental to a nontaxable service. Furthermore, the taxpayer’s charges per CD were not separated from the cost of the labor used in processing the scanned information and replicating the CDs. The production of the CDs was deemed a service rather than a taxable sale at retail. Since there was no sale of tangible personal property at retail, the taxpayer was not liable for sales tax on it production and distribution of the CDs. (Western Blue Print Co. v. Director of Revenue, Missouri Supreme Court, No. SC90172, April 20, 2010) (06/10) Indiana Use Tax Due on Waste Hauling Trucks Because Public Transportation Exemption Requirements Not Met An Indiana corporation engaged in waste hauling was found liable for use tax on the purchase and repair of trucks used to haul waste. The taxpayer argued that these trucks qualified for the public transportation exemption because it contracts with a broker who acts as the taxpayer’s agent in securing waste from customers for transport to landfills, and therefore does not own the waste and is transporting the property of another. Although it is undisputed that the language of the agreement between the taxpayer and the broker limits the agency relationship to the transportation of the material and not the material itself, the agreement does not contain language that suggests that the broker or the customers own the waste. The precedent set in other cases dictates that absent this specific language, the waste hauler is presumed to be the owner of the waste at the moment it is picked up. Since the taxpayer was found to own the waste, it is not transporting the personal property of another and therefore does not qualify for the exemption. (Letter of Findings No. 09-0591, Indiana Department of Revenue, April 29, 2010) (06/10) Indiana Car Dealerships Sales of Optional Warranty Contract and Purchases of Credit Reports Taxable The Indiana Department of Revenue found that a dealership’s sale of optional warranty contracts were subject to tax because the contracts were billed as a single price for the service, labor, and parts provided under the contract. Since the dealership did not separate the cost of the service from the cost of the cost of the tires and wheels that would be provided in the event of a repair, the Department’s decision to impose sales tax on the warranties is reasonable and within its statutory authority. 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. Simplified Sales TaxMainstreet Fairness Act introduced in Federal Congress . On July 1, 2010, HR 5660 was introduced by Rep DeLaHunt from Massachusetts which would impose a sales and use tax collection responsibility on remote sales made into states that are full members of the Streamlined Sales Tax Agreement (SSUTA). The bill references the SSUTA and incorporates many of the key provisions. It includes a provision for vendor compensation and a small business exception but does not provide any specifics in regards to these provisions. It also includes in its definition of state, Puerto Rico and the US Territories. It did not specifically address how digital goods should be taxed but did include a provision that each Member States should work with other Member States to prevent double taxation in situations where a foreign country has imposed a transaction tax on a digital good or service. The legislation is supported by the National Retail Federation, Retail Industry Leaders of America, International Council of Shopping Centers, Real Estate Investment Trusts Association, National Governors Association, U.S. Conference of Mayors, the National Conference of State Legislatures, National Association of Counties, and National League of Cities, and over 50 state-level retail associations and chambers of commerce. For a copy of the bill visit http://delahunt.house.gov/mainstreetfairnessact.pdf (H.R. 5660, July 1, 2010) (08/10) (08/10) Kansas Legislation Conforms to SST Agreement changes Senate Bill 430, effective upon publication in the Kansas Register, conforms Kansas provisions with the recent changes to the Streamlined Sales and Use Tax (SST) Agreement. Specifically, the legislation replaces provisions governing direct mail sourcing with and without a direct pay permit with provisions governing advertising and promotional direct mail and other direct mail. S.B. 430 defines advertising and promotional direct mail as printed material that meets the definition of direct mail for which the primary purpose is to attract public attention to a product, person, business or organization, or to attempt to sell, popularize, or secure financial support for a product, person, business, or organization. A purchaser of advertising or promotional direct mail can provide the seller with 1) a direct pay permit; 2) an exemption certificate or other statement approved, authorized, or accepted by the secretary claiming direct mail; or 3) information showing the jurisdiction to which the advertising and promotional direct mail is to be delivered to recipients. Other direct mail has also been updated by S.B. 430 to be defined as any direct mail that is not advertising and promotional direct mail, regardless of whether such advertising and promotional direct mail is included in the same mailing. A purchaser of other direct mail may provide the seller with 1) a direct pay permit, or 2) an exemption certificate, or other statement approved, authorized, or accepted by the secretary claiming direct mail. Washington Commercial Printer Must Follow Destination-Based Sourcing As Washington follows the Streamlined Sales and Use Tax Agreement’s destination-based sourcing rules, a commercial printer that performs bid distribution and other printing jobs was required to source its print jobs and sales of paper and supplies to the location where the customer takes receipt of those items. The taxpayer did not qualify for the direct mail sourcing rule because it delivers its own products and does not deliver its printed material by U.S. mail or other delivery service to a mass audience. (Tax Determination No. 09-0203, Washington Department of Revenue, July 31, 2009, released April 30, 2010) (05/10) Utah Legislation Amended for SST Agreement Conformity Utah legislation, H.B. 50, Laws 2010, has amended the Sales and Use Tax Act to conform with recent changes to the Streamlined Sales and Use Tax (SST) Agreement. Amended provisions include sourcing of transactions involving a prepaid wireless calling service, the definition of bundled transaction, and the tax rate at which sales and use taxes are collected. SST Panel Interprets Souring Rule of Short-Term Rentals In December 2009, a release was issued by Ohio, an SST associate member state, announcing that the state had changed its laws to benefit from a Streamlined Sales Tax (SST) Agreement amendment that retains origin sourcing for most sales. However, the release stated that leases of tangible personal property generally must be sourced on a destination basis. 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: TelecommunicationsIndiana Updates Telecommunication Bulletin – Ancillary Services Exempt An updated bulletin on telecommunications services, released by the Indiana Department of Revenue, highlights that ancillary services do not qualify as telecommunications services and are therefore not taxable. Pursuant to Indiana legislation, the definition of ancillary services means services that are associated with or incidental to the provision of telecommunication services, including detailed telecommunication billing, directory assistance, vertical services, and voice mail services. Furthermore, a vertical service is defined under the Streamlined Sales and Use Tax Agreement to mean an ancillary service that is offered in connection with one or more telecommunication services, which offers advanced calling features that allow customer to identify callers and to manage multiple calls and call connections, including conference bridging services. Call waiting, caller ID, call forwarding, distinct ringing, and voice mail services all qualify as vertical services and are therefore exempt. (Informational Bulletin #51T, April 8, 2010) (04/10) Use Tax Aircraft Subject to Florida Use Tax An aircraft that was purchased and repaired in California more than six months to its use in Florida will be subject to Florida use tax because the taxpayer purchased the aircraft with the intent to base and use the aircraft in Florida. The taxpayer stated that the aircraft should be exempt from use tax because Florida law provides that an aircraft purchased outside the state and used in another state for six months or more prior to the time it is brought into Florida is presumed to be exempt as purchased for use outside of Florida. However, the taxpayer had indicated that the aircraft was intended to be used in Florida at the time of purchase, including that the aircraft would be flown to and be based in Florida following the repair and restoration work to render the aircraft serviceable. Any presumption that the aircraft was purchased for use outside Florida was rebutted with the taxpayer’s stated intent to base the aircraft in Florida following the repair and restoration work. (Technical Assistance Advisement, No. 10A-006, Florida Department of Revenue, February 10, 2010, released May 2010) |
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