Agile Consulting Group

Vermont Sales Tax Exemption for Medicated Wound Care Products and Wound Closure Devices

Mon, 16 Mar 2026 18:30:16 GMT

Vermont provides two distinct sales and use tax exemptions that apply to products purchased by healthcare providers: one for prescription drugs under 32 V.S.A. § 9741(2) and one for prosthetic devices under the same statute. The prescription drug exemption covers compounds, substances, or preparations intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease, while the prosthetic device exemption applies to replacement, corrective, or supportive devices worn on or in the body to artificially replace a missing portion of the body, prevent or correct a physical deformity or malfunction, or support a weak or deformed portion of the body ( 32 V.S.A. § 9701(29) and § 9701(35) ).

Agile Consulting Group's Recent Guidance from the Vermont Department of Taxes

The pioneers at Agile Consulting Group submitted a comprehensive tax guidance request to the Vermont Department of Taxes to confirm the exempt status of medicated wound care products and wound closure devices under Vermont's drug and prosthetic device exemptions. Agile's guidance request argued that certain wound care products qualify for exemption either as prescription drugs (because they are infused or impregnated with pharmaceutical compounds and dispensed only pursuant to prescription) or as prosthetic devices (because they are worn on or in the body to prevent or correct physical malfunctions). The exemption applies when these products are sold to licensed healthcare facilities, specifically hospitals, ambulatory surgical centers, long-term acute care facilities, and skilled nursing facilities, and where the products are dispensed to patients under the supervision of licensed practitioners. The Department of Taxes confirmed that all of the following products qualify for a sales and use tax exemption.

Medicated Wound Care Products Qualifying as Prescription Drugs

The following types of medicated wound care products qualify for Vermont's prescription drug exemption under 32 V.S.A. § 9741(2) because they contain pharmaceutical compounds intended to treat disease by healing wounds and are legally dispensed only pursuant to prescription:

Antimicrobial Silver Dressings
Antimicrobial Honey Dressings
PHMB-Impregnated Dressings

Analgesic Dressings
Enzymatic Debriding Agents
Growth Factor Dressings and Gels

Charcoal Dressings
Collagen-Based Dressings
Skin Substitutes

Wound Closure Products Qualifying as Prosthetic Devices

The following wound closure products qualify for Vermont's prosthetic device exemption under 32 V.S.A. § 9741(2) because they are corrective and supportive devices worn on or in the body to correct physical malfunctions by restoring skin continuity, preventing infection, and ensuring proper wound healing:

Sutures
Skin Staples
Pre-Loaded Skin Staplers
Skin Closure Devices
Skin Closure Strips

How to Claim the Exemption

Healthcare facilities purchasing qualifying medicated wound care products or wound closure devices should provide their suppliers with a completed Vermont Purchaser's Certificate of Exemption indicating the purchase qualifies under the prescription drug exemption or the prosthetic device exemption ( 32 V.S.A. § 9741(2) ). The certificate should reference the applicable statutory provision and specify that the products will be dispensed to patients in a licensed healthcare facility.

How to Recover Vermont Taxes Previously Paid to Vendors

Vermont allows taxpayers to claim refunds for sales tax paid in error on qualifying exempt purchases. Healthcare facilities may file a refund claim for purchases made within three years from the date the tax was paid or the return was due, whichever is later. To support the refund claim, facilities should provide: (1) original invoices showing the sales tax paid; (2) documentation demonstrating that the purchased products meet the statutory definition of either prescription drugs or prosthetic devices (such as FDA labeling showing "RX Only" designation or product specifications confirming the items are worn on or in the body to correct physical malfunctions); (3) a completed Application for Refund of Vermont Sales and Use Tax Form REF-620 ; and (4) attestation that the products were dispensed to patients within the healthcare facility pursuant to prescription or medical order. Facilities should submit refund claims to the Vermont Department of Taxes along with supporting documentation.

The consultants at Agile Consulting Group have experience in recovering overpaid sales taxes from the Vermont Department of Taxes and can assist any Vermont healthcare provider with this cumbersome process.

Reach Out to Us with Questions

If you have any questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or need assistance with a sales tax refund review or any other sales and use tax issue, please contact a member of Agile Consulting Group's sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

Idaho Sales Tax Exemption for Wound Care Products

Tue, 10 Mar 2026 16:46:40 GMT

Idaho provides a sales and use tax exemption for certain wound care products purchased by healthcare facilities when these items qualify either as prescription drugs or prosthetic devices. Idaho Code Ann. § 63-3622N(a)(1) exempts drugs purchased under a prescription or work order of a practitioner, while Idaho Code Ann. § 63-3622N(a)(5) exempts prosthetic devices — defined in Idaho Code Ann. § 63-3622N(e) as devices that replace a missing part or function of the human body — when purchased under a prescription or work order. Medicated wound care dressings infused with antimicrobial agents, analgesics, or growth factors qualify as prescription drugs because they are intended for the treatment of disease and labeled "Rx Only." Wound closure products and non-medicated wound care items qualify as prosthetic devices because they replace the skin's protective barrier and structural functions lost due to injury or surgical incision.

Agile Consulting Group's Recent Guidance from the Idaho State Tax Commission

The pioneers at Agile Consulting Group submitted a comprehensive tax guidance request to the Idaho State Tax Commission in October 2025 seeking confirmation that medicated wound care dressings, wound closure products, and non-medicated wound care items qualify for Idaho's sales tax exemptions when purchased by hospitals, ambulatory surgical facilities, long-term acute care facilities, and skilled nursing facilities. The request argued that medicated dressings meet Idaho's definition of a "drug" under Idaho Code Ann. § 54-1704(15) because they are intended for the treatment or prevention of disease and affect the structure or function of the body, and that wound closure products and non-medicated items meet the definition of a "prosthetic device" because they replace the skin's missing barrier and structural functions during the healing process. The request emphasized that all qualifying items are administered or distributed by practitioners and prescribed via written or electronic orders in patients' charts. The State Tax Commission confirmed that all of the following products qualify for a sales and use tax exemption.

Medicated Wound Care Dressings Qualifying as Prescription Drugs

Medicated wound care dressings are infused or impregnated with therapeutic agents that treat wounds by killing pathogens, reducing inflammation, promoting tissue regeneration, or managing pain. These products meet Idaho's definition of a "drug" because they contain substances intended for the treatment or prevention of disease and are labeled "Rx Only" under federal law. Qualifying medicated dressings include:

Antimicrobial silver dressings
Antimicrobial honey dressings
PHMB-impregnated dressings
Analgesic dressings
Enzymatic debriding agents

Growth factor dressings and gels
Charcoal dressings
Collagen-based dressings
Skin substitutes

Wound Closure Products Qualifying as Prosthetic Devices

Wound closure products mechanically close the edges of surgical incisions or traumatic wounds to restore the skin's protective barrier and structural integrity. These items replace the missing part or function of the skin by bridging wound gaps, preventing infection and fluid loss, and facilitating proper tissue alignment during healing.

Qualifying wound closure products include:

Sutures
Skin staples
Zip 16 Surgical Skin Closure Device
Skin closure strips

Non-Medicated Wound Care Products Qualifying as Prosthetic Devices

Non-medicated dressings, bandages, and gauze replace the skin's function as a protective barrier during wound treatment. These products prevent infection, absorb exudate, maintain optimal moisture levels, facilitate tissue regeneration, and prevent complications such as contractures, scarring, or tissue necrosis.

Qualifying non-medicated wound care products include:

Wound dressings
Bandages
Gauze

How to Claim the Exemption

Healthcare facilities purchasing qualifying wound care products in Idaho should provide their suppliers with a completed Idaho Sales Tax Resale or Exemption Certificate ( Form ST-101 ). The certificate should indicate that the products are being purchased for administration or distribution by a practitioner under a prescription or work order. Facilities should retain documentation demonstrating that the products meet the statutory definitions of "drug" or "prosthetic device", including product labeling showing "Rx Only" designations, product inserts describing therapeutic uses, and references to national databases (such as the National Library of Medicine's GUDID) confirming prescription requirements.

How to Recover Idaho Taxes Previously Paid to Vendors

Healthcare facilities that paid Idaho sales or use tax on qualifying wound care products may file a refund claim using Idaho State Tax Commission Form TCR (Sales Tax Refund Claim) to recover these overpaid taxes. Idaho allows refunds for purchases made within three years from the date the tax was paid to the state.

Facilities must provide detailed documentation with their refund claim, including:

A detailed exemption worksheet identifying each qualifying product, the tax paid, and the applicable exemption statute
Copies of invoices showing the sales tax paid
Product documentation (labeling, inserts, GUDID references) demonstrating the items qualify as prescription drugs or prosthetic devices
Evidence that the products were administered or distributed by practitioners under prescription or work order (e.g., facility protocols, sample prescription records)

The consultants at Agile Consulting Group have experience in recovering overpaid sales taxes from the Idaho State Tax Commission and can assist any Idaho healthcare provider with this cumbersome process.

Reach Out to Us with Questions

Nebraska Sales Tax Exemption for Forklifts Used in Manufacturing

Mon, 21 Jul 2025 18:54:09 GMT

The Nebraska sales tax exemption for forklifts used in manufacturing is generous compared to other states with similar exemptions. Nebraska has a few requirements and restrictions with their exemption, so the pioneers at Agile Consulting Group requested guidance from the Nebraska Department of Revenue for clarity on how manufacturers should be claiming the exemption. The Department’s Policy Section issued Agile proprietary and unique Tax Guidance that addresses the taxability of various purchase categories associated with the Nebraska sales tax exemption for forklifts used in manufacturing.

General Requirements for Exemption

Forklifts used in a Nebraska manufacturing operation will be exempt from sales tax according to Neb. Rev. Stat. Sec. 77-2704.22(1) if:

The business is a manufacturer – More than 50% of the business’ revenue must come from manufacturing activities as discussed in Neb. Admin. & Regs 1-107.02.

Physical change – The activity of the manufacturer causes tangible personal property to be “reduced or transformed into a different state, quality, form, property, or thing” pursuant t0 Neb. Admin. R. & Regs. 1-107.03 .

Used in manufacturing – This last requirement is different than other states that have a predominant use requirement, where 50% or more of the property’s use must occur in manufacturing activities to qualify for exemption. Instead, the Nebraska Supreme Court determined in Kerford Limestone Co. v. Nebraska Dept. of Rev., 287 Neb. 653, 844 N.W.2d 276 (2014) that any amount or percentage of use meets the “used in manufacturing” requirement if the task being performed is an exempt task.

Taxability of Forklift Purchases According to Agile’s Tax Guidance Letter

The Tax Guidance issued to Agile has clarified the taxability of various forklift-related purchases and whether they qualify for the Nebraska sales tax exemption for forklifts used in manufacturing. Here are some of the highlights from that Tax Guidance:

Forklifts – Purchases, leases and rentals of forklifts are all exempt from sales and use tax when used in manufacturing operations.

Used in Manufacturing – Unlike other states that have an exemption for forklifts used in manufacturing, there is no predominant use requirement. Forklifts used in the manufacturing operation in any capacity will qualify.

Exempt Usage – Although the Nebraska Department of Revenue does not provide any definitive guidance as to the exact starting and ending points of a manufacturing operation, Neb. Admin. R & Regs. 1-107.04(F) provides that “machinery and equipment used to transport, convey, handle, or store the raw materials or components used in manufacturing, or the products produced by the manufacturer for sale” are considered exempt manufacturing activities. Therefore, forklifts used to convey to raw materials, work-in-progress, and finished material qualify for the manufacturing machinery and equipment exemption.

Fuel – All types of fuel (off-road diesel, propane, and electricity) used to power forklifts that are used in manufacturing will qualify for exemption. Although there is not a minimum use threshold for forklifts for tax exemption purposes, there is a minimum threshold for energy usage that must be met for the tax exemption of energy sources to apply. As provided in Neb. Rev. Stat. Sec. 77-2704.13(2) , purchases of energy sources such as off-road diesel, propane and electricity will qualify for exemption “when more than fifty percent of the amount purchased is for use directly in processing, manufacturing, refining, or …” So, if the 50% threshold is met, then the total charge for these energy sources will be exempt.

Consumables – Consumable supplies such as grease, motor oil, hydraulic fluid and coolant that are required to maintain forklifts will not qualify for exemption according to Neb. Admin. R. & Regs. 1-107(05H) .

Repair Labor – Separately stated labor charges to repair or install parts onto forklifts used in manufacturing will qualify for exemption per Neb. Admin. R. & Regs. 1-107.10 .

Repair / Replacement Parts – Repair or replacement parts for forklifts used in manufacturing are exempt from sales or use tax according t0 Neb. Admin. R. & Regs. 1-107.09 .

How to Claim the Nebraska Sales Tax Exemption for Forklifts

In order to claim the Nebraska sales tax exemption for forklifts used in manufacturing, the manufacturer will need to complete Form 13 “Nebraska Resale or Exempt Sale Certificate” by completing both the top section and Section B. In Section B, you will select exemption category 5 as the basis for exemption. Please note that you’ll also need to include a description of the property or service purchase and its intended use in the manufacturing process. Once you have properly completed this Form 13, you’ll need to provide it to your vendors so they stop charging you sales tax on future qualifying purchases.

How to Claim a Sales Tax Refund for Sales Tax Paid in Error to Sellers

Nebraska manufacturers that paid sales tax in error to vendors on their forklift purchases, leases, repairs, or fuel will have the ability to claim the refund directly from the Nebraska Department of Revenue by completing Form 7 – “Claim for Refund of Sales and Use Tax”. Follow the template on the second page as the Nebraska Department of Revenue requires a schedule of invoices to be in a specific format or the refund claim will be denied. The eligible lookback period to recover any overpaid sales taxes is thirty-six months. The consultants at Agile Consulting Group have experience in recovering overpaid sales taxes from the Nebraska Department of Revenue and can assist any Nebraska manufacturer with this cumbersome process.

Reach Out to Us with Questions

If you have any questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or need assistance with a sales tax refund review or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.

Pennsylvania Sales Tax Exemption for Forklifts Used in Manufacturing

Fri, 11 Jul 2025 19:46:57 GMT

The Pennsylvania sales tax exemption for forklifts used in manufacturing is decent compared to other states with similar exemptions. Pennsylvania has a few requirements to properly identify exempt forklifts and related items, so the pioneers at Agile Consulting Group requested tax guidance from the Pennsylvania Department of Revenue for clarity on how manufacturers should be claiming the exemption. The Department issued Agile a proprietary and unique tax guidance letter that addresses the taxability of various purchase categories associated with the Pennsylvania sales tax exemption for forklifts used in manufacturing.

General Requirements for Exemption

Forklifts used in a Pennsylvania manufacturing operation will be exempt from Pennsylvania’s sales tax according to 61 Pa. Code § 32.32 if the forklifts are predominately and directly used in manufacturing. Predominately just means more than 50% and consideration shall be given to the following factors when determining if the forklifts are directly used in manufacturing:

1. The physical proximity of the property in question to the production process in which it is used.

2. The proximity of the time of use of the property in question to the time of use of other property used before and after it in the production process.

3. The active causal relationship between the use of the property in question and the production of a product. The fact that particular property may be considered essential to the conduct of the business of manufacturing because its use is required either by law or practical necessity does not of itself mean that the property is used directly in the manufacturing process.

Taxability of Forklift Purchases According to Agile’s Tax Guidance Letter

The Tax Guidance Letter issued to Agile has clarified the taxability of various forklift-related purchases and whether they qualify for the Pennsylvania sales tax exemption for forklifts used in manufacturing. Here are some of the highlights from Agile’s Tax Guidance Letter.

Forklifts – The purchase, lease or short-term rental of forklifts will be exempt from Pennsylvania’s sales tax if they are predominately and directly used in the manufacturing operation as required by 61 Pa. Code § 32.32 .

Predominant Use – All tasks performed by a forklift shall be considered when determining if the 50% predominant use threshold is met, and any reasonable method of apportionment may be used to determine what percentage was directly used in exempt manufacturing activities. For example, plant personnel can document the time spent performing various exempt tasks (conveying work in process from one manufacturing step to the next manufacturing step or moving work in process to the packaging area, for example) and taxable tasks (removing raw materials from storage and conveying to the first step in the manufacturing process or loading finished goods onto customer vehicles, for example). If the total time spent on exempt tasks exceeds 50%, then the 50% threshold requirement has been met.

Exempt Usage – As provided in 61 Pa. Code § 32.32 , the manufacturing process commences at the first step in the manufacturing process and ends at the last step in the manufacturing process – when finished goods are packaged. Consequently, the movement of raw materials to the first step in the manufacturing process is pre-production and the removal of finished goods from the packaging area for conveyance to finished goods storage is post-production.

Fuel – All types of fuel (off-road diesel, propane, and electricity) used to power forklifts that are predominantly and directly used within the manufacturing operation will qualify for exemption. However, unlike an all or nothing exemption using the 50% threshold for the purchase, lease or rental of a forklift, the exemption for fuel is based on the actual exempt use percentage. For example, if the forklift is used 75% of the time performing exempt tasks, then 75% of the fuel costs will be exempt.

Operating Supplies – Operating supplies, such as grease and motor oil, which are actively and continuously used in the operation of exempt forklifts will qualify for exemption according to 61 Pa. Code § 32.32(a)(3)(ii) .

Repair Labor – Separately stated labor charges to service or repair forklifts are not considered manufacturing activities according to 61 Pa. Code § 32.32(a)(3)(ii) and are therefore subject to sales tax.

Repair / Replacement Parts – Repair or replacement parts for forklifts predominately and directly used in manufacturing will qualify for exemption.

How to Claim the Pennsylvania Sales Tax Exemption for Forklifts Used in Manufacturing

In order to claim the Pennsylvania sales tax exemption for forklifts used in manufacturing, a manufacturer may issue a Form REV-1220 – Pennsylvania Exemption Certificate to claim the exemption.

How to Claim a Sales Tax Refund for Sales Tax Paid in Error to Sellers

Pennsylvania manufacturers that paid sales tax in error to sellers on their forklift purchases, leases, fuel, or replacement and repair parts can file a claim for refund directly Pennsylvania Department of Revenue using Form REV-65 Board of Appeals Petition Form . Likewise, this form can also be used if the Pennsylvania manufacturer paid use tax in error directly to the Pennsylvania Department of Revenue.

The eligible lookback period to recover any overpaid sales and use taxes in Pennsylvania is thirty-six months. The consultants at Agile Consulting Group have experience in recovering overpaid sales and use taxes from the Pennsylvania Department of Revenue and can assist any Pennsylvania manufacturer with this cumbersome process.

Reach Out to Us with Questions

If you have any questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or need assistance with a sales tax refund review or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

Kentucky Sales Tax Exemption for Forklifts Used in Manufacturing

Wed, 19 Mar 2025 14:38:06 GMT

Written by: Mike Martin

The Kentucky sales tax exemption for forklifts used in manufacturing is modest compared to other states with similar exemptions. Kentucky has some peculiar requirements and restrictions with their exemption, so the pioneers at Agile Consulting Group requested guidance from the Kentucky Department of Revenue for clarity on how manufacturers should be claiming the exemption. The Department issued Agile a proprietary and unique ruling, Kentucky Technical Advice Memorandum KY-TAM-25-01, that addresses the taxability of various purchase categories associated with the Kentucky sales tax exemption for forklifts used in manufacturing.

General Requirements for Exemption

Forklifts used in a Kentucky manufacturing operation will be exempt from Kentucky’s sales tax according to Ky. Admin. Regs. 103 Sec. 30-120 Section 2 if four specific requirements are met – these requirements are:

It shall be machinery (forklifts are considered machinery).
It shall be used directly in the manufacturing or industrial processing process. Per KRS 139.010(13) , “Directly used in the manufacturing or industrial processing process” means the process that commences with the movement of raw materials from storage into a continuous, unbroken, integrated process and ends when the finished product is packaged and ready for sale.
It shall be incorporated for the first time into:
Plant facilities established in this state; or
The premises of alcohol producers in this state that include a retail establishment licensed under KRS 243.030 or KRS 243.040.
It shall not replace other machinery.

However, according to Ky Admin. Regs. 103 Sec. 30:120 Section 3 (4) , there are four exceptions to the fourth requirement (“It shall not replace other machinery”) previously mentioned in Ky. Admin. Regs. 103 Sec. 30-120 Section 2 . New machinery purchased to replace other machinery in the plant or licensed premises shall be subject to tax unless the new machinery does one of the following:

Increases the consumption of recycled materials at the plant facility or licensed premises by not less than ten (10) percent,
Performs a different function,
Manufacturers a different product, or
Has a greater productive capacity, measured by units of production, than the machinery replaced.

Taxability of Forklift Purchases According to Agile’s TAM

The TAM issued to Agile has clarified the taxability of various forklift-related purchases and whether they qualify for the Kentucky sales tax exemption for forklifts used in manufacturing. Here are some of the highlights from that TAM.

Replacement Forklifts – The purchase or lease of new forklifts that are predominantly used directly in the manufacturing process and increase production capacity (measured by actual units of production) qualify for the exemption. Short-term forklift rentals will not qualify for the exemption because they do not meet the first-time incorporation requirement in KRS 139.010(22)(a)(2) .

Predominant Use – To meet the predominant use threshold referenced above, forklifts must be used at least 50% of the time in an exempt usage manner to qualify for exemption. Forklifts with multiple uses within the facility that are used less than 50% in production activities will not qualify.

Exempt Usage – As provided in KRS 139.010(13) , the manufacturing process commences with the movement of raw materials from storage into a continuous unbroken and integrated process and ends when the finished product is packaged and ready for sale. Consequently, forklifts that are used to remove raw materials and place into production, are used to move work in process throughout the plant and are used to convey the finished product into the packaging area for final wrapping will qualify for exemption. Forklifts that are used for raw material storage, in-process storage, post-production storage and shipping are not activities directly within the manufacturing process.

Fuel – All types of fuel (off-road diesel, propane, and electricity) used to power forklifts that are predominantly directly used within the manufacturing process may qualify for the for the partial energy exemption if the manufacturer qualifies and holds an Energy Direct Pay Authorization. Kentucky does provide an exemption for energy costs that exceed 3% of a manufacturer’s total production costs, and forklift propane, and other forklift energy costs can be included as part of the numerator when calculating a manufacturer's total exempt energy usage percentage. The partial energy exemption is discussed in greater detail in KRS 139.480(3) .

Consumables – Consumable supplies such as grease, motor oil, hydraulic fluid and coolant that are required to maintain forklifts predominantly directly used in the manufacturing process will qualify for exemption per KRS 139.470(9) .

Repair Labor – Separately stated labor charges to repair forklifts or install parts onto a forklift that is directly used in the manufacturing process will qualify for exemption as provided in KRS 139.470(22) .

Repair / Replacement Parts – Repair or replacement parts are taxable as they are specifically excluded from the new and expanded machinery exemption per KRS 139.010(22)(b).

How to Claim the Kentucky Sales Tax Exemption for Forklifts

In order to claim the Kentucky sales tax exemption for forklifts used in manufacturing, a manufacturer may issue Form 51A111 – Certificate of Exemption for Machi nery for New and Expanded Industry for property meeting the requirements as set forth in 103 KAR 30:120 Machinery for new and expanded industry .

How to Claim a Sales Tax Refund for Sales Tax Paid in Error to Sellers

Kentucky manufacturers that paid sales tax in error to vendors on their forklift purchases, leases or repair labor services will have to request the sales tax refund directly from their vendors. However, form 51A209 Sales and Use Tax Refund Application can be used in situations where use tax was self-assessed and paid directly to the Kentucky Department of Revenue in error.

The eligible lookback period to recover any overpaid sales taxes in Kentucky is forty-eight months. The consultants at Agile Consulting Group have experience in recovering overpaid sales taxes from vendors charging Kentucky sales taxes in error and the Kentucky Department of Revenue, and can assist any Kentucky manufacturer with this cumbersome process.

Reach Out to Us with Questions

If you have any questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or need assistance with a sales tax refund review or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

Missouri Sales Tax Exemption for Prosthetic Devices

Tue, 11 Feb 2025 16:35:25 GMT

Written by: Mike Martin

The Missouri sales tax exemption for prosthetic devices allows healthcare providers in the state to purchase prosthetic devices exempt from state and local sales and use tax. Missouri Revisor of Statutes 144.030.2(18) states that all sales of prosthetic devices, as defined by the federal Medicare program pursuant to Title XVIII of the Social Security Act of 1965, are exempt from sales and use tax. This exemption is also explained in Missouri Code of State Regulations 10-110.013 , which defines the term prosthetic devices differently from the statute. In this regulation, prosthetic device is defined as “ a device that replaces all or part of the function of a permanently inoperative or malfunctioning internal body organ and is medically required .” The regulation provides some examples of qualifying prosthetic devices, which include:

Breast prosthetics
Cardiac pacemakers
Colostomy bags, ostomy bags, and necessary equipment required for attachment
Hemodialysis equipment
Maxillofacial devices and devices which replace all or part of the ear or nose
Intraocular lens
Urinary collection systems, including foley catheters, when replacing bladder function

Agile Consulting Group’s Recent Guidance

The pioneers at Agile Consulting Group noticed that the Missouri sales tax exemption for prosthetic devices has conflicting definitions of the term “prosthetic devices” between the Revisor of Statutes and the Code of State Regulations, and requested some guidance from the General Counsel’s Office with the Department of Revenue to clarify this conflict.

The original basis for the Missouri sales tax exemption for prosthetic devices in MO Rev. Stat. 144.030.2(18) relies on the definition of a prosthetic device under Medicare. This definition states that prosthetic devices include products that " replace all or part of an internal body organ (including colostomy bags and supplies directly related to colostomy care), including replacement of such devices ." See Section 1861(s)(8) of the Social Security Act . This definition under Medicare specifically excludes the requirement that a prosthetic device must be replacing all or part of the function of a “permanently inoperative” organ. To be considered a prosthetic device under Medicare, the device must only be replacing the function of an internal body organ, regardless of whether it’s a permanent or temporary solution.

This is an important distinction because the Code of State Regulations incorporates a “permanently inoperative” requirement, even though this is not located in the original Revisor of Missouri Statutes or the Social Security Act upon which the Statute relies. Since there is a conflict between the Statute and the Regulation, the Statute takes precedence and prosthetic devices qualify for a state and local sales and use tax exemption regardless of whether they are replacing a permanently inoperative organ.

Agile has received guidance from the General Counsel’s office that this is the correct interpretation of the exemption, which we discovered as part of a refund denial appeal on the purchase of ventilators and their associated component parts for a long-term acute care hospital. Based on this guidance, other types of purchases that can be considered prosthetic devices are:

Bone fracture repair guidewire and K-wire
Endotracheal tubes
Laryngeal airways
Peripherally inserted central catheters (PICC lines)
Tracheostomy tubes

How to Claim the Missouri Sales Tax Exemption for Prosthetic Devices

In order to claim the Missouri sales tax exemption for prosthetic devices, qualifying healthcare providers must fully complete a Form 149 Sales and Use Tax Exemption Certificate . The healthcare provider should complete the “Purchaser” and “Seller” sections, include the exemption reason under “Other” as prosthetic devices, and then sign the form. Once the form has been completed and signed, the healthcare provider should furnish the completed form to their sellers.

How to Recover Missouri Sales Taxes Already Paid to a Seller

Missouri healthcare providers that have already made purchases which meet the exemption criteria listed above are entitled to refunds for purchases that were made within ten years from the date the tax was paid. Missouri healthcare providers are eligible to recover any sales tax overpayments on qualifying prosthetic devices by submitting a Form 472P with the Missouri Department of Revenue. This Form 472P Purchaser’s Claim for Sales Tax Refund must be filed with the appropriate documentation in order for the Missouri Department of Revenue to consider the claim valid. Some of the required documentation includes a signed & notarized Form 5433 from the seller, a detailed worksheet explaining how each item meet the exemption criteria as a prosthetic device and invoice copies.

The consultants at Agile Consulting Group have experience in recovering overpaid sales taxes from the Missouri Department of Revenue and can assist any Missouri healthcare provider with this cumbersome process.

Reach Out to Us with Questions

If you have any questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or need assistance with a sales tax refund review or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

Arizona Transaction Privilege Tax Exemption for Prosthetic Appliances

Mon, 10 Feb 2025 20:47:38 GMT

Written by: Mike Martin

The Arizona transaction privilege tax exemption for prosthetic appliances has been recently expanded with the Arizona Department of Revenue’s issuance of Ruling TPR 23-1 with an effective date of 5/1/2023. This ruling was issued to clarify the types of purchases that are considered a prosthetic appliance exempt from the retail transaction privilege tax classification under Arizona Revised Statutes 42-5061(A)(9) following the Arizona Court of Appeals decision in VHS Acquisition Subsidiary Number 1 Inc. v. Arizona Department of Revenue, No. 1 CA-TX 20-0007, 2021 WL 1747353.

In addition to TPR 23-1, the pioneers at Agile Consulting Group have requested and received guidance from the Department on the taxability of various medical devices under this law change. The law change in TPR 23-1 can be broadly interpreted, so we requested this guidance on behalf of the Ambulatory Surgery Centers in the state to confirm that many of their common device purchases qualify for the exemption.

Prosthetic Appliance Exemption: Prior to May 2023 Ruling

Prior to this ruling, the Arizona transaction privilege tax exemption for prosthetic appliances only included purchases of artificial devices that were “necessary to support or take the place of a part of the body, or to increase the acuity of a sense organ” per Arizona Revised Statutes 23-501(7) . In order to qualify for the TPT exemption, the artificial devices must be “prescribed or recommended by a health professional licensed pursuant to title 32, chapter 7, 8, 11, 13, 14, 15, 16, 17 or 29” per Arizona Revised Statutes 42-5061(A)(9) . These chapters include podiatrists, doctors of chiropractic, dentists, physicians and surgeons, naturopathic physicians, nurses, osteopathic physicians and surgeons, and homeopathic physicians. Based on the definition of “prosthetic appliance” in this section of the Arizona Revised Statutes, the exemption was essentially limited in scope to only include devices that actually replaced, either partially or fully, a body part.

Prosthetic Appliance Exemption: After May 2023 Ruling

Ruling TPR 23-1 , which expanded the Arizona transaction privilege tax exemption for prosthetic appliances, is based on the Arizona Court of Appeals decisions in VHS Acquisition Subsidiary Number 1 Inc. v. Arizona Department of Revenue and Renal West v. Ariz. Dep’t of Revenue, 189 Ariz. 409, 414 (App. 1997) . In both of these decisions, the Arizona Court of Appeals ruled that the term “prosthetic appliances” is not limited to the artificial device, but also includes equipment, supplies and solutions necessary to an “integrated prosthetic process”, as well as items necessary to apply prosthetic appliances. Furthermore, the Court also determined that items used to support, keep together, or seal a body part, or otherwise contain bodily fluids like skin and tissue, are considered “prosthetic appliances” because they help facilitate healing. By broadening the definition of the term “prosthetic appliances” in this manner, the TPT exemption will now include a wide array of purchases that healthcare providers make in the provision of their medical services.

Some examples of purchases that will now qualify for the Arizona transaction privilege tax exemption for prosthetic appliances are the following:

Adhesive skin closures, liquid skin adhesives, mesh fixation devices, bone wax, surgical clips, ligature loops, staples, and sutures
Ligation clip appliers, surgical staplers, suture devices, pens and ampules
Kidney dialysis machines, bloodlines, concentrates, and other testing equipment

Ruling TPR 23-1 also confirmed that the Arizona transaction privilege tax exemption for prosthetic appliances allows healthcare providers like hospitals, ambulatory surgery centers, long-term acute care facilities, and clinics to purchase these items as tax-exempt on behalf of their patients. As long as the prosthetic appliance is prescribed or recommended by a licensed health professional for a patient, then the Court ruled that it's appropriate for the health care provider to claim the exemption because “the statutory language defines the type of appliance that is exempt from tax, rather than who receives the exemption.”

Agile Consulting Group’s Guidance

In addition to the specific items referenced in TPR 23-1, Agile received guidance from the Department of Revenue that the Arizona transaction privilege tax exemption for prosthetic appliances will apply to the following devices:

Artificial joint implant instruments, ACL reconstruction repair instruments, arthroscopic suture passer, bone fracture repair instruments, and bone fracture repair guidewire/K-wire
Custom total knee packs
Hernia repair positioning systems
Phacoemulsification handpieces
Cataract surgical packs
Foley catheter trays
Ventilators & associated components (breathing circuits, connectors, humidifiers, masks, etc.)
Respiratory oxygen therapy systems
Enteral feeding pumps & associated components (bag sets, syringes, tubing, connectors, etc.)
Coronary balloon dilatation catheters
Spinal cord electrical stimulation systems
Breast implant surgical packs
Tympanostomy instruments

How to Recover Arizona Transaction Privilege Tax Already Paid to Vendors

Arizona healthcare providers that have already made qualifying purchases under the Arizona transaction privilege tax exemption for prosthetic appliances, as provided in Arizona Revised Statutes 42-5061(A)(9) , can request a refund up to four years from of the original date of purchase. To determine whether an item will qualify as a “prosthetic appliance”, the purchaser needs to use the following guidelines:

Identify that the device is “prescribed or recommended by a licensed health professional”
Identify whether the device is artificial (meaning it’s not human or other naturally occurring tissue)
Identify the body part or body function the device is seeking to support or replace
Identify whether the device is necessary to support that part of the body or body function, take the place of that part of the body or body function, or if the device increases the acuity of one of the senses
Identify whether the device is part of an “integrated prosthetic process” or is necessary to apply a prosthetic appliance

Some examples of substantiating documentation to prove that the device will qualify for this exemption are the following:

Purchase invoices
Documentation that the purchaser is a licensed healthcare provider
Product labels, “Indications for Use” inserts, or product brochures to show that the item meets the updated criteria as a “prosthetic appliance” and that it’s required to be lawfully dispensed pursuant to a prescription
Arizona Form 5000 (Transaction Privilege Tax Exemption Certificate)

The consultants at Agile Consulting Group have experience in recovering overpaid sales taxes from the Arizona Department of Revenue and can assist any Arizona healthcare provider with this cumbersome process.

Reach Out to Us with Questions

If you have any questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or need assistance with a sales tax refund review or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

Michigan Sales Tax Exemption for Industrial Processing

Mon, 06 May 2024 19:19:21 GMT

Written by: Mike Martin

The Michigan sales tax exemption for industrial processing, also commonly referred to as manufacturing, is very broad and provides a sales and use tax exemption as detailed in Mich. Comp. Laws Ann. Sec. 205.54t for most purchases that are used by an “industrial processor” in “industrial processing” activities.

As defined in Mich. Comp. Laws Ann. Sec. 205.54t(8)(b) :

“Industrial processing” means the activity of “converting or conditioning tangible personal property by changing the form, composition, quality, combination, or character of the property for ultimate sale at retail, for use in the manufacturing of a product to be ultimately sold at retail.”
“Industrial processor” is defined to mean an entity that “performs the activity of converting or conditioning tangible personal property for ultimate sale at retail, for use in the manufacturing of a product to be ultimately sold at retail.” per Mich. Comp. Laws Ann. Sec. 205.54t(8)(c) .

For example, this includes operations as wide ranging as a multi-location Michigan manufacturing icon such as Ford Motor Company all the way down to an individual that operates a machine shop in their backyard that fabricates car parts by merely cutting metal into specific dimensions. Both entities will quality as an industrial processor if the finished goods are ultimately to be sold at retail.

When Does Industrial Processing Begin and End?

Since the Michigan sales tax exemption for industrial processing or manufacturing only applies to purchases that are used in “industrial processing” activities, it’s important to understand when the industrial process starts and when it ends. According to Michigan Revenue Administrative Bulletin No. 2000-4, 6/13/2000 , “Industrial processing begins when tangible personal property begins movement from raw materials storage to begin industrial processing and ends when finished goods first come to rest in finished goods inventory storage.” Some activities that are included within the definition of “industrial processing” are:

Production or assembly
Research or experimental activities
Inspection or quality control
Production material handling
Storage of in-process materials
Design, construction, or maintenance of production or other exempt machinery, equipment, and tooling

What Qualifies for the Michigan Sales Tax Exemption?

Some examples of property that qualify for the Michigan sales tax exemption for industrial processing include the following:

Machinery and equipment used in production, processing or manufacturing
Repair parts for machinery and equipment
Property that becomes an ingredient or component part of the finished product
Tools and dies

Material handling equipment used for conveying work-in-process
Foundations that support industrial processing machinery and equipment
Property that is consumed in industrial processing, such as greases and lubricating oils
Fuel or energy, such as electricity, natural gas, welding gases, etc.
Labor used to repair exempt machinery and equipment

What Doesn’t Qualify for the Exemption?

The following types of purchases commonly made by manufacturing companies are not within the purview of the Michigan sales tax exemption for industrial processing:

Office equipment not used for an industrial processing activity
Office furniture or office supplies
Tangible personal property used for receiving and storage of materials, supplies, parts, or purchased by the user or consumer
Tangible personal property used or consumed in the preservation or maintenance of a finished good once it first comes to rest in finished goods inventory storage
Returnable shipping containers

Exemption Based on a Percentage of Use

Although the Michigan sales tax exemption for industrial processing is quite broad, the sales and use tax exemption for machinery and equipment and other items is calculated on a percentage of use basis. Michigan Revenue Administrative Bulletin No. 2000-4, 6/13/2000 provides numerous examples of what qualifies for exemption and how to determine the amount of tax that is subject to refund or exemption. For example, an industrial processor that has one meter for their electricity consumption in both its exempt industrial processing activities and taxable non-industrial processing activities is required to determine the percentage of use for each activity type. If the industrial processor consumes 30% of the electricity in an industrial processing function, then only 30% of the total amount for electricity, transmission, and distribution would be exempt for industrial processing. For additional clarification, see example 23 in Michigan Revenue Administrative Bulletin No. 2000-4, 6/13/2000 .

How to Claim the Exemption and Recover Michigan Sales Tax Overpayments

Michigan industrial processors can avoid paying sales tax on exempt items by providing their vendors with a copy of Michigan Sales and Use Tax Certificate of Exemption – Form 3372 . As Michigan’s industrial processing exemption is very broad, it is highly probable that a Michigan industrial processor may have paid sales tax in error to its vendors, and beginning in January 2019, Michigan industrial processors are able to request refunds directly from the Michigan Department of the Treasury by completing P urchaser Refund Request for a Sales or Use Tax Exemption – Form 5633 for transactions going back 48 months. This is a significant change from the prior iteration of the refund recovery process which required the vendors or suppliers that originally sold the item to be heavily involved in recouping any overpaid Michigan sales taxes. The knowledgeable and experienced sales tax consultants at Agile Consulting can help you with the process of determining whether you are being charged tax incorrectly as well as recovering any overpayments from the Michigan Department of Treasury.

Choose Agile Consulting Group!

If you have any questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue, need further assistance with a sales tax refund review or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.

Mike Martin

Mike began his career in Indirect Tax with the Florida Department of Revenue in 1992, conducting compliance audits in Miami. He later transitioned to consulting and moved to Birmingham, AL, with his wife and their 3 dogs, where he worked with manufacturing clients and started his own consulting companies specializing in tax recovery projects.

Nebraska Sales Tax Exemption for Manufacturers

Mon, 29 Apr 2024 21:10:12 GMT

Written by: Mike Martin

The Nebraska sales tax exemption for manufacturers applies to businesses that are involved in fabricating, assembling, processing, refinishing, or refining activities. In addition to performing any of these necessary activities, 50% or more of the manufacturer’s revenue must be generated from the sale of products resulting from these activities. Any machinery and equipment the manufacturer intends to claim must also be used 50% or more of the time performing a “manufacturing” task. However, the machinery and equipment does not have to come into direct physical contact with the tangible personal property being produced for sale in order to be considered manufacturing machinery or equipment. If the machinery and equipment meet all these requirements, then the Nebraska sales tax exemption for manufacturers will apply.

In Nebraska, manufacturing means an “action, or series of actions, performed upon tangible personal property, either by hand or machine, which results in that tangible personal property being reduced or transformed into a different state, quality, form, property, or thing.” Manufacturing requires a physical change to the tangible personal property within the process and does not simply require an increase in the value of a product without a physical change to the item in question. See both Neb. Rev. Stat. Sec. 77-2701.47 and Neb. Admin. R. & Regs. Sec. 1-107 .

When Does Manufacturing Begin and End in Nebraska?

The Nebraska sales tax exemption for manufacturers covers items that are used within the manufacturing process and excludes items that are used before manufacturing commences or post manufacturing. Based on the definition provided by the Nebraska Department of Revenue, manufacturing begins with “the storage of raw materials” and manufacturing ends “after finished goods are transported to a warehouse for storage.” For example, machinery and equipment involved in the receiving of raw materials or the removal of finished goods from storage for customer delivery are not considered part of the manufacturing process and fall outside the purview of this exemption.

Items That Will Qualify for the Nebraska Sales Tax Exemption Include:

Ingredient or component parts of the item being manufactured for sale
Machinery and equipment used in production
Repair and replacement parts for production machinery and equipment
Conveyance equipment such as forklifts, overhead cranes, etc.
Molds and dies
Testing equipment used for quality control purposes
Fuel (electricity, propane, diesel fuel, etc.) used for production purposes

Items That Will Not Qualify for the Exemption Include:

Hand tools powered by solely by human effort, even if they come into direct contact with the product being manufactured
Computers and software that are not used for manufacturing purposes
Machinery and equipment used in research and development
Office equipment used for administrative purposes
Supplies and other items consumed by a manufacturer, like solvents and cutting oils
Vehicles that are registered for operation on roads

How to Claim the Nebraska Sales Tax Exemption for Manufacturing

In order to claim the Nebraska sales tax exemption for manufacturers, the manufacturer will need to complete Form 13 “Nebraska Resale or Exempt Sale Certificate” by completing both the top section and Section B. In Section B, you will select exemption category 5 as the basis for exemption. Please note that you’ll also need to include a description of the property or service purchase and its intended use in the manufacturing process. Once you have properly completed this Form 13, you’ll need to provide it to your vendors so they stop charging you sales tax on future qualifying purchases.

How to Claim a Sales Tax Refund for Sales Tax Paid in Error to Sellers

Nebraska manufacturers are able to recover sales taxes that they have overpaid to their suppliers on exempt qualifying items directly from the Nebraska Department of Revenue by completing Form 7 – “Claim for Refund of Sales and Use Tax”. Follow the template on the second page as the Nebraska Department of Revenue requires a schedule of invoices to be in a specific format or the refund claim will be denied. The eligible lookback period to recover any overpaid sales taxes is thirty-six months. The consultants at Agile Consulting Group have experience in recovering overpaid sales taxes from the Nebraska Department of Revenue and can assist any Nebraska manufacturer with this cumbersome process.

Reach Out to Us with Questions

If you have any questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or need assistance with a sales tax refund review or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.

Mike Martin

South Carolina Sales Tax Exemption for Manufacturers

Thu, 25 Apr 2024 16:32:06 GMT

Written by: Mike Martin

The South Carolina sales tax exemption for manufacturers is very broad and covers all businesses that are involved in processing, compounding, and mining. To qualify for exemption, machinery and equipment must be “integral and necessary” to the manufacturing process and must be used at a manufacturing facility. Additionally, in order to qualify, the machinery or equipment must be part of an “essential and indispensable” part of the manufacturing process and be substantially used in the production process. South Carolina defines substantially to mean that the machinery or equipment must be used more than one-third of the time performing a manufacturing task per S.C. Code Regs. 117-302(5)(b) . This one-third substantial use requirement is lower than most other states that have a minimum 50% use requirement. As a final requirement, the product being manufactured in this process must be held for sale upon completion. If the machinery and equipment meet all of these criteria, then the South Carolina sales tax exemption for manufacturers will apply.

When Does Manufacturing Begin and End in South Carolina?

The South Carolina sales tax exemption for manufacturers is applicable to items that are used in the manufacturing process and excludes items that are used before manufacturing commences or after manufacturing is considered to be concluded per South Carolina’s definition of the manufacturing process. Manufacturing begins with the introduction of raw materials to the first processing stage or machine. In South Carolina, manufacturing ends after finished goods are transported to a warehouse for storage. For example, machinery and equipment involved in the receipt and initial storage of raw materials awaiting their time to be placed into production would fall outside the purview of this exemption. When a forklift, for example, removes the raw material from storage and places them into production, that would be the initiation of the manufacturing process in South Carolina. On the other end of the production process, machinery and equipment that takes the finished product from the final stage of production and places the items onto a warehouse floor would fall within the scope of manufacturing. However, if a forklift later takes that pallet of goods and loads it onto a truck for shipment to a wholesaler or retailer, that action would fall outside the defined manufacturing process and therefore not qualify for the South Carolina sales tax exemption for manufacturers.

Items That Will Qualify for the South Carolina Sales Tax Exemption Include:

Ingredient or component parts of the item being manufactured for sale
Machinery and equipment used in production (as described above)
Repair and replacement parts for production machinery and equipment
Consumable supplies such as grease, oil, and hydraulic fluid
Material handling equipment , such as forklifts, if used in manufacturing
Labor charges to repair or install machinery or replacement parts
Labor charges to repair or install machinery or replacement parts

Fuel and energy such as electricity and propane, if used within the manufacturing process

Quality control tools , machinery or equipment that are used to test product samples

Items That Will Not Qualify for Exemption Include:

Workers’ protective clothing
Maintenance tools and equipment
Storage equipment such as racks used to store raw or finished goods
Real property and foundations that support exempt machinery
Administrative machines, furniture, and supplies
Machinery and equipment used less than one-third of the time in manufacturing

How to Claim the South Carolina Sales Tax Exemption for Manufacturing

The South Carolina sales tax exemption for manufacturers is easy to claim – just complete the “South Carolina Exemption Certificate – Form ST-8” and provide your vendors with a completed ST-8. A South Carolina manufacturer claiming an exemption on Form ST-8 will complete the top portion, and then choose the sixth “box” from the top for “Machinery used in manufacturing…” There are two pages associated with Form ST-8, so make sure that you are providing both pages to your vendors when purchasing exempt items.

How to Claim a Sales Tax Refund for Sales Tax Paid in Error to Sellers

A South Carolina manufacturer can claim a refund directly from the South Carolina Department of Revenue by completing a “Sales & Use Tax Refund Claim - Form ST-14” , or the South Carolina manufacturer can also complete the application online by going to MyDORWAY.dor.sc.gov. In addition to completing the refund claim form, the South Carolina manufacturer will also have to obtain a completed “Assignment of Rights to a Sales Tax Refund – Form ST-16” that essentially transfers the rights to the sales tax refund from the seller to the South Carolina manufacturer and will allow the South Carolina Department of Revenue to refund the sales tax directly to the South Carolina manufacturer.

Reach Out to Us with Questions

If you need assistance with a sales tax refund review or have any questions, comments or would like to discuss the specific circumstances you are encountering in regard to any sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.

Mike Martin

West Virginia Sales Tax Exemption for Manufacturers

Mon, 15 Apr 2024 20:44:03 GMT

Written by: Mike Martin

The West Virginia sales tax exemption for manufacturers is fairly comprehensive and extends to purchases of tangible personal property that is directly used in the manufacturing process. West Virginia began applying the “direct use concept” to its sales and use tax exemption for manufacturing on July 1, 1987. The “direct use concept” means that the manner in which the tangible personal property is used in the manufacturing process will determine its taxability.

In addition to items having to be directly used or consumed in the manufacturing process, items must also be an integral and essential part of the manufacturing process as provided in W. Va. Code Sec. 11-15-2(b)(4) to qualify for West Virginia sales tax exemption for manufacturers. According to W. Va. Code Sec. 11-15-2(b)(10) , “manufacturing” means a systematic operation or integrated series of systematic operations engaged in as a business or segment of a business which transforms or converts tangible personal property by physical, chemical or other means into a different form, composition or character from that in which it originally existed.

In instances where certain items of machinery and equipment, such as forklifts, are used in both a taxable and exempt manner, apportionment, or percentage of use, may be necessary to determine the amount of sales tax eligible for exemption or refund as discussed in West Virginia Taxpayer Services Division Publications No. TSD-358, 07/01/2008 . See the Direct Use Guidelines for Manufacturing Industries section of this referenced publication for more specific information.

When Does Manufacturing Begin and End in West Virginia?

The West Virginia sales tax exemption for manufacturers covers items used in the systematic operation or integrated series of systematic operations which begins with the arrival of raw materials and continues until the property has reached that point where no further chemical, physical or other changes are to be made to the item in the production process per WV Code of State Rules 110-15-2.46 . Storage of completed products and transportation of completed products to the customer or to another site is not included within the manufacturing process (See the Direct Use Guidelines for Manufacturing industries in West Virginia Taxpayer Services Division Publications No. TSD-358, 07/01/2008 ).

For example, a forklift that removes raw materials from a supplier’s vehicle and conveys these raw materials to a storage area for future use in the manufacturing operation will qualify for exemption. However, a forklift used to convey finished goods from the packaging area to a storage area for ultimate shipment to the customer is an activity that falls outside the scope of the manufacturing process and will not qualify for the exemption.

Items That Will Qualify for the West Virginia Sales Tax Exemption Include:

Raw materials
Transportation equipment , like forklifts, used to convey raw materials and work-in-process
Machinery or equipment used directly in manufacturing
Repair or replacement parts for machinery or equipment used directly in manufacturing
Labor to repair exempt equipment

Machinery, tools, repair parts and materials used to repair and maintain equipment used directly in the manufacturing process
Quality control items used to test and inspect products during production
Safety equipment or clothing such as shoes, goggles, or safety gloves
Services used in plant security such as security guard services or alarm systems

Items That Will Not Qualify for Exemption Include:

Office furniture
Office supplies
Uniforms for the personal comfort of employees
Machinery, tools, parts, and materials used to maintain site facilities other than facilities directly used in the manufacturing process

How to Claim the West Virginia Sales Tax Exemption for Manufacturing

In order to claim the West Virginia sales tax exemption for manufacturers, the manufacturer will need to apply for a Direct Pay Permit from the West Virginia State Tax Department by completing the CST-250 – Consumer Sales and Use Tax Application for Direct Pay Permit . Once completed and submitted, the West Virginia State Tax Department will issue a Direct Pay Permit to the manufacturer, which the manufacturer can then furnish to their suppliers to stop charging them sales taxes on exempt items directly used in the manufacturing process.

How to Claim a Sales Tax Refund for Sales Tax Paid in Error to Sellers

West Virginia manufacturers are able to recover sales taxes that they have overpaid to their suppliers on exempt qualifying items directly from the West Virginia Department of Revenue by completing Form CST-240 “Claim for Refund or Credit of Sales Tax Paid to a Vendor/Reseller . Follow the format on the second page as the West Virginia Department of Revenue requires a schedule of invoices to be in a specific format. The eligible lookback period to recover any overpaid sales taxes is thirty-six months. The consultants at Agile Consulting Group have experience in recovering overpaid sales taxes from the West Virginia State Tax Department and can assist any West Virginia manufacturer with this cumbersome process.

Reach Out to Us with Questions

If you need assistance with a sales tax refund review, have any questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.

Mike Martin

Louisiana Sales Tax Exemption for Food Purchases

Mon, 08 Apr 2024 16:50:21 GMT

The industry leading sales tax experts at Agile Consulting Group have just secured a ruling from the Louisiana Board of Tax Appeals that requires the Parishes to honor the Louisiana Sales Tax Exemption for Food Purchases made by hospitals, nursing homes, adult residential care providers and other continuing care retirement communities. This exemption, which is codified in Louisiana Revised Statutes 47:305(D)(2) , has been available for these specific types of facilities since June 13, 2013. Prior to this effective date, the exemption was only applicable to hospitals, but the passage of Act 271 during the 2013 legislative session expanded the exemption to include other types of residential facilities, including nursing homes, adult residential care providers, and continuing care retirement communities.

Louisiana Parishes Had Been Denying the Exemption

Parishes in Louisiana are separate taxing authorities from the state and administer their taxes independent of the Louisiana Department of Revenue. This means that, in certain situations, they can create their own sales tax laws (ordinances) and take different positions regarding the applicability of exemptions created by the Louisiana legislature. The Louisiana Sales Tax Exemption for Food Purchases is a situation where the Parishes wanted to take a narrow approach on how this exemption applies to qualifying facilities.

The exemption in Louisiana Revised Statutes 47:305(D)(2) states that “Sales of meals furnished…to the staff and patients of hospitals and to the staff and residents of nursing homes, adult residential care providers, and continuing care retirement communities” are exempt from both state and local sales tax. Since the exemption is written to exempt the “sales of meals” and these types of facilities don’t itemize meals on monthly bills (meals are included as part of a fixed monthly cost that patients pay), the Parishes argued that the facilities aren’t actually “selling” a meal. They claimed that the Louisiana Sales Tax Exemption for Food Purchases does not apply to them because the facility doesn’t directly charge patients and staff for the meals.

This is contrary to the Department of Revenue’s position, which states that this exemption is applicable to the purchases of food that are used in the preparation of meals furnished to staff and patients of these facilities. The Department’s logic is that the food purchases are a “sale for resale” because the facility is purchasing the food with the intention of furnishing it in the form of a meal to their staff and patients where they receive monetary consideration for the provision of that meal.

Louisiana Board of Tax Appeals Decision on Food Purchases

Since Agile Consulting Group believed that the Louisiana Sales Tax Exemption for Food Purchases should be applicable to qualifying facilities in the Parishes, in coordination with several of our clients and our attorney, we submitted petitions to the Louisiana Board of Tax Appeals (“BTA”) that protested the denials of refund claims for our clients’ food purchases.

On March 14, 2024, Judge Cole of the BTA issued his decision in Anderson Memory Care, LLC v. Smith, BTA Docket No. L01161 and Camelot of North Oaks, LLC v. Tangipahoa Parish, BTA Docket No. L01474.

In his decision, Judge Cole ruled that the “sales of meals” exemption in Louisiana Revised Statutes 47:305(D)(2) extends to the purchases of food items by qualifying facilities and that these food purchases can be purchased tax-exempt as a “sale for resale”. Essentially, the ruling concurs with the Department of Revenue’s, where a “sale can occur without a set price so long as the transaction is supported by some type of consideration.” Since the meal costs are included in the monthly fee that these facilities charge their patients, the facilities receive monetary compensation for meals and this qualifies as a “sale”.

Next Steps to Recover Parish Sales Taxes on Food Purchases

The Parishes have until May 14, 2024, which is 60-days from the BTA decision, to appeal. If they don’t appeal and choose to accept the decision, then all Parish sales taxes paid by hospitals, nursing homes, adult residential care providers, and continuing care retirement communities to their food vendors will be exempt.

Some of the most common food vendors in the Louisiana Parishes are Ben E. Keith, Performance Food Group (formerly known as Reinhart), Sysco, and US Foods. From Agile’s experience working closely on this issue since 2020, we know that these vendors were advised by the Parishes to continue charging Parish sales tax to their Louisiana customers. Now that the Board of Tax Appeals has issued their decision, qualifying facilities can take advantage of the Louisiana Sales Tax Exemption for Food Purchases by issuing resale certificates to their food vendors. As the pioneers on this issue who fought on behalf of the Louisiana healthcare industry, the consultants at Agile Consulting Group are the ideal partner to help you claim the exemption going forward.

Reach Out to Us with Questions

With Judge Cole's recent ruling confirming the applicability of this exemption to food purchases by qualifying facilities, stakeholders now have the opportunity to recover Parish sales taxes and streamline their financial operations.

If you have any questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or need assistance with a sales tax refund review or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.

Alabama Sales Tax Exemption for Prosthetic Devices

Mon, 26 Feb 2024 16:32:07 GMT

Written by: Matt Soifer

The Alabama sales tax exemption for prosthetic devices allows healthcare providers in the state to purchase prosthetic devices that are billed to a health benefit plan as tax-exempt. This exemption in AL Code 40-9-30(d) has been available for healthcare providers since August 1, 2014. However, many healthcare providers found the exemption difficult to apply in practice because it was extremely time-consuming to document. Agile’s efforts in 2018 to secure a ruling from the Alabama Department of Revenue greatly enhanced the ability for healthcare providers to take advantage of this Alabama sales tax exemption for prosthetic devices. Agile’s original and pioneering ruling was explained in this research bulletin from July 6, 2020 , but essentially, we developed a simplified methodology to document the paper trail on how prosthetic devices are purchased by the healthcare provider and then subsequently billed to the insurance plan. Since Agile’s ruling in 2018 and our research bulletin in 2020, we have a few important updates that we want to share.

Recent Guidance from the Alabama Tax Tribunal

There are three components to the sales tax rates throughout Alabama, the state tax, city tax, and county tax. Compared with most other states, Alabama has a unique system of sales tax administration because the cities and counties are authorized to self-administer their own sales tax collections. So rather than having the Alabama Department of Revenue collect and distribute all of the taxes, cities and counties can enforce their collections independent of the Department of Revenue. While some choose this approach, many others have outsourced their collections to a third-party administrator called Avenu Insights & Analytics (formerly known as Revenue Discovery Systems).

For the cities and counties that use Avenu Insights & Analytics as their third-party administrator, Avenu is also responsible for reviewing any refund petitions to recover overpayments of tax that qualify for the Alabama sales tax exemption for prosthetic devices. In reviewing refund petitions submitted for this exemption, Avenu has taken the position that the Department of Revenue’s approved methodology from Agile’s ruling isn’t applicable to the cities and counties. Since this ruling was issued by the Department of Revenue, they are making the argument that this methodology should only apply to the state tax component that is administered by the Department of Revenue, and that the cities and counties can choose a different methodology to satisfy the exemption’s requirements.

The Alabama sales tax exemption for prosthetic devices in AL Code 40-9-30(d) specifically states that the exemption applies to “state, county, and municipal sales, use and rental and leasing taxes”, so in response to the pushback Agile and its clients have received from Avenu Insights & Analytics, Agile submitted an appeal to the Alabama Tax Tribunal to argue that all of the cities and counties must follow the Department of Revenue’s guidance regarding the methodology used to document the exemption. The Tribunal issued an Opinion on April 18, 2023 that agreed with Agile. In referencing Agile’s methodology, the Tribunal judge stated in part “I conclude that the Taxpayer sufficiently proved that the purchases at issue in the refund petitions were “purchased by or on behalf of an individual pursuant to a valid prescription.”

This is a significant update, as it now confirms that the cities and counties must abide by the Department of Revenue’s approved methodology to allow sales tax refunds on any overpayments of tax on prosthetic devices billed to a health-benefit plan.

Localities Mobilizing to Threaten Exemption

There are some indications that the cities and counties are lobbying the Alabama legislature to revoke the Alabama sales tax exemption for prosthetic devices. The Gadsden Times published an article on August 18, 2023 that discussed the challenges faced by the city of Gadsden over a refund petition submitted by Gadsden Regional Medical Center (“GRMC”) to recover overpayments on taxes paid for prosthetic devices. The refund petition submitted by GRMC requested approximately $1.5 million in refunds and this created some fiscal challenges for the City because they did not incorporate these potential refunds into their budget.

As a result, the City Council “passed a resolution calling on legislators, the Alabama League of Municipalities, the Alabama Association of School Boards and the Association of County Commissions of Alabama to join forces to seek clarification of Section 40-9-30 of the state code.” The attorney representing the city of Gadsden was also quoted as saying that the Alabama legislature should “go back and clean up the statute so cities, school boards and counties can make their budgets knowing what kind of money is going to come in and not have to look at paying $1.5 million three years later.”

Gadsden’s initiative in passing their resolution may be the harbinger of a larger movement with the cities and counties in lobbying the Alabama legislature to “clean-up” or even rescind the Alabama sales tax exemption for prosthetic devices. Since the cities and counties are beginning to take notice of this exemption’s impact on their budgets, it is imperative that any healthcare provider currently paying sales taxes on prosthetic devices billed to a health-benefit plan take immediate action in submitting refund petitions to recover the overpayments.

Agile Can Help Set-Up the Exemption Going-Forward

One concern that we often hear from healthcare providers about the Alabama sales tax exemption for prosthetic devices is how they can claim the exemption on future purchases. Agile has helped all of our healthcare clients in Alabama apply for and secure the correct exemption certificate from the Alabama Department of Revenue that allows their vendors to stop billing them taxes on future purchases. Agile has also taken responsibility for contacting the vendors who are billing sales taxes in error on exempt prosthetic devices and providing them with the official exemption certificate to stop billing taxes going forward. One important thing to note about this Alabama sales tax exemption certificate is that it’s only valid for 1-year and needs to be renewed on an annual basis.

Reach Out to Us with Questions

If you have any questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or need assistance with a sales tax refund review or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.

Matthew Soifer

Matthew Soifer, Agile's Principal and Director of Recovery Operations, joined in 2008, progressing from part-time intern to part-owner in 2021. With a comprehensive background in sales and use tax consulting, particularly in healthcare, Matthew holds an MBA from Georgia Tech and is dedicated to sports in his free time.

Arizona Transaction Privilege Tax Exemption for Forklifts Used by Manufacturers

Mon, 12 Feb 2024 17:19:19 GMT

Written by: Aaron Giles

The Arizona Transaction Privilege Tax exemption for forklifts used by manufacturers has been clarified and expanded as a result of a recent ruling received by the sales tax consultants at Agile Consulting Group. Transaction Privilege Tax or TPT is to Arizona what Sales and Use Tax is to most other U.S. states. Transaction Privilege Tax is levied on sales of most goods and some services in the state of Arizona. However, there is an exemption in place for the manufacturing industry.

In a prior post, Agile has discussed the Arizona sales tax exemption for manufacturing . The exemption is outlined in Ariz. Rev. Stat. Ann. §42-5061(B)(1) and includes a number of different categories of purchases commonly made by manufacturers. One area where the Statutes and the Arizona Department of Revenue’s guidance has been lacking relates to forklifts, which are arguably one the most universally used types of machinery and equipment across all types of manufacturing operations regardless of the product being produced. In fact, no prior rulings or guidance have been provided regarding how the Arizona Department of Revenue suggests that the manufacturing exemption applies to forklift purchases, leases, repairs, as well as the fuel used to power these units.

Agile requested clarification of the Arizona Transaction Privilege Tax exemption for forklifts used by manufacturers in a ruling submitted to the Arizona Department of Revenue in June 2023. Additionally, our sales tax consultants argued for favorable tax treatment of these forklifts across twelve different scenarios for forklifts in use at a plant for one of our longstanding Arizona manufacturing clients. In the response Agile received from the Arizona Department of Revenue’s Taxpayer Services Section representative, we received encouraging news for all Arizona manufacturers that use forklifts within their manufacturing process.

The key takeaways from the ruling Agile received about the Arizona Transaction Privilege Tax exemption for forklifts used by manufacturers are:

1. Forklifts have the underlying characteristics of qualifying “machinery and equipment”, however, that does not mean that all forklifts qualify for an exemption from Arizona Transaction Privilege Tax, which is Arizona’s equivalent to sales and use tax.

2. To qualify for the exemption, a forklift must meet two criteria:

a. First, the forklift must be “used directly” in manufacturing, processing, or other types of production. Direct use is determined by whether the function or step is essential to the operation. A good guideline is that the closer the item comes to direct contact with the product being produced, the greater likelihood that the item is being “used directly”.

b. Second, the fo rklift must be used within the prescribed boundaries of the “manufacturing, processing, fabricating, job printing, refining, or metallurgical operations”. Arizona considers manufacturing or production to begin at “the first stage where processing ultimately begins in order to place the tangible personal property in a different form, composition or character than that in which it was acquired”. Arizona considers manufacturing or production to end whenever “the finished product is completed, finished or packaged for commerce”. Any functions or steps that fall between these two points are considered to fall within the acceptable boundaries.

2. Any forklift that meets the two-pronged test above can take full advantage of the Arizona Transaction Privilege Tax exemption for forklifts, however, the determination made by any taxpayer can be questioned by the Arizona Department of Revenue and its auditors.

3. For a qualifying forklift, the exemption applies equally to purchases, long-term and short-term leases.

4. For a qualifying forklift, the exemption applies to repair or replacement parts used in the maintenance and upkeep of such units.

5. Fuel does not qualify for the Arizona sales tax exemption for manufacturing regardless of whether it is used in a qualifying forklift or not.

While we have focused our discussion around forklifts specifically, the underlying logic of the Arizona Transaction Privilege Tax exemption for forklifts would apply to any form of intraplant transportation equipment or conveyance machinery such as hoists, cranes, hydraulic lifts, conveyors or pipes.

As detailed in our previous post regarding the Arizona sales tax exemption for manufacturing , an Arizona manufacturer can claim the exemption on a go forward basis with its vendors via providing a valid Arizona Form 5000 exemption certificate . An Arizona manufacturer is also able to recoup any taxes paid in error over the prior 48 months. Additional information about how to accomplish these objectives can be found in our prior post, or you can reach out to Agile Consulting Group directly for guidance and assistance.

As with all sales and use tax research, the specific circumstances and fact patterns of each taxpayer’s scenario need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Arizona sales and use tax exemptions also known as Transaction Privilege Tax. If you have questions, comments or would like to discuss your circumstances regarding this issue or any other sales and use tax issue, please contact an Agile sales tax consultant at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

Aaron Giles

Aaron C. Giles, Founder of Agile Consulting Group, brings over two decades of expertise in sales and use tax consulting. With a background in economics and an MBA with Honors, Aaron has successfully challenged tax laws to secure exemptions for clients across various industries. He leads a dedicated team, focusing on operating taxes, particularly excelling in the sales and use tax realm.

Economic Nexus State By State Guide

Tue, 06 Feb 2024 21:48:04 GMT

Written by: Agile Consulting

What Triggers Economic Nexus?

Chances are you’ve heard of economic nexus yet you might not know what the term really means. If you are a business owner, entrepreneur, manager, or involved in accounting or tax, and struggling with economic nexus, you have surfed your way over to the right corner of the web. Economic nexus is established when sales exceed the benchmark or threshold outlined by a state. Then, the seller has the obligation to begin collection of sales tax in that state. The quantification of the sales benchmark is tabulated in either transactions, revenues or sometimes both. In certain states, exempt or nontaxable sales are included in the count that dictates whether economic nexus is triggered.

Let's take a look at each state’s economic nexus details including their respective thresholds. Without further ado, here’s your guide to economic nexus by state.

State By State Guide to Economic Nexus

Alabama

Alabama's economic nexus began October 1, 2018. The state's threshold is $250,000 in retail sales within a single year. Businesses are expected to register by the first of January the year subsequent to the threshold being exceeded.

Transactions included in the determination of economic nexus are the aggregate retail sales of tangible personal property delivered within the state as well as sales made via a non-collecting marketplace facilitator. Sales completed through a registered marketplace facilitator should be excluded from this computation.

Alaska

Alaska does not have a state sales tax. However, Nome, Alaska made history as the first-ever city to pass an economic nexus law. The law went into effect on September 1, 2019. The city's economic nexus threshold is $100,000 in gross sales or 100+ transactions within the city's limits in a calendar year. The city requires registration on the first day of the month that begins 30 days after the date on which the threshold was met.

Arizona

The economic nexus in Arizona began on October 1, 2019. The state's economic nexus is triggered at $100,000 in gross annual sales. The deadline for registration is the first day of the month 30 days after the date on which the threshold was exceeded.

In terms of determining whether a business has met Arizona’s economic nexus threshold, included transactions are the gross proceeds of the sales of tangible personal property or services, including any exempt or nontaxable revenue. The state’s excluded transactions are sales that occurred within marketplace facilitators registered for sales tax collection within the state.

Arkansas

Arkansas launched its economic nexus on the first of July in 2019. The state's threshold for triggering economic nexus is $100,000 in taxable sales or 200 yearly transactions. Businesses are required to register on the day that the threshold is passed.

Arkansas’ determination includes transactions such as taxable services, digital codes and products and aggregate taxable sales of tangible personal property. The state excludes transactions such as sales completed with registered marketplace facilitators along with exempt sales of tangible personal property and services.

California

California's economic nexus started on the first of April in 2019. The threshold is half a million dollars of gross sales in a year. The expected registration date is that on which the threshold is first passed.

In terms of measuring the threshold, the state’s included transactions include the aggregate tangible personal property sales delivered into the state without regard for whether those are taxable or nontaxable sales, such as those for resale. California’s excluded transactions encompass both taxable and exempt services.

Colorado

Colorado's economic nexus started June 1, 2019. The state's economic nexus threshold is $100,000 in retail sales in a calendar year. Colorado does not have a transaction count clause in their economic nexus policy. The required registration date is the first day of the month 90 days after passing the threshold.

Colorado’s evaluation of economic nexus includes the gross receipts from the retail sale of tangible personal property regardless of whether those are taxable or nontaxable sales. The state has excluded transactions of services, both taxable and exempt, as well as sales for resale otherwise known as wholesale sales, SaaS and digital products.

Connecticut

Connecticut's economic nexus start date was December 1, 2018. The state's threshold for economic nexus is $100,000 gross sales along with 200 transactions in a year. It is one of the few states that require businesses to meet both criteria before sales tax registration is expected. The registration date is the first day of the month of October in the year in which the benchmark was met.

The state’s included transactions are gross receipts resulting from the sale of tangible personal property without any deduction allowed for exempt sales, all services regardless of whether they are taxable or exempt, and sales made through online marketplaces. Sales for resale are the state’s only excludable transactions.

Delaware

Delaware does not have sales tax , so there is no applicable economic nexus within this state.

Florida

Florida was one of the last states to enact economic nexus. Florida's economic nexus started July 1, 2021. The state's threshold is $100,000 of taxable remote sales per year. Businesses should register on the day that the threshold is exceeded.

The state only includes taxable sales of tangible personal property that is physically moved into the state in its evaluation of economic nexus. Florida excludes nontaxable sales of tangible personal property as well as most services.

Georgia

Georgia's economic nexus program kicked off on January 1, 2019. The threshold is $100,000 of retail sales or 200 annual retail transactions. The time to register is the date that the threshold is surpassed.

For determination of economic nexus, Georgia’s included transactions are limited to gross revenue derived from retail sales of items. Georgia’s excluded transactions are non-retail sales of tangible personal property and many services.

Hawaii

Hawaii's economic nexus start date was July 1, 2018. The state’s threshold is $100,000 of gross sales or 200 annual transactions. The required registration date is the first day of the next month after the threshold has been met.

For determination of economic nexus, the state includes gross income from both tangible and intangible property sent into the state, services rendered within the state without regard for whether those services are classified as taxable or non-taxable, as well as non-taxable or exempt sales.

Id aho

Idaho's economic nexus start date is June 1, 2019. The state's threshold is $100,000 of annual gross sales. The time to register for a sales tax license with the state of Idaho is the day on which the threshold is surpassed.

For determination of economic nexus, Idaho includes all transactions or the cumulative gross receipts resulting from any and all product or service sales without regard to whether those sales are subject to tax or are exempt.

Illinois

Illinois began its economic nexus program on October 1, 2018. The state has established a threshold of either $100,000 or 200 transactions in retail sales of tangible personal property within a calendar year. Once the threshold is met, the seller is required to register for an Illinois sales tax license the first day of the next quarter.

When determining whether a company has met the economic nexus threshold, Illinois includes gross receipts from sales made into the state regardless of whether those sales are considered to be taxable or exempt sales. Sales processed through a market facilitator, sales for resale, services and occasional sales are categories of transactions that can be excluded from the calculations when evaluating economic nexus within Illinois.

Indiana

Indiana’s start date for its economic nexus policy was October 1, 2018. The state’s threshold is $100,000 of gross sales or 200 annual transactions. Registration is expected the day that the threshold is surpassed.

For determination of economic nexus, Indiana includes transactions such as gross sales revenue from sales of tangible personal property, products or services delivered electronically into the state, taxable and exempt services and exempt sales such as sales for resale.

Iowa

Iowa's economic nexus start date was January 1, 2019. The state has a threshold of $100,000 of annual gross sales. Iowa does not have a transaction count as part of its threshold. The registration date is the first day of the month that is 30 days after surpassing the threshold. For example, if the economic nexus threshold was surpassed on April 22nd, then the company must be registered by June 1st.

When evaluating whether one has economic nexus in Iowa, the gross sales revenue derived from tangible personal property including sales for resale or otherwise non-taxable sales, electronically delivered products and services must be included in the revenue calculations.

Kansas

Kansas kicked off its economic nexus policy effective October 1, 2019. The threshold is $100,000 of gross sales per calendar year. Kansas does not have a transaction count as part of its threshold. Taxpayers are required to register the day on which the threshold is surpassed.

For determination of economic nexus, Kansas has provided guidance that says that the gross receipts of the business should be evaluated. That includes all sales to customers located within Kansas - tangible personal property, services, and digital products such as software as a service (SaaS).

Kentucky

Kentucky rolled out its economic nexus policy effective October 1, 2018. Its threshold is $100,000 of gross sales or 200 separate transactions within a calendar year. Registration for sales tax collection is required by the first day of the month that is 60 days post-threshold. For example, if the threshold was met on July 3rd, the registration must be in place by October 1st.

For determination of economic nexus, Kentucky includes transactions such as sales of tangible personal property and sales of digital products electronically transferred into the state. Services are the only category of sales that can be excluded from the calculations.

Louisiana

Louisiana was one of the last states to enforce an economic nexus policy. Taxpayers who has exceeded the threshold were required to be registered no later than July 1, 2020. Louisiana’s threshold is either $100,000 of gross sales or 200 transactions over the course of a calendar year. Registration must be completed within 30 days of surpassing the threshold, however, Louisiana offers a grace period of an additional 30 days before sales tax collection must begin.

For determination of economic nexus, Louisiana evaluates gross revenues of products delivered into the state, including electronically delivered products and software. Services are also included in the calculation.

Maine

Maine's start date for its economic nexus policy was July 1, 2018. The state has a threshold of $100,000 in gross sales or a transaction count of 200+ during a calendar year. The day the threshold is surpassed is the day Maine expects a business to register.

For determination of economic nexus, Maine includes transactions of taxable services, and all sales of tangible personal property in its evaluation of a business’s revenue. Services that are not subject to tax in the state of Maine are excluded from the calculations when determining economic nexus.

Maryland

Maryland initiated its economic nexus program on October 1, 2018. Maryland’s threshold is either $100,000 in gross sales or 200 transactions within a calendar year. Maryland expects businesses to register by the 1st day of the month subsequent to surpassing either of these thresholds.

In its evaluation of a business for economic nexus, Maryland includes gross sales of tangible personal property, digital goods or software delivered into the state, as well as services that are subject to tax under Maryland’s sales and use tax laws. Services which are typically not taxed in Maryland can be excluded from the calculations.

Massachusetts

Massachusetts kicked off its current economic nexus policy effective October 1, 2019, however, it originally implemented its first economic nexus policy effective October 1, 2017. The 2019 change reduced the threshold to $100k of gross sales in a calendar year. There is no transaction count threshold as part of the current economic nexus policy in the state of Massachusetts. Massachusetts is unique in that a business is expected to complete its registration on a different timeline depending on when it exceeds the threshold. If the threshold is met before October 31st in a calendar year, the registration must be effective as of January 1st of the subsequent year. If the threshold is met between November 1st and December 31st in any calendar year, then the registration must be effective by the first day of the month that is two months after exceeding the threshold. For example, if the economic nexus threshold is met on December 5th, then the business must have its registration in place by February 1st.

For determination of economic nexus, the state of Massachusetts looks at gross sales. There are no sales that can be excluded. That means that all sales of tangible and intangible personal property as well as all services should be included in the calculations.

Michigan

Michigan has a start date of October 1, 2018 for its economic nexus policy. Its threshold is either $100,000 in gross sales or 200 transactions over the timespan of a calendar year. If the threshold is met any time during a calendar year, a registration with an effective date of January 1st of the subsequent year is expected.

For determination of economic nexus, Michigan’s includes all sales transactions, including sales of tangible personal property as well as all services.

Minnesota

Minnesota's beginning date for economic nexus was October 1, 2018 or sixty days following the remote seller's surpassing the benchmark. The state has a threshold of either $100,000 of total sales or 200 transactions within a rolling 12-month timespan. A taxpayer must register within 60 days of exceeding either threshold.

Minnesota does not require businesses to include all sales transactions when making the evaluation of whether it has exceeded the defined thresholds. A business should include retail sales, sales not subject to tax including non-profit or otherwise non-taxable entities as well as sales of taxable services. A business can exclude sales for resale, and exempt services.

Mississippi

Mississippi's initial date that its economic nexus policy went into effect was September 1, 2018. The state has a threshold of $250K in gross sales made into the state within a rolling 12-month time period. Registration is expected the day the threshold is reached.

For the determination of economic nexus, the state considers total sales made into Mississippi without allowing for any exclusions.

Missouri

Missouri was the last U.S. state to enact its economic nexus policy. It did so effective January 1, 2023. The threshold for economic nexus in Missouri is $100,000 in gross sales over the course of the preceding 12-month timespan. The state does not have a transaction count as part of its economic nexus threshold. Registration is expected before the first day of the month 90 days after the end of the quarter in which the threshold was exceeded. For example, if the threshold is met on May 23rd, then the registration should be completed before September 1st.

For determination of economic nexus, the state includes gross sales of tangible personal property, but does allow businesses to exclude sales that are not subject to tax, such as sales for resale or sales to a non-taxable entity and sales of all services.

Montana

The state of Montana does not have sales tax and therefore does not have an economic nexus policy.

Nebraska

Nebraska has a January 1st, 2019 start date for its economic nexus policy and a threshold of $100k in gross sales or greater than 200 transactions over the course of the current or preceding calendar year. Registration is required by the first day of the second calendar month after crossing the threshold. For example, if either threshold is met on February 23rd, then April 1st is the deadline for registration.

For determination of economic nexus, Nebraska’s includes gross retail sales to in-state customers, including sales not typically subject to tax. Services are also included. However, a business can exclude sales for resale, and transactions that involve subleasing or subletting property.

Nevada

Nevada began enforcing its economic nexus policy on November 1, 2018. Its threshold is either $100,000 in retail sales or 200 retail transactions completed over a calendar year. Once a remote seller meets either threshold, it is expected to complete a registration by the first day of the month 30 days after reaching the threshold. That means that if nexus is triggered on June 12th, then the registration must be submitted to the Nevada Department of Taxation by August 1st.

For determination of economic nexus, Nevada includes gross retail sales of tangible personal property with no deduction allowed for tangible personal property of a nature that is typically not subject to sales tax in the state. Nevada does allow for the exclusion of sales for resale and any services from the calculations for determining nexus.

New Hampshire

New Hampshire does not have sales tax.

New Jersey

New Jersey initiated its economic nexus program on November 1, 2018. The state's thresholds are either $100,000 in gross sales or 200 completed transactions over the course of a calendar year. Registration is expected on the same day the threshold is surpassed.

For determination of economic nexus, the New Jersey State includes the gross revenue obtained from the retail sales of tangible personal property, certain digital products, and taxable services listed in N.J.S.A. 54:32B-3(b). New Jersey excludes any transactions for exempt services, which are all other services than those listed in the aforementioned section of the New Jersey Statutes.

New Mexico

New Mexico's start date for its economic nexus program was July 1, 2019. The state's threshold is $100,000 of annual taxable sales. New Mexico does not have a transaction count as part of its threshold requirements. The date by which registration is expected of taxpayers who reach the $100,000 threshold is the first day of the subsequent year.

For determination of economic nexus, New Mexico includes the following categories of revenue in its evaluation: sales for licensing or use of real property, sales of digital products and SaaS, and the total TAXABLE gross receipts from the sale, lease or licensing of tangible personal property. Businesses can exclude revenue earned from the sale of exempt goods and services.

New York

The state of New York’s economic nexus policy began on June 21, 2018, which was the date the U.S. Supreme Court issued its ruling in the landmark case SD v. Wayfair. New York’s threshold is one of the few states that requires businesses to reach both a revenue AND transaction count threshold. The combination threshold is $500,000 in gross sales AND 100+ transactions over the course of the preceding 4 quarters. New York evaluates this on a rolling calendar basis, not a calendar year basis. New York expects businesses to register within 30 days of meeting the thresholds.

For determination of economic nexus, New York includes gross receipts earned from the sales of tangible personal property. New York considers SaaS to be tangible personal property, so those transactions would be included as well. Services are excluded from the calculations in New York.

North Carolina

North Carolina began its economic nexus policy effective November 1, 2018. Its threshold is either $100,000 in gross sales or 200+ transactions within a calendar year. A business is expected to register the day the threshold is surpassed.

For determination of economic nexus, the state of North Carolina includes all gross sales made into the state including sales of tangible personal property, digital products and services without deductions for any such items that are non-taxable per North Carolina’s sales and use tax exemptions. There are no sales that can be excluded from North Carolina’s economic nexus calculations.

North Dakota

North Dakota's beginning date for economic nexus was October 1, 2018. The state's threshold is $100,000 of taxable sales in a year. The expected registration date depends upon when a business meets this threshold. If a business meets the threshold between January 1st and October 1st of a calendar year, registration is expected to be completed within sixty days. If a business meets the threshold between October 2nd and December 31st, then the business is expected to be registered effective January 1st of the subsequent year.

When determining if a business has met North Dakota’s economic nexus threshold of $100,000, only taxable sales of tangible personal property and services should be included in the calculations. Any sales of products or services that are not subject to tax in North Dakota can be excluded. Also, sales made through a marketplace facilitator can be excluded since that marketplace facilitator is responsible for assisting with the filings.

Ohio

On November 1, 2018, the state of Ohio began enforcing its economic nexus policy. Its threshold is either $100,000 in gross sales or 200+ transactions completed within the state per calendar year. Ohio expects a business to register the day it meets either of these thresholds.

When assessing one’s transactions to determine if either of Ohio’s economic nexus thresholds have been met, total gross retail sales of tangible personal property should be included along with any revenue generated from the enumerated taxable services as defined by the Ohio tax code. Bear in mind that Ohio considers many digital products to be tangible personal property. Wholesale or resale sales of tangible personal property can be excluded along with revenue from non-taxable services.

Oklahoma

That state of Oklahoma initiated its economic nexus policy on July 1, 2018 start date. The state’s threshold is $100,000 of gross sales in the current or previous calendar year. Oklahoma expects businesses that exceed this threshold to register for a sales tax license by the 1st day of the next month. That means that if you meet the threshold on July 3rd, Oklahoma would expect you to submit a registration no later than August 1st.

Only the revenue from taxable tangible personal property and taxable services are included in the calculations to determine economic nexus within Oklahoma. Any exempt transactions, either of tangible personal property or services, can be excluded from the calculations in Oklahoma.

Oregon

Oregon has no sales tax.

Pennsylvania

July 1, 2019 was the first date on which the state of Pennsylvania began enforcing economic nexus. Its threshold is $100,000 in gross sales during a calendar year. If a business meets this $100,000 threshold at any point during a calendar year, the state of Pennsylvania expects the business to be registered by the first of April in the next calendar year.

Pennsylvania makes it simple to evaluate a business’ sales in terms of establishing economic nexus - any revenue from all types of transactions is included with no exclusions or exceptions.

Puerto Rico

The economic nexus start date in Puerto Rico was July 1, 2021. The U.S. territory has a threshold of $100,000 or 200 transactions over the course of the seller’s accounting year. Registration is expected the day the threshold is met.

Total gross sales revenue should be evaluated when determining the status of economic nexus within Puerto Rico. There are no transactions that can be excluded.

Rhode Island

Rhode Island first attempted to implement economic nexus on August 17, 2017 prior to the U.S. Supreme Court ruling in South Dakota v. Wayfair, however, its revised and current policy went into effect on July 1, 2019. Rhode Island’s threshold is $100,000 in taxable sales or 200+ taxable transactions within a calendar year. Once either of those thresholds are met, Rhode Island expects a business to be registered by the first day of January in the subsequent year.

Rhode Island has chosen to include taxable transactions involving the sale of tangible personal property, prewritten computer software and other digital products regardless of the method of delivery, and services that are taxable within the state. Non-taxable transactions and exempt services can be excluded.

South Carolina

South Carolina's kickoff date for its economic nexus policy was November 1, 2018. South Carolina's threshold is $100,000 of yearly gross sales. There is no component of the threshold tied to transaction count. South Carolina’s expected registration date is the first day of the second calendar month after the threshold is surpassed. For example, if either threshold is met on May 23rd, then July 1st is the deadline for registration.

The Palmetto State includes gross revenue derived from sales of tangible personal property or services as well as electronically transferred digital products, as South Carolina has defined those to be tangible personal property. No transactions can be excluded from the revenue calculations.

South Dakota

The state that was the impetus for the U.S. Supreme Court’s concept of economic nexus, South Dakota, initiated its policy on November 1, 2018. Its threshold is $100k in gross annual sales. South Dakota expects businesses to complete their registration by the first day of the second calendar month after the threshold was met. For example, if the revenue threshold is met on June 19th, then August 1st is the deadline for registration.

To determine whether a business has economic nexus within South Dakota, the calculations are straightforward. All revenue earned from any sales of products, services and digital goods are included. There are no types of transactions that should be excluded from the calculations.

Tennessee

Tennessee began its economic nexus policy enforcement on October 1, 2019. Its threshold is $100,000 in retail sales over the preceding 12 months on a rolling calendar, not calendar year basis. Tennessee requests that all businesses that meet this threshold complete their registration by the first day of the third calendar month. In other words, if your business meets the threshold on June 5th, then September 1st is the deadline for registration.

Tennessee allows businesses to deduct any revenue earned through wholesale sales or through online marketplaces such as Amazon, Etsy or Walmart from its calculations to determine economic nexus. All retail sales to customers within Tennessee, regardless of whether those entities are taxable or non-taxable, need to be included along with all revenue earned from services rendered within the state.

Texas

The Lonestar State of Texas commenced its economic nexus policy enforcement on July 1, 2019. Its threshold is $500,000 in gross sales made within the preceding 4 quarters. A business is expected to register with the Texas Comptroller’s Office no later than the first day of the fourth month after the remote seller hits the threshold. That means that if your business meets the threshold on August 8th, December 1st is the deadline for having a Texas sales tax license.

All sales made into the state of Texas are included when evaluating revenue for establishing economic nexus. There are no allowable deductions.

Utah

Utah's start date for its economic nexus program was January 1, 2019. The state of Utah’s threshold is $100k of gross sales or 200 transactions in a calendar year. Utah expects businesses to register the day either threshold is met.

When evaluating a business’ revenue in terms of the state of Utah’s economic nexus thresholds, the transactions to include are gross revenues from sales of tangible personal property, services rendered and any digital products, even if those are distributed electronically. This includes both taxable and non-taxable sales of these types. There are no sales that should be excluded from these calculations.

Vermont

The state of Vermont’s first day of its economic nexus program was July 1, 2018. Its threshold is $100,000 in gross sales or 200 transactions over the previous 12 months. Note that this threshold is computed on a rolling calendar basis over the preceding 12 months, not necessarily on a calendar year basis. Vermont expects businesses to register by the first day of the month after reaching either threshold.

When assessing a business’ sales in regard to Vermont’s economic nexus thresholds, the following types of sales should be included: tangible personal property, services, digital products, even if those are transferred electronically. No sales should be excluded from these calculations.

Virginia

Virginia's economic nexus policy went into effect on July 1, 2019. Its thresholds are either $100,000 in retail sales or 200+ retail transactions within a calendar year. Virginia expects businesses to register for sales tax collection the day either threshold is met.

Virginia includes sales of tangible personal property, digital products delivered electronically, and services subject to tax when assessing whether a business has reached either threshold. The state allows businesses to exclude any wholesale sales, sales for resale and services not subject to tax in Virginia.

Washington

Washington began its economic nexus policy with an effective date of January 1, 2018. Its current threshold is solely tied to revenue, although prior iterations of its policy included transaction counts. Any business that reaches sales revenues of $100,000 from sales within the state of Washington has established economic nexus. A business is expected to register the first day of the month that begins 30 days after the threshold is surpassed. If you meet the threshold on September 5th, then your business must have its registration completed by November 1st.

Washington includes all sales revenue in its calculations to determine economic nexus. There are no categories of sales that may be excluded.

Washington D.C.

Washington D.C., also known as the District of Columbia, began its economic nexus program on January 1, 2019. Its threshold is either $100,000 in retail sales or 200 retail transactions within a calendar year. A business is expected to register the day it meets either threshold.

Washington D.C. includes retail sales and taxable services in its determination of economic nexus. Non-taxable services, wholesale sales and sales for resale may be excluded from a business’ calculations.

West Virginia

The start date for economic nexus in West Virginia was January 1, 2019. The state threshold is either 200+ retail transactions or $100,000 in retail sales within a calendar year. Registration is required on the date on which either the threshold is exceeded.

The state includes all transactions when evaluating a business’ sales in terms of economic nexus.

Wisconsin

Wisconsin's economic nexus policy start date was October 1, 2018. The state’s threshold is $100,000 in gross sales over the course of a calendar year. Wisconsin expects a registration to be completed the same day that the threshold is reached.

Wisconsin includes all transactions in its assessment of whether a business has economic nexus. There are no types or categories of sales that should be excluded.

Wyoming

Wyoming began enforcing its economic nexus program on February 1, 2019. Wyoming's threshold is either $100,000 of gross sales or 200 distinct transactions per calendar year. Businesses should register the same day that either threshold is surpassed.

The state of Wyoming includes all transactions a business makes within the boundaries of the state when evaluating its economic nexus threshold. No sales should be excluded in Wyoming.

Find More Information for Your State

2024 Sales Tax Holidays

aaron.giles@salesandusetax.com (Aaron Giles) — Mon, 29 Jan 2024 15:48:49 GMT

Sales tax holidays give shoppers a break from paying tax on purchases. Many states offer sales tax holidays to boost consumerism and help their local economies. In some cases, sales tax holidays are held on multiple dates throughout the year. They may be inclusive, meaning all items are included in the tax-free shopping, or they may be selective, in which case only certain things are part of the sales tax holiday.

What is a Sales Tax Holiday?

A sales tax holiday is a period of time when consumers don’t have to pay sales tax on qualifying purchases. Sales tax holidays typically run over a weekend, since that’s when most people have more free time to shop. However, some states run sales tax holidays for longer periods of time, ranging from one week to an entire month.

Do All States Have Sales Tax Holidays?

Not all states have sales tax holidays. States that do not have sales tax have no need for sales tax holidays. Some states offer local tax holidays in lieu of a sales tax holiday. In addition, some sales tax holidays are chartered into a state’s regulations. Others are at the discretion of government officials on a year-to-year basis.

When Are Sales Tax Holidays or Tax-Free Weekends?

Sales tax holidays and tax-free weekends typically take place when they have the most benefit for the consumer. For instance, sales tax holidays on school supplies usually take place in July or August, before the schools begin their sessions. Sales tax holidays on weather preparedness items like furnaces and other appliances usually take place in the fall, before the winter season. Each state is in charge of planning when their sales tax holidays are to take place each year.

What Products Are Included in a Sales Tax Holiday?

Sales tax holidays vary from state to state . Typical products included in a sales tax holiday are storm protection products like windows and doors, furnaces and water heaters, school supplies, clothing, and computers.

2024 Sales Tax Holidays by State

Note that sales tax holidays are typically available to everyone, not just residents of that particular state. If you wonder if this is true where you want to shop on a sales tax holiday, a quick call to a retailer in the area will answer the question.

Jump to the states that interest you:

Alabama

Alabama tax-free weekends apply to state sales tax. Local jurisdictions can opt to participate or not , so it’s important to check first whether or not your municipality is participating. Both sales tax holidays begin at 12:01 a.m. and end at midnight on the dates indicated.

Severe Weather Preparedness Sales Tax Holiday, February 23-25, 2024

A full list of covered items can be found here , which includes:

Portable generators with a sales price of $1,000 or less
Severe weather supplies (batteries, tarps, etc.) with a sales price of $60 or less

Back To School Sales Tax Holiday, July 19-21, 2024

A full list of covered items can be found here , which includes:

Books with a sales price of $30 or less
Clothing with a sales price of $100 or less
Computers, computer software, and school computer supplies with a sales price of $750 or less
School supplies with a sales price of $50 or less

Arkansas

All retailers are required to participate in the 2024 sales tax holiday, which applies to both state and local taxes. Retailers are not permitted to charge tax on qualifying items during the Arkansas tax-free weekend, which begins at 12:01 a.m. on the first Saturday of August and ends at 11:59 p.m. the following Sunday.

Arkansas 2024 sales tax holiday , August 3–4, 2024

Clothing with a sales price of less than $100
Clothing accessories and equipment (including wigs and hair pieces) with a sales price of less than $50
Electronic devices (no price limitations)
School supplies (no price limitations)

Connecticut

Connecticut has an entire sales tax-free week on certain items , which applies to state sales tax only, since Connecticut has no local tax.

August 18–24, 2024

Certain clothing and footwear priced less than $100

Florida

Florida sales tax exemption period on Energy Star appliances , July 1, 2022–June 30, 2024

Clothes dryers with a price of $1,500 or less
Refrigerators or refrigerator/freezers with a price of $3,000 or less
Washing machines with a price of $1,500 or less
Water heaters with a price of $1,500 or less

Florida sales tax exemption period on impact-resistant windows, doors, and garage doors , July 1, 2022–June 30, 2024

Doors, garage doors, or windows must carry an impact-resistant rating
Florida sales tax exemption period on gas ranges and cooktops, July 1, 2024–June 30, 2024
gas ranges or cooktops fueled by combustible gas, excluding outdoor grills, camping stoves, and other portable stoves

Florida sales tax exemption period on school supplies, January 1, 2024–January 14, 2024

school supplies with a price of $50 or less
clothing with a price of $100 or less
Computers with a price of $1,500 or less

Iowa

All retailers with regular operating hours on these dates are required to participate. The tax-free period begins at 12:01 a.m. on the first Friday of August and ends the next day at midnight. Applies to both state and local sales tax.

Iowa annual sales tax holiday for select clothing and footwear , August 2–3, 2024

Clothing and footwear priced under $100, with the exception of watches, watchbands, jewelry, umbrellas, handkerchiefs, sporting equipment, skis, swim fins, roller blades, skates, and any special clothing or footwear designed primarily for athletic activity or protective use and not usually considered appropriate for everyday wear.

Maryland

Starting from midnight on the second Sunday in August until the end of the following Saturday, clothes and shoes that cost $100 or less won't have Maryland's six percent sales tax. The first $40 of sales for backpacks or books is also exempt.

This exemption applies to each item that's $100 or less, even if you buy more than one at the same time. For example, if you get two shirts for $80 each, both shirts are exempt from tax, even though the total is more than $100 ($160).

The tax holiday doesn't cover:

Accessories, even if they cost $100 or less.
The first $100 of a pricier single item or set (like a suit) of clothing or footwear. For instance, if someone purchases pants for $110, the sales tax applies to the full $110.
Special clothing or footwear mainly designed for protection or not meant for everyday use.
Taxable services related to clothing or footwear, like alterations.

Massachusetts

The Massachusetts state sales tax holiday for 2024 has not yet been announced. However, according to state regulations, the dates for the Massachusetts sales tax holiday weekend must be set each year no later than July 1. Historically, the dates fall around the middle of August. All businesses, including those who sell online, are mandated to participate in Massachusetts’ tax-free weekend.

August, 2024

Single items of tangible personal property priced at $2,500 or less

Mississippi

Mississippi holds an annual sales tax holiday towards the end of July. Participation isn’t mandatory, so local sales tax may still apply, depending upon the retailer. Tax-free weekends in Mississippi start at 12:01 a.m. and end at midnight.

Clothing and footwear priced less than $100
Certain school supplies priced less than $100

Mississippi Second Amendment sales tax holiday , to be held at the end of August 2024 applies to both state and local sales tax.

Ammunition, firearms, and certain hunting supplies (with no price restriction)

Missouri

Both tax-free periods begin at 12:01 a.m. and end at midnight. Participation isn’t mandatory, so local sales tax may still apply, depending upon the retailer.

Missouri Show Me Green sales tax holiday , April 19–25, 2024

Energy Star products with a price of $1,500 or less

Missouri back-to-school sales tax holiday , August 2–4, 2024

Clothing priced at $100 or less
Personal computers and peripheral devices with a price tag of $1,500 or less
Software priced at $350 or less
Graphing calculators with a price tag of $150 or less
School supplies priced at $50 or less

Nevada

Nevada Day sales tax holiday, October 25–27, 2024

This unique sales tax holiday exclusively benefits eligible individuals affiliated with the Nevada National Guard and their qualified dependents. Those wishing to benefit from the temporary sales and use tax exemption must annually submit an application through their Commanding Officer, with the deadline set at least 30 days before Nevada Day. Eligible applicants will receive a letter of exemption from the Nevada Department of Taxation. Retailers completing exempt sales to qualifying National Guard members or their dependents are required to acquire and keep a copy of the consumer's exemption letter.

Tangible personal property sold to a member of the Nevada National Guard who is on active duty and a resident of Nevada, or to their qualifying dependents

New Jersey

New Jersey annual back-to-school sales tax holiday , August 25–September 2, 2024, between 12:01 a.m. and 11:59 p.m. on those dates. Items to be included are:

Computers with a price tag of less than $3,000
Computers and supplies less than $1,000
School art supplies with no price restrictions
School instructional materials with no price restrictions
School supplies with no price restrictions
Sports or recreational equipment with no price restrictions

New Mexico

The annual gross receipts tax holiday is the first weekend of August from 12:01 a.m. on the first Friday to midnight the following Sunday. Note that retailers aren’t required to participate in the back-to-school tax holiday.

New Mexico back to school tax-free holiday , August 2–4, 2024

Bookbags, backpacks, maps, and globes priced below $100
Clothing, footwear, and accessories less than $100
Computers and devices up to $1,000
Computer peripherals priced up to $500
Handheld calculators less than $200
School supplies less than $30

Ohio

The tax-free period begins at 12:00 a.m. on the date and concludes at 11:59 p.m. Items used in a trade or business are not exempt during the tax-free weekend. Eligible items are exempt from state sales tax as well as county and transit sales taxes. Participation is mandatory and applies to both state and local taxes.

Ohio sales tax holiday , August 2–4, 2024

Clothing at $75 or less
School instructional materials at $20 or below
School supplies at $20 or less

Oklahoma

Retailer participation is mandatory. Applies to both state and local sales taxes.

Oklahoma sales tax holiday , August 2–4, 2024

Clothing and footwear priced lower than $100

South Carolina

South Carolina’s tax-free weekend begins at 12:01 a.m. on the first Friday in August and runs to midnight on the following Sunday. Retailer participation is mandatory. Applies to both state and local sales taxes. No price restrictions on eligible goods.

South Carolina sales tax holiday , August 2–4, 2024

Certain bed and bath items
Clothing and footwear
Computers, printers and printer supplies, and software (excludes cell phones, smartphones, or other handheld devices that make phone calls or are primarily used to listen to music, watch videos, or read books)
School supplies

Tennessee

The annual sales tax holiday begins at 12:01 a.m. on the last Friday in July and concludes at 11:59 p.m. the following Sunday. Applies to state and local sales tax. Participation is mandatory

Tennessee sales tax holiday , July 26–28, 2024

Clothing and footwear priced at $100 or less
Computers, laptops, and tablets priced at $1,500 or less
School and art supplies with a price tag of $100 or less

Tennessee grocery tax holiday , August 1, 2024–October 31, 2024

Food and food ingredients

Note that sales of alcoholic beverages, candy, dietary supplements, and prepared food do not qualify for the sales tax exemption.

Texas

These Texas tax holidays apply to state and local sales tax and retail participation is mandatory. Texas tax-free weekends begin at 12:01 a.m. and conclude at midnight.

Texas emergency preparation supplies sales tax holiday , April 27–29, 2024

Hurricane shutters and emergency ladders less than $300
Portable generators less than $3,000
Specified emergency preparation supplies less than $75

Texas Energy Star sales tax holiday , May 25–27, 2024

Energy Star air conditioners priced at $6,000 or less
Energy Star refrigerators priced at $2,000 or less
Specified Energy Star products, no price restriction

Texas water-efficient products sales tax holiday , May 25–27, 2024

Any WaterSense-labeled product may be purchased (for business or personal use) tax-free during the sales tax holiday
Certain water-conserving products (for residential use only) may be purchased tax-free
No price restrictions

Texas annual sales tax holiday , August 9–11, 2024

Clothing and footwear priced less than $100 (including cloth and disposable fabric face masks)
Specified school supplies and school backpacks priced at less than $100 per item

Virginia

Virginia sales tax holiday  (three-in-one sales tax holiday), August 2-4, 2024. Applies to both state and local sales tax.

Clothing and footwear at $100 or less
Energy Star and WaterSense products priced at $2,500 or less
Gas-powered chain saws at $350 or less
Portable generators at $1,000 or less
School supplies that cost $20 or less
Certain hurricane and emergency preparedness supplies are priced $60 or less

West Virginia

Applies to state and local sales and use tax. Retailer participation is mandatory.

West Virginia state sales tax holiday , August 2–4, 2024

Clothing and footwear with a price tag of $125 or less
Computers priced at $500 or less
School instructional materials that cost $20 or less
School supplies at $50 or less
Sports equipment with a price tag of $150 or less

Ensure Compliance with 2024 Sales Tax Holidays - Talk to Our Experts Today

For businesses, staying compliant during 2024 sales tax holidays can be complicated, especially with varying state regulations and product-specific exemptions. At Agile Consulting Group, we specialize in helping companies navigate these complexities to avoid penalties and missed opportunities.

Whether you're a retailer preparing for back-to-school tax holidays, or a business looking to capitalize on energy-efficient product exemptions, our team of tax professionals can guide you through every step. We offer tailored solutions to help you manage compliance across multiple states, ensuring you stay up-to-date with changing regulations.

Reach out to Agile Consulting Group today for expert advice on 2024 sales tax holidays. Let us help you protect your business and maximize your savings. Contact us today for a free consultation on how we can assist with your tax compliance strategy.

Michigan Sales Tax Exemption for Prosthetic Devices

Wed, 03 Jan 2024 16:38:47 GMT

The Michigan sales tax exemption for prosthetic devices has been expanded by the Michigan Department of Treasury’s response to Agile Consulting Group’s recent ruling request. The Tax Professionals at Agile Consulting Group, a proud member of the Michigan Ambulatory Surgery Association (MASA) , received updated written guidance from the Michigan Department of Treasury’s Tax Policy group regarding the Michigan sales tax exemption for prosthetic devices. From Agile’s recent experience at the MASA 2023 Education Day and subsequent interactions with its members, most Michigan Freestanding Surgical Outpatient Facilities, licensed under Part 208 of Michigan’s Public Health Code , and Hospitals, are aware of the law

change that occurred on 3/3/2020 to exempt implant purchases from sales tax. The recent ruling that Agile received from the Michigan Department of Treasury will be appealing to both MASA members and hospitals because it confirms that, in addition to implants specifically, many of their other purchases qualify for the Michigan sales tax exemption for prosthetic devices.

Michigan Prosthetic Device Exemption – Updated from Tax Policy Guidance

The law change that expanded the Michigan sales tax exemption for prosthetic devices in Mich. Comp. Laws Ann. Sec. 205.54ff , specifically for hospitals and freestanding outpatient surgical facilities, eliminated the “dispensed pursuant to a prescription” requirement. An implantable prosthetic device will be exempt from Michigan sales tax if the prosthetic device is purchased by a hospital or a freestanding surgical outpatient facility and is a replacement, corrective, or supportive device, other than contact lenses and dental prosthesis, and does one or more of the following:

Artificially replace a missing portion of the body.
Prevent of correct a physical deformity or malfunction of the body.
Support a weak or deformed portion of the body.

The law change has been well-received by Michigan hospitals and freestanding outpatient surgical facilities and most of the qualifying facilities understand that the exemption will cover implants permanently implanted into a patient, such as:

Artificial knees, hips and shoulders
Pacemakers
Intra-Ocular Lenses (IOLs)
Stents
Bone pins, screws & nails

However, the law change in Mich. Comp. Laws Ann. Sec. 205.54ff contained some ambiguity regarding the duration of time that the implanted prosthetic device must remain in the body for the Michigan sales tax exemption for prosthetic devices to apply. In addition to the exempt items previously listed, the Tax Policy group at the Michigan Department of Treasury provided Agile Consulting Group with Written Guidance that confirmed the following items will also qualify for exemption if purchased by a hospital or freestanding surgical outpatient facility:

Endotracheal tubes
Foley catheters
Intravenous catheters (e.g., PICC lines)
Surgical mesh
Sutures (both absorbable and non-absorbable)

How to Recover Michigan Sales Tax Already Paid to Vendors

Michigan hospitals and freestanding surgical outpatient facilities that have already made qualifying purchases under the Michigan sales tax exemption for prosthetic devices, as provided in Michigan Comp. Laws Ann. Sec. 205.54ff , can request a refund up to four years from the original date of purchase. Michigan Department of Treasury Form 5633 is used to request the refund directly from the Department. One Form 5633 is completed for each vendor and the following purchase information must be provided:

Invoice Number
Invoice Date
Tax Refund Requested
Type of Tax (Sales or Use)
Description of the item purchased

The vendor also completes a portion of the form attesting that the sales tax listed on the transaction schedule provided by the hospital or freestanding surgical outpatient facility was indeed collected by the vendor and paid to the Michigan Department of Treasury. The consultants at Agile Consulting Group have experience recovering overpaid sales taxes from the Michigan Department of Treasury and can assist any Michigan hospital or freestanding outpatient facility with this cumbersome process.

Contact Agile Consulting Group with Your Questions

If you have any questions, comments or want to discuss the specific circumstances you are encountering in regard to this issue or need assistance with a sales tax refund review or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at 888-350-4839 or via email at info@salesandusetax.com.

Michigan Sales Tax Exemption for Implants

aaron.giles@salesandusetax.com (Aaron Giles) — Fri, 22 Sep 2023 14:05:28 GMT

The Michigan sales tax exemption for implants was expanded when the Michigan Governor signed into law Public Act #46 with an effective date of 3/3/2020. This law modified the definition of prosthetic devices that qualify for exemption when purchased by a Hospital, or Freestanding Surgical Outpatient Facilities that are licensed under Part 208 of Michigan’s Public Health Code . The tax professionals at Agile Consulting Group recently filed a request for a Technical Advice Letter to obtain additional clarification as to what will qualify for exemption.

Prosthetic Implant Exemption: Prior to March 2020 Law Change

Prior to this law change in March 2020, the Michigan sales tax exemption for implants was limited to purchases of prosthetic devices that were “resold” to patients of Hospitals and Freestanding Surgical Outpatient Facilities. Prosthetic devices are defined in Mich. Comp. Laws Ann. Sec. 205.51a(q) as a “replacement, corrective, or supportive device, other than contact lenses and dental prosthesis, dispensed pursuant to a prescription, including repair or replacement parts for that device worn on or in the body” that does one or more of the following:

Artificially replace a missing portion of the body;
Prevent or correct a physical deformity or malfunction of the body; or
Support a weak or deformed portion of the body.

The prior rule stated that implantable prosthetic devices were only “dispensed” when sold to a patient. Consequently, the implantable prosthetic devices needed to be administered contemporaneously with, or prior to, the transaction for which the exemption is claimed, rather than some future transaction for the exemption to apply. Michigan Letter Ruling 2019-2 offers a more detailed explanation of the exemption requirements prior to 3/3/2020.

Prosthetic Implant Exemption: After March 2020 Law Change

The law change that expanded the Michigan sales tax exemption for implants in Mich. Comp. Laws Ann. Sec. 205.54ff , specifically for hospitals and freestanding outpatient surgical facilities, eliminated the dispensed pursuant to a prescription requirement. Hospitals and freestanding outpatient surgical facilities now must only prove that the implantable prosthetic device meets the definitional criteria of a prosthetic device listed in Mich. Comp. Laws Ann. Sec. 205.51a(q) .

Some examples of implantable prosthetic devices that clearly qualify for exemption are:

Artificial knees, hips & shoulders
Pacemakers
Intra-Ocular Lenses (IOLs)
Stents

These devices will qualify for exemption as they either artificially replace a portion of the body, prevent or correct a physical deformity of the body, or support a weak or deformed portion of the body. These items are all implanted in the body and are meant to be in the body permanently or for an extended period of time.

The Michigan sales tax exemption for implants that are “inserted” or “attached” to the body for a short period of time is currently ambiguous, and the tax professionals at Agile Consulting Group have requested a Technical Advice Letter from the Michigan Department of Treasury to see if such implantable prosthetic devices will qualify for exemption. Some examples of prosthetic devices that are temporary inserted or attached to a person that “may” qualify for exemption are items such as:

Endotracheal tubes
Foley catheters
Intravenous catheters (like PICC lines)
Sutures

How to Recover Michigan Sales Tax Already Paid to Vendors

Michigan Hospitals and Freestanding Surgical Outpatient Facilities that have already made qualifying purchases under the Michigan sales tax exemption for implants, as provided in Mich. Comp. Laws Ann. Sec. 205.54ff , can request a refund up to four years from of the original date of purchase. Michigan Department of Treasury Form 5633 is used to request the refund directly from the Department. One Form 5633 is completed for each vendor and the following purchase information must be provided:

Invoice Number
Invoice Date
Purchase Amount
Tax Refund Requested
Type of Tax (Sales or Use)
Description of the item purchased

The vendor also completes a portion of the form attesting that the sales tax listed on the transaction schedule provided by the hospital or freestanding surgical outpatient facility was indeed collected by the vendor and paid to the Michigan Department of Treasury. The consultants at Agile Consulting Group have experience in recovering overpaid sales taxes from the Michigan Department of Revenue and can assist any Michigan Hospital or Freestanding Surgical Outpatient Facility with this cumbersome process.

Reach Out to Us with Questions

If you have any questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or need assistance with a sales tax refund review or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

Texas Sales Tax Medical Exemption for Hospitals Includes Many Categories of Purchases

Fri, 25 Aug 2023 19:31:00 GMT

In addition to the Texas sales tax medical exemption for orthopedic devices and appliances provided in the Zimmer ruling , there are several other categories of exemptions available to Texas hospitals and healthcare providers. Texas Tax Code Ann. § 151.313 provides a sales and use tax exemption for the following items:

Prescription drugs or medicines
Hypodermic syringes or needles
Braces used on the human body to correct a physical ailment or defect
Prosthetic devices
Hospital beds and related parts
Wound care dressings
Blood glucose monitoring test strips
IV systems and related supplies

For most of these items, the definitions in Texas Admin. Code §3.284 have not changed since 2004. Prosthetic devices are defined as, “an item that is artificial and replaces a missing part of the body, performs the function of a vital organ or appendage of the human body, or that is permanently implanted in the body.” Some examples of prosthetic devices are heart-lung pumps, ventilators, gastrointestinal devices, and urethral stents. Wound care dressings are defined as, “an item that absorbs wound drainage, protects healing tissue, maintains a moist or dry wound environment (as appropriate), or prevents bacterial contamination.” Bandages, gauze, hemostats, and nasal packing strips are some types of items that would meet the definition of a wound care dressing.

There was a significant change to the definition of intravenous systems that occurred in 2013. Effective Sept. 1, 2013, House Bill 3169 altered the definition of an IV system to any product “designed or intended to be used to administer fluids, electrolytes, blood and blood products, or drugs to patients or to withdraw blood or fluids from patients, regardless of whether the product is designed or intended to be inserted subcutaneously into any part of the body.” Prior to this change, intravenous systems and supplies only qualified for the Texas sales and use tax exemption if they were administered subcutaneously, which means they had be used for injection below the skin. With this change, some items that now qualify as exempt are angiographic catheters, anesthesia infusion catheters, contrast media injection tubing, fluid drainage catheters, and infusion pumps.

There has also been a recent change to the sales and use tax exemption related to radiation emitting equipment repairs and maintenance. In 2012, Texas Ruling #201209577L stated that the repair, remodeling, maintenance, or restoration of diagnostic imaging or therapeutic equipment subject to oversight under the Radiation Control Program administered by the Texas Department of State Health Services qualified for the sales and use tax exemption found under Texas Tax Code Ann. § 151.338. Types of radiation equipment that were determined to be exempt in this ruling were computed tomography (“CT”), x-ray radiographic and/or fluoroscopic (“XR” and “XF”), cardiac catheterization and similar vascular (“XV”), mammography (“MM”), bone densitometers, gamma camera and other nuclear medicine (“NM”). This exemption also applied to component parts of an integrated unit of qualifying diagnostic imaging or therapeutic equipment, including x-ray tubes, filters, detectors, power supplies, operator’s workstations, viewing equipment, printers, patient tables, networking equipment, and associated computer software.

On June 28, 2018, Ruling #201209577L was superseded by Texas Ruling # 201806001L , which limited the exemption to only separately stated labor charges to repair diagnostic and therapeutic equipment that emit radiation. Therefore, any component or integrated part that is attached or connected to this equipment that does not emit radiation itself will not qualify for a Texas sales and use tax exemption.

From our experience working with hospitals and health care providers in Texas, we’ve found that vendors like Cardinal Health, Medline and Owens & Minor are charging sales tax on IV systems and supplies, wound care dressings, and hypodermic syringes and needles that would qualify for a Texas sales and use tax exemption. In order to claim the exemption on future qualifying purchases from their vendors, Texas hospitals and healthcare providers need to supply their vendors with a properly completed Texas Certificate of Exemption (Form 01-339) . If sales tax has already been paid, collected, and remitted on the purchase of any of these qualifying health care supplies in Texas, the purchaser can apply for a refund from the Texas Comptroller of Public Accounts, provided they do so within the 48-month statute of limitations for which the TX Comptroller allows refunds to be filed.

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Agile Consulting Group’s sales tax consultants can be found on our page summarizing Texas sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this issue or any other sales and use tax issue, please contact any of Agile Consulting Group’s sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

The post Texas Sales Tax Medical Exemption for Hospitals Includes Many Categories of Purchases appeared first on Agile Consulting Group .

Arizona Transaction Privilege Tax (“Sales Tax”) Exemption for Manufacturing

Mon, 07 Aug 2023 18:13:00 GMT

Arizona Sales Tax Exemption for Manufacturing

Arizona allows manufacturers in the state to purchase machinery and equipment directly used in the manufacturing process “transaction privilege tax” exempt.

While Arizona does not technically collect sales tax, they do collect transaction privilege tax which is treated in the same manner as most states treat sales tax. Transaction privilege tax is the tax levied by the state of Arizona on a vendor for the privilege of conducting business in the state.

The main difference in transaction privilege tax and traditional sales tax is that the burden lies on the seller versus the purchaser. Because of this many of the transaction privilege tax laws have a corresponding use tax law.

The Arizona transaction privilege tax exemption for manufacturing extends to manufacturing machinery and equipment used directly in processing, fabrication, job printing, refining, metal working, mining, electrical power transmitting, oil and gas extraction, and research and development [ Ariz. Rev. Stat. Ann. §42-5061(B)(1) ]. Directly used in manufacturing means the item purchased must be involved in the direct production of the product.

Tax Exempt Items (Directly used in Manufacturing):

Taxable Items (Indirectly Used in Manufacturing):

How to Claim Arizona Transaction Privilege Tax Exemption for Manufacturing

The manufacturer should already be purchasing manufacturing equipment tax exempt from their vendors because the burden of transaction privilege tax lies on the seller and not the purchaser, but this is not always the case. In order to ensure the Arizona transaction privilege tax exemption for manufacturing, manufacturers can supply their vendors with a “Transaction Privilege Tax Exemption Certificate”. “Arizona form 5000 – TPT Exemption Certificate” which can be found at the Arizona Department of Revenue’s website. The manufacturer will fill out, sign and send to their vendor to have their account set up as tax exempt. This will guarantee manufacturing sales will be purchased tax exempt. Please contact the experienced sales tax consultants at Agile Consulting to help you determine if you are being charged tax incorrectly.

How to Recover Arizona Transaction Privilege Tax

The entity that remitted tax to the state is the only entity that can recover refunds from the Arizona Department of Revenue. Due to this, the purchaser must go back to their vendor in order to secure the refund. The purchaser can go back up to 4 years (48 months) to collect taxes paid in error. Once the purchaser requests a transaction privilege tax refund of exempt purchases from their vendor the vendor has one of two options.

Option one is for the vendor to amend their returns and issue a credit or check to their customer. Option two is for the vendor to fill out, sign and send in “Form SCR (Seller’s Claim for Refund)” along with the “Refund Request Workbook” into the Arizona Department of Revenue at TPTREfunds@azdor.gov . Once submitted, the refund request will be assigned to an Arizona auditor and either accepted or denied. Once the auditor has completed the review and accepted the refund request, a check will be mailed to the vendor. The vendor will then reimburse their customer of the transaction privilege tax paid in error. Agile’s knowledgeable and skilled tax consultants are ready to assist you with your Arizona auditors.

Choose Agile Consulting Group!

If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact any of Agile Consulting Group’s sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

Agile Consulting Group has developed a patented, real-time nexus study program that provides instant results. Now we have two ways we can assist you when it comes to determining whether your business has sales tax nexus in any U.S. states ! Choose our traditional, manual study conducted by our team of sales tax compliance specialists, or opt for an instant solution via our real-time nexus study .

The post Arizona Transaction Privilege Tax (“Sales Tax”) Exemption for Manufacturing appeared first on Agile Consulting Group .

Missouri Sales Tax Payment for Manufacturers: Additional Options

Mon, 07 Aug 2023 13:53:00 GMT

Prior to 2013, taxpayers who paid Missouri sales tax on exempt purchases of machinery, equipment and parts were required to request a refund from the seller. However, House Bill 1504 which was signed into law by the Governor on July 10, 2012 and went into effect on Aug. 28, 2012 now provides an easier alternative for purchasers to obtain refunds directly from the Missouri Department of Revenue.

Rather than requesting a refund directly from the seller, purchasers can now obtain a notarized assignment of rights form (“AOR form”) from the seller. This form essentially states that the seller collected and remitted the Missouri sales tax on the purchase and that the seller will not seek a refund from the Missouri Department of Revenue for the taxes in question.

If the seller refuses to sign the assignment of rights form, the purchaser can provide a notarized statement with documentation that an effort was made to obtain this form. Once these forms and statements have been collected, the purchaser can complete a Form 472P and file this with the Missouri Department of Revenue to recover Missouri sales tax paid within the 36-month statute of limitations.

If the purchaser did not pay Missouri sales tax, but self-assessed use tax on their purchases of exempt machinery, equipment and parts, then they can complete and file a Form 472P without any documentation from the seller. However, in this situation the purchaser will need to amend their sales & use tax returns to adjust for the taxes previously paid in error.

In the state of Missouri, manufacturers qualify for a variety of Missouri sales tax exemptions related to their purchases of machinery and equipment used directly in production of tangible personal property sold at retail.

Mo. Revenue Statute 144.030(2) & (5) states that, “replacement machinery, equipment, and parts and the materials and supplies solely required for the installation or construction of such replacement machinery, equipment, and parts, used directly in manufacturing or producing a product which is intended to be sold ultimately for final use or consumption” is exempt from state and local sales and use tax.

Mo. Code Regs. 10-111.010(2)(D) defines machinery and equipment as, “devices that have a degree of permanence to the business, contribute to multiple processing cycles over time and generally constitute fixed assets other than land and buildings for purposes of business and accounting practices.”

Additionally, Mo. Code Regs. 10-111.010(2)(D) defines parts as, “articles of tangible personal property that are components of machinery or equipment, which can be separated from the machinery or equipment and replaced.” If the item is consumed during the manufacturing process, it is not considered a part because it doesn’t have a degree of permanence or durability. Some examples of parts are nuts, bolts, hoses, chains, belts, gears and bearings. Items like lubricant, coolant, and adhesives are considered materials and supplies, which are exempt from state tax and local use tax under a different citation, Mo. Revenue Statute 144.054 .

The direct use provision in the manufacturing exemption is defined in Mo. Code Regs. 10-111.010(3)(A) , which states that Missouri utilizes the integrated plant theory to allow for a broad interpretation of the machinery, equipment and parts exemption. As long as the purchase is both “essential” and “integral” to the manufacturing process, then it is considered to be used directly. However, the purchase must meet both of these requirements.

If the purchase is integral to a manufacturing process but not essential, such as a forklift used for material storage, then it does not meet this definition and will not qualify for the exemption. Some additional factors that are used to determine whether a purchase is integral and essential is how close or causal the item is to production and whether the purchase operates harmoniously with other machinery to make an integrated and synchronized system.

Furthermore, an item does not need to cause a direct physical change in the composition of raw materials or work in process to qualify for the direct use requirement. As long as the item in question is used within the continuous progression from when raw materials enter production through the finished good, it is part of the integrated and synchronized system and is exempt from Missouri sales tax. For example, a conveyor belt which transports work-in-process between stages of production would qualify although the conveyor itself does not cause a direct physical change.

If you have questions, comments or would like to discuss the specific circumstances you are encountering about this issue or any other Sales & Use Tax issue, please contact us at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

The post Manufacturers Provided with Additional Options for Missouri Sales Tax Recoveries appeared first on Agile Consulting Group .

Use Tax vs Sales Tax: What’s the Difference?

Fri, 21 Jul 2023 14:24:25 GMT

The concepts of sales tax and use tax can be very confusing for new and existing business owners. While agile accounting firms can adeptly calculate and counsel owners about these two tax forms, it’s helpful to have a basic understanding of them.

What is Sales Tax?

Sales tax is levied by governmental authorities on the sale, exchange or transfer of taxable goods and services. This tax is applied to the end user’s total price, based on the cost of the taxable goods or services. It’s typically calculated as a percentage of the sale price and collected by the seller from the consumer at the point of sale, then remitted to the relevant tax authority.

Note that sales tax rates and laws differ from state to state , and sometimes from county to county or city to city. Certain goods and services will be exempt from sales tax, depending on the specific state's tax code. In most U.S. states, for example, grocery whole foods are exempt from sales tax, whereas prepared foods—even from grocery stores—may be subject to sales tax.

Sales tax is considered a trust tax, since the seller is the separate entity collecting the tax when it makes a sale. The governmental agency “trusts” that the seller will remit the collected sales tax at a later date.

Example of Sales Tax:

A hypothetical example of sales tax would be: Fashion Haven, located in Dallas, Texas , is a popular department store. A customer buys a brand new dress for $156.99. Texas state law requires that Fashion Haven charge the customer an additional 8.25% (state and local combined rate) of the selling price as sales tax. The customer pays Fashion Haven a total of $169.95. The extra $12.96 collected as sales tax will later be remitted to the Texas Comptroller of Public Accounts.

What is Use Tax?

Use tax is the tax that is charged for the consumption, use or storage of taxable goods or services that have had no sales tax imposed. In other words, there cannot be both a sales tax and a use tax; it’s either/or.

Use tax may be imposed on purchases where the taxing jurisdiction is out of the state, but the use is within the state. Today, use tax most commonly applies to online sales. In addition, often the use tax is self-calculated based on the state in which the buyer receives the goods or where they intend on using the goods.

Two types of use tax exist:

Consumer Use Tax is a tax that the buyer remits and self-calculates, and applies to taxable goods in instances where the seller didn’t collect sales or use tax during the time of purchase.

Vender/Retailer Use Tax applies to sales where the purchaser resides in a separate state from the seller, but the seller is registered in the state where the goods are to be delivered. This is essentially synonymous with sales tax.

Example of Use Tax:

Imagine that Cozy Threads, a business based in Boston, Massachusetts , buys trendy coats from a seller in New Hampshire, where no sales tax is collected. The coats are shipped to Cozy Threads in Boston . If the cost of the coats is $5,000, Cozy Threads may owe a use tax to the Commonwealth of Massachusetts. If, for example, the Massachusetts use tax rate is 6.25%, Cozy Threads would need to pay a use tax of $312.50 (6.25% of $5,000).

What is the Difference Between Sales and Use Tax?

There are several key differences between sales tax and use tax. Understanding these differences is essential, since it impacts tax collection, reporting and remittance obligations.

Point of Collection: Sales tax is collected by the seller at the point of sale for later remittal. Use tax is paid directly by the purchaser to the state tax agency.
Tax Responsibility: The responsibility for paying sales tax to the government agency rests with the seller. Payment of use tax is the buyer's responsibility, who must report and pay the tax, usually when they file their state income tax return.
Transaction Location: Sales tax is generally charged on in-state sales or in any state where a remote seller has established nexus. Use tax applies to out-of-state purchases brought into the buyer's state for use, storage or consumption.
Purpose: Sales tax is designed to raise revenue for the state by taxing the sale of goods and services. Use tax is intended to level the playing field between in-state businesses, which must col lect sa les tax , and out-of-state vendors that may not be required to collect sales tax.

What is Nexus and Why Does It Matter?

Nexus is a tax term that references the degree of business presence in a particular state necessary to trigger a tax obligation . It defines the connection between the seller and the government agency that represents a state that has legal authority to impose tax on the seller.

Without nexus, a state does not have that legal authority. For example, if a business called MotorParts is physically located in California and sells to consumers in California, MotorParts has a nexus in the state of California. The company does not have nexus in Texas, Nevada or other states where it’s not registered and has no physical presence. However, if MotorParts decides to sell parts to consumers online, it may create a tax nexus in the state where the consumer is located if MotorParts exceeds the economic nexus threshold within that state.

Nexus has traditionally been tied to physical presence. A business was said to have a sales tax nexus in a state if it had a physical location, employees, inventory, or property in the state. For example, a warehouse, office, or even a traveling salesperson within a state could establish nexus.

However, the rise of e-commerce has expanded the understanding of nexus. Now, states can assert an economic nexus based on the volume of sales or the number of transactions a business conducts within a state, even if the business has no physical presence there.

Taxes are inherently confusing, but hopefully this basic explanation of what sales and use tax is will help your company to better understand your tax obligations. To maximize your business’ sales tax exemptions and get the most out of your accounting system, contact Agile Consulting today.

The 5 States without Sales Tax & Everything You Need to Know

Fri, 21 Jul 2023 14:20:36 GMT

What is Sales Tax?

If you are a business owner, manager or decision-maker, it is in your interest to understand the nuances of your state’s sales tax laws (or lack thereof). Sales tax is often referenced in mainstream media yet rarely explained. Nearly every state collects sales tax, typically between 4% and 10%.

The purpose of collecting sales tax is to generate revenue for government services. However, the fact that five states do not collect sales tax presents an opportunity for those living in and near those jurisdictions to buy items and services without paying a penny in sales tax. However, those who buy products and services in states that collect sales tax pay at the point of sale. The retailer then passes on the collected sales tax d olla rs to the state government.

Which States Don’t Have Sales Tax?

If you detest the idea of paying sales tax to the government for simply purchasing goods and services, you are not alone. Those who live in the vicinity of the five states that sell items/services tax free and plan on spending a significant amount of money, should recognize that it is in their interest to consider making a shopping trip to a sales tax-free state.

The states with no sales tax are as follows:

Alask a

De lawar e

M ontan a

New Hampshire

Oregon

Below, we provide an in-depth look at each of these states with no sales tax .

Alaska

Alaska is unique in that it does not have a sales tax or personal income tax. The state’s minimization of taxes is largely the result of revenue stemming from petroleum. In fact, Alaskans receive a universal basic income each year thanks to the jurisdiction’s petroleum wealth. However, we would be remiss to gloss over the fact that Alaska empowers local municipalities and boroughs to collect sales tax up to 7%. As an example, Alaska’s capital of Juneau rakes in 5% sales tax, yet the city of Anchorage does not have sales tax.

Delaware

Delaware, the most popular state to incorporate businesses, is revered for its economically-friendly tax laws and minimal bureaucratic regulation. Delaware law mak ers intentionally wrote the state’s laws to attract businesses as well as consumers from nearby New England states. As an example, Pennsylvania and New Jersey have sales tax that often drives residents of those states to Delaware for tax-free shopping.

More than one-third of Delaware tax revenue is generated from corporate taxes from out of state corporations that register their enterprises in the business-fri endly state of De laware . It must be noted that Delaware has a nearly 2% gross receipts tax on business income along with a nearly 4% car purchase registration fee.

Montana

Montana is one of the freest states in the country partially because it does not have state sales tax. The "Treasure State" offsets the lost revenue through state income taxes along with taxes collected on the sale of its plentiful natural resources. However, the state does collect local sales tax on specific transactions, such as automobile rentals and hotel accommodations.

New Hampshire

New Hampshire does not have an overarching state sales tax or any personal income tax. The state rakes in revenue through taxes on property owners. Landlords pass on their tax burden to renters through increases in monthly rent. New Hampshire has a nearly 10% sales tax rate on auto rentals, hotel stays and prepared meals. Moreover, the New Hamps hire gover nment makes money through taxes on electricity, alcohol, tobacco in the form of cigarettes and gas.

Oregon

Oregon’s zero sales tax stance is possible thanks to its elevated state income tax. Though Oregon lawmak ers often debate whether it is prudent to add a sales tax to goods and services purchased within state boundaries, the proposed changes have not been enacted into law. Some local governments have taxes on certain purchases such as prepared meals and hotel lodgings. Moreover, the state has taxes on telecommunications, alcohol sales and lodging that are ultimately paid by everyday people in the form of increased costs.

Physical Presence Nexus

Those who work in the l egal indu stry sometimes reference the physical presence nexus yet most laymen understandably have no idea what this legalese means. In plain terms, physical presence in the context of taxation law indicates there is an obligation to collect sales tax in the state. A physical presence within a state’s boundaries creates the nexus. Even delivering goods to another state with the use of one’s personal automobile has the potential to create a physical presence nexus.

Economic Presence Nexus

As a business owner or manager, it is in your interest to understand the nuances of economic nexus presence laws , especially if your enterprise is headquartered in one of the states with no sales tax. Economic presence nexus refers to a business’s presence in a state within the United States that requires a seller that is located in a different state to collect sales tax in the jurisdiction where sales occur.

Economic nexus laws are on the books in the 45 states that have a sales tax in addition to Alaska’s local municipalities that enforce sales tax collection, the District of Columbia and even Puerto Rico. However, this nexus is not triggered until a specific number of transactions are logged or when other sales criteria are met.

Thankfully, efforts have been made to reduce the financial burden of the economic nexus on business owners that sell remotely. Each state provides specific exceptions for enterprises that sell below a specific sales figure. Each state’s economic nexus threshold is unique.

As an example, the economic nexus threshold in Illinois is $100,000 in aggregate gross receipts, or, alternatively, 200 distinct transactions within the current or prior year. The threshold in California is half a million dollars of the aggregate sale of personal property delivered to California within the current or preceding 365 days.

Find If you Have Nexus in a State with Agile Consulting Group

Texas Sales Tax Regulations Explained

Thu, 29 Jun 2023 21:26:00 GMT

The state of Texas requires taxpayers with $50,000 or more in sales and use taxes reported in the preceding state of Texas fiscal year (i.e. Sept. 1 ^st through Aug. 30 ^th ) to file their Texas sales tax compliance returns online. Paper Texas sales tax compliance returns are still accepted from taxpayers below that threshold. While every state has different nuances to sales tax compliance reporting, Texas may, in fact, have more local reporting jurisdictions that any other U.S. state. Texas sales tax outsourcing is thus a popular choice for many Texas taxpayers.

Texas State and Local Sales Tax Reporting Guidelines

Texas sales tax outsourcing solutions, like those offered by Agile Consulting Group, eliminate the headaches and hassles many taxpayers encounter while trying to remain fully compliant with Texas sales tax compliance reporting guidelines. There are over 1,300 cities in Texas that have a local sales tax. Locations outside city limits may be excluded from the city sales tax rate, but may be subject to a county sales tax rate.

Special Purpose Districts (SPDs)

In addition to the Texas city and county rates , there are also a number of special purpose districts (“SPD”). Those special purpose districts are often the most challenging jurisdictions to report correctly on Texas sales tax compliance returns.

Metropolitan Transit Authority Districts (MTAs)

Additionally, while most major cities in Texas have Metropolitan Transit Authority districts (“MTA”) to fund public transportation, those MTA districts may cross multiple counties’ borders. Knowing under which county to report the MTA taxes may require a manual search to determine the county unless the sales tax compliance reporting software or systems the taxpayer is using is sophisticated.

Similar challenges exist for city transit departments (“CTD”), San Antonio’s advanced transit district (“ATD”), and Denton County’s county transit authority (“CTA”).

The Reality for Today’s Taxpayers

For taxpayers with robust, well-staffed tax departments with experienced, in-house individuals dedicated to the sales tax compliance reporting function, these issues and concerns are manageable challenges. However, having such a well-staffed tax department is not the reality for most taxpayers today.

Often Texas sales tax compliance reporting duties fall to controllers, accounts payable managers or other staff accountants and often become one of their ancillary duties in addition to their core job responsibilities. Texas sales tax outsourcing enables the in-house staff to focus on other higher leverage opportunities and enables companies to know with certainty that they are compliant with Texas sales tax compliance reporting requirements as well as all deadlines.

Sales Tax Outsourcing Made Easy with Agile Consulting Group

Partner with an experienced sales tax consulting firm like Agile Consulting Group and rest assured that your Texas sales tax compliance is outsourced to a group of reliable, experienced sales tax consultants.

The post Texas Sales Tax Outsourcing appeared first on Agile Consulting Group .

What Happens if a Business Doesn't Pay Sales Tax? Can You Go to Jail?

Tue, 27 Jun 2023 21:24:32 GMT

If you are wondering what happens when a business doesn't pay sales tax, you are not alone. There is a common misconception that the IRS will immediately barge into such businesses, demanding prompt payment. Others assume state government representatives will immediately freeze the business’s bank accounts.

Here’s a quick look at what happens when a business doesn't pay sales tax.

Common Ways Businesses are Non-Compliant with Their Sales Tax

Failing to pay sales tax is not the only way in which businesses violate sales tax law. As detailed below, there are several other ways small business owners break sales tax laws and rules.

Failure to Register for a Sales Tax Permit

Every business that sells taxable services and goods is required to register for a sales tax permit, also known as a certificate. If you do not have a sales tax permit, contact your state revenue department for guidance. Though obtaining such a permit will likely be free, there are some states that charge a minor fee. Be sure to have your business’s Employer Identification Number (EIN) on-hand along with other relevant business details to expedite the process.

Collecting Sales Tax but not Remitting It

Collecting sales tax is not enough. Your business must also remit the collected tax to the government. Fail to remit the collected sales tax and you’ll be forced to pay back taxes, pay fines and face additional punishment as detailed below. The amount of sales determines the frequency of the state or municipal tax collection.

For the most part, sales tax is collected on a monthly or quarterly basis. Even if you do not sell a wide variety of goods and have low sales volume, it is in your interest to lean on an outside sales tax specialist to guide you through the process, ensuring full compliance .

Underreporting Sales

Every single sale that falls under the sales tax umbrella must be taxed accordingly. Document all sales including sales tax for those sales including all invoices and you’ll make it that much easier for your outsourced tax professional to fulfill your sales tax obligations.

Keep in mind, some state and municipal governments request sales tax receipts from sales so keep all relevant paperwork. Abide by the state’s schedule for reporting sales tax including the process for reporting to avoid penalties including criminal charges.

Charging Incorrect Sales Tax Rates

The sales tax rate in your state isn’t the same as that in other states. Every business owner and manager should be aware of their state’s exact sales tax rate and collect that percentage from each applicable sale. If you are uncertain as to what the state’s sales tax rate is, reach out to the state’s revenue agency for information.

Moreover, we would be remiss not to mention that municipalities can also charge sales tax. It is even possible for sales tax rates to differ based on the unique services and goods sold by your small business.

Failing to File Sales Tax Returns

Fail to file your business’s sales tax returns and you’ll inevitably be audited. As detailed below, failing to file the sales tax return also has the potential to lead to civil and criminal charges including potential jail time. Some states have misdemeanor criminal charges on the books for business owners who refuse to file their company’s sales tax returns.

What Happens If a Business Doesn’t File Taxes

Contrary to popular opinion, it is not uncommon for a small business to sidestep filing sales tax returns. Small business owners tend to be in favor of small government and private industry, meaning they aren't exactly enthusiastic about paying Uncle Sam his cut. However, there are consequences when a business refuses to pay sales tax.

Fail to pay sales tax and your small business will likely face a sales tax audit . Though such an audit might not immediately occur after tax season ends, it will likely occur in the months or years that follow the failure to pay sales tax. The bottom line is collecting sales tax and failing to forward that money to the state is a crime.

The audit process begins with a warning letter in which the business in question is notified of its failure to pay sales tax. Interest is added to the unpaid sales tax as a punitive measure.

Civil Implications

The failure to pay sales tax to the state government leads to civil penalties. Aside from the addition of interest on the unpaid sales tax, there might also be a standard rate penalty added in accordance with local regulations.

Criminal Implications

The worst possible outcome of not paying sales tax is a criminal penalty. Criminal penalties are applicable to business owners that knew they owed sales tax and kept the collected sales tax for the benefit of the enterprise. Moreover, generating fake or inaccurate sales paperwork has the potential to spur criminal penalties. Such penalties have the potential to be quite harsh simply because the business owner refused to pay tax owed to the government as opposed to merely missing a deadline.

Lawsuit

It is possible for a business that failed to pay its sales tax to face legal action in the form of a lawsuit. The company itself is sued, potentially leading to a ruling that results in a punitive fine and interest added onto the unpaid sales tax owed. Moreover, lawsuits are expensive in that they require the guidance of a seasoned tax law attorney for representation in and out of court.

Add in the fact that a lost sales tax lawsuit will compromise the company’s standing in the community and there is all the more reason to outsource your sales tax responsibility to an expert . However, if you can prove your business mistakenly missed the sales tax payment deadline or there was an unintentional paperwork error, you will likely win the lawsuit.

Benefits of Outsourcing Sales Tax

Sales tax calculations, tax forms and deadlines are inherently challenging to complete with 100% accuracy. Instead of adding to your existing workload, lean on the outside experts to handle everything sales tax-related on your behalf. As is often said, the best possible way to solve a complex problem is to ask those who are in the know . Outsource your business’s sales tax to the experts who understand sales tax rules, regulations and laws and you’ll be liberated to focus on your strengths as a business owner or manager.

Agile Consulting is here to help your business operate like a well-oiled machine and in full compliance with tax laws.

We align business’s tax and accounting systems with the law to maximize all relevant sales tax exemptions. Contact us today to learn more about how we can help your business. You can reach us at (888) 350-4TAX or by email at info@salesandusetax.com .

Do I Need a Seller’s Permit For My Business?

Thu, 15 Jun 2023 21:07:47 GMT

If you intend to start a business where you sell physical items or services, then chances are you’ll need a seller’s permit. The seller’s permit is an official document issued by the state that empowers your business to collect sales tax from your customers.

What is a Seller’s Permit?

A seller's permit is sometimes referred to as a sales tax permit or a resale permit. It is a sales tax permit; a state-issued document officially authorizing a business to collect sales tax on taxable items and services that the business sells. Seller’s permits are an integral part of the regulations that govern retail businesses in the U.S. A seller’s permit is typically required for businesses that sell physical products or certain types of services.

The main purpose of a seller's permit is to empower the state to control the collection and remittance of sales taxes. In the vast majority of cases, when a business sells a product or service, it’s required to collect sales tax from the customer. This tax needs to be accounted for, held, and then periodically reported and subsequently paid directly to the state's tax agency. The seller's permit is the official document that provides the mechanism for this process, ensuring that businesses are properly collecting and remitting this tax on every sale.

Not all states have sales tax. In those states, a seller’s permit may not be required. The five states without sales tax are:

Alaska
Delaware
Montana
New Hampshire
Oregon

Note that the requirements around obtaining a seller’s permit vary from state to state . Some states, such as those listed above, which don’t charge a sales tax, may not require a permit at all, while others may have different types of permits depending on the nature of the business or the types of products or services it sells.

Who Needs a Seller’s Permit?

Whether or not your business needs a seller’s permit depends on what kind of business you’re in, what you sell and where you sell it. Most states do require that retail and e-commerce businesses collect and remit sales tax, but certain items such as food or clothing may be exempt in some states. For instance, a retail business in Florida selling clothing must collect 6% of the total price of every sale. But a Florida grocery store selling produce needn’t collect sales tax on food items. However, that same grocery store does have to collect 6% tax on any sales it makes on non-food items, such as sunglasses, kitchenware, etc.

Another important nuance to be aware of is that a business in Florida must charge a 6% sales tax on non-food items, even if it sells to a New Hampshire resident—where there is no sales tax—shopping in the state of Florida.

If your business involves selling taxable goods or services, you will likely need a seller's permit that authorizes you to collect sales tax on behalf of the state's Department of Revenue. In short, via the seller’s permit, the business is acting as the middleman between the customer and the State Department of Revenue. No portion of the collected sales tax belongs to the business. The collected tax is remitted in full to the state taxing authority.

Seller's permits are state-specific. This means that if you conduct business in multiple states, you may need more than one seller's permit. Consult with your state’s revenue department to find out what your exact requirements are, based on your business location and structure.

Be sure to obtain a seller's permit before—not after—you start selling goods or services to ensure that you’re in compliance with state and local laws from day one . Failure to do so will almost always result in fines and/or penalties.

Does an Online Business Need a Seller’s Permit?

Online businesses aren’t exempt from the requirement to get a seller’s permit. If your state collects sales tax, chances are your online business will need a seller's permit. This includes situations where the business has a warehouse, store, office or any other kind of physical presence.

The seller's permit allows online businesses to collect and remit sales tax for sales to in-state customers. In some cases, online businesses may also be required to collect taxes from out-of-state customers if they meet a certain threshold of sales within that state. This is often referred to as an economic nexus. The threshold varies from state to state, so you need to consult with your state’s Department of Revenue.

Not all online businesses may need a seller's permit. For instance, if you’re selling products or services in certain regulated industries, such as healthcare, you might not need a seller's permit to conduct business online. But again, check with your state’s regulating agency, because the law varies from state to state.

Where Can I Get a Seller’s Permit?

The process for how to get sellers permit documentation varies, but typically you would apply to the Department of Revenue in your state. Today, the process is easier than ever, and you can likely complete all the steps online in a matter of minutes. Seller’s permits are usually either free of charge or available for a nominal fee.

Typically, you would go online and submit some basic information about your business, such as the business name and address, social security number or FEIN and estimated monthly sales. You might have a choice to mail the application or submit it online, but the actual seller’s permit will likely be mailed to your business address. This is an official document that you should handle carefully. Many brick and mortar businesses choose to display their seller’s permit so customers and inspectors can easily inspect it. This is sometimes a legal requirement.

The seller’s permit contains a number unique to your business. You’ll use that number when you remit taxes to the state agency, so your business gets credit for paying the tax. This sales tax is paid to the state quarterly and submitted along with the appropriate state tax forms.

What is the Difference Between a Seller’s Permit and a Wholesale Certificate?

A seller's permit and a wholesale certificate serve different purposes and are used in different contexts. As explained above, a seller's permit is issued by the state to businesses, allowing them to sell goods and services and to collect sales tax from customers within their state.

A wholesale certificate, also known as a resale certificate, identifies businesses that are permitted to buy certain goods without paying sales tax on them. These include wholesale items for resale and items that are purchased for use in the manufacture of products for resale. The resale certificate keeps a business from having to pay tax twice, since the sales tax that’s due to the state is collected later on when the item is purchased by the end user. You’ll need to provide your wholesale certificate number to the original provider of the goods that you intend to resell.

There is help available for your business if you need help with sales tax compliance or if you need sales tax audit defense . Contact us today to learn more.

Mississippi Medical Sales Tax Exemptions for Drugs, Medicine, Equipment, and Supplies

Tue, 30 May 2023 01:10:00 GMT

Mississippi sales and use tax law allows health care providers to claim a Mississippi sales and use tax exemption on various types of purchases, including drugs, medicines, durable medical equipment and home medical equipment and supplies. The Mississippi sales and use tax exemption for hospitals and health care has been expanded in recent years, so Agile Consulting Group’s sales tax consulting services are ideally suited to ensure that your organization is positioned to take advantage of these law changes.

Mississippi Code Ann. 27-65-111(h) exempts from sales tax the retail sales and the use or consumption of drugs and medicines. Medicines are defined in this statute as, “any substance or preparation intended for use by external or internal application to the human body in the diagnosis, cure, mitigation, treatment or prevention of disease and which is commonly recognized as a substance or preparation intended for such use.” This definition of medicine includes any item that is permanently implanted in the human body to and remains or is absorbed by the body after implantation. Some examples of permanently implanted items that qualify for the Mississippi sales and use tax exemption as a medicine are sutures, bone screws, bone pins, and pacemakers. Sales of splints, bandages, wound care dressings are not considered to be a medicine under this definition.

To qualify for the Mississippi sales and use tax exemption, the drug or medicine must meet one of the following criteria:

The drug or medicine must be prescribed by a person authorized to write prescriptions
It must be furnished by a licensed physician or surgeon to their own patient for treatment of that patient
It must be furnished by a hospital for treatment of any person pursuant to a prescription by licensed physician or surgeon
It must be sold to a licensed physician, surgeon, or hospital for treatment of a human being
It must be sold to a medical facility or clinic affiliated or associated with the state of Mississippi or any political subdivision or municipal corporation thereof

Essentially, the drug or medicine must be required by a prescription and sold to a licensed physician or hospital for human treatment. For the purposes of this exemption, a hospital is defined in Mississippi Code Ann. 41-9-3 as, “a place devoted primarily to the maintenance and operation of facilities for the diagnosis, treatment and care of individuals suffering from physical or mental infirmity, illness, disease, injury or deformity, or a place devoted primarily to providing obstetrical or other medical, surgical or nursing care of individuals, whether or not any such place be organized or operated for profit and whether any such place be publicly or privately owned.” Hospitals do not include facilities that only provide room and board.

Effective on July 1, 2016, House Bill 1687 amended Mississippi Code Ann. 27-65-111 to expand the sales tax exemption. The expanded exemption includes sales of durable medical equipment (DME) and home medical supplies (HMS) that are listed as eligible for payment under either Medicare or Medicaid. These sales are exempt when ordered in writing or prescribed by a licensed physician for the medical purposes of a patient. The durable medical equipment and home medical supplies that qualify for the sales tax exemption in Mississippi Code Ann. 27-65-111(dd) do not need to be billed to Medicare, Medicaid or any insurance policy, contract or plan. The entire sale qualifies for a Mississippi sales and use tax exemption regardless of who makes the payment now as a result of House Bill 1687.

Durable medical equipment is defined as having the following characteristics:

Withstands repeated use
Used or operated by a person without specialized training
Primarily used to serve a medical purpose
Only useful to persons with illness or injury
Not worn in or on the body

Home medical supplies are defined as having all the characteristics above, except they can be disposable or single-use items and can be worn in or on the body. Some examples of items that qualify as either DME or HMS are catheters, dialysis equipment, hospital beds, ventilators, prosthetics, and orthotics. Any health care provider can claim a sales tax exemption on these items, including home health service providers and hospice services, as long as these items are prescribed by a licensed physician and paid through Medicare or Medicaid.

Agile Consulting Group can provide your healthcare organization with the sales tax consulting knowledge and expertise to leverage the benefits of these Mississippi sales and use tax exemptions going forward. Our sales tax consulting team will work with your finance and accounting staff to discover areas for improvement, from identifying overpayments to delivering the proper exemption documentation to your vendors. Agile’s sales tax consulting team has extensive healthcare industry experience from working with hospitals and clinics throughout the country and this makes their sales tax consulting services a valuable resource to supplement your organization’s current approach to sales and use tax.

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consulting team can be found on our page summarizing Mississippi sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this issue or any other sales and use tax issue, please contact any of Agile Consulting Group’s sales tax consulting experts at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

The post Mississippi Medical Sales Tax Exemptions for Drugs, Medicine, Equipment, and Supplies appeared first on Agile Consulting Group .

Indiana Sales Tax Exemption for Manufacturing

Thu, 23 Mar 2023 15:57:00 GMT

The Indiana sales tax exemptions for manufacturing are available to all Indiana manufacturers on purchases of manufacturing machinery, tools, and equipment that are “directly used” in production, manufacture, fabrication, assembly, extraction, mining, processing, refining, or finishing of tangible personal property per Indiana Admin. Code 45 §2.2-5-10 . Indiana defines manufacturing machinery, tools, and equipment to be “directly used” in the production process if they have an immediate effect on the tangible personal property being processed. Manufacturing machinery, tools, and equipment have an immediate effect on the tangible personal property being processed if they are an “essential and integral” part of an integrated production process. The integrated production process for manufacturers starts once work-in-process materials are transported into the manufacturing process and ends after the product is packaged for sale.

The Indiana sales tax exemptions for manufacturing also include property incorporated as a part of the final product and property consumed that is directly used in the production process. Agile Consulting Group’s experienced sales tax consultants are available to help manufacturers take advantage of this Indiana sales tax exemption for manufacturing.

Indiana Sales Tax Exemption for Manufacturing

Examples of Indiana sales tax exemptions that are directly used in production include the following:

Manufacturing Equipment
Production Machinery Repair Parts
Electrical Components, Screws, Nuts, Bearings, Washers, Filters, Pumps, etc.
Production Tools and Supplies
Drills, Taps, Blades, Grinders, Sockets, Files, etc.
Material Handling Equipment and Repair Parts (only used within an Integrated Production Process)
Forklifts, Cranes, etc.
Consumables
Abrasives, Grease, Fuel, Welding Gases, Gas Cylinders, Electricity, Natural Gas, etc.
Cost of Goods Sold (COGS)
Material incorporated into the final product
Safety Clothing or Equipment
Gloves, Coveralls, Ear Plugs, Hard Hats, Glasses, Safety Shoes, etc.
Packaging Supplies
Pallets, Boxes, Strapping, Wrap, etc.
Research and Development
Property purchased solely for research and development

In order to be set up for the Indiana sales tax exemptions for manufacturing, Indiana manufacturers will need to fill out, sign and send in Indiana Form ST-105 “General Sales Tax Exemption Certificate” to their vendors. Once the vendor has the Indiana sales tax exemption certificate on file, they will stop charging sales tax on qualifying purchases and set up the account as tax exempt.

Indiana Sales Tax “Claim for Refund”

Indiana manufacturers are also able to recover taxes erroneously paid to their suppliers or self-assessed on their use tax returns as part of the Indiana sales tax exemptions for manufacturing. The state of Indiana has a statute of limitations that enables manufacturers to go back and recover sales tax refunds up to three years, or 36 months, from when the Indiana sales or use tax was paid. In order to recover these taxes paid, the Indiana manufacturer will need to fill out, sign and send in Indiana Form GA-110L “Claim for Refund” to the Indiana Department of Revenue. Once the “Claim for Refund” form has been sent in, it will be assigned to an Indiana state sales and use tax auditor for review. After the review is completed a refund check will be sent to the manufacturer. The experienced sales tax consultants at Agile Consulting Group are excited at the opportunity to help Indiana manufacturers with this refund process.

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Indiana sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact any of Agile Consulting Group’s sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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Washington Sales and Use Tax Exemptions for Medical Products Purchased by Hospitals

Tue, 28 Feb 2023 20:29:00 GMT

Washington sales and use tax law considers hospitals and health care facilities to be the consumers of the medical supplies and equipment used in providing medical services to patients. The Washington sales and use tax exemptions that apply to certain purchases do so based upon the use of the item in question.

Washington Sales and Use Tax Exemptions

Prescription drugs for human consumption are exempt from Washington sales and use tax. There is a three-pronged definition a substance must meet in order to be defined as a “drug” under sales and use tax law. First, it must be a substance that is listed in the official United States pharmacopoeia. Second, it must be intended for use during the diagnosis, cure, mitigation, treatment or prevention of disease. Third, the substance must affect the structure or function of the body. Products which are intended to supplement a patient’s diet such as: vitamins, minerals, herbs, amino acids and supplements would be considered “dietary supplements” rather than “drugs.” Over the counter drugs and dietary supplements would generally be subject to tax unless they are dispensed to patients pursuant to a prescription or under a doctor’s order.

Laboratory Reagents or Other Diagnostic Substances

Purchases of laboratory reagents or other diagnostic substances may be considered “drugs” under certain circumstances. In order to qualify as “drugs” and thus for the corresponding Washington sales and use tax exemption, the laboratory reagents or other diagnostic substances must physically interact with a specific patient’s specimen to qualify for exemption. Laboratory reagents or other diagnostic substances used solely for the preparation of specimens that do not produce a chemical reaction resulting in the detection, measurement, or production of another substance merely facilitate or enable testing and are not exempt from Washington sales and use tax. Examples of taxable purchases include: electrodes; test tubes, slides or other media that do not contain reagents; and acids or chemicals used for cleaning of laboratory equipment.

Disposable or Single-Use Devices

Under WAC § 458-20-18801 disposable or single-use devices used to deliver drugs to patients are tax exempt. Examples include: needles, tubing, syringes, and IV catheters. Durable medical equipment would not qualify for the exemption because it can stand repeated use and therefore cannot be characterized as disposable or single-use devices.

Prosthetic and Orthotic Devices

Prosthetic and orthotic devices are not subject to Washington sales and use tax. Prosthetic devices are replacement, corrective or supportive devices worn on or in the body to replace a missing body part or prevent or correct a physical deformity, malfunction or support a weak or deformed portion of the body. Repair and replacement parts for prosthetic devices are also not subject to sales and use tax. Orthotic devices including braces, casts and splints which supplement or activate weakened body part or functions are not subject to sales and use tax. Ostomy products including related supplies and consumables such as creams and germicides also fall under the prosthetic and orthotic device exemption.

“Bundled Transactions” of Medical Kits

The state of Washington has provided specific instructions for the taxation of “bundled transactions” which, for hospitals, are most often medical kits or trays containing a group of distinct and identifiable products sold for a single non-itemized price. Whether the medical kit or tray is subject to Washington sales and use tax depends on whether the predominant cost of the items within the medical kit or tray are taxable or non-taxable products. If more than fifty percent of the cost of the kit is attributable to taxable products then the entire cost of the medical kit or tray is subject to Washington sales and use tax. Alternatively, if fifty percent or more of the cost of the kit is attributable to non-taxable products then the entire cost of the medical kit or tray would be exempt from Washington sales and use tax.

Non-Profit Organizations

Unlike some other states that provide broad exemptions for nonprofit taxpayers, there is no general Washington sales and use tax exemption for nonprofit organizations. There are some limited exemptions for nonprofit entities from Washington sales and use tax. RCW §82.04.050(2)(a) provides an exemption for laundry services to all nonprofit health care facilities. Additionally, RCW §82.08.02795 provides a Washington sales and use tax exemption to free hospitals. Free hospitals are those to do not charge patients for the health care provided. A list of free hospitals and clinics can be found at Washington Health Care Access Alliance .

Agile Consulting Group

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Washington sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact an Agile Consulting sales tax consultant at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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NJ Sales Tax Manufacturing Exemption

Thu, 23 Feb 2023 18:53:00 GMT

The New Jersey sales and use tax exemption for manufacturers enables machinery, apparatuses, or equipment to be purchased without paying New Jersey sales and use tax. New Jersey Revenue Statute 54:32B-8.13(a) further clarifies the sales and use tax exemption by stating that the machinery, apparatuses or equipment must be for use or consumption directly and primarily in the production of tangible personal property by manufacturers, processors, assemblers or refineries. This New Jersey sales and use tax exemption for manufacturers applies to any such machinery, apparatus, or equipment regardless of whether the item is purchased, rented or leased.

Since machinery, apparatus, or equipment only qualifies for a New Jersey sales and use tax exemption if it is used or consumed directly and primarily in production, it is relevant to understand how New Jersey defines production, direct use, and primary use.

NJ Sales Tax Manufacturing Exemption Codes

The New Jersey Administrative Codes

From our firsthand experience providing sales and use tax consulting services in New Jersey as well as from the guidance provided in New Jersey Administrative Code 18:24-4.4(b) , production is defined as beginning when the raw materials are introduced into a series of systematic manufacturing, processing, assembling, or refining operations. Production ceases when the product is in the form that will be sold to consumers. Production does not include any distribution activities, which means that machinery or equipment used to pack products into shipping containers after the product has been manufactured into the form in which it will be purchased by the consumer does not qualify for this New Jersey sales and use tax exemption for manufacturers.

N.J. Admin. Code 18:24-4.4(c) states that machinery, apparatus, or equipment is considered to be “directly used in production” only when it is used to “initiate, sustain, or terminate the transformation of raw materials into finished products.” There are three factors that are used to determine whether machinery, apparatus, or equipment meets the direct use criteria:

Physical proximity of the machinery, apparatus, or equipment in relation to the production process in which it is used
Proximity of time of use of the machinery, apparatus, or equipment in relation to property used before and after it in the production process
The active causal relationship between the use of the machinery, apparatus, or equipment and production of the product. Even though particular property may be essential to the production process because its use is required by law or practical necessity does not mean that the property meets the direct use provision according to N.J. Statutes. For example, property used to prevent accidents has no causal relationship to the production of a product, therefore it is not considered directly used.

Regarding the “primary use” provision, N.J. Admin. Code 18:24-4.4(d) states that a single unit of machinery, apparatus, or equipment used for two different activities, one activity qualifying as direct use and one activity not qualifying as direct use, is only exempt from New Jersey sales and use tax if its directly used in manufacturing, processing, assembling or refining operations more than 50 percent of the time. For example, if a manufacturer purchases a forklift that is used 60 percent of the time to move work in process and 40 percent of the time in loading finished goods onto a truck, then the forklift qualifies for exemption since it is directly used in production more than 50 percent of the time.

New Jersey Exempt Use Certificate

In order to claim this exemption on future qualifying purchases, New Jersey manufacturers must supply their vendors with a valid exemption certificate. The proper form that should be completed is the New Jersey Exempt Use Certificate (ST-4) . This certificate can be found at the New Jersey Division of Taxation website. For manufacturers who have already paid the sales tax to their vendors or remitted use tax to the N.J. Division of Taxation on qualifying exempt purchases, they can complete the A-3730 Claim for Refund form . An application for a refund must be submitted within four years from the date of payment. This refund claim form can also be found on the N.J. Division of Taxation website.

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing New Jersey sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact us about our sales and use tax consulting services at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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Iowa Manufacturing Replacement Parts and Supplies Exemption Beginning 7/1/2016

Tue, 06 Dec 2022 21:08:00 GMT

Effective July 1 ^st , 2016 Iowa Code 423.3(47)(a) now provides an exemption for manufacturers to purchase replacement parts for computers, machinery and equipment without paying Iowa sales and use tax. Manufacturing supplies also now qualify for this exemption. The legislation effecting this change has created new definitions for the terms “replacement parts” and “supplies”. These definitions can be found in Iowa Code 423(47)(d)(7) and (8) , respectively.

The new language updates Iowa’s sales tax exemption for the manufacturing industry and broadens it extensively. In practice, these new definitions will enable processors and manufacturers to purchase many more repair and replacement items tax exempt. This change removes the requirement that repair or replacement parts and supplies needed to be depreciable for state and federal income tax purposes. Historically, very few repair or replacement parts and supplies rose to the level of depreciable status. Now these items, which could also be thought of as “consumables”, are eligible to be purchased tax exempt.

Iowa House File 2433, which initiated this change to the Iowa Code, was drafted by the 86 ^th Iowa General Assembly in March of 2016 and was signed by Governor Branstad on March 21, 2016 . While Governor Branstad was pleased that this broader sales and use tax exemption “will help Iowa taxpayers and businesses,” he also expressed disappointment that the exemption did not extend further.

Below is a brief summary of the updated definitions for “replacement parts” and “supplies” and examples of qualifying items.

Replacement Parts for Manufacturers:

Iowa manufacturing replacement parts, as now defined, are items of tangible personal property replacing a component of a computer, machinery or equipment. The replacement part must perform the same or similar function as the component it replaces. The replacement part must also restore the computer, machinery or equipment to a working or operational condition or upgrade or improve its efficiency.

Supplies for Manufacturers:

Supplies, as now defined, are items of tangible personal property meeting the following four conditions:

Is connected to a computer, machinery or equipment and requires regular replacement because the item is consumed or deteriorates through use.
Is used in conjunction with computer, machinery or equipment specifically used in manufacturing products.
Comes into physical contact with other items of tangible personal property used in processing and is used to assist or maintain conditions necessary for processing or manufacturing.
Is used directly and primarily in processing or manufacturing of goods.

Examples of supplies qualifying for the Iowa manufacturing replacement parts and supplies exemption include: saw blades, drill bits, filters, jigs, dies, tools other than hand tools, cutting fluids, oils and lubricants, coolants, etc.

This is not a retroactive change in this Iowa sales and use tax exemption. It is strictly on a go-forward basis beginning July 1, 2016. Prior to July 1, 2016, Iowa manufacturing replacement parts needed to be depreciable for state and federal income tax purposes. Only those parts which either materially added to the value of the machinery and equipment or appreciably extended their lives would qualify for the sales and use tax exemption. Replacement parts that merely kept manufacturing machinery and equipment in good working condition did not qualify. Historically, Iowa would either require documentation supporting this designation or would accept an audit procedure agreement, which essentially sets a mutually agreed-upon dollar threshold between the state of Iowa and the taxpayer that is used to distinguish between taxable and exempt qualifying purchases.

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Agile Consulting Group’s sales tax consultants can be found on our page summarizing Iowa sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or any other sales & use tax issue, please contact us at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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Texas Orthopedic Devices and Appliances Tax Exemption (aka Zimmer Ruling)

Sat, 12 Nov 2022 14:04:00 GMT

Historically, the TX Comptroller of Public Accounts maintained that Texas Tax Code Section 151.313 did not create a Texas orthopedic devices and appliances tax exemption for hospitals that provide medical services. However, in 2012, the Court of Appeals concluded that the definition of the term “orthopedic appliance” in Rule 3.284, which interprets TX Tax Code Sec. 151.313, did exempt instruments and tools used to implant orthopedic devices.

In the 2012 court case, Zimmer US, Inc., Appellant v. Susan Combs, Comptroller of Public Accounts of the State of Texas , Zimmer claimed that the language used in Rule 3.284 to define appliances or devices and orthopedic appliances should include instruments used exclusively in orthopedic procedures. Rule 3.284(a)(1) of the Texas Administrative Code, defines an appliance or device as, “an instrument, apparatus, implement, machine, contrivance, implant, chemical, or other similar or related product that does not achieve its primary intended purposes through chemical action within or on the body, and that is not dependent upon being metabolized for the achievement of its primary intended purposes.” Rule 3.284(a)(12) defines an orthopedic appliance as “any appliance or device designed specifically for use in the correction or prevention of human deformities, defects, or chronic diseases of the skeleton, joints, or spine.”

Zimmer reasoned that if an instrument is designed specifically for use in a particular orthopedic surgical procedure, and because the implantation of prosthetics would be impossible without this procedure, they are part of the “correction” of an orthopedic condition. The court agreed with Zimmer’s contention, stating that both of the definitions in Rule 3.284 leave no major terms undefined, include very specific lists, and contain reasonable interpretations of the term “orthopedic device” that does not contradict the tax code’s plain language.

A significant term that supported the basis of the court’s determination is the language in Rule 3.284(a)(12) that states, “designed specifically.” This essentially means that the appliance or device needs to be designed by the manufacturer for exclusive use in the correction of skeleton, joints, and spine deformities. If the appliance or device can be used in other surgical procedures, then it will not qualify for exemption as an orthopedic appliance or device. For example, a pneumatic drill and associated attachment burs may be purchased by a hospital for use during skeleton and joint repair procedures. However, if the drill and attachment burs are designed by the manufacturer for use in other applications, such as neurosurgery and ENT procedures, then it would not qualify for exemption.

Since the exemption is determined by the designed use of the appliance or device, it is important to conduct due diligence and review all relevant documentation for the item. There are several pieces of documentation that can be helpful in determining device classification; marketing materials and product brochures issued by the manufacturer, instructions for use that contain indications for the item, and FDA 510K statements which often states the device classification. The inclusion of a product in the FDA classification of orthopedic devices does not mean the item automatically qualifies as an orthopedic appliance or device for Texas sales tax purposes. Even if an item is classified as an Orthopedic Device under Title 21 of the Code of Federal Regulations, Part 888, the item must also clearly meet the definition of an orthopedic appliance or device under Rule 3.284(a)(12) and be designed specifically for use in the correction or prevention of human deformities, defects, or chronic diseases of the skeleton, joints, or spine.

Generally, vendors making sales orthopedic appliances and devices must collect tax. Additionally, most vendors haven’t adjusted their systems to account for this ruling that allows an exemption on orthopedic appliances and devices. The vendor does not need to charge sales tax on purchases of orthopedic appliances and devices if the purchaser provides them with a Texas Certificate of Exemption (Form 01-339). If sales tax has already been paid, collected, and remitted on the purchase of orthopedic appliances and devices in Texas, the purchaser can apply for a refund from the Texas Comptroller of Public Accounts.

As with all Sales & Use Tax research, the specifics of each case need to be considered when determining taxability. Agile Consulting Group’s sales tax consultants can be found on our page summarizing Texas sales and use tax exemptions. If you have questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or any other Sales & Use Tax issue, please contact us at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

Citations:

Texas Rule §3.284

Texas Tax Code, Chapter § 151.313

Zimmer US, Inc., Appellant v. Susan Combs, Comptroller of Public Accounts of the State of Texas

The post Texas Orthopedic Devices and Appliances Tax Exemption (aka Zimmer Ruling) appeared first on Agile Consulting Group .

Florida Sales Tax Exemption for Food

Fri, 11 Nov 2022 17:28:03 GMT

Know the Florida Facts Before You File Your Tax

There has been a longstanding Florida sales tax exemption for food, however that exemption was limited to specific categories and types of food and did not extend to all food sales. In a restaurant setting, all food purchases would be exempt from Florida sales and use tax because of the intent to resell the food to its customers. In healthcare facilities, as well as other types of facilities that provide food services to the individuals occupying them, the line of demarcation between who is the ultimate consumer of the food can be more complex. Agile Consulting Group’s sales tax consultants have received a ruling from the Florida Department of Revenue that entitles facilities that furnish meals to individuals housed within them to make non-taxable purchases of all food under an expanded interpretation of the Florida sales tax exemption for food.

Section 212.08(1), F.S. - Exemption for Food Products Consumed by Humans

Section 212.08(1), F.S. provides a sales and use tax exemption for food products for human consumption, however, the extent of that exemption is limited by the caveats provided within subparagraph (c). For example, meats, cheese and bread bought independently are considered non-taxable, while prepared combinations of meats, cheese and bread are considered to be taxable as “sandwiches for immediate consumption.” This example is merely one of the thirteen limitations on the Florida sales tax exemption for food for human consumption. Other notable exceptions include soft drinks and other canned beverages, bakery products, and ice cream.

Section 212.08(7)(i), F.S. - Exemption for Hospital Meals

Effective June 9, 1995, a Florida sales and use tax exemption for hospital meals can be found in Section 212.08(7)(i), F.S. , and while the title appears to restrict the exemption to hospital facilities only, a more in-depth reading of the exemption expands its scope.

(i) Hospital meals and rooms. — Also exempt from payment of the tax imposed by this chapter on rentals and meals are patients and inmates of any hospital or other physical plant or facility designed and operated primarily for the care of persons who are ill, aged, infirm, mentally or physically incapacitated, or otherwise dependent on special care or attention. Residents of a home for the aged are exempt from payment of taxes on meals provided through the facility. A home for the aged is defined as a facility that is licensed or certified in part or in whole under chapter 400, chapter 429, or chapter 651, or that is financed by a mortgage loan made or insured by the United States Department of Housing and Urban Development under s. 202, s. 202 with a s. 8 subsidy, s. 221(d)(3) or (4), s. 232, or s. 236 of the National Housing Act, or other such similar facility designed and operated primarily for the care of the aged.

Rule 12A-1.0115(11), F.A.C. - Further Clarification on Exemption for Hospital Meals

As the Florida Department of Revenue is wont to do, it adopted a Rule within the Florida Administrative Code, to clarify upon the exemption drafted by the Florida Legislature. This Rule 12A-1.0115(11), F.A.C. , addresses and further clarifies the exemption found in Section 212.08(7)(i), F.S. and states,

(11) Hospitals and homes for the aged.

(a) Meals furnished to residents of homes for the aged, as defined in section 212.08(7)(i), F.S., are exempt.

(b) Meals furnished to patients and inmates of any hospital or other institution designed and operated primarily for the care of persons who are ill, aged, infirm, mentally or physically incapacitated, or for any reason dependent upon special care or attention are exempt.

(c) Meals sold and delivered as a charitable function by a nonprofit volunteer organization to handicapped, elderly, or indigent persons at their residences are exempt.

Although the Rule was intended to clarify the Florida sales tax exemption for food, in our work with Florida healthcare organizations, Agile’s sales tax consultants identified that confusion nevertheless existed about what qualified for the exemption. Our sales tax consultants found that many food distributors were erroneously billing sales tax to healthcare facilities and those facilities were often paying it either unknowingly or unquestioningly.

Agile's Response

In response to this reality, Agile’s sales tax consultants submitted a request to the Florida Department of Revenue for a Letter of Technical Advice (“Florida Sales and Use Tax LTA”). Within that request, Agile’s sales tax consultants shared the common facts involving these purchases, outlined 14 different types of facilities or entities we believed should qualify for the Florida sales tax exemption for food and shared our position as to why purchases of all food products made by these organizations should fall within the interpretation of this exemption.

Agile received a response from the Technical Assistance and Dispute Resolution (“TADR”) section of the Florida Department of Revenue that confirmed their attorneys agreed with our interpretation of the Florida sales tax exemption for food.

What Does This Mean for Florida Taxpayers?

In essence, this means that certain healthcare organizations and facilities can now purchase all food products exempt from Florida sales and use tax. Furthermore, not only does this exemption take effect on all future purchases, it also allows for recoveries of any taxes collected in error by food distributors, or remitted as use tax directly to the Florida Department of Revenue.

This expansion of the Florida sales tax exemption for food is yet another example of the forward, outside-the-box thinking Agile Consulting Group’s sales tax consultants demonstrate on a regular basis in their efforts to make sure that our clients

Additionally, opportunities to take advantage of other Florida sales and use tax exemptions exist for many healthcare facilities. Which other exemptions those facilities may qualify for is largely dependent upon the level of care required by the patients or residents. Those facilities where the residents require a higher level of care will make a larger volume of purchases that qualify for the other medical exemptions including prescription-required, single-use medical items , or medical gases. There are also other Florida sales and use tax exemptions that would apply to all facilities, including the software used in operations or financial reporting of the business.

As with all Sales & Use Tax research, the specifics of each case need to be considered when determining taxability. Agile Consulting Group’s sales tax consultants can be found on our page summarizing Florida sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or any other Sales & Use Tax issue, please contact us at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.

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PA Sales Tax Exemptions for Manufacturing

Mon, 17 Oct 2022 20:55:00 GMT

What is Covered Under Pennsylvania's Sales Tax Exemptions?

Pennsylvania sales tax exemptions for manufacturing offer both manufacturers and processors an exemption on purchases of tangible personal property, including machinery and equipment, predominantly used directly in manufacturing or processing operations per PA Code 32.32 . This Pennsylvania sales tax exemption for manufacturing also applies to repair parts for machinery and equipment, as well as supplies that are directly used or consumed in the manufacturing or processing operation.

PA Code 32.1 defines manufacturing as, “an integrated series of operations which places personal property in a form, composition or character different from that in which it was acquired.” Some examples of activities that qualify as manufacturing are compounding, fabricating, and processing.

What is Covered Under Pennsylvania's Sales Tax Exemptions?

PA Code 32.1 also defines the manufacturing operation as, “the series of production activities, beginning with the first production operation and ending with the packaging of the product for the ultimate consumer.”

Since this definition limits the scope of the manufacturing operation to the first stage of production through the packaging of the final product for sale, activities such as collecting, weighing or storing raw materials and loading or delivery of the packaged goods to the customer do not qualify for the Pennsylvania sales tax exemption for manufacturing.

Important Criteria for Pennsylvania Sales Tax Exemptions in Manufacturing

Two important criteria in the Pennsylvania sales tax exemptions for manufacturing involve the provision stating that machinery, equipment, repair parts, or supplies must be predominantly used in the manufacturing operation and directly used in the manufacturing operation. Per PA Code 32.32(a)(2), tangible personal property must be used more than 50% of the time in manufacturing operations to be considered as having a predominant use.

For example, if a forklift is used 55% of the time to move work-in-process and used 45% of the time to load the final product onto a delivery truck, then this forklift would be considered as having a predominant use in the manufacturing operation and would be entirely exempt for sales and use tax purposes.

What Factors Do I Need to Consider When Using Personal Property in a Manufacturing Operation?

Per PA Code 32.32(a)(1), to determine whether tangible personal property is directly used in the manufacturing operation, there are three factors to consider:

The physical proximity of the property to the actual production process
The proximity of the time of use of the property in relation to time of use of other property used before and after it in the production process
The active causal relationship between use of the property and production of the final product

What Types of Property Are Exempt?

Assuming the property meets the predominant use and direct use criteria and is part of the manufacturing operation, some types of property that would qualify for the Pennsylvania sales tax exemption are:

Machinery and equipment used to transport, convey, handle or store the product
Repair parts to machinery and equipment used to transport, convey, handle or store the product
Equipment, machinery and supplies used to control, abate or prevent air, water or noise pollution
Property used for quality control in testing and inspecting the product throughout the production cycle
Packaging equipment and supplies that are used to ship the final product to the ultimate consumer
Research & development equipment and supplies that are used to create a new or improved product or devise a new method of production
Safety supplies that are used to protect employees during the manufacturing operation and are required by OSHA
Electricity and natural gas used to power production equipment. A utility survey must be completed for each meter claimed to be exempt and should be prepared by either a plant engineer or independent consulting firm. This survey needs to indicate the usage of each meter that has a direct causal relationship to the manufactured product.

Claiming Pennsylvania Sales Tax Exemptions for Manufacturing

To claim the Pennsylvania sales tax exemption for manufacturing on machinery and machine tools, qualifying manufacturers need to complete the Pennsylvania Exemption Certificate (REV-1220) and provide a copy of this certificate to their vendors.

For manufacturers who have already paid sales taxes to their vendors, they can complete and submit the Board of Appeals Petition Form (REV-65) to recover sales taxes on qualifying tangible personal property predominantly used directly in a manufacturing operation.

The Board of Appeals Petition Form can also be used to recover use taxes accrued on exempt tangible personal property predominantly used directly in a manufacturing operation. A Board of Appeals Petition must be filed within three years of the actual payment of the tax, otherwise the statute of limitations will have lapsed, and any taxes paid in error will not be eligible for a refund.

Both forms can be located on the Pennsylvania Department of Revenue website .

If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact our sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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2022 NFL Flag Summit Sales Tax FAQs

Fri, 05 Aug 2022 17:33:01 GMT

A One-Stop Shop for Compliance Queries

For the past two years, NFL Flag has hosted a summit with the goal of bringing its leaders and leagues together to collaborate on the best ways to support and improve their industry. Each year Agile has attended in order to provide information and perspective on sales and use tax. This year's summit brought Aaron and Kevin to New Orleans to address the queries and concerns of leagues nationwide. After their presentation, several individuals had additional questions on how they can be as successful with their sales tax as they are on the field. This is a one-stop shop for answering those questions!

What does the sales tax certificate look like that we need to upload and where can we find it? Is it state by state?

The look of sales tax certificates varies by state. In order to obtain one, you will need to register with the state. Most businesses can fill out an online registration form. Some states will require a business that is based out of the country, a contractor, does not have an FEIN, or has a representative member without an SSN to file paper forms. Here is a checklist of the basic information you will need in order to register:

Legal Entity Name & DBA
Physical & Business Mailing Addresses
Business Phone Number
FEIN
Website url
Corporation Type
Date and State of Incorporation/Organization
NAICs Code(s)
Business Description
Accounting Method (Accrual or Cash)
Accounting Period (ex. 1/1-12/31)
Officer Information (Full Name, Position, Start Date, Home Address, Phone Number, DOB, Driver's License # and State of Issue, SSN)

Can a copy of these slides be distributed, as a guide?

Of course! Here is a copy of the presentation that Agile provided during the summit. It covers the basics of sales tax and how we tackle compliance for our customers.

Do you recommend using multiple accounts to better allocate funds and to keep track of expenses for tax purposes?

Depending on the size of your business's sales taxes and your filing frequency, it may be beneficial to use multiple accounts. However, most companies can manage this out of their primary accounts.

How do you set up sales tax while selling a product?

First, it’s best to know if you need to set up sales tax while selling a product. Not all businesses are required to collect sales tax – the rules vary by state. Recently, one of our team members posted a blog about this titled “ Debunking Nexus Compliance ” which summarizes knowing when to collect sales tax. If you've confirmed that you are required to collect and remit sales tax, it's best to acquire a sales tax software that can track this for you.

If we are 501 C 3 classified and in Texas are we sales tax exempt?

Yes! Nonprofit organizations such as 501(c)(3), (4), (8), (10), or (19); are exempt from franchise and sales tax.

For multiple leagues, do you recommend separate income/outcome for each location or keep everything a one-stop shop?
For multiple leagues, it would be best to have separate income/outcome for each location - especially if the sales tax is significant. Each FEIN needs its own registration and each state the league is registered in needs to file a return. So, mirroring your accounts this way is beneficial.

Is there a registration fee tax or use tax and if only in some states which states?

While most states have free registration available, some will charge a fee that varies by state. In some states, if you have a DBA there is an additional fee assessed. For other states, your initial registration is free but additional registrations will populate a fee. Some states will only assess a registration fee if the business is registering from out of state. Below is a list of registration fees associated with state sales tax registrations- please note that this is not a complete and comprehensive list and is subject to change

AZ $12
CT $100
HI $20
RI $10
SC $50
WA $90
WV $30

What are the best ways to pay less tax?

The best way to pay less tax is to have a comprehensive understanding of tax law or hire someone that does. Many businesses are collecting sales tax on items that are not taxable or they are collecting at a rate that far exceeds what is required. Hiring a tax consultant to manage these or simply conduct an assessment to get you on the right track may be the best financial decision your business makes all year. Here at Agile, we have departments dedicated to both Compliance and Contingency. That means that we can get you back on track with your taxes and pursue any refunds that you are due.

Unasked Questions, to which we still have answers!

Nexus Studies

These are the first steps towards compliance. Nexus is a connection between a business and the state. Once the nexus has been established (through the volume of sales, amount of sales or physical location) you will be required to collect and remit sales in each jurisdiction where it is met. Rather than only focusing on one state, it would be best to conduct a nexus study to review where in the U.S. the client is required to register and begin remitting sales tax. This will be beneficial to avoiding or managing the risk tolerance of audits, penalties and fees.

Taxability Studies

Taxability varies across states. In one state, your sales may be seen as taxable and in another, only a part of none of it may be taxable. In a taxability study, we review your data and product categories to create a presentation that helps you understand how your products and services are taxed across all locations where nexus is/is going to be established and offer recommendations on handling these tax obligations.

I got registered, now what?

File your returns regularly! Once you have confirmed that you are required to register and taken the plunge, you are on the hook to file returns based on your established filing frequency. The state or jurisdiction which you are registered in can require you to file monthly, quarterly, semi-annually or annually and this is subject to change at their discretion. We do not advise registering in every state you think you should without a Nexus study as once you are registered you must KEEP filing. Deregistering is a bit of a hassle. Failure to file (even a $0 return) will result in penalties and fees. Know your business and your obligations before you begin registering!

Reach Out to Us with Questions

If you have questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.

Missouri Sales Tax Exemption for Agriculture

Mon, 11 Jul 2022 17:21:42 GMT

What's exempt from sales tax for the agriculture industry in Missouri?

The Missouri sales tax exemption for agriculture provides a sales & use tax exemption for Missouri-based businesses involved in an agricultural production process like producing crops or raising and feeding livestock or poultry for sale at retail. The knowledgeable and detail-oriented sales tax consultants at the Agile Consulting Group can provide your organization with the resources and tools to take advantage of this exemption and improve your business’s cash flow.

In general, per MO Code Regs. 10-110.900 , “the purchase of farm machinery, equipment, and repair and replacement parts and supplies and lubricants used exclusively, solely, and directly for producing crops, raising and feeding livestock, fish, or poultry, or producing milk for ultimate sale at retail, and motor fuel used for agricultural purposes is exempt from tax.” To qualify for this exemption, the machinery, equipment, repair and replacement parts, and supplies must meet the following three criteria:

Used exclusively for agricultural purposes
Used on land owned or leased for the purpose of producing farm products; and
Used directly in producing farm products to be sold ultimately in processed form or otherwise at retail or in producing farm products to be fed to livestock or poultry to be sold ultimately in processed form at retail.

One of the key determinants for this Missouri sales tax exemption for agriculture is whether the purchase is “used directly” in the agricultural production process. For the purposes of this exemption, “used directly” could encompass items that are used in pre-production, during production, or post-production, depending on three factors:

Where the item in question is used
When the item in question is used
How the item in question is used

Since there are several factors involved in determining whether an item is considered to be “used directly” in agricultural production, it is important to review each item in detail to ensure that it qualifies for the sales tax exemption.

Machinery & Equipment that Qualify for the Exemption

The following is a non-exhaustive list of the types of machinery & equipment that would qualify for the Missouri sales tax exemption for agriculture:

Anhydrous ammonia applicators, nurse tanks and toolbars
Balers
Combines
Drag conveyors
Fertilizer spreaders & sprayers
Grain augers, binders, conveyors, and handling equipment
Irrigation equipment
Seeders
Tractors

MO Code Regs. 10-110.900(4)(A) provides a more comprehensive listing of the items that qualify under this exemption. MO Code Regs. 10-110.900(4)(B) also references the types of items that are taxable and do not qualify for this exemption.

How to Claim the Missouri Sales Tax Exemption for Agriculture

In order to claim the Missouri sales tax exemption for agriculture, qualifying agricultural producers must fully complete a Missouri Form 149 Sales and Use Tax Exemption Certificate and furnish this completed form to their sellers.

How to Recover Missouri Sales Taxes Already Paid to a Seller

Missouri agricultural producers that have already made purchases which meet the exemption criteria listed above are entitled to refunds for purchases that were made within three years from the date the tax was paid. Missouri agricultural producers are eligible to recover any sales tax overpayments on machinery, equipment, repair & replacement parts and supplies used in agricultural production by submitting a Missouri Form 472P with the Missouri Department of Revenue. This Missouri Form 472P Purchaser’s Claim for Sales Tax Refund must be filed with the appropriate documentation in order for the Missouri Department of Revenue to consider the claim valid. Some of the required documentation includes a signed & notarized Missouri Form 5433 from the seller, a detailed worksheet explaining how each item is used during agricultural production, and invoice copies. The consultants at Agile Consulting Group have experience in recovering overpaid sales taxes from the Missouri Department of Revenue and can assist any Missouri agricultural producer with this cumbersome process.

Reach Out to Us with Questions

Debunking Nexus Compliance

Wed, 06 Jul 2022 14:43:04 GMT

How do you know when you should collect sales tax? Do I have to collect sales taxes in states where I don’t have a physical presence? What is nexus, physical nexus, and economic nexus? In the wake of South Dakota v. Wayfair , the landscape for sales & use tax compliance has become more complex. A member of our team adapted our partner Avalara’s recent Understanding Where, When and Why Your Business has a Sales Tax Obligation webinar to give this quick guide to nexus compliance:

What’s nexus? Starting with: Physical Nexus

A business is required to collect and remit sales taxes once the business has established nexus for sales taxes in a state. Prior to South Dakota v. Wayfair , physical presence (like buildings, facilities, or employees) in a state was the sole marker for sales tax obligations. Physical nexus is still important, and you can most easily think of physical nexus as anywhere your business has employees (including those “working from home”), buildings (including your home if you don’t have a formal office), or 1099 contractors that act in a sales/marketing role. While economic nexus, which we’ll discuss in a second, is important and more complicated, do not ignore where you have physical nexus! These states’ physical nexus compliance will require you to register and remit sales and use taxes.

Pro Tip: Travelling into a state for a conference where you’re making sales or soliciting customers can trigger physical nexus. This issue can be more complex as the size of the business gained, time spent in the state, and other factors can change whether we’d recommend registering, collecting, and remitting tax.

So, what changed? Introducing: Economic Nexus

After South Dakota v. Wayfair , the Supreme Court made it legal for states to require businesses to collect and remit sales taxes if the business has enough of an economic presence in the state. While economic nexus compliance can be more complex, you can think of it most simply as the sales made based on the “ship to” address on your invoices. If you’re in IL and shipping candles to a customer in IA, you may have sufficient economic presence in IA to need to register for sales and use taxes and then to collect and remit those taxes. However, your business does not automatically trigger economic nexus by selling goods or services into a state. States have varying nexus compliance thresholds for how much economic activity triggers economic nexus. While the thresholds vary by state, many states have hovered around a common threshold of either 200 invoiced transactions or $100k in sales, whichever is hit first. More populous states like NY, CA, and TX have higher thresholds, but the 200 transactions/$100k rule is a good gut-check to see if your business is close enough to worry about triggering economic nexus. If you feel like you’re triggering nexus, have triggered nexus, or will do so this year, we’d recommend contacting one of our sales & use tax experts.

I think I have economic nexus. What do I do?

Avalara’s panel recommended a process like our own: a nexus study leading to a taxability study. First, we’d want to understand where you have triggered physical and economic nexus. These are the states where you, by the book, should practice nexus compliance by registering, collecting and remitting taxes. Next, we recommend to many clients to do a taxability study of their products to understand if those products are taxable in the states where you have nexus. This study can further narrow down the list of where to register if a business isn’t making any taxable sales. (You might be technically required to register, but if your taxable sales were $0, any potential audit would uncover $0 of back taxes with no added fees or interest, making registration and filing a less-desirable hassle.) Combining a nexus study with a taxability study can estimate any existing liabilities as well, and we can advise how your business proceeds with nexus compliance based on your risk tolerance.

What if I don’t comply?

While some businesses choose to not worry about back taxes or sales tax collection based on their risk tolerance, we would recommend that you register and file taxes in any state where your business has physical or economic nexus in addition to taxable sales. If your business isn’t registered and practicing nexus compliance, most states could audit you for 7-8 or more years of potential back-taxes with penalties and fines. If you are registered and filing, many states limit the eligible audit period to 3-4 years.

I exclusively sell on Amazon, Etsy, etc. Do I have to worry about sales taxes?

Some marketplace facilitators like Amazon, Walmart, and Etsy will handle the sales & use tax collection and remit the taxes on their vendors’ behalf. If you’re exclusively making sales on one of these platforms, they might be handling your sales tax concerns. However, if you also have your own e-commerce site, your Amazon sales could be triggering physical or economic nexus in states where you’ll then be required to practice nexus compliance for your e-commerce sales. If you’re unsure if your marketplace facilitator is collecting sales taxes on your behalf, you can usually check into their reports on your account to see if they’ve been collecting the taxes.

Pro Tip: Many businesses think Shopify is a marketplace facilitator even though it runs sales through their own website. Shopify helps drive sales, but Shopify is not a marketplace facilitator and does not automatically handle sales taxes for its clients . Many of our e-commerce clients who we’ve helped with sales & use tax nexus compliance use Shopify, and we’d be happy to help with your compliance needs as well!

What should I do if I’m unsure about my nexus?

Agile has developed a patented, real-time nexus study program that provides instant results. Now we have two ways we can assist you when it comes to determining whether your business has sales tax nexus in any U.S. states! Choose our traditional, manual study conducted by our team of sales tax compliance specialists, or opt for an instant solution via our real-time nexus study.

Georgia Sales Tax Exemptions for Manufacturing

Thu, 28 Apr 2022 21:21:00 GMT

There are many Georgia sales tax exemptions for manufacturing available to manufacturers operating within the state. In recent years, Georgia’s sales and use tax exemptions for manufacturers have broadened through the integrated plant theory with respect to manufacturing machinery and equipment. The integrated plant theory as it relates to Georgia sales and use tax exemptions has evolved in stages beginning in 2009.

Georgia Sales Tax Exemptions for Manufacturing: Prior to the Integrated Plant Theory

Prior to the integrated plant theory, the Georgia sales and use tax manufacturing exemption statute [ O.C.G.A. § 48-8-3 ] read as “machinery which is used directly in the manufacture of tangible personal property when the machinery is bought to replace or upgrade machinery in a manufacturing plant presently existing in this state and machinery components which are purchased to upgrade machinery used directly in the manufacture of tangible personal property in a manufacturing plant.”

Georgia Sales Tax Exemptions for Manufacturing: After the Integrated Plant Theory

This statute has been revised to add the words “or equipment” after machinery to include items such as component parts that might not be considered “machinery”. The revised statute also eliminates the term “directly used” and adds “necessary and integral” to eliminate confusion on direct and indirect use in the manufacturing process. Furthermore, the revised statute allows for mobile or portable machinery and handheld tools. GA Regs. 560-12-2-.62 now reads “this Rule explains the sales and use tax exemptions in O.C.G.A § 48-8-3.2 for machinery and equipment necessary and integral to the manufacture of tangible personal property in a manufacturing plant, for repair and replacement parts associated with such machinery and equipment, and for industrial materials and packaging supplies.”

The integrated plant theory also phased in an exemption on energy used by manufacturers. Georgia Code 48-8-3.2[c](1) states “the sale, use, storage, or consumption of energy which is necessary and integral to the manufacture of tangible personal property at a manufacturing plant in this state shall be exempt from all sales and use taxation except for the sales and use tax for educational purpose.”

The integrated plant theory has the exemption phased in over a four year period as follows:

Georgia Sales Tax Exemption for Consumable Supplies

One of the final items that the integrated plant theory revised was the exemption for “consumable supplies” by incorporating it into the definition of “equipment” which qualifies for the Georgia sales tax exemptions for manufacturing. Ga. Comp. R. & Regs. §560-12-2-.62(2)(a) defines consumable supplies as, “tangible personal property, other than machinery, industrial materials, packaging supplies, and energy, that is consumed or expended during the manufacture of tangible personal property.” Consumable supplies also include, “water treatment chemicals for use in or in conjunction with machinery or equipment and items that are readily disposable.”

In conclusion, the Georgia sales and use tax exemptions for manufacturers have been expanded over the past few years due to the integrated plant theory and mainly the statute change in wording from “direct use” to “necessary and integral”. Exempt items now include new manufacturing equipment, repair parts for manufacturing equipment, hand tools, cutting and welding gases, consumables, safety supplies, uniforms, utilities, and forklift leases and repairs.

To receive the benefit of these exemptions, the manufacturer must be set up as tax exempt with their vendors by issuing a Georgia sales and use tax certificate of exemption form (ST-5M). Erroneous tax payments may be recovered from the state of Georgia for up to 36-months after the payment of the sales and use tax.

As with all Sales & Use Tax research, the specifics of each case need to be considered when determining taxability. Agile Consulting Group’s sales tax consultants can be found on our page summarizing Georgia sales tax exemptions for manufacturing . If you have questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or any other Sales & Use Tax issue, please contact us at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

The post Georgia Sales Tax Exemptions for Manufacturing appeared first on Agile Consulting Group .

Arkansas Sales Tax Exemption Overhaul for Manufacturers

Mon, 11 Apr 2022 21:21:00 GMT

Arkansas Sales Tax Exemptions: Act 465

Act 465 will significantly change the Arkansas sales and use tax exemptions available to manufacturers by phasing out two sales tax incentives while concurrently expanding the exemption for manufacturing repair parts and services. Arkansas Act 465 , which was enacted on March 13, 2017, sunsets the InvestArk incentive as of June 30, 2017 and the Major Maintenance and Improvements incentive as of June 30, 2022.

The InvestArk incentive, also known as retention tax credit program, detailed in Arkansas Code §15-4-2706 , encourages capital investment and job creation within the state of Arkansas by businesses. Applications need to be submitted to the Arkansas Economic Development Commission. If awarded, the approved business would be entitled to use the tax credits as either a sales and use tax credit or an income tax credit. The InvestArk program will be accepting applications through June 30, 2017. Carryforwards of any InvestArk incentives awarded will still be honored for the 5-year period after the year in which the credit was first earned.

The Major Maintenance and Improvements incentive explained in Arkansas Code §15-4-3501 provides a 100% refund of Arkansas sales and use taxes for qualifying major maintenance and improvement projects. This increased sales and use tax refund must be pre-approved by the Arkansas Economic Development Commission and is project-specific. Applications for this incentive program will be accepted through June 30, 2022.

Arkansas Sales and Use Tax Reductions for Manufacturing Machinery

While Arkansas is ending these two popular sales and use tax programs, there is some good news for taxpayers related to Arkansas sales and use tax as part of Act 465. In addition to phasing out these sales and use tax incentives, the Act will also phase in an additional reduction in the Arkansas sales and use tax rate for manufacturing machinery and equipment repair, replacement and service beyond what was implemented beginning July 1, 2014.

Arkansas Act 465 will phase in an additional reduction in the Arkansas sales and use tax rate for manufacturers’ purchases of qualifying repairs, replacements and services over a 5-year period of time beginning July 1, 2018. Eligible purchases include repair and replacement parts and services for manufacturing machinery or equipment used directly by the manufacturer in manufacturing, producing, fabricating, processing, assembling, finishing or packaging products at manufacturing facilities located within Arkansas.

Additional reduced sales and use tax rates for corresponding time periods:

Reduced sales & use tax rate of 5.5% for the periods July 1, 2014 through June 30, 2018
Reduced sales & use tax rate of 4.5% for the periods July 1, 2018 through June 30, 2019
Reduced sales & use tax rate of 3.5% for the periods July 1, 2019 through June 30, 2020
Reduced sales & use tax rate of 2.5% for the periods July 1, 2020 through June 30, 2021
Reduced sales & use tax rate of 1.5% for the periods July 1, 2021 through June 30, 2022
Reduced sales & use tax rate of 0.0% beginning July 1, 2022

Additionally, Arkansas Act 465 will broaden the methods available for taxpayers to claim the benefit of the reduced Arkansas sales and use tax rates. Prior to the enactment of Act 465,taxpayers were required to hold a direct pay sales and use tax permit in order to claim the sales and use tax refund. Beginning July 1, 2018, taxpayers that do not hold a direct pay sales and use tax permit may obtain the credit or rebate authorized by claiming the amount against the amount of state tax due to be remitted with the taxpayer’s sales and use tax return. It’s important to note that taxpayers cannot report credits or rebates exceeding the sales and use tax liabilities that are reported on a return.

Arkansas Sales Tax Code Changes

Two sections of the Arkansas Code were amended to accomplish these changes related to the additional reduction in the Arkansas sales and use tax rate for manufacturing machinery and equipment repair, replacement and service. Arkansas Code §26-52-447 was amended to implement the changes related to sales tax and Arkansas Code §26-53-149 was amended to make the corresponding changes related to use tax.

Arkansas Act 465 was originally introduced to the 91st General Assembly as Senate Bill 362 on February 17, 2017 and remained largely unchanged as it moved through the legislative session. Senate Bill 362 was initially co-sponsored by 24 members of the General Assembly including 9 Senators and 15 Representatives. Act 465 went into effect on March 13, 2017, but the different provisions have implementation dates ranging between March 13, 2017 and July 1, 2022.

As with all Sales & Use Tax research, the specifics of each case need to be considered when determining taxability. Agile Consulting Group’s sales tax consultants can be found on our page summarizing Arkansas sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or any other Sales & Use Tax issue, please contact us at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

The post Arkansas Sales Tax Exemption Overhaul for Manufacturers appeared first on Agile Consulting Group .

Tennessee Sales Tax Return Instructions

Fri, 08 Apr 2022 20:02:32 GMT

One of Agile's team members sat in on the Tennessee Department of Revenue’s sales and use tax webinar to provide this short summary for your reference. Here are the tips we picked up to help you with your Tennessee sales tax return!

What are your responsibilities for Tennessee Sales Tax Return?

Businesses that qualify for Nexus in Tennessee collect and remit sales and use tax on the sales, lease, or rental of tangible personal property (an item you can touch, smell, or taste), recreational activities, and digital products. Digital products are subject to a special local rate unless the products are also available as tangible product. For example, an eBook version of a book in print. In cases like that, the digital products are taxed at the normal rate.

While most services are exempt from tax in Tennessee, some have specific laws making them taxable. Taxable services include lodging services and rooms, short-term rental space for making sales, cleaning/repairing/installation of tangible personal property including animal bathing or computer software installation, parking or storage of motor vehicles, telecommunication & ancillary telecommunication services, and enriching of uranium materials.

Any business with physical Nexus in Tennessee (brick and mortar locations or employees working in the state) are required to register for sales and use tax if their gross sales exceed $4,800/year or if their taxable services exceed $1,200/year. Out of state businesses with no physical presence in Tennessee must register if they achieve economic Nexus. Companies can assume they meet economic Nexus if they exceed $100,000 of sales in Tennessee. This determination is made by destination delivery of sales, but it does not include sales for resale.

Taxpayers should register, file, and pay their Tennessee sales tax return through Tennessee’s online portal TNTAP . Most businesses will be required to file monthly, which is the default filing frequency. After 1 year of filing, any business that averages more than $1000/month can choose to file quarterly or annually instead.

Two Common Confusions on a TN Sales Tax Return

While filing on TNTAP is generally self-explanatory, we wanted to highlight two common confusions:

Many businesses find the concept of a “single article” (reported in schedules B and C of your TN sales tax return) to be cryptic. If an item sold is sold as one, assembled entity, that item is considered a single article even if component parts may have been sold for different charges. The best example of this is a car. While you may have paid for the upgraded leather interior and a subwoofer as separate trim options, the final item is sold as a single article. However, a set of separate items sold as one unit do not count as a single article. For instance, if you buy a furniture set consisting of a love seat and a sofa, they would be considered two items for your Tennessee sales tax return because, despite being invoiced as a set, they’re separate items.
While food sales are taxed at a lower rate of 4%, prepared food is taxed at the full 7% state rate. The easiest way to think about this difference is where the food is purchased. Most prepackaged food or meal ingredients sold at a grocery store will be taxed the lower rate, while food that is sold at something akin to a restaurant is taxed at the full rate.

We hope this advice was helpful, but should you need sales & use tax assistance in TN or any other state. Agile has developed a patented, real-time nexus study program that provides instant results. Now we have two ways we can assist you when it comes to determining whether your business has sales tax nexus in any U.S. states! Choose our traditional, manual study conducted by our team of sales tax compliance specialists, or opt for an instant solution via our real-time nexus study.

TaxJar Q & A

Tue, 22 Mar 2022 15:06:41 GMT

A member of our team sat in on TaxJar’s sales and use tax Q & A webinar to provide you with these five tips to help you navigate the world of sales and use tax!

1. Use consultants alongside sales and use tax software.

Because tax software packages often fulfill parts of the same roles that Agile tackles, we often get questions about how sales tax consultants like Agile Consulting Group and sales tax software companies such as TaxJar work in tandem when it comes to sales and use tax compliance. Clete Werts with TaxJar offered the most succinct explanation, “Software isn’t going to provide you guidance; we’re not going to tell you what to do.” Sales tax software is great for automating some more cumbersome parts of the sales tax compliance process like rate calculation, managing already-defined product catalogues, and keeping track of your exemption certificates.

Agile is partnered with TaxJar, since to get the software running well, you must have already established an idea of where your company has physical and economic nexus as well the taxability of your products. A sales tax software won’t be able to provide that sort of guidance, but Agile Consulting Group can help get your systems and team ready to go for ongoing sales and use tax compliance. Once you’re registered and up to speed, either Agile or one of our sales tax partners can handle your ongoing compliance filings. Both are great solutions with their own values!

2. Understand where you have economic nexus.

Ever since the South Dakota v. Wayfair, Inc. case, states have been allowed to charge sales tax to out of state businesses based on their economic presence in the state. This sudden change has left a lot of companies confused on when they’re liable to collect sales taxes in the states they operate in. The laws differ state by state, but one of our tax experts would be happy to answer some introductory questions in a free consultation .

If you think you might qualify for economic nexus, TaxJar's panel members suggested that the best steps to take are to remediate by filing voluntary disclosure agreements (VDAs), register, and remain compliant going forward. While this advice is good, we suggest starting with a nexus and taxability study to get an idea of where your exposure is. Once you have a summary of your liabilities, the next steps you take will be based on your risk profile.

3. Sales tax liabilities can hurt acquisitions and investments.

Two of the panel members pointed out that it is becoming increasingly more common for both buyers and investors to watch their sales and use tax exposure before making business decisions. Both said they had seen deals fall through or go on hold until the company figured out how it was going to handle its sales tax liabilities. Depending on the industry and state, you may be able to balance some outstanding liabilities with sales and use tax recoveries based on existing exemptions that apply to your business’s purchases.

4. Don’t ignore physical nexus!

Panel members highlighted that a common mistake many businesses make is focusing solely on the relatively new and confusing landscape of economic nexus. However, physical nexus still creates sales and use tax responsibilities! You can think of physical nexus as anywhere you have brick and mortar locations, warehouses, or employees (and often also 1099 contractors, depending on the state and their role). While physical nexus is typically easier than economic nexus to figure out, you don’t want to ignore this important step in sales and use tax compliance!

5. Get an exemption certificate from a client before ceasing to charge sales and use tax.

Often, businesses will honor a “tax exempt” client if they’re aware of the relevant exemption. However, this practice can create unnecessary liability on your company. In case of an audit, you’ll need to have the necessary exemption paperwork from any sales tax-exempt clients. In the panelists’ and Agile’s experience, getting exemption paperwork from your clients after a transaction has already occurred is significantly more difficult than telling your client upfront that specific forms will need to be filed before taxes can be removed. One panelist warned that your client could go out of business and become impossible to reach by the time an auditor comes around!

6. Make sure to report all streams of income.

The panelists stated that modern businesses often have omni-stream revenue where money comes in from different aspects of the business and in diverse formats. Reconciling sales tax to a business’s income tax return is becoming more common in a sales tax audit for the auditor to guarantee they’re capturing each stream of earnings.

7. Get representation for audit defense from a sales and use tax consultant.

COVID has brought more remote audits and more “green” auditors (those without much experience). Because of the new modality and amateur auditors, the state can waste your time and resources going down rabbit holes, placing a burden on your operations. While it is always a good idea to have a sales and use tax consultant to represent you for audit defense, this current environment requires representation to decrease how interruptive an audit can be.

8. Drop-shippers need reseller certificates.

As a drop-shipper, you’ll need reseller certificates to avoid having to charge and remit sales & use taxes. Fortunately, you can avoid the hassle of having to register and seek certificates in each state that you operate in. Most of the states participate in one of two sales and use tax organizations for reseller certificate purposes, and one of our sales and use tax experts would be happy to guide you through that process.

We hope you found these tips helpful! As always, you can call one of our sales and use tax experts if you have any additional questions. We’d be happy to help your business become and remain compliant with sales and use tax.

The Hidden Cost of Interstate Sales Tax

Mon, 21 Mar 2022 17:16:46 GMT

CPA Treadline shows how Wayfair sales tax laws have affected businesses' ability to remain tax compliant.

One of our team members read through CPA Trendline’s “The Hidden Cost of Interstate Sales Tax” and wanted to offer summary and insight.

CPA Trendline highlights a grim reality: emerging small, and medium-sized businesses are struggling to remain sales tax compliant post-Wayfair.

Ever since South Dakota v. Wayfair, Inc. , states can collect sales and use taxes based on a business’s economic presence in that state. These requirements are a significant change from pre-Wayfair sales tax laws which stated a business needed to have a physical presence (either employees or buildings) in a state to be obligated to collect sales taxes. Since each state has varying thresholds for their “economic nexus”, businesses of all sizes are having trouble keeping up with where they are required to collect sales taxes, which of their products are taxable, and how to properly file in each territory where they’re responsible to collect.

Compliance confusions are costing businesses money.

CPA Trendlines estimates around 39% of small business clients have some sort of sales and use tax compliance issue, especially related to economic nexus in states where they don’t have a physical presence. Avalara recently conducted a survey to get an idea of the cost companies were shelling out to solve these problems internally.

They found that businesses with less than 20 employees were spending roughly $12,000 a month paying and hiring employees to deal with compliance. As the size of one's business grows, Avalara found that so does the amount of money spent attempting to resolve tax compliance issues. In fact, businesses with 20-50 employees averaged almost $18,000 in tax costs. Along with that, Avalara's survey revealed that 62% of medium-sized businesses and 39% of small businesses hired entirely new team members to handle their compliance issues which is a costly solution. While these numbers vary by industry and hurt businesses across all levels, costs proved to be the worst for retailers.

Audits generate additional burdens.

Even with 62% of the “small-to-medium” business category hiring new staff to address these issues, 19% were audited for sales and use tax in the past 5 years, adding an average of 35 hours of staff time spent on audit management. CPA Trendlines quotes the following deadly statistics:

48% of all surveyed companies were penalized for rate or rule errors.
41% were penalized for missing exemption certificates.
37% were penalized for late filings.
33% got nabbed for failing to register and file.
26% had consumer use tax liabilities.

So, what can businesses do?

Fortunately, Agile Consulting Group helps businesses become and remain compliant with sales and use tax every day, and our affordable options for external, ongoing compliance filing are often much cheaper and more sensible than hiring additional staff. We recommend a few initial steps:

1. Start with a nexus study.

Our first step is to understand where our clients have physical and economic nexus to know where they’re obligated to collect and remit sales and use taxes.

2. Complete a taxability study in states where you have nexus.

After we’ve narrowed down where you have physical and economic nexus, we recommend assessing liabilities and exposure by doing a taxability study. We determine what part of your product category is and is not taxable in each state where you have nexus. We’ll then provide you with an Excel sheet that you can distribute amongst your accounting team.

3. Register/Complete VDAs

Once we have an idea of where your company has nexus and what potential liabilities exist, we can recommend the next steps on where to register and collect taxes going forward. We will also suggest states where it may be beneficial to complete a Voluntary Disclosure Agreement (VDA) and ask the state to waive penalties and fees on owed sales and use taxes. We work with each client to recommend best practices based on the client’s risk tolerance, exposure, and our knowledge of how aggressive each state’s audit process is.

4. Software

At this step, some businesses benefit from incorporating sales and use tax software to help with rate calculation and collection of sales taxes. However, without guidance, businesses are essentially shooting in the dark on how to correctly integrate these software solutions and properly set them up to collect their taxes appropriately. Fortunately, Agile is partnered with most sales and use tax software companies and can not only help you set up your software solution properly, but help you select one and facilitate an introduction.

5. Ongoing Compliance

As mentioned before, many companies have been hiring costly additional staff to deal with their ongoing compliance issues. Agile’s ongoing sales and use tax compliance filing service combines the expertise and specificity of having a real sales tax expert filing your returns along with the cost-effective aspect of outsourcing your compliance concerns.

Reach out for a free consultation with one our sales and use tax experts, and we’d be happy to help you tackle this post-Wayfair sales and use tax landscape.

Florida Sales Tax On Medical Supplies: Prescription-Required Single-Use Hospital Exemption

Wed, 16 Mar 2022 19:47:00 GMT

The state of Florida provides several sales & use tax exemptions for medical purchases made by hospitals and health care facilities. One exemption that provides an opportunity for sales & use tax savings applies to purchases that are required to be issued under a physician’s prescription and are only used for one patient. This is often referred to as the prescription-required single-use exemption for hospitals, surgical centers or other healthcare establishments.

Fla. Admin. Code Ann. 12A-1.020(6)[c](1) states that, “medical products, supplies, or devices sold to hospitals, healthcare entities, or licensed practitioners are exempt when the medical product, supply, or device must be dispensed under federal or state law only by the prescription or order of a licensed practitioner; and the medical product, supply, or device is intended for use on a single patient and is not intended to be reusable.” Additionally, “medical trays and surgical or procedure kits containing medical products, supplies, or devices that are labeled to be dispensed only by the prescription or order of a licensed practitioner and are intended for use on a single patient are exempt, even when the medical tray or kit contains one or more items that, when sold separately, would be subject to tax.”

In practice, the most effective way to determine if a medical purchase qualifies for this exemption is to review the product label for the item. The FDA requires medical device product labels to contain symbols and statements that assures the devices are used safely and effectively. The most frequently used symbol to indicate that a device is prescription required appears as “RX Only.” While this is a common symbol, the product label can also contain the following statement to indicate that a device is prescription required, “Caution: Federal law restricts this device to sale by or on the order of a physician, dentist, or other licensed practitioner.” The symbol used to indicate that a device is intended for use on a single patient appears as a 2, as noted in the picture to the right. Similar to the prescription requirement, the product label can contain the following statements in lieu of the symbol, “For single patient use only” or “Do not reuse, this is a single use device.” If the product label does not contain the relevant information, then the IFU (Instructions for Use) that comes with most medical purchases can also contain these symbols and indications.

Generally, vendors making sales of these types of items are still charging tax to their customers. The vendor does not need to charge sales tax on purchases of medical devices that are prescription required and single-use only if the purchaser provides them with a Florida Exemption Certificate. The suggested format for this exemption certificate is available under Fla. Admin. Code Ann. 12A-1.020(11) . If sales tax has already been paid, collected, and remitted on the purchase of medical purchases that are prescription required and single-use only in Florida, the purchaser can apply for a refund from the Florida Department of Revenue.

As with all Sales & Use Tax research, the specifics of each case need to be considered when determining taxability. Agile Consulting Group’s sales tax consultants can be found on our page summarizing Florida sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or any other Sales & Use Tax issue, please contact us at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.

The post Florida Sales Tax On Medical Supplies: Prescription-Required Single-Use Hospital Exemption appeared first on Agile Consulting Group .

12 Common Sales and Use Tax Audit Triggers

Mon, 21 Feb 2022 22:51:00 GMT

When you receive a sales and use tax audit notice in the mail, it sparks worry, concern and anxiety. Frequently, the first question that comes to mind is “What triggered this sales and use tax audit?” Understanding the sales and use tax audit triggers or cause of the audit can help companies both prepare for the audit by predicting what the auditor will be looking for, as well as take steps to avoid sales and use tax audits in the future.

Similar to the IRS with income tax audits, states have systems, policies and procedures in place that help them to identify businesses to select for a sales and use tax audit. While each state’s methodology is different, there are some common reasons taxpayers are flagged for a sales and use tax audit.

Our analysis of common sales and use tax audit triggers is based upon Agile Consulting Group’s 15 years’ worth of sales and use tax audit defense and representation services that we have provided to hundreds of taxpayers across the U.S. We have arranged these reasons in order of the likelihood of triggering a sales and use tax audit.

Trigger #1. Prior sales and Use Tax Audit Liabilities

Far and away the most common of all sales and use tax audit triggers is having a large liability in a prior audit. Audit liabilities are the clearest evidence a state has that a company either does not understand sales and use tax law or is not taking appropriate steps to manage this important function. Besides that, states want to focus their efforts on audits that will generate revenue. A prior track record of your company’s audit being “productive” or resulting in a large audit liability makes it more likely you will be flagged for a subsequent sales and use tax audit. Don’t believe that states track and pay attention to this? They absolutely do. Some states even publish public lists of their largest delinquent taxpayers including California , Colorado , Minnesota , New York , Oklahoma and Wisconsin .

What is considered a “large” sales and use tax audit liability?

“Large” liabilities can mean different things to different states as it can for different taxpayers depending on their size, scope and footprint of operations. Some states, such as Illinois and Texas, have provided clear guidance to taxpayers about what they consider a large prior audit liability. Illinois considers $15,000 of tax , exclusive of penalty and interest, to be the threshold for a large audit liability. Texas considers any prior sales and use tax audit that generated a liability of $25,000 or greater to be a “prior productive” account . All states have established thresholds, but not all states publicize those amounts.

Trigger #2. Irregularities in Sales and Use Tax Filings

States continuously evaluate taxpayers’ sales and use tax returns to identify patterns that are suspicious. Such irregularities are a precursor to many sales and use tax audit notifications. Here are four of the most prevalent irregularities found in taxpayers’ sales and use tax filings:

Late Sales and Use Tax Filings

Late filings tell the state that a company isn’t managing its sales and use tax compliance obligations well. The deadline is the same every month, quarter or year so it should never catch a taxpayer unprepared to file. States initiate audits based off late filings because “where there’s smoke, there’s fire.”

Wide Fluctuations in Figures Reported on Sales and Use Tax returns

For non-seasonal businesses, the state expects to see your total revenues, exempt revenues, and purchases on which use tax is reported to normalize within a certain range. Spikes or craters to those amounts raise a red flag for the state. Of course, from time-to-time all businesses have a month that is an outlier. A single month outlier is unlikely to trigger a sales and use tax audit. Month after month of yo-yoing financials will.

Never Reporting any Use Tax

If your company never reports any use tax on its sales and use tax returns, that is a red flag for the state. With the proliferation of internet sales, it is unrealistic for a company to make purchases that don’t require use tax accruals. The state interprets this pattern as a taxpayer trying to take advantage of the use tax self-reporting system.

High Ratios of Exempt Sales to Gross Sales Reported on Sales and Use tax Returns

High volumes of exempt sales can be a red flag for the state, particularly if this ratio of exempt to taxable sales is not in line with other taxpayers within the same industry.

Outsourced Sales and Use tax Compliance Can Help Address These Irregularities

States recognize these irregularities in sales and use tax filings as surefire sales and use tax audit triggers. One easy way to combat this risk is by making sure your company’s sales and use tax filings are on time and accurate. As businesses grow, sales and use tax compliance becomes increasingly more complex and time consuming.

If your company’s sales and use tax compliance is not getting the attention it requires because of other important day-to-day activities, you should consider outsourcing sales and use tax compliance to a trusted sales tax consulting firm. It will relieve the stress and headaches that come with your regular filings and reduce the likelihood of erroneous filings triggering a sales and use tax audit for your company.

Trigger #3. Closing a Location, Shutting Down Operations, Dissolving a Business or Declaring Bankruptcy

When a business closes a location, ceases operations, dissolves the business, or declares bankruptcy, these actions will frequently trigger a sales and use tax audit. The state will view this occurrence as its last opportunity to recover any taxes that might be owed.

Trigger #4. The Industry a Business Operates Within Can Increase Its Likelihood of a Sales and Use Tax Audit

States know that certain industries are more likely to have issues with their sales and use tax compliance. Cash-based businesses such as convenience stores, restaurants and bars are often targets for sales and use tax audits because states have years of data showing that cash sales are frequently under reported on sales and use tax returns.

Another industry that is frequently flagged for sales and use tax audits is construction contractors. Contractors have very complex rules for which purchases and sales are subject to tax. Add in the variety of ways in which contracts can be written – lump sum, time and materials, cost plus, etc. – and the state knows the likelihood of errors is high.

Another way that industry may play a role in selection of taxpayers for sales and use tax audits is when the state identifies a common error frequently made industry wide. If the state has success (read: lucrative audit assessments) in its auditing of doctor’s offices or wineries, for example, expect the state to find additional doctor’s offices or wineries to audit.

Trigger #5. Leads from Your Customers’ Sales and Use Tax Audits

Although they’re bureaucratic government organizations, states want to invest their time on projects that yield results. Sales and use tax audit triggers are the initial signs that peak the interest of the state. When the state conducts audits of other taxpayers, the state auditor will often be on the lookout for targets for future sales and use tax audits. One way in which this happens is when the auditor identifies sellers not collecting sales and use tax appropriately.

It is a reasonable assumption that if you are not collecting sales taxes correctly from one of your customers, it is very likely you are making mistakes on other customers’ invoices as well. States and state auditors will assume these errors are less of a stand-alone problem and are representative of a larger, more endemic problem. Expect to receive a sales and use tax audit notification letter if errors are found on your accounts receivable invoices in the state’s audit of another taxpayer.

Which leads us to…

Trigger #6. Leads from Your Suppliers’ or Vendors’ Sales and Use Tax Audits

This is a corollary to #5 above except that instead of following the breadcrumb trail of your accounts receivable invoices back to your company, the auditor may instead be following your suppliers’ or vendors’ accounts payable invoices.

If in the process of auditing your suppliers’ or vendors’ records the auditor learns that the supplier or vendor in question has errors or irregularities in collecting sales tax from its customers, the state will often issue sales and use tax audit notifications to its largest customers.

Now it could be that those largest customers are correctly reporting and remitting use tax on those transactions, but auditors are not likely to assume that is the case. Errors on invoices an auditor reviews in his or her review of another company can absolutely be a sales and use tax audit trigger.

Trigger #7. Type of business structure

States know that sole proprietorships and partnerships generally are smaller in size and have less resources to dedicate to their sales and use tax compliance filings. Organizations structured in that manner are more likely to be audited than a corporation because sole proprietorships or partnerships are less likely to have a dedicated tax department. That means someone in accounts payable, or some other generalist, is filing their returns. States know that someone whose ancillary duties include filing sales and use tax returns is less likely to understand and comply with current sales and use tax laws.

Trigger #8. Changes in a State’s Sales and Use Tax Law

If a state’s sales and use tax law or the Department of Revenue’s interpretation of a law changes in a manner that is likely to generate sales and use tax audit liabilities, audit notifications will be generated. A common cause of sales and use tax audits in the wake of the South Dakota v. Wayfair Supreme Court Ruling in June 2018 relates to the new definition of nexus allowed by the Court. If you’re interested in reading more about the new definition of nexus in the U.S., please see our previous discussion of this change .

Conversely, if sales and use tax law changes in a fashion that would broaden an exemption, the state is less likely to conduct an audit because of the likely sales and use tax refunds it may owe a company. This is a key time to mention that in ANY sales and use tax audit, the auditor should find both liabilities as well as credits for overpayments. If your workpapers do not show any transactions where you overpaid sales and use tax, you’re not receiving fair treatment from the state auditor.

Trigger #9. Regularly Scheduled Audits for a State’s Largest Taxpayers

Larger businesses may be audited regularly. Often, members of the Fortune 500 are under continuous audits with the states in which they operate. This practice is in place because states want to ensure that taxpayers making the most significant volume of sales or purchases within their state are complying with current sales and use tax laws.

Trigger #10. Random Audits

It happens…bad luck. There are times when a business is randomly selected for a sales and use tax audit. It could be that it is just your turn.

Trigger #11. Requesting a Refund

It is a common misconception that filing any sales and use tax refund request will automatically trigger a corresponding sales and use tax audit in response. In the early 2000’s, some states, such as Georgia, had a policy that any taxpayer who submitted a sales and use tax refund request and had not been subjected to a sales and use tax audit in the previous several years would be audited before any refunds were issued. In recent years, that policy has been eliminated in Georgia and other states. States have learned that taxpayers who file sales and use tax refund requests are generally more attuned to sales and use tax law which means they are not the best candidates for audits. Filing a refund request can trigger an audit, but over 97% of our firm’s sales and use tax refund requests are reviewed without one.

Trigger #12. Whistleblowers or Referrals from an Outside Party

Disgruntled taxpayers, customers or even suppliers or vendors may notify the state of potential sales and use tax audit leads. Certainly, there is an element of “sour grapes” to these sorts of claims, but states do consider such notifications. It is difficult to know just how much this trigger is responsible for initiating sales and use tax audits because a state auditor will not inform the taxpayer that this is, in fact, the reason they are being audited. Our sales tax consultants do not believe that this is a serious concern for most businesses.

Sales and use tax audit triggers can be avoided if a company is proactivein planning and handling its sales and use tax compliance functions. Don’t wait until that audit notice arrives inthe mail to begin thinking about what changes and improvements can be made toyour company’s internal systems to help avoid a sales and use tax audit.

What's the sales tax audit lookback limit?

The lookback period for a sales tax audit—the period during which tax authorities can review your business's financial records—varies by jurisdiction. In the United States, for example, the lookback period can range from three to six years, and sometimes longer in cases of suspected fraud.

What are the Consequences if you fail a sales tax audit?

If you fail a sales tax audit, consequences can vary depending on the specific circumstances and the tax laws of the jurisdiction. Potential outcomes may include:

Penalties and Interest : You could be subject to penalties and interest on the unpaid or underreported sales tax amounts. The severity of penalties and the interest rate can vary based on the jurisdiction.
Back Taxes and Fines : You may be required to pay the back taxes owed, along with additional fines imposed for non-compliance.
Revocation of Business License : In some cases, repeated failure to comply with sales tax regulations could lead to the revocation of your business license, temporarily or permanently affecting your ability to operate.
Legal Action : The tax authorities may take legal action against your business to enforce compliance, which could result in court proceedings and additional legal expenses.

Agile Consulting Group, Inc. is a sales and use tax consulting firm that was founded in 2005. We have experience working in all 45 U.S. states that have sales and use tax. We assist our clients with a comprehensive suite of sales and use tax consulting solutions including sales tax audit defense, sales and use tax compliance, sales and use tax recovery reviews and sales and use tax research. Please reach out to our sales and use tax consultants at info@salesandusetax.com or by calling (888) 350-4TAX or (888) 350-4829. We welcome the opportunity to assist you with your sales and use tax questions or concerns.

The post Sales Tax Audit Triggers appeared first on Agile Consulting Group .

Software Sales Tax California Exemption

Mon, 14 Feb 2022 21:33:00 GMT

In 1993, the California legislature enacted a California software sales tax exemption for technology transfer agreements (“TTA”) relating to the transfer of intellectual property, but has never really honored that exemption until the 2011 Nortel court ruling. Now in 2017, California says it is nearly ready to begin issuing refund checks.

According to CA Code Regs. 1507 , a technology transfer agreement is defined as, “an agreement evidenced by a writing (e.g., invoice, purchase order, contract, etc.) that assigns or licenses a copyright interest in tangible personal property for the purpose of reproducing and selling other property subject to the copyright interest.” A technology transfer agreement also includes, “a written agreement that assigns or licenses a patent interest for the right to manufacture and sell property subject to the patent interest, or a written agreement that assigns or licenses the right to use a process subject to a patent interest.”

Software Sales Tax California Exemption: Defining Terms

Since a TTA only applies in situations where the tangible personal property is assigned or licensed subject to a copyright or patent interest, it is important to clarify the meaning of these terms under CA Code Regs. 1507 . A copyright interest means that the owner of the property has the exclusive right to authorize reproduction, distribution, and performance of the work subject to the copyright. Copyrights generally refer to “original works of authorship,” such as literary, musical, and dramatic works. A patent interest means that the owner of the patent has the exclusive right to, “make, use, offer to sell, or sell a patented process, machine, manufacture, composition of matter, or material.” Patents apply more to processes that have acts or steps that produce a “concrete, tangible and useful result.” Assigning or licensing a copyright or patent means, “to transfer in writing a patent or copyright interest to a person who is not the original holder of the patent or copyright interest where, absent the assignment or license, the assignee or licensee would be prohibited from making any use of the copyright or patent provided in the technology transfer agreement.”

Exemption Details

The exemption for a copyright or patent interest assigned or licensed by the owner in a technology transfer agreement only applies to the intangible portions of the transaction. For example, in a transaction that includes equipment, hardware, written instructions, a copy of computer software that makes the equipment and hardware work, and the right to copy that software onto the equipment’s hard drive to use the software to operate the equipment, the equipment, hardware, and written instructions are all considered tangible personal property and are subject to tax.

While the California Board of Equalization has attempted to argue that the copy of the computer software is also tangible personal property, the CA Court of Appeals ruled in the 2011 case Nortel Networks Inc. v. State Board of Equalization that the medium in which the copyright or patent is transferred is not essential or physically useful to the later use of this intangible property. Even if the property is transferred on a tangible medium, as long as it is assigned or licensed and subject to a copyright or patent, then it qualifies as a TTA.

Receiving the California software sales tax exemption is still a challenge for California taxpayers. Generally, vendors making sales of these types of items are still charging tax to their customers. There are no specific exemption certificates that customers can distribute to their vendors for purchases that qualify as technology transfer agreements. However, if sales tax has already been paid, collected, and remitted on the purchase of property that qualifies as a TTA in California, the purchaser can request their vendor to issue a refund or credit.

Navigate California Sales and Use Tax with Agile Consulting Group

As with all Sales & Use Tax research, the specifics of each case need to be considered when determining taxability. Agile Consulting Group’s sales tax consultants can be found on our page summarizing California sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or any other Sales & Use Tax issue, please contact us at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.

The post Software Sales Tax California Exemption appeared first on Agile Consulting Group .

Connecticut Sales Tax Compliance

Fri, 11 Feb 2022 20:32:33 GMT

Connecticut sales tax compliance is not extremely complex, but it’s also not one of the simplest states out there when it comes to sorting out all the different tax laws. Connecticut’s state-wide sales tax rate is 6.35%. However, sales tax compliance in Connecticut is not as simple as businesses collecting a 6.35% sales tax rate every time they make a sale.

Connecticut Sales Tax

There are a number of special of sales tax rates attributable in Connecticut. The tax rate for renting a vehicle for less than 30 days is 9.35%. While purchasing a vehicle, the tax rate will be 7.75% if the motor vehicle is less than $50,000. The sale of jewelry more than $5,000 and the sale of clothing over $1,000 also has a tax rate of 7.75%. Vessels, motors for vessels, and trailers used for transporting vessels are taxed at a rate of 2.99%. Computer and data processing services have a 1% sales tax. If you are a full-time active duty, non-resident member of the armed service stationed in the state for duty, you can expect to pay a 4.5% tax rate on items. Certain meals and drinks will be charged a 7.35% sales tax rates. These taxed food products are usually bought at places like hotels, restaurants, etc. and they exclude non-profit and healthcare facilities.

Connecticut sets up taxpayers to file their taxes either on a monthly, quarterly, or annual basis depending on volume of sales. Connecticut sales tax compliance requires all taxpayers to file their returns by the end of the next month following the reporting period. If the due date falls on a weekend or national holiday, then tax filings will be due the following business day. Luckily, Connecticut sales tax compliance does not require accelerated payments or pre-payments, so taxpayers don’t have to worry about that. Connecticut also does not have vendor compensation or timely discounts.

The most challenging part of Connecticut’s sales tax compliance is making sure to choose the correct deductions. You will be able to find this in the dropdown menu under “Sales Deductions”. If the appropriate exemption is not listed, use other adjustments line, and make sure they are indeed nontaxable sales. Along with that, Connecticut has a variety of reduced rates depending on the services or merchandise being sold, so taxpayers may have some trouble making sure they are paying the appropriate tax rate. However, the state does not have local taxing jurisdiction with varied rates, so taxpayers only need to focus on the 6.35% state tax rate as well as special rates mentioned above.

If you are curious to learn more information about Connecticut sales tax compliance, make sure to visit Connecticut’s sales tax website .

Connecticut Sales Tax Compliance Services

Agile’s experienced sales tax consultants can help by completing your company’s ongoing compliance filings in the state of Connecticut. In fact, we’ve offered an outsourcing solution for this process since 2005. You can learn more about our outsourced sales tax compliance services or simply give us a call at (888) 350-4829. We are interested to learn more about your needs, and you might be surprised how little it will cost to have a sales tax expert take this responsibility off your hands!

Pennsylvania Sales Tax Compliance

Tue, 08 Feb 2022 15:30:14 GMT

Pennsylvania Tax Article

Pennsylvania sales tax compliance is not super complicated, but there are a couple of details you'll want to pay attention to when filing your taxes. Pennsylvania has a statewide sales tax rate of 6% and does not offer reduced rates. Due to this, businesses can expect to collect and remit a 6% sales tax rate on purchases they make, unless they are in a county with a varied tax rate.

Pennsylvania Sales Tax

Pennsylvania will set up taxpayers to file their taxes in one of three frequencies: monthly, quarterly, and semi-annually. When it comes to monthly and quarterly filings, Pennsylvania sales tax compliance requires all taxpayers to file their returns by the 20 ^th of the following reporting period. For those who are filing semi-annually, the due date varies depending on the time of year. From January to June, the due date will fall on August 20 ^th . For the second half of the year (July through December), be ready to file by February 20 ^th . If the tax return due date falls on a weekend or national holiday, then the correct due date will get pushed back to the following business day.

In addition, Pennsylvania sales tax compliance requires some accelerated payments or pre-payments. Businesses with tax liabilities between $25,000 and $100,000 per quarter have two choices available to them. They can either choose to pay 50% of what they paid for that same month in the previous calendar year, or they can calculate an estimate of what their monthly liabilities will be and pay 50% of that amount. Businesses with a tax liability of more than $100,000 per quarter need to pay 50% of the sales & use taxes that they paid in the same month of the previous year.

Fortunately, the state of Pennsylvania does offer timely filing discounts. For monthly filings, the discount is $25 or 1% of the tax collected, depending on whichever is less. For those filing quarterly, the discount is $75 or 1% (also whichever is less). For semi-annual filings, the discount is, similarly, $150 or 1%.

Calculating the vendor discount and one’s pre-payments is probably the most difficult part of Pennsylvania’s sales tax compliance. However, these factors are automatically calculated when you file online! Along with that, Pennsylvania does have local taxing jurisdictions with varied rates, so those can be a bit tricky to remember. The local jurisdiction sales tax rate will only be 1 or 2%. There are two local taxing jurisdictions with varied rates: Allegheny County adds an extra 1%, and Philadelphia County adds 2%.

If you are curious to learn more information about Pennsylvania sales tax compliance, make sure to visit Pennsylvania’s sales tax website.

Manufacturing companies in Pennsylvania may be eligible for sales tax exemptions on certain purchases related to their operations. Learn more about these exemptions in our PA Sales Tax Exemptions blog .

Pennsylvania Sales Tax Compliance Services

Agile’s experienced sales tax consultants can help by completing your company’s ongoing compliance filings in the state of Pennsylvania. In fact, we’ve offered an outsourcing solution for this process since 2005. You can learn more about our outsourced sales tax compliance services or simply give us a call at (888) 350-4829. We are interested to learn more about your needs, and you might be surprised how little it will cost to have a sales tax expert take this responsibility off your hands!

So, you’ve been selected for a MI Sales and Use Tax Audit

Wed, 15 Dec 2021 22:47:15 GMT

One of our team members sat in on the Michigan Department of Treasury’s MI sales & use tax audit webinar to provide this short summary for your reference. Here are some tips to make your audit process easier and less painful!

Understand Your Basic Responsibilities

If you’ve already been selected for an audit and are familiar with your tax-collection responsibilities, skip ahead. For everyone else, it is important to know that sales & use tax collection is your obligation. When you don't collect sales & use tax the liability falls on you. Even though customers commonly pay sales taxes, the selling business is the one responsible for adequately collecting and remitting sales taxes. (If you need help with sales tax compliance, reach out to one of our tax experts here.)

Fortunately, MI is an easier state to deal with sales and use tax. They only have the 6% rate for the entire state with no local rates, and their online platform MTO (Michigan Tax Online) is helpful and can make the process much easier! (Read about the benefits of MTO and refresh on general MI sales and use tax tips here.)

Why Did I Get Picked for an Audit?

Michigan uses sales & use tax risk assessment software to select candidates for an audit. To put it simply, a computer crunched some numbers, and you were the lucky audit winner. Fortunately, our assistance can make the Michigan sales & use tax audit process a lot less painful. Our reverse audits can reduce liabilities, fees, and penalties. With our help, we may even be able to get your audit shifted from the red to the black!

What to Expect?

If you’ve been selected, you most likely already got the audit pre-confirmation letter and a Michigan tax audit questionnaire in the mail. Michigan uses these forms to gather necessary information before meeting in-person or over-the-phone for a pre-audit conference. After you have been notified that a Michigan sales & use tax audit will be performed and paperwork about your business and operations has been filled out, a timeline for the audit is planned out. You can work with the auditor to refute this timeline if it won’t work with your operations.

For example, if they want to come onsite during your busiest month, you can tell the auditor that month is bad and request they visit sooner or later. Next, you’ll receive an audit confirmation letter and a records request, so the state can review your files. Most audits (and especially ones done on cash-basis operations) involve an in-person audit appointment where the auditor will come onsite and review your operations. The auditors will work on your files, present the review findings, and then hold a closing conference to come to an “agreement” about the audit.

How Do I Defend Myself?

Michigan usually takes a two month sample of your invoices then projects those findings over the entire audit period. This process is why it’s so important to enlist experts like us to defend you during a sales & use tax audit. Most businesses have inconsistent numbers, and many healthy businesses grow their sales every year. As a result, a two month sample can over-project your actual liabilities and undervalue where you’ve overpaid sales and use taxes. When we work with a client for Michigan tax audit defense, we find areas of overpayment by looking at all invoices during the audit period to provide the most accurate schedule to reduce your liabilities. Because each dollar saved reduces the overall interests and fees, a full sales & use tax recovery review is one of the best ways to defend yourself during a Michigan sales & use tax audit.

Communicate with the Auditor

Besides getting experts like us to help, remember that you can always work with the auditor to communicate how the audit is working with your business and whether or not the audit timeline works for you. If the auditor’s two month sample is unrepresentative of your business, you can inform them that this timeline will over-project. If the holiday season is a big sales season for your business, it might not be appropriate for the auditor to select November and December as the two months they choose. As we mentioned before, if the timeline of the audit will interfere with your operations, you can relay that to the auditor to find a schedule that will be less interruptive.

Don’t Throw Anything Away

Of course, you should always hold onto all of your records physically or digitally. This advice applies to anything the Michigan Department of Treasury gives you during your sales & use tax audit.

What is a Closing Agreement Audit?

Michigan now employs a closing agreement audit to save on time and money for themselves. They’ll offer to use industry-specific, historical information to estimate an approximate audit value for your business, especially if you work in a cash-basis industry. This type of audit is always optional. To save the most amount of money, we’d recommend choosing a full audit and enlisting the help of a dedicated team like us. Why let Michigan guess how much you owe and cut them a check just because they said so?

How Do I Appeal?

While we’d recommend reaching out to one of our experts first, you should know that you have two basic opportunities to appeal your Michigan tax audit when it comes to sales and use taxes. If you’ve already been audited and have received your “intent to assess” (or more simply, the bill) from the state, you have 60 days to request an informal conference. If you’re earlier in the process, you can submit a request for reconsideration anytime after receiving the pre-audit determination and before receiving the intent to assess.

We hope this advice was helpful, and if you’re facing a Michigan sales and use tax audit, we strongly recommend reaching out to one of our experts. We will be able to reduce your liabilities, penalties, interest, and fees. Every dollar saved during an audit counts, and we’re more than happy to help!

Ohio Sales Tax Compliance

Mon, 13 Dec 2021 20:11:33 GMT

When it comes to tax laws, Ohio is one of the more painless states to understand, since they have little variation between rates. Ohio sales tax compliance has a state-level sales tax rate of 5.75%, and the state does not offer reduced rates. Businesses have two options: they will either be exempt from taxes, or they will collect and remit a 5.75% sales tax rate on all sales along with local jurisdiction rate, which we will explain later. Pretty straight-forward!

Ohio Sales Tax

When it comes time for taxpayers to file their tax returns, Ohio has three filing frequencies available. These filing frequencies include monthly, quarterly, and semi-annually. Ohio sales tax compliance requires all taxpayers, no matter their filing frequency, to file their returns by the 23 ^rd of the month following the reporting period. If the 23 ^rd of the month falls on a weekend or national holiday, then the correct due date for your return filings will be pushed back to the following business day.

Along with that, Ohio does require accelerated payments for taxpayers whose sales tax liability exceeds $75,000 annually. The accelerated payment is 75% of the average of the previous fourth month's tax liability. The previous month’s accelerated payment is subtracted from the current month’s total liabilities. Since all of Ohio’s sales tax laws are considered fairly simple, calculating the accelerated payment to be 75% of the average of the previous four months’ tax liability is probably the most difficult part of filing returns in the state of Ohio. Luckily, Ohio does offer a discount rate of 0.75% of the sales tax liability. This discount rate is relatively easy to calculate, and it isn’t capped.

Even though the sales tax laws in Ohio are generally uncomplicated, the state does have local taxing jurisdictions with varied rates. In fact, there are 92 different local taxing rates within Ohio. The local jurisdiction sales tax rate ranges from .05%-.3% combined with the states 5.75% sales tax rate. Fortunately for taxpayers, the total combined tax rate will never exceed 8.75%.

If you are curious to learn more information about Ohio sales tax compliance, make sure to visit Ohio’s Department of Taxation’s sales tax website .

Ohio Sales Tax Compliance Services

Agile’s experienced sales tax consultants can help by completing your company’s ongoing compliance filings in the state of Ohio. In fact, we’ve offered an outsourcing solution for this process since 2005. You can learn more about our outsourced sales tax compliance services or simply give us a call at (888) 350-4829. We are interested to learn more about your needs, and you might be surprised how little it will cost to have a sales tax expert take this responsibility off your hands!

Kentucky Sales Tax Compliance

Fri, 19 Nov 2021 17:22:53 GMT

Kentucky sales tax compliance is fairly simple and straight-forward in comparison to other states’ tax laws. Kentucky has a state-level sales tax rate of 6%, and the state does not offer reduced rates. Due to this, businesses can expect to collect and remit a 6% sales tax rate on all taxable sales they make.

Kentucky Sales Tax

There are three filing frequencies at which taxpayers file their tax returns which will be determined by the Kentucky Department of Revenue at the time of registration. These three frequencies are monthly, quarterly, and annually. Kentucky sales tax compliance requires all taxpayers to file by the 20 ^th of the following reporting period, no matter their filing frequency. If the return due date falls on a weekend or national holiday, then the correct due date will get pushed back to the next business day.

Furthermore, Kentucky sales tax compliance does not require any accelerated or pre-payments, so that is one less factor to be bothered with. On the other hand, Kentucky does offer vendor compensation. The discount is 1.75% of the first $1,000 of one’s tax liability. After the first $1,000, the discount percentage is lowered to 1.5% of the remaining tax liability. However, the vendor compensation is capped at $50.

Calculating the vendor compensation is probably the most difficult part of Kentucky’s sales tax compliance. Taxpayers must remember the compensation rate changes after the first $1,000, which is a small detail that can easily slip one’s mind. Luckily, when filing tax returns online, the compensation rate is calculated automatically which takes the responsibility and pressure off the taxpayer’s hands. Along with that, the state does not have local taxing jurisdictions with varied rates, so the sales tax rate will always be 6% state-wide no matter what.

If you are curious to learn more information about Kentucky sales tax compliance, make sure to visit Kentucky’s sales tax website .

Kentucky Sales Tax Compliance Services

Agile’s experienced sales tax consultants can help by completing your company’s ongoing compliance filings in the state of Kentucky. In fact, we’ve offered an outsourcing solution for this process since 2005. You can learn more about our outsourced sales tax compliance services or simply give us a call at (888) 350-4829. We are interested to learn more about your needs, and you might be surprised how little it will cost to have a sales tax expert take this responsibility off your hands!

Michigan Sales Tax Tips

Mon, 01 Nov 2021 19:06:00 GMT

One of our Agile team members sat in on the Michigan Department of Treasury’s sales and use tax webinar to provide this short summary for your reference. Here are some useful Michigan sales tax tips we picked up during the webinar!

Use Michigan Treasury Online (MTO)

Generally, companies will want to use Michigan Treasury Online (or MTO for short) to register, file, and pay Michigan sales and use taxes. While the state allows taxpayers to mail in their paper forms once registered, the Michigan Dept. of Revenue highly recommends using MTO for a few distinct advantages.

Arguably, the best part of MTO is that it helps prevent you from making unnecessary errors. The state creates new, updated forms for tax returns almost every year, so knowing which form corresponds with the current year can be confusing. Luckily, MTO will automatically use the correct paperwork, and it will double check for math errors or lines that were accidentally left blank.

Another benefit of using MTO is that it facilitates faster payment turnarounds. Tax payments made online before 8 p.m. Eastern Time are posted by the next business day. If you’re mailing a check, transit time is less certain, but if you run into a tight spot, you can get the post office to postmark your check. Furthermore, MTO also allows you to schedule payments ahead of time, so you can complete your filing well before the 20 ^th of the month and check it off your to-do list. Payments on MTO can be made at anytime and in installments.

Some specific businesses are required by the state of Michigan to file through MTO. The types of companies included in this requirement are fuel and vehicle dealers, 4% and 6% filers (for home heating), marijuana sellers, and businesses with more than 250 employees. The state will also assign the status of "accelerated filers" to certain taxpayers, and they too are required to use MTO to file.

Know Your Responsibilities and Filing Frequency

Knowing your responsibilities is one of the less interesting Michigan sales tax tips, but you should still understand what your obligations are in the state’s eyes. A taxpayer's responsibilities are to maintain your treasury registration information, keep records (like invoices, exemption certificates, and records of payments), and respond to any treasury letters. Along with that, it is taxpayers' responsibility to file a tax return and payment monthly, quarterly, or annually as assigned by the state.

Note: even if your payment will be $0, you still need to file a tax return stating you’re responsible for $0 in payments. Should you be audited, not filing can result in a much longer lookback window than if you are filing.

Michigan assigns companies a specific filing frequency based off their tax liabilities. The webinar hosts pointed out that, as of October 2021, the current numbers on Michigan’s website are incorrect for determining filing frequency. Businesses that owe more than $1000 a month are meant to file monthly; businesses that owe between $63-999 a month file quarterly; and businesses that file less than $62 a month are required to file annually. All seasonal filers and fuel retailers or suppliers should be filing monthly, but seasonal filers may apply to only file during the months in which they’re open.

Most businesses will file monthly or quarterly using Form 5080, while others will file annually with Form 5081. However, even if a company is told by the state to file monthly or quarterly, they must still submit an annual reconciliation. MTO streamlines this process, if you’ve already been filing digitally, by pulling numbers from previous returns.

Michigan provides significant sales tax exemptions to manufacturers involved in industrial processing, and it's crucial to be aware of the exemptions you may be eligible for. Additionally, individuals who are uncertain about whether they are classified as a retailer or a contractor for Michigan real estate should ensure they understand their payment obligations. It's important to know what you are responsible for paying.

The Best of our MI Sales Tax Tips: Pay Early

Make the most of your dollars by paying your taxes before the 12 ^th of the month. Doing so earns taxpayers an early payer discount and saves them a little bit of money. Those who consistently pay by the 20 ^th , called Timely Payers, also receive a tax discount, but it’s smaller than the early payer discount. The maximum discount one can receive is $20,000.

Penalty Waivers

Lastly, you may request a penalty waiver (in writing only) should you miss a return or payment. Waivers are generally granted for death, serious illness, fire, theft, criminal acts against the taxpayer, or for misapplications of payment by the Michigan treasury. You’re also able to request a one-time penalty waiver for any reason at any time. This one-time waiver is one of the Michigan sales tax tips that we’ve found often works in other states too.

We hope this advice was helpful, but should you need sales & use tax assistance in Michigan or any other state , feel free to contact one of our experienced sales and use tax experts for a free consultation.

Iowa Sales Tax Compliance

Mon, 01 Nov 2021 15:28:50 GMT

Iowa has a state-level sales tax rate of 6%. There are a couple of reduced rates offered in Iowa. Motor Vehicle registration is exempt from sales tax but subject to 5% new registration fee. Hotels and motels have a standing 5% state excise tax on lodging plus local hotel and motel tax which can range from 1%-7% rate.

Iowa sales tax compliance does have varied rates when it comes to local taxing jurisdictions. There are 99 total local county taxing rates within this state which can seem intimidating to taxpayers at first. However, the local tax rate is either 0% or 1% in addition to the state-wide tax rate of 6% which is not too much of a difference. Outside of a couple of specific exemptions, most companies will collect and remit a 6% state sales tax rate as well as a 1% county local rate to the specific county the sale was made.

Iowa Sales Tax

There are four filing frequencies at which taxpayers file their returns in Iowa: semimonthly, monthly, quarterly, and annually. Iowa sales tax compliance requires taxpayers with quarterly tax returns to file by the last day of the month in the month after the reporting period. Annual filers’ returns will be due on January 31 ^st . If the return due date falls on a weekend or national holiday, then the correct due date for your filings will get pushed back to the next business day.

In Iowa, monthly taxpayers are required to submit pre-payments for the first two months of the quarter on the 20 ^th of the month after the reporting period. Semi-monthly taxpayers who have over $60,000 in tax liability per year will have a first pre-payment from the 1 ^st to the 15th. This pre-payment will be due on 25th of that month. The second pre-payment includes the 16th to the end of month, and this payment is due on the 10th day of the following month.

Iowa sales tax compliance does not offer any vendor compensation, vendor discounts, or timely filing discounts. This makes calculating taxes a bit easier, but make sure to remember the pre-payment dates. The pre-payment due dates are the most challenging part of Iowa sales tax compliance. While taxpayers can expect to collect and remit a 6% tax rate on most sales, the pre-payments are an important part of Iowa’s tax filing. The monthly pre-payments are due on the 20 ^th , but the final quarterly return is due the last day of the month following the reporting period.

If you are curious to learn more information about Iowa sales tax compliance, make sure to visit Iowa’s sales tax website.

Agile's Iowa Sales Tax Compliance Services

Agile’s experienced sales tax consultants can help by completing your company’s ongoing compliance filings in the state of Iowa . In fact, we’ve offered an outsourcing solution for this process since 2005. You can learn more about our outsourced sales tax compliance services or simply give us a call at (888) 350-4829. We are interested to learn more about your needs, and you might be surprised how little it will cost to have a sales tax expert take this responsibility off your hands!

Michigan Sales Tax Compliance

Wed, 27 Oct 2021 19:36:05 GMT

Michigan sales tax compliance is fairly easy to follow and understand. Michigan has a state-level sales tax rate of 6%. The state does not offer reduced rates, but there are exemptions available for businesses with the correct certificate of exemption. Some of these exempt businesses include churches, schools, wholesalers, resale retailers, government 501(c)3 and 501(c)4 organizations, and more. Outside of these types of companies, most businesses will collect and remit a 6% sales tax rate on sales.

Michigan Sales Tax

Michigan has three frequencies at which taxpayers file their returns. The three filing frequencies are monthly, quarterly, and annually. Your filing frequency will be determined by the Michigan Department of Treasury after registration. Michigan sales tax compliance requires taxpayers with monthly and quarterly tax returns to file by the 20 ^th of the following reporting period, while taxpayers annual returns will always be due on the 28 ^th of February. Michigan requires all taxpayers to file an annual return even if they are also filing monthly or quarterly. If the return due date falls on a weekend or national holiday, then the correct due date for your filings will get pushed back to the next business day.

Michigan does require that any taxpayer averaging $720,000 in sales tax annually submit accelerated payments. The accelerated payment is 75% of the lesser of the previous month's tax liability or the same period from last year's tax liability. Michigan also offers a total discount which is explained on page 2 of Michigan Sales Tax Return, and how the total discount is calculated depends on your filing frequency. Discounts apply only to 2/3 of the sales and use tax collected at a 6% rate. Usually, the total discount is $6 per month or $18 per quarter, but the discount amount does depend on when the taxpayer files for their returns and the amount of tax liability.

Monthly filer

· If the tax is less than $9, calculate the discount by multiplying the tax by 2/3

· If the tax is $9 to $1,200 and paid by the 12 ^th , or $9 to $1800 and paid by the 20 ^th , then enter $6

· If the tax is more than $1,800 and paid by the 20 ^th , calculate discount using this formula: (Tax x .6667 x .005)

· The maximum discount is $15,000 for the tax period

Quarterly Filer

· If the tax is less than $27, calculate the discount by multiplying the tax by 2/3

· If the tax is $27 to $3,600 and paid by the 12 ^th , or $27 to $5,400 and paid by the 20 ^th , then enter $18

· If the tax is more than $3,600 and paid by the 12 ^th , calculate discount using this formula: (Tax x .6667 x .0075)

· The maximum discount is $20,000 for the tax period

· If the tax is more than $5400 and paid by the 20 ^th , calculate discount using this formula: (Tax x .6667 x .005)

· The maximum discount is $15,000 for the tax period

Accelerated Filer

· If the tax is paid by the 20 ^th , calculate discount using this formula:

· Tax x .6667 x .005

· No maximum discount applies

The sales tax laws in Michigan are generally straightforward and uncomplicated, and the state does not have local taxing jurisdictions with varied rates. For the most part, businesses can expect to collect and remit a 6% sales tax rate on all of their sales. The most difficult part of Michigan sales tax compliance is most likely the total discount. Calculating it can be a bit confusing, but luckily, the total discount amount is automatically calculated when filing online.

If you are curious to learn more information about Michigan sales tax compliance, make sure to visit the Michigan sales tax website.

Michigan Sales Tax Compliance Services

Agile’s experienced sales tax consultants can help by completing your company’s ongoing compliance filings in the state of Michigan. In fact, we’ve offered an outsourcing solution for this process since 2005. You can learn more about our outsourced sales tax compliance services or simply give us a call at (888) 350-4829. We are interested to learn more about your needs, and you might be surprised how little it will cost to have a sales tax expert take this responsibility off your hands.

Washington DC Sales Tax Compliance

Thu, 07 Oct 2021 14:38:08 GMT

Washington D.C. sales tax compliance is fairly easy to follow and understand. Washington D.C. has a state-level tax rate of 6% and offers no reduced rates. For the most part, you can expect to be paying a 6% sales tax on your goods every time you make a purchase. However, there are some higher rates for certain purchases made such as soft drinks, alcohol, hotels, parking, and more. Since there are quite a few products that have a higher tax rate, you will want to review the Washington D.C. website to see if you are buying any items that fall under these higher rates.

Washington DC Sales Tax

For registered Washington D.C. taxpayers, there are three tax return filing frequencies: monthly, quarterly, and annually. Your filing frequency will be determined by the D.C. OTR after registration. All returns are due by the 20 ^th of the month following the reporting period. If the due date falls on a weekend or national holiday, then the correct due date for your filings will get pushed back to the next business day.

Luckily for taxpayers, Washington D.C. sales tax compliance does not require any pre-payments or accelerated payments. Unfortunately, Washington D.C. does not offer vendor compensation, vendor discounts, timely filing discounts, or anything similar to reward the taxpayer for on time filing. An extra factor to keep in mind while reviewing your taxes is that if a one’s tax liability is over $5,000 then the taxpayer is required to file and pay their taxes electronically.

As previously mentioned, the established tax laws in Washington D.C. are pretty straight-forward in comparison to other state sales tax laws. Their simplicity makes it easier to keep that 6% tax rate in the back of your head when checking to make sure you are filing everything correctly. The hardest part about Washington D.C. sales tax compliance is remembering which purchases have atypical sales tax rates. Since these rates refer to specific items, it can be slightly more difficult to remember which materials are included within these varying tax rates, so be sure to double check!

If you are curious to learn more information about Washington D.C. sales tax compliance, make sure to visit the Washington D.C. Office of the Chief Financial Officer's website. The website also includes a detailed list of which purchases stray from the usual 6% tax rate. This list will be useful to browse over when dealing with your sales tax compliance.

Washington DC Sales Tax Compliance Services

Agile’s experienced sales tax consultants can help by completing your company’s ongoing compliance filings in the state of Washington D.C. In fact, we’ve offered an outsourcing solution for both this process since 2005. You can learn more about our outsourced sales tax compliance services or simply give us a call at (888) 350-4829. We are interested to learn more about your needs, and you might be surprised how little it will cost to have a sales tax expert take this responsibility off your hands!

Florida Sales Tax Compliance

Tue, 21 Sep 2021 17:27:00 GMT

Florida’s tax rates are mostly consistent across the board, but there are a couple of exceptions that are useful for one to keep in mind while filing taxes. Florida has a state-level tax rate of 6%, but when it comes to commercial rentals, the tax rate is .5% less. This makes the state-level tax rate on commercial rentals 5.5%. Florida sales tax compliance also imposes a 4% tax on amusement machines and a 6.95% tax on electricity.

Florida Sales Tax

There are four different types of filing frequencies for tax returns in Florida: monthly, quarterly, semi-annually, and annually. Make sure to mark your calendar for the 19 ^th of each month because that is the last day you can file your tax returns in Florida. If the 19th falls on a weekend or on a business holiday, then the deadline is changed to the first applicable business day before the 19 ^th . This is different than how most states deal with their return due dates. Usually, states will push the due date back to after the weekend or holiday. Keep that in mind, so you do not end up missing the due date because you thought you had a little bit of extra time. Please note that all payments must be made before 5pm EST of the due date to be considered on time.

Aside from the regular state tax rate, if a taxpayer pays $200,000 or more in sales tax liability over the previous calendar year, they are also responsible for paying estimated tax. The specific amount a taxpayer must pay in estimated tax can be calculated in one of three ways:

1. Calculate 60% of your tax liability of the same month from the previous year.

2. Calculate 60% of your monthly average tax liability based off the previous year.

3. Calculate 60% of the sales tax due for next month's return and pay that amount.

When you are filing your taxes, please be aware that Florida has a Collection Allowance for taxpayers that file and pay on time. This allowance is 2.5% of the sales tax liability, but it’s capped at $30, so you can get some tax back for being a timely filer.

Florida sales tax compliance has its own unique version of local county taxes called Discretionary Sales Surtax. There are five different rate variations of this surtax, which range from 0.5% to 2.5% in increments of 0.5% depending on which county the sale was located. Taxpayers must report the amount of discretionary sales surtax on line 15(d) of their tax return. Any transactions over $5,000 cannot be subjected to discretionary sales surtax. Transactions over $5,000 are subject to the state and discretionary sales surtax up to $5,000, each dollar over the $5,000 threshold is only taxed at the state rate of 6%.

If you are curious to learn more information about Florida sales tax compliance, feel free to visit the Florida Dept. of Revenue's website.

Florida Sales Tax Compliance Services

Agile’s experienced sales tax consultants can help by completing your company’s ongoing compliance filings in the state of Florida. In fact, we’ve offered an outsourcing solution for both this process since 2005. You can learn more about our outsourced sales tax compliance services or simply give us a call at (888) 350-4829. We are interested to learn more about your needs, and you might be surprised how little it

will cost to have a sales tax expert take this responsibility off your hands! To also see if your business qualifies for money-saving tax exemptions such as those on manufacturing supplies , food , and medical supplies in Florida, consider consulting a sales tax expert today.

Indiana Sales Tax Compliance

Tue, 21 Sep 2021 16:42:22 GMT

Compared to some other states, Indiana sales tax compliance laws are fairly straight-forward, and they have one of the less confusing tax rates. Indiana has a consistent 7% state-level sales tax rate. The state does not have any other reduced rates, so you can expect to pay a 7% tax rate every time.

Indiana Sales Tax

There are two frequencies at which you can file your tax returns. In Indiana, you will either file monthly or annually. The state offers two due dates for monthly filings which are based off one’s monthly tax liability. The first due date is the 20 ^th of each month, and this due date applies to taxpayers that have more than $1,000 in average monthly tax liability based off the last calendar year. The second filing date of the month is the 30 ^th , and this is available for taxpayers who have less than $1,000 in average monthly tax liabilities from the previous calendar year. Annual filers due date is January 31 ^st for the previous year’s activity.

Along with Indiana’s stable tax rate, the state makes doing one’s taxes even less complicated by not requiring any pre-payments or accelerated payments., The state also has a collection allowance to reward taxpayers who submit and pay on time based on the previous calendar year's tax liability. There are three different collection allowance rates:

1. 0.73% up to $60,000

2. 0.53% between $60,000 and $599,999.

3. 0.26% over $600,000

Luckily, when it comes to taxes, Indiana sales tax compliance has one of the more clear-cut returns out there. Many states have varied tax rates depending on purchases, liabilities, and other possible factors. Fortunately for taxpayers, Indiana likes to keep their tax rate simple and easy to understand by making the sales tax rate 7% everywhere in the state. This makes filing tax and returns a lot easier on a taxpayer because they do not have to stress over whether or not they are paying the correct rate, and they will not get lost in complicated tax jargon.

If you are interested in learning more information about Indiana sales tax compliance, take a look at the Indiana Dept. of Revenue's website.

Indiana Sales Tax Compliance Services

Agile’s experienced sales tax consultants can help by completing your company’s ongoing compliance filings in the state of Indiana. In fact, we’ve offered an outsourcing solution for both this process since 2005. You can learn more about our outsourced sales tax compliance services or simply give us a call at (888) 350-4829. We are interested to learn more about your needs, and you might be surprised how little it

will cost to have a sales tax expert take this responsibility off your hands!

Georgia Sales Tax Rates and Compliance

Wed, 08 Sep 2021 15:05:18 GMT

If you’re planning on filing a sales and use tax return in Georgia, you’ll need to know the following information :

- Total sales in Georgia

- Amount of sales exempt from tax

- Amount of sales tax collected

- Amount of taxable sales

Georgia sales tax compliance has a state-level sales tax rate of 4%. However, in Atlanta and Clayton County, the Motor Vehicle taxes 1% less than the normal rate. The sale of food (which includes groceries, food ingredients, unprepared food, etc.) is tax exempt at the state level. Although you don’t have to pay taxes on food at the state level, there are still taxes applied to the sale of food at Georgia’s local level.

Georgia Sales Tax Rates and Requirements

Georgia sales tax compliance offers three frequencies for which you can file for returns: monthly, quarterly, and annual. The Georgia DOR will start taxpayers on a monthly filing frequency; however, taxpayers can submit a written request to the Georgia DOR to have their filing frequency changed. Don’t forget to file your taxes before the 20 ^th of each month because that is the deadline of each filing period. If the 20 ^th of the month falls on a weekend or a business holiday, then the deadline is extended to the next business day.

If the taxpayer pays $60,000 or more in state sales tax for the previous calendar year, the taxpayer must make monthly accelerated tax payments (prepaid tax). The state’s “prepaid tax” is 50% of the average monthly state sales tax the taxpayer paid the previous calendar year. This amount will be calculated by the Georgia DOR annually and automatically filled into returns filed on the GTC (Georgia Tax Center).

When it comes to taxes, the city of Atlanta is a tricky place. Everywhere in Georgia, outside of Atlanta, only charges state and county tax, so properly distributing Atlanta’s special taxes can be the most challenging part about filing a sales tax return in Georgia. Georgia sales tax compliance has many local county and special taxing jurisdictions with varied rates. In total, there are 161 different local taxing rates. On average, the range of the local jurisdiction sales tax rate is usually somewhere between 2% to 4.9%.

Georgia Sales Tax Compliance Services

Agile’s experienced sales tax consultants can help by completing your company’s ongoing compliance filings in the state of Georgia. In fact, we’ve offered an outsourcing solution for both this process since 2005. You can learn more about our outsourced sales tax compliance services or simply give us a call at (888) 350-4829. We are interested to learn more about your needs, and you might be surprised how little it

will cost to have a sales tax expert take this responsibility off your hands!

Colorado Manufacturing Sales Tax Exemption

Tue, 24 Aug 2021 21:23:00 GMT

Colorado manufacturers are eligible for a local sales tax exemption on purchases of machinery and machine tools over $500 to be used directly and predominantly in manufacturing tangible personal property for sale. This Colorado sales tax exemption for manufacturing is now automatically applicable to sales taxes at the Regional Transportation District (“RTD”) and Scientific and Cultural District (“CD”) jurisdictions. Prior to January 1, 2014, purchases of machinery and machine tools that would qualify for an exemption from sales tax at the Colorado state tax rate of 2.9% would not be subject to an exemption at the local RTD and CD jurisdictions.

Colorado Manufacturing Sales Tax Exemption: Critical Criteria

The Colorado sales tax exemption for manufacturing that applies to the local Regional Transportation District (RTD) and Scientific and Cultural District (CD) jurisdictions must meet the same criteria as the exemption that applies to the 2.9% state sales tax. Those criteria are:

What is “Direct Use" in Manufacturing?

Per Colorado Revenue Statutes 39-26-709(1)(d), “direct use in manufacturing” is defined as beginning at the point in which the raw material reaches the first machine involved in changing the form of that raw material and ending at the point in which that raw material has been altered to its completed form. Equipment such as forklifts or conveyor belts that move materials from one step in production to another step in a continuous flow would also meet the definition of direct use.

What is “Predominant Use" in Manufacturing?

Colorado Revenue Statutes 39-26-709.1 defines predominant use as, “the greatest use of the machinery must be its use in manufacturing.” If machinery or machine tools have multiple uses, then they must be used more than 50% of the time in the direct use production process to qualify for the Colorado sales tax exemption for manufacturing. To determine whether machinery or machine tools meet this predominant use criteria, they are not considered to be in use when they are shut off or when they are being repaired.

Justidictions Where Machinery and Machine Tools Exemptions Apply

Colorado Publication DR1002 has a complete listing of the boundaries for the Regional Transportation District (RTD) and Scientific and Cultural District (CD) jurisdictions that began applying the Colorado sales tax exemption for machinery and machine tools on January 1, 2014. This publication also provides a list of other cities, counties and special districts that offer a sales tax exemption from the local tax rates. Since localities have the option, but are not required to offer the machinery and machine tools sales tax exemption per Colorado Revenue Statutes 29-2-105(1)(d)(I)(A), it is important to consult this publication to determine whether a qualifying purchase is exempt within each local jurisdiction.

Claim Colorado Sales Tax Exemption with Form DR1191

In order to claim the Colorado sales tax exemption for manufacturing machinery and machine tools, qualifying manufacturers need to complete the Sales Tax Exemption on Purchases of Machinery and Machine Tools (DR 1191) and provide one copy to their vendors and a second copy to the Colorado Department of Revenue. For manufacturers who have already paid sales taxes to their vendors, they can complete and submit the Claim for Refund of Tax Paid to Vendors (DR 0137B) to recover state sales taxes on qualifying manufacturing machinery from the Colorado Department of Revenue. For manufacturers who have accrued state use tax on purchases of exempt machinery and machine tools, they can complete and submit the Claim for Refund (DR 0137) to the Colorado Department of Revenue. These forms can also be used to apply for refunds for RTD and CD sales taxes administered by the state, which are listed on DR1002. For RTD and CD sales taxes administered at the locality, refund claim forms vary and can generally be found on the city or county’s website.

Reach Out to Us with Questions

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Colorado sales and use tax exemptions . If you have questions, comments, concerns or would like to discuss the specific circumstances you are encountering in regard to sales and use tax, please contact our sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

The post Colorado Manufacturing Sales Tax Exemption appeared first on Agile Consulting Group .

New Georgia Sales Tax Nexus Compliance for Online Retailers

Mon, 17 May 2021 14:53:00 GMT

Georgia will require online retailers to file Georgia sales tax compliance returns beginning January 1, 2019 if their annual Georgia revenues exceed $250,000 or if they have more than 200 separate retail transactions within the state per calendar year. As an alternative to collecting Georgia sales tax from its customers and filing sales tax compliance returns, the retailer may instead send “tax due” notices to all Georgia customers who purchased more than $500 of taxable goods during the year. The law, which originated as House Bill 61 and became Act 365 , was signed by Governor Nathan Deal on May 8, 2018.

Since 1992, state revenue agencies have been unable to force retailers who do not have physical nexus within their state to file sales tax compliance returns or to collect and remit sales taxes from their customers. The Supreme Court of the United States’ ruling in Quill Corp. v. North Dakota defined nexus as having a sufficient physical presence, such as a brick-and-mortar store or distribution center, within the state. This precedent is currently being challenged by a case awaiting final ruling by the Supreme Court, South Dakota v. Wayfair, Inc. South Dakota is arguing that the Quill ruling is outdated since online retail sales now constitute a significant portion of sales for retailers. The inability of states to require retailers to file sales tax compliance returns discriminates against brick-and-mortar stores that must charge sales tax, thereby increasing prices for consumers and making them less competitive against online retailers that are not required to collect sales taxes. Furthermore, state governments are losing potential revenue from online retail sales, approximately $13.7 billion in the 2017 calendar year , according to an audit by the U.S. Government Accountability Office. The state of Georgia’s Department of Audit and Accounts estimates that the Georgia sales tax compliance revenues will increase by approximately $1.64 billion over the next five years as a result of Act 365.

Even though Act 365 has been signed into law, the Supreme Court will still need to overturn Quill in order for Georgia to require retailers to collect sales tax from their customers and to file Georgia sales tax compliance returns. Essentially, Act 365 was a preemptive measure taken by Georgia’s Legislature to jump start the process prior to adjourning the 2017-2018 Regular Session on March 29, 2018. Online sellers should begin making preparations to register and comply with Georgia sales tax reporting requirements while keeping an eye towards the South Dakota v. Wayfair, Inc. decision. If you have any questions, concerns or would like to discuss your specific circumstances regarding this issue or any other sales tax compliance issue, please contact any of our sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

The post New Georgia Sales Tax Compliance Requirements for Online Retailers appeared first on Agile Consulting Group .

Oklahoma Sales Tax Exemption for Software

Tue, 17 Nov 2020 22:36:00 GMT

The Oklahoma sales tax exemption for software allows businesses that utilize software at their Oklahoma-based locations to claim an exemption on software purchases that meet certain criteria. The experienced, detail-oriented and knowledgeable sales tax consulting team at Agile Consulting Group is uniquely qualified to help your business leverage this sales tax exemption to improve your cash flow.

According to Section 1354(A)(9) of Title 68 of the Oklahoma Statutes , “Computer hardware, software, coding sheets, cards, magnetic tapes or other media on which prewritten programs have been coded, punched, or otherwise recorded, including the gross receipts from the licensing of software programs” are subject to sales tax. Since prewritten computer software is subject to sales tax in Oklahoma, it is important to understand how the Oklahoma tax code defines this term. Per Section 1352(20) of Title 68 of the Oklahoma Statutes , prewritten computer software means, “‘computer software’, including prewritten upgrades, which is not designed and developed by the author or other creator to the specifications of a specific purchaser.” Prewritten computer software also includes the following:

Even though prewritten computer software is subject to sales tax in Oklahoma, there are several types of software purchases that qualify for the Oklahoma sales tax exemption for software.

Oklahoma Sales Tax Exemption for Software: Custom Software

The Oklahoma tax code specifically exempts the sales of customized computer software programs from sales taxes. Sales of custom software programs qualify for the Oklahoma sales tax exemption for software because they are considered service transactions instead of sales of tangible personal property. According to Oklahoma Admin. Code 710:65-19-52(g) , a software program is considered to be customized when the program is “prepared to the special order of a customer.” Based on this definition and the criteria regarding what is considered prewritten computer software, a software program will be considered customized when it can only be used by the customer for whom the program was developed and is useless to any other user. If a software program is developed for a specific purchaser, but has value for other customers and can be usable for other customers, then it will not meet the limited definition of custom software in Oklahoma and would be considered taxable prewritten computer software.

Oklahoma Sales Tax Exemption: Electronically Delivered Software

The Oklahoma sales tax exemption for software also applies to sales of software that is delivered electronically. Section 1357(32) of Title 68 of the Oklahoma Statutes provides this specific exemption for electronically delivered software. For the purposes of this exemption, the term “delivered electronically” means a method of delivery to the purchaser that does not occur through tangible storage media like a CD-ROM or USB.

Software Maintenance Contracts

The Oklahoma sales tax exemption for software may also apply to software maintenance contracts, depending on whether the contract is mandatory or optional. According to Oklahoma Admin. Code 710:65-19-52(d)(1), the entire sales price of a mandatory maintenance contract sold with prewritten computer software is subject to sales tax. A mandatory computer software maintenance contract is defined in Oklahoma Admin. Code 710:65-19-52(a)(8) as, “a computer software maintenance contract that the customer is obligated by contract to purchase as a condition to the retail sale of computer software.” An optional computer maintenance contract, which is defined in Oklahoma Admin. Code 710:65-19-52(a)(9) as “a computer software maintenance contract that a customer is not obligated to purchase as a condition to the retail sale of computer software” is subject to tax when either of the following two conditions are met:

In other words, as stated in Oklahoma Admin. Code 710:65-19-52(d)(3), optional software maintenance contracts will qualify for the Oklahoma sales tax exemption for software if they provide only separately stated maintenance agreement support services. If the maintenance contract is sold with custom software or with prewritten computer software delivered electronically, then the contract will be exempt from taxation regardless of whether the contract is mandatory or optional.

How to Claim the Oklahoma Sales Tax Exemption for Software

Since the Oklahoma Tax Commission does not provide a specific exemption certificate for custom software programs or electronically delivered software on their website, any Oklahoma business making a qualifying exempt software purchase can submit a letter to their vendors that includes the following information:

How to Recover Oklahoma Sales Taxes Already Paid

Oklahoma businesses that have already made a purchase of software which meets the exemption criteria listed above are entitled to refunds for purchases that were made within two years from the date the tax was paid by the claimant. There are two options available to Oklahoma purchasers to recover any sales tax overpayments on software. The first is to reach out to the original seller and request that they issue a refund or credit. The seller can accomplish this by amending their Oklahoma sales and use tax return from the period in which the original sale was billed. If the seller declines to issue the purchaser a refund or credit directly by amending their sales and use tax returns, then Oklahoma purchasers can file a claim for refund directly with the Oklahoma Tax Commission by completing and submitting Oklahoma Form 13-9 . This 13-9 Application for Credit or Refund of State and Local Sales or Use Tax also allows purchasers to claim a refund with the Oklahoma Tax Commission for any self-assessed taxes that the purchaser realizes were incorrect at the time. The sales tax consultants at Agile Consulting Group have experience in recovering overpaid sales taxes from both sellers and the Oklahoma Tax Commission and can assist any Oklahoma business with this cumbersome process.

Reach Out to Our Sales Tax Consultants with Questions

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Sales Tax Automation: An Overview of Sales Tax Software

Mon, 16 Nov 2020 22:31:00 GMT

Choosing the best sales tax software solution for your business can be an intimidating process. There are many options available in the marketplace. Each software choice seemingly has different features designed to separate it from the competition. How do you determine the best sales tax software solution for your business needs?

Our consultants get asked this question frequently. In fact, it’s one of the most popular queries we receive. And here is the answer…it depends on your business’s needs in relation to sales tax collection and compliance.

What Does Sales Tax Software Do?

If you’re reading this post, odds are that you already have an understanding of its purpose and whether your business needs it. If so, you can skip ahead to the next section. Otherwise, here’s a quick synopsis below regarding the three main purposes of sales tax software.

#1. Automates a Business Sales Tax Calculation and Collection Functions

Sales tax automation through software solutions can help business’s sales tax calculation and collection functions. This is important and essential for several reasons.

First, the appropriate tax rate needs to be charged on all taxable sales in states in which the business has nexus. Knowing what tax rate to charge a customer is complex. States are either origin- or destination-based, meaning that sales tax needs to be collected either based upon the “ship from” or “ship to” address.

In addition, the taxation rates are dynamic and rates can change on the first of each month. Keeping up with these nuances and changes manually is essentially impossible particularly if you’re selling into multiple states or you have a large volume of transactions.

#2. Helps Determine Which Items are Subject to Sales Tax

Second, sales tax software helps a business determine which items are subject to sales tax and which items are not subject to tax. Each state drafts its own sales and use tax laws which means that the taxability of items will vary from state-to-state. Even if your entire product catalog consists of taxable items, consider other charges that may be added to the customers’ invoices such as freight, shipping and handling or fuel surcharges.

#3. Streamlines the Allocation and Reporting of Sales Revenues

Finally, once the sales tax has been collected from customers, it must be remitted to the appropriate states and jurisdictions within those states (except for those few states like Connecticut, Indiana and others which have a fixed state-wide rate). Sales tax software is an excellent tool for simplifying and streamlining the process of allocating and reporting sales revenues to the appropriate jurisdictions. Furthermore, many ecommerce solutions even have automated filing capabilities.

How to Determine Which Sales Tax Software is Right for Your Business

When we advise our consulting clients about choosing the best sales tax software for their needs, we start with an overview of the products they’re selling. Certain software platforms as a service (SaaS) platforms are geared towards companies selling specific products. Simply saying you’re an ecommerce retailer is not enough information for our consultants to provide adequate guidance.

Understand Which Products You Sell

We need to have an in-depth understanding of the products you’re selling so we can assign the appropriate category to each product so that it will result in the correct taxability determination by whichever SaaS is selected. This is quite challenging for someone who is not well versed in sales tax law and is the primary reason many clients reach out to Agile’s sales tax consultants when going through this process.

Consider the Cost

The second consideration is cost. Most current software choices for sales tax collection have a tiered cost plan that is driven off the number of transactions that need to be calculated on a monthly basis. Having said that, there are certainly some solutions that are more budget-friendly than others, but like many things in life you often get what you pay for.

Determine Necessary Service Levels

If you have more complex needs or require assistance with implementation, you will have to pay for that higher level of service. While Agile’s sales tax consultants are absolutely not software programmers, we have helped a number of clients through fairly standard implementations and set ups of these software solutions. Let our prior experience be an asset for you.

Other Points of Consideration

In addition to those three main concerns, there are other ancillary concerns as well to consider when selecting the best compliance software for your business.

Examples of other questions to consider include:

Discuss Your Software Options with Agile Consulting

Agile Consulting Group is a partner with both Avalara and TaxJar and we have firsthand experience with the other solutions in the marketplace including the popular choices of Sovos, TaxCloud and Vertex. Our sales tax consultants are happy to consult with you as you embark on this important decision. All these software solutions have their pluses (and minuses) and our sales tax consultants will collaborate with you to find the solution best suited for your business.

If you have questions, comments or would like to discuss your software needs and the options available in the marketplace, please contact Agile Consulting Group’s sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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Michigan Sales Tax Exemption for Manufacturing

Mon, 16 Nov 2020 17:01:00 GMT

Michigan provides an extensive sales tax exemption for manufacturers involved in industrial processing. Michigan defines industrial processing as “the activity of converting or conditioning tangible personal property by changing the form, composition, quality, combination or character of property for ultimate sale at retail or for use in the manufacturing of a product to be ultimately sold at retail or affixed to and made a structural part of real estate located in another state. Industrial processing starts when tangible personal property moves from raw materials storage and ends when finished goods first come to rest in inventory storage” [Mich. Comp. Laws Ann. §205.54t(7)(a)]. This exemption applies to many items used in the manufacturing process and the skilled sales tax consultants at Agile Consulting are ready to assist Michigan manufacturers with the nuance of the tax law.

Sales Tax Exempt Industrial Processing Manufacturing Items

Taxable Items

How to Claim the Michigan Sales Tax Exemption for Manufacturing

Michigan manufacturers can easily purchase exempt manufacturing items by supplying their vendors with “Michigan Sales and Use Tax Certificate of Exemption – Form 3372” . This form can be found on the Michigan Department of Treasury’s website. The manufacturer will fill out and send in one form for each of their qualifying vendors. On the exemption certificate the manufacturer will check box 7 “Industrial Processing” and use code 4 for “Manufacturing” on section 4 on the exemption certificate. Once the vendor has this certificate on file, the manufacturer can purchase qualifying items tax exempt. Agile Consulting has experienced sales tax consults eager to help Michigan manufacturers take advantage of the Michigan sales tax exemption for manufacturing.

How to Recover Michigan Industrial Processing Sales Tax

Purchasers are entitled to a refund of sales tax dollars erroneously paid on manufacturing items. The state of Michigan allows purchasers to request a refund on items purchased up to 4 years (48 months) from the date of purchase. Due to a recent change in refund procedures (Public Act 168) purchasers may request a sales tax refund directly from the Michigan Department of the Treasury as of January 2019. In order to receive the refund, the manufacturer must fill out sign and send in “Purchaser Refund Request for a Sales or Use Tax Exemption – Form 5633” into the Michigan Department of Treasury. Please note that while the purchaser is now able to request a refund directly from the Treasury, form 5633 has a statement that indicates that the seller paid tax on the original transaction and will not seek a refund. This statement must be signed by the seller. Once the refund request is received by the Treasury it will be assigned to an auditor for review. Once the review is completed and both sides agree, a refund check will be sent to the purchaser. Please consult Agile’s knowledgeable sales tax consultants for help in the refund recovery process.

Agile Consulting Group

If you have any questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact any of Agile Consulting Group’s sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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Maryland Sales Tax Exemption for Software

Fri, 28 Aug 2020 20:09:00 GMT

The Maryland sales tax exemption for software provides a sales & use tax exemption for Maryland-based businesses that purchase and use certain types of software during the course of their operations. The knowledgeable and detail-oriented sales tax consultants at the Agile Consulting Group can provide your organization with the resources and tools to take advantage of this exemption and improve your business’s cash flow.

In general, per MD Code Ann. Tax-Gen. 11-102(a) , tangible personal property that is sold at retail is subject to sales and use tax on the gross sales price. Tangible personal property is defined in MD Code Ann. Tax-Gen 11-101(k)(1)(i) as meaning, “corporeal personal property of any nature.” By using the term “corporeal”, Maryland institutes a very literal definition of tangible personal property because corporeal means that the property in question must be a physical object and exist as a physical form. This definition is relevant to any discussion about software purchases because this definition makes an important distinction between the type of software that should be considered as tangible personal property versus intangible personal property.

Prewritten or Canned Software

The Maryland sales tax exemption for software does not apply to any purchases of “prewritten” or “canned” software that are delivered in a “corporeal” manner. MD Code Ann. Tax-Gen 11-103(b) states that, “the person required to pay the sales and use tax has the burden of proving that a sale in the State is not subject to the sales and use tax.” Since the Maryland tax code and administrative regulations do not provide any specific sales tax exemption in the law, “prewritten” and “canned” software programs, which are considered to be software that is not designed, created, or developed for and to the specifications of an original purchaser are presumed to be taxable tangible personal property.

Furthermore, these types of software programs have historically been held by the Maryland Court of Appeals to be considered taxable tangible personal property. In the case MD COMPTROLLER OF THE TREASURY v. EQUITABLE TRUST COMPANY, 296 Md 459 464 A2d 248, 08/11/1983 , the taxpayer was contesting the results on an audit that assessed sales taxes on the purchase of canned computer program software licenses. The taxpayer attempted to argue that the assessment was incorrect because the licenses should be considered intangible personal property that merely granted the customer the right to use programs, knowledge, and information, even though they were delivered via a temporary magnetic tape. The Court of Appeals upheld the tax assessment by concluding that, “as a matter of law that the dominant purpose or essence of the transactions was the programs and that computer programs are intangible.” By upholding the Maryland Comptroller’s tax assessment on these software programs, the Court of Appeals affirmed that “canned” software delivered in a tangible medium is taxable tangible personal property under the Maryland Tax Code.

Electronically Delivered Software

While “canned” software purchases that are physically delivered are considered taxable tangible personal property in Maryland, electronically delivered software where the purchaser does not receive any physical medium qualifies for the Maryland sales tax exemption for software. According to the most recent Comptroller of Maryland Publication that discusses tangible personal property and services subject to sales and use tax, page 13 of this publication states that, “Canned computer software accessed electronically through digital download etc.” is not subject to sales and use tax. This exemption will only apply if the purchaser does not receive the right to receive tangible personal property as part of the sale.

Custom Software

The Maryland sales tax exemption for software also applies to custom computer software programs and services. Per MD Code Ann. Tax-Gen 11-219(b) , sales and use tax does not apply to the sale of custom computer software services relating to procedures and programs that meet the following criteria:

Essentially, this means that any software or related services that are performed for a specific customer and only for that specific customer are not an enumerated service in Maryland and would not be subject to sales and use tax.

How to Claim the Maryland Sales Tax Exemption for Software

Since the Comptroller of Maryland does not provide a specific exemption certificate for custom software programs or electronically delivered software on their website, any Maryland business making a qualifying exempt software purchase can submit a letter to their vendors that includes the following information:

How to Recover Maryland Sales Taxes Already Paid

Maryland businesses that have already made a purchase of software which meets the exemption criteria listed above are entitled to refunds for purchases that were made within four years from the date the tax was paid. There are two options available to Maryland purchasers to recover any sales tax overpayments on software. The first is to reach out to the original seller and request that they issue a refund or credit. The seller can accomplish this by amending their Maryland sales & use tax return from the period in which the original sale was billed. If the seller declines to issue the purchaser a refund or credit directly by amending their sales & use tax returns, then Maryland purchasers can file a claim for refund directly with the Comptroller of Maryland by completing and submitting Maryland Form SUT205 . This SUT205 Sales and Use Tax Refund Application also allows purchasers to claim a refund with the Comptroller of Maryland for any self-assessed taxes that the purchaser realizes were incorrect at the time. The consultants at Agile Consulting Group have experience in recovering overpaid sales taxes from both sellers and the Comptroller of Maryland and can assist any Maryland business with this cumbersome process.

Reach Out to Us with Questions

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Alabama Medical Sales Tax Exemption for Implants

Mon, 06 Jul 2020 21:53:00 GMT

An often-overlooked Alabama medical sales tax exemption that can yield significant refund opportunities and future sales and use tax savings is related to the purchase of implants. If your Alabama hospital or ambulatory surgery center is acquiring implants for patients and paying sales or use tax on those purchases, Agile Consulting Group can help.

Sales Tax Consulting Firm Succeeds in Expanding Alabama Medical Sales Tax Exemption for Implants

We originated and pioneered this issue by first fighting for the correct application of Section 40-9-30, Code of Alabama 1975 , which includes an Alabama sales and use tax exemption that had been “ on the books ” since August 1, 2014, but not honored by the Alabama Department of Revenue. Our sales tax consultants then worked hand-in-hand with the Alabama Department of Revenue and local taxing authorities to find mutually agreeable supporting documentation that would enable hospitals and surgery centers to enjoy the benefits of this Alabama medical sales tax exemption for implants.

Alabama Medical Sales Tax Exemption for Implants: An Overview

In the Regular Session of 2014, House Bill 280 was introduced into the Ways and Means Education Committee by Representative Ron Johnson from District 33. The Bill made its way through both houses and was forwarded to Governor Bentley on April 3, 2014. House Bill 280 was signed into law and became Act 2014-453 taking effect August 1, 2014. Act 2014-453 added subparagraph (d) to Section 40-9-30. Subparagraph (d) reads,

In addition to any other exemptions provided in subsection (b) or (c), any items used for the treatment of illness or injury or to replace all or part of a limb or internal body part purchased by or on behalf of an individual pursuant to a valid prescription and covered by and billed to Medicare, Medicaid, or a health benefit plan shall be exempt from state, county, and municipal sales, use and rental and leasing taxes, including, but not limited to, any of the following:

To paraphrase, this exemption states that any items, including prosthetic devices, used for the treatment of illness, injury or to replace a limber internal body part that are dispensed per a prescription can be purchased tax exempt if they are covered by and billed to Medicare, Medicaid or any other health insurance provider.

Agile Requests a Sales Tax Ruling from the Alabama Department of Revenue

We first learned of this exemption in early 2018 and according to our discussions with the Alabama Department of Revenue at that time, no Alabama hospital or surgery center had taken advantage of this exemption despite it being available to them for nearly three and a half years. Agile’s sales tax consultants believed that the Alabama medical sales tax exemption for implants was not being used by taxpayers for several reasons.

First, Alabama hospitals and surgery centers were largely unaware that the law had even changed because there had been no public discussion of the new Alabama medical sales tax exemption. Second, subparagraph (d) was vague as to the meaning of “ covered by and billed to Medicare, Medicaid, or a health benefit plan .”

Obviously, standard operating procedure in the healthcare industry dictates that Medicare, Medicaid, or a health benefit plan does not itself directly acquire the implants (or other items) used by patients covered by the health care plan. The hospital or surgery center purchases those items and is then reimbursed by Medicare, Medicaid, or the health benefit plan for the materials used in the hospital or surgery center’s care of the patient in question.

Based on the language in subparagraph (d), it was unclear whether this arrangement would invalidate the exemption. Third, if this standard arrangement between the medical facility and the patient’s insurer was an acceptable interpretation of the exemption language, then there was no clear guidance on the documentation that an Alabama hospital or surgery center would need to provide to entitle them to acquire the implants (or other items) in a tax exempt manner.

With these thoughts in mind, Agile’s sales tax consultants wrote to the Alabama Department of Revenue in early 2018 requesting guidance on the Alabama medical sales tax exemption for implants. We received a Private Letter Ruling addressing these and other specific concerns. This effectively opened a dialogue between our sales tax consultants and the Alabama Department of Revenue through which we learned how to make this exemption an actuality for Alabama hospitals and surgery centers.

Putting it into Practice: Filing Refunds Related to the Alabama Medical Sales Tax Exemption for Implants

With our newly acquired information from the Alabama Department of Revenue, we set about pursuing sales and use tax refunds for one of Agile’s longstanding Alabama hospital clients to prove through our firsthand experience that we could turn this concept into sales and use tax refunds. It was an ideal test case because the hospital specialized in orthopedic surgeries, acquired a large volume of implants for these orthopedic surgeries and settled over 99% of its cases through Medicare, Medicaid, or another health benefit plan.

Success! Sales and Use Tax Refunds Issued to Alabama Hospital and Surgery Center

Beginning in early 2019, Agile began securing refunds related to the Alabama medical sales tax exemption for implants for its first Alabama hospital client. To date, the hospital has received over $1.8M in sales and use tax refunds related to the Alabama medical sales tax exemption for implants.

In our review, we identified over 20 different vendors from whom the hospital was making purchases that qualified for the Alabama medical sales tax exemption for implants including:

Here are examples of three refund checks received by our client in relation to this issue:

How You Too Can Recover Refunds Related to the Alabama Medical Sales Tax Exemption for Implants

If you are an Alabama hospital or ambulatory surgery center that is acquiring implants for patients and paying sales or use tax on those purchases, Agile Consulting Group can help you recover sales and use taxes paid on such purchases from the prior 36 months. Not only will you recover refunds for these prior purchases, but going forward we will work with you to update your accounting and tax systems to capture this exemption on future qualifying purchases made. This will result in an immediate and direct improvement to your facility’s bottom line.

Agile Consulting Group

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Louisiana Sales Tax Exemption for Manufacturing

Thu, 28 May 2020 14:05:00 GMT

The Louisiana sales tax exemption for manufacturing provides an incentive for manufacturing production in Louisiana by allowing manufacturers to purchase manufacturing machinery and equipment tax exempt [La. Rev. Stat. Ann. §47:301(13)(k)(i)]. Louisiana defines “ machinery and equipment ” as “ tangible personal property or other property that is eligible for depreciation for federal income tax purposes and that is used as an integral part in the manufacturing of tangible personal property for sale .” “ Machinery and equipment ” shall also mean tangible personal property or other property that is eligible for depreciation for federal income tax purposes and that is used as an integral part of the production, processing, and storing of food and fiber or of timber” [La. Rev. Stat. Ann. §47:301(3)(i)(ii)(aa)].

The state then reviewed this statue and determined that although manufacturing machinery repair parts are not depreciated, they are still considered exempt under the spirit of the statue [Louisiana Revenue Bulletin No. 15-006, 01/22/2015]. To qualify for the Louisiana sales tax exemption for manufacturing, the manufacturer must have a Louisiana Workforce Commission assigned NAICS code of one of the following: 113310, 2211, 31-33, 3211-3222, 327213, 3361, 423930, or 511110.

The expert tax consultants at Agile Consulting are here to help navigate the nuance of the Louisiana sales tax exemption for manufacturing.

Exempt Machinery and Equipment:

Taxable Machinery and Equipment:

Additional Exempt Tangible Personal Property used in Manufacturing Process:

Claiming the Louisiana Sales Tax Exemption for Manufacturing

Louisiana separates state and local taxes into two different governing bodies. The Louisiana Department of Revenue handles all state taxes and the local parish handles the local taxes. Each parish handles sales tax and refunds differently so it is important to review your local parish’s rules. In order to purchase manufacturing machinery and equipment tax exempt manufacturers must apply for a manufacturing certification with the Louisiana Department of Revenue. Manufacturers need to fill out, sign and send in Form R-1070 “Application for Certification as a Manufacturer” found at the LA DOR website. Once the state approves the application and issues an exemption certificate, the manufacturer can then purchase manufacturing machinery and equipment tax free.

How to Recover Louisiana Sales Taxes

The statue of limitations on sales tax in Louisiana goes back 3 years (36 months) to when the sales tax was paid. Meaning Louisiana manufacturers can go back 3 years and recover sales taxes erroneously paid under the Louisiana sales tax exemption for manufacturing. The first step for manufacturers to recover sales taxes is to fill out, sign and send in Form R-20127 “Claim for Refund of Overpayment” found at the LA DOR website. Once submitted, a Louisiana auditor will review the refund claim and either approve or deny the refund. If denied the taxpayer can send in additional materials to support their refund claim. Once the taxpayer and the state have agreed on the refund claim, the state will send out a refund check to the taxpayer. Please remember that this refund request is only for state sales tax and to review your local parish’s rules for sales tax refunds. Each parish has their own claim for refund form which is to be sent to the appropriate parish. Agile consulting’s sales tax consultants are eager to assist Louisiana manufacturers with this sales tax refund process.

Agile Consulting Group

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Sales Tax Recovery Can Help Cash Flow in the Time of Covid-19

Thu, 28 May 2020 13:32:00 GMT

Sales tax recovery reviews, sometimes known as sales tax reverse audits are a great way to generate cash flow at any time, but the disruption Covid-19 has caused worldwide has forced many businesses to reevaluate. Will reopening generate the volume of sales businesses had pre-Covid-19? Will our economy tip into a recession? Will businesses be forced to trim costs or even payroll to remain profitable? Businesses are facing these and many other pressing questions over the coming months. One thing is certain, businesses have found ways to adapt and do more with less over the past 10+ weeks. Maybe it is time to reconsider recovering overpaid sales taxes.

Many of you are familiar with sales tax recovery reviews. Quite a few of you have enjoyed success in prior sales tax recovery reviews. We view sales tax recovery reviews as something akin to a doctor’s checkup. Maybe they don’t need to occur on an annual basis (who are we kidding, we all know we’ve missed one from time-to-time), but every few years it is imperative to go in for that checkup to make sure everything is still functioning properly and to address any concerns we have. That’s the same opportunity sales tax recovery reviews offer your business as it relates to sales tax.

Policies, processes and procedures are key to any business. Over time, even the best planned policies, processes and procedures have slippage and need to be revisited. In sales tax particularly, you must review your company’s policies, processes and procedures on a regular basis.

Why should sales tax recovery reviews occur on a regular basis?

Tax laws change

State Legislatures pass new laws every year, sometimes in multiple sessions. These changes add new sales tax exemptions, eliminate some and amend others. Sales tax is a moving target. Not only do you have to keep an eye on new legislation, but taxpayers are constantly requesting guidance or rulings from the State Revenue Agencies. Court cases are another source of change. Sometimes, the underlying law itself doesn’t change, but the interpretation of it may. These changes in interpretation are more difficult to keep up with because they seldom receive any publicity, and some are even private rulings. We’ve fought hard to win private rulings from a number of states because of the very fact that they are not public information.

Processes change

Are you making a new product, offering a new service or assisting clients in a new state or industry? If so, your sales tax processes must reflect those changes. Maybe the process change isn’t related to a shift in your company’s operations but is due to streamlining or is technology related. Have you gone from a manual, paper-based purchase order system to a software-based one? Are we sure that new electronic purchase order has all the right fields and information on it to help with sales tax compliance? Even if it does, it’s possible that the people using it may not understand all the implications and importance of the information they place on that form.

People change

People can affect sales tax in a number of ways. When we work with clients who have multiple locations, there are always some locations that are better at taking advantage of the sales tax exemptions for which they qualify and other locations that are not. Inevitably, that difference comes down to the people making decisions at those different locations. When people change roles, through no fault of their own, there is always a learning curve. Staffing and roles are frequently changed and seldom is sales tax part of the new job training. People are often left to fend for themselves regarding sales tax. Some never get there with sales tax because they view it as an afterthought. If your company has experienced new hires or promoted people from within to roles that impact sales taxes, then a sales tax recovery review is an ideal way to understand their strengths and weaknesses in taking advantage of sales tax exemptions. Our sales tax recovery reviews provide granular detail about which items sales taxes are being overpaid on. We also provide custom-developed taxability matrices, with citations included, for all major categories of purchases that we find in our reviews. These are excellent training and reference materials for ongoing sales tax compliance.

Software gets updated

If you’ve experienced a change in your company’s software systems, you know what a process that can be. Often it takes months and involves cross-departmental teams with members concerned about how the changes will impact their department’s operations. How much attention does sales tax get? Even if it is a high priority item and is given much consideration, the real world often presents situations not covered during implementation or testing. We recommend conducting a sales tax recovery review after the new program, or updated existing software, is up and running. You’d rather discover a problem in the first 90 days than in a state sales and use tax audit 3-4 years down the road that could result in a large assessment.

Vendors or suppliers go through of these changes above as well

OK, so maybe none of these things have changed at your company. Are you sure you major vendors or suppliers haven’t made any of these changes? Something we see frequently is a longtime vendor or supplier of one of our clients begin charging sales tax on an account that has been set up to be non-taxable for years. Confusing, right? When we call to re-provide the exemption certificate(s) we learn that a new account rep has been assigned to the account or they have updated the ERP system and all accounts have been defaulted back to taxable status. It happens more often than one would think.

How often should a sales tax recovery review take place?

We recommend engaging a sales tax consulting firm to review your purchases every 2-3 years. Statutes of limitations vary from state-to-state, but many states have clustered around the 36-month statute of limitations for sales and use tax recoveries. We believe that you should never leave any of these periods unreviewed. Remember, it will take any sales tax consultant you select some time to conduct the analysis and prepare their findings. We strive to turn around all of our reviews in 60-90 days from the date we begin reviewing the invoices, depending on the size of our clients’ operation and the volume of records to review.

The timing has never been better to conduct a sales tax recovery review. Overpaid sales taxes are sitting there waiting for you to recover them in the states in which you operate. If you don’t request a refund of those taxes from your State Revenue Agency within the open statute of limitations, the state gets to keep your tax dollars whether or not they were paid appropriately. Don’t let the state keep tax dollars that will have a positive effect on your company’s cash flow.

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Do I Need to Charge eCommerce Sales Tax for My Online Business?

Wed, 27 May 2020 18:48:00 GMT

Whether your online business is a brand-new start-up or an established enterprise expanding into eCommerce, managing sales tax correctly has become an increasingly complex responsibility. The landscape of eCommerce sales tax compliance has shifted significantly, particularly following the 2018 U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc. This guide provides an overview of the latest sales tax requirements for online retailers and answers frequently asked questions about eCommerce sales tax.

Do I have to charge sales tax for online sales?

The answer depends on two primary factors:

Factor #1: Have I established sales tax nexus within a state?

How to determine whether you have established sales tax nexus within a state:

Between 1992 and 2018, the nationwide standard for whether a business had established sales tax nexus hinged on whether the business had a “physical presence” within a state. Things were relatively simple then. On June 21, 2018 in its South Dakota v. Wayfair, Inc. ruling , the U.S. Supreme Court overturned the 1992 Quill case that established that “physical presence” principle. We’ve written extensively on the Wayfair case (if you’d like to read more click here ) because of the seismic shift in caused in the world of sales tax, but to summarize briefly here, the Wayfair case changed the sales tax nexus standard from “physical presence” to “economic presence.” Now, a business that has either a physical presence or a sufficient economic presence within a state has established sales tax nexus, and all the collection and reporting obligations that go along with that, within that state’s borders.

What amount of eCommerce sales establishes “economic nexus” within a state?

Like everything in sales tax, the answer is “it depends.” The rules of “economic nexus” vary by state, although most have clustered around the thresholds first established by South Dakota (and essentially OK’ ed by the U.S. Supreme Court in its June 2018 decision) of $100,000+ in sales or 200+ separate transactions per year. Of course, there are outliers. The way I think about it is that the most populated states, and those with the largest tax revenue bases, have established higher thresholds than their less populated (and more revenue-starved)counterparts. For example, the “economic nexus” threshold in California is $500,000+; in New York it is $500,000+ and100+ transactions; and in Texas it is $500,000+. The complexities are too detailed to summarize neatly within this article, but we provide a table in our sales tax nexus studies for eCommerce retailers that summarizes all of this information by state as well as providing the date each state enacted its economic nexus policy. If you have concerns, please reach out to us for additional information and a free consultation .

Factor #2: Are the products I’m selling subject to sales tax within a state?

How to determine what products are taxable:

Even in states where you have established nexus, you will find that some products are subject to sales tax while others are not. You would not need to collect any eCommerce sales tax on the sale of non-taxable items. The rules of what is and is not taxable varies from state-to-state because each state’s Legislature and Department of Revenue establish the rules about product taxability within their state. What is subject to sales tax and what isn’t seldom makes sense and often depends on special interests, lobbyists and other non-logical bases.

For example, here are some popular categories of items frequently sold by online retailers and their corresponding taxability in 5 states:

eCommerce Sales Tax Product Taxability Chart

OK, so maybe the last item in this list is not an example of a popular, frequently sold online product, but nonetheless it is a great illustration of the seemingly random taxability decisions made by states.

Recap & Summary of eCommerce sales tax overview:

Compliance with eCommerce sales tax requirements is more complex under the “economic nexus” standard implemented by the U.S. Supreme Court in its 2018 Wayfair decision. States have implemented different thresholds for what constitutes “economic nexus” and a number of those thresholds have changed, sometimes on multiple occasions, since 2018. To determine if your online store should be collecting sales tax on its sales, you must first determine if your business has established “economic nexus” within a state. If so, then you must determine whether the goods and items your online store is selling are subject to eCommerce sales tax in that state. There are wide variations in the taxability of items from state-to-state, so one cannot assume that a product that is exempt from sales tax in State #1 is also exempt from sales tax in State #2, etc.

Attorneys, or CPA’s may be able to assist you in researching these issues and providing guidance, however, sales tax is often not the main focus of an attorney or CPA’s practice. Sales tax consulting firms, like Agile Consulting Group, have already answered these questions for other clients and have firsthand experience helping other online retailers become and remain compliant with the frequently changing sales tax laws in this niche subject/area. Discussing your business’ operations and concerns with a sales tax consultant is a prudent step many online retailers are taking to ensure they do not run afoul of any states’ eCommerce sales tax reporting requirements.

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Virginia Sales Tax Exemption for Software

Wed, 27 May 2020 18:47:00 GMT

The Virginia sales tax exemption for software allows businesses that utilize software at their Virginia-based locations to claim an exemption on software purchases that meet certain criteria. With their team of knowledgeable and detail-oriented consultants, the Agile Consulting Group is uniquely qualified to help your business leverage this sales tax exemption to improve your cash flow.

In general, per Virginia Code Ann. 58.1-603 , tangible personal property that is sold at retail or distributed in Virginia is subject to sales tax on the gross sales price. Prewritten computer software, which is defined in Virginia Code Ann. 58.1-602 as, “a computer program that is prepared, held or existing for general or repeated sale or lease, including a computer program developed for in-house use and subsequently sold or leased to unrelated third parties” is considered tangible personal property in Virginia and is subject to sales tax when it is delivered through a physical medium. However, there are several types of software purchases that are not considered tangible personal property and thus, are not subject to sales tax.

Custom Software

Virginia Code Ann. 58.1-609.5(7) provides a specific Virginia sales tax exemption for software purchases that are considered to be “ custom programs ”. Per Virginia Code Ann. 58.1-602 , a custom program is defined as “a computer program that is specifically designed and developed only for one customer.” This definition does not include prewritten programs that are modified to any degree or the combination of two or more prewritten programs. Based on the way Virginia defines “ custom programs” , this exemption is somewhat limited because it only applies to software programs that are designed, developed, and intended for use with a specific customer. Even if a software program undergoes substantial modifications or changes to satisfy the specific needs of a customer, the Virginia Department of Revenue has consistently issued rulings determining that those modifications are not sufficient to meet the definition of “ custom program ” in Virginia Code Ann. 58.1-602 . However, separately stated amounts charged for labor or services rendered in connection with the modification of a prewritten software program are exempt from sales tax per Virginia Code Ann. 58.1-609.5(6) .

Electronically Delivered Software

The Virginia sales tax exemption for software also applies to sales of software that are delivered electronically to customers, regardless of whether the software program is prewritten or custom. The Virginia Department of Revenue has maintained a long-standing policy, which is referenced in Virginia Public Document Ruling No. 05-44 , that sales of software delivered electronically do not constitute the sale of tangible personal property and are not subject to sales tax. This exemption also applies to any software updates that are subsequently provided to the customer, as long as those updates are delivered electronically . If there is any tangible personal property included with the sale of software delivered electronically , like hardware or a backup copy of the software, then the entire transaction is considered to constitute a sale of tangible personal property and is subject to sales tax. Since the inclusion of tangible personal property with software delivered electronically changes the taxability of the transaction, the purchaser must retain clear documentation that establishes the software was delivered electronically and that there was no exchange of tangible personal property connected with the sale.

How to Claim the Virginia Sales Tax Exemption for Software

Since the Virginia Department of Revenue does not provide a specific exemption certificate for custom software programs or electronically delivered software on their website, any Virginia business making a qualifying exempt software purchase can submit a letter to their vendors that include the following information based on the guidelines provided in Virginia Code Ann. 58.1-623 :

How to Recover Virginia Sales Taxes Already Paid

Any Virginia business that purchased software which meets the exemption criteria listed above are entitled to refunds for purchases that were made within three years from the due date of their vendor’s sales and use tax return. In order to receive a refund for overpaid sales tax on exempt software, Virginia purchasers will have to request a refund directly from the vendor who sold the software because the only entity that can request a refund from the Virginia Department of Revenue is the one who remitted the taxes on their sales and use tax returns. To accomplish this, the vendor will need to amend their Virginia sales and use tax returns and issue the purchaser a refund. The consultants at Agile Consulting Group have experience in recovering overpaid sales taxes directly from vendors and can assist any Virginia business with this cumbersome process.

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Mississippi Sales Tax Exemption for Manufacturing

Wed, 12 Feb 2020 20:47:00 GMT

The Mississippi sales tax exemption for manufacturing enables manufacturers and custom processors to take advantage of a lower tax rate on eligible machinery and equipment as well as a full sales tax exemption on items incorporated into the final manufactured product. The skilled sales tax consultants at Agile Consulting are excited to help Mississippi manufacturers understand and take advantage of these generous exemptions.

The state of Mississippi defines manufacturing as “activities of an industrial or commercial nature wherein labor or skill is applied, by hand or machinery, to materials belonging to the manufacturer so that a new, different, or more useful article of tangible personal property or substance of trade or commerce or electric power is produced for sale or rental and includes the production or fabrication of special-made or custom-made articles for sale or rental” [Miss. Code Ann. §27-65-11(b)] . Manufacturing also includes recycling that does convert material into more useful product for sale.

Manufacturing does not include:

Mississippi defines custom processing as “the performance of a manufacturing service done or made to order upon the property of the customer and shall include laundering, cleaning and pressing, but shall not include “repairs” or “maintenance” as these terms are defined herein; nor self-service commercial laundering, drying, cleaning and pressing equipment” [Miss. Code Ann. §27-65-11(e)] .

Mississippi manufactures can make qualifying purchases at a sales tax rate of 1.5% as opposed to the standard sales tax rate of 7% [Miss. Code Ann. §27-65-17(e,f)] .

The Mississippi Sales Tax Exemption for Manufacturing Includes the Following Types of Purchases:

The Mississippi Department of Revenue has provided taxpayers with examples of purchases that do and do not qualify for the Mississippi sales tax exemption for manufacturing.

Examples of Qualifying Purchases for Manufacturer at 1.5% Sales Tax Rate:

Examples of Non-Qualifying Purchases for Manufacturer 1.5% Sales Tax Rate:

The Mississippi sales tax exemption for manufacturing also includes some items that manufacturers can purchase completely tax exempt:

Examples of Qualifying Purchases Exempt from Sales Tax

How to Claim the Mississippi Sales Tax Exemption for Manufacturing

In order to take advantage of the Mississippi sales tax exemption for manufacturing, qualifying manufacturers must fill out, sign, and send to the state Mississippi Sales Tax Form 72-15-18 “Direct Pay Permit Application” which can be found at the Mississippi Department of Revenue website. Once the state approves the Direct Pay Permit, manufacturers can then purchase machinery and equipment from their vendors completely tax free. However, it is then the manufacturer’s responsibility to self-assess and remit the 1.5% tax on qualifying purchases on their use tax return to the state.

How to Recover Mississippi Sales Taxes

Mississippi manufacturers are also entitled to refunds for purchases that were made at the incorrect tax rate back to 3 years (36 months) from when the tax was paid. In order to receive a refund for overcharged sales tax, Mississippi manufacturers will have to request a refund directly from their vendors because only the entity that remitted the sales tax to the state is able to recover the sales tax from the state. The vendor can then amend their sales tax returns and issue their customer a refund check. Please feel free to contact Agile’s sales tax consultants for help and experience with this process.

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Georgia Sales Tax Exemptions for Software

Tue, 04 Feb 2020 21:56:00 GMT

Since most businesses utilize software in their operations, it is important for tax and accounting professionals to recognize how Georgia sales tax exemptions for software impact their business. GA Comp. R. & Regs. 560-12-2-.111(3)(b) provides a sales tax exemption on the sale, lease, rental, license or use of custom computer software. Custom computer software is defined as, “computer software, including custom updates, which is designed and developed by the author to the specifications of a specific purchaser” per GA Comp. R. & Regs. 560-12-2-.111(2)(e). This Georgia sales tax exemption for custom computer software will apply regardless of how the purchase obtains the software. A purchaser can receive the custom computer software through a tangible medium and it will not affect the taxability of the software since the tangible medium is considered incidental to the sale.

The real essence of the transaction with custom computer software is the professional service provided by the seller in the creation and development of the custom software program. If a software program that is developed to the specifications of a specific purchaser is then distributed for widespread use to different purchasers, the software ceases to be considered custom and would become subject to sales tax as prewritten computer software. However, the original purchaser can obtain multiple copies or license agreements of the custom software that was developed to their specifications and this would meet the criteria for the sales tax exemption.

Georgia Sales Tax Exemptions for Software: The Exception to the Exemption

While the Georgia sales tax exemption for software applies to customized programs designed and developed for specific purchasers, it does not always apply to modified prewritten computer software. GAComp. R. & Regs. 560-12-2-.111(3)(c) states that, “pre-written computer software or a prewritten portion thereof that is modified or enhanced to any degree, where such modification or enhancement is designed and developed to the specifications of a specific purchaser, remains prewritten computer software.”

This means that any modifications to “canned” software, which is defined as software which is “designed, prepared or held for general distribution or repeated use” per GA Comp. R. & Regs. 560-12-2-.111(2)(i), is not enough to change the composition of the software from “prewritten” to “custom” for Georgia sales tax purposes. The sales tax on modified prewritten computer software is only applicable when the software is sold for one lump-sum price.This means that a separately stated charge on the seller’s invoice for modifications or enhancements to prewritten computer software will qualify for Georgia sales tax exemptions since this is a nontaxable professional service.

Assessing The Method of Delivery

As briefly mentioned in the discussion on custom computer software, the method of delivery can also determine whether a software purchase meets the criteria necessary to qualify for the Georgia sales tax exemption for software. GA Comp. R. & Regs. 560-12-2-.111(4)(a)states that, “computer software delivered electronically is not a sale of tangible personal property and therefore is not subject to sales or use tax.”

The seller’s invoice, purchase contract or other documentation must clearly indicate how the software was delivered to the purchaser, otherwise the salewill be presumed to have been made through a tangible medium. In other words,the burden of proof remains with the purchaser to establish that the software was delivered electronically. When a purchase of software delivered electronically also includes software delivered through a tangible medium, the entire transaction is considered taxable unless the software qualifies as custom.

Examining Software Installation and Maintenance Agreements

Finally, any discussion on the Georgia sales tax exemptions for software must also include software installation and maintenance agreements. The installation charges of any computer software, whether it is prewritten or custom, are exempt from sales and use tax if they are separately stated on the seller’s invoice per GA Comp. R. &Regs. 560-12-2-.111(5)(a). The sales tax treatment of software maintenance agreements for prewritten software is a little more complicated and depend on whether the charges are bundled vs. separately stated from the sale of the software and depend on what is included in the maintenance agreement.

Software maintenance agreements for prewritten software that are bundled with the sale of the software are subject to sales tax if they are provided in a tangible medium per GA Comp. R. &Regs. 560-12-2-.111(5)(b). Software maintenance agreements that are separately stated from the sale of prewritten software and include updates,upgrades, or enhancements delivered via tangible medium and include support services are deemed to be taxable at 50% of the software maintenance agreement’s total stated sales price per GA Comp. R. & Regs. 560-12-2-.111(5)(c).

An alternate percentage may be allowed if the seller can establish the actual cost of estimated sales price of the software update, upgrade, or enhancement. Separately stated software maintenance agreements that only include updates, upgrades or enhancements delivered via tangible medium and don’t include any support services are subject to sales and use tax on the total sales price per GA Comp. R. & Regs. 560-12-2-.111(5)(d).Separately stated charges for software maintenance agreements that only include support services are exempt from sales and use tax per GA Comp. R. & Regs. 560-12-2-.111(5)(e).The tax treatment for each of the scenarios referenced above only apply to pre-written computer software; all maintenance agreements for custom software are exempt.

Claiming Georgia Sales Tax Exemptions for Software

To claim the Georgia sales tax exemption for software, qualifying manufacturers need to complete Georgia Form ST-5 SST , which is a Georgia Streamlined Sales and Use Tax Certificate of Exemption, and provide a copy of this certificate to their vendors. For purchasers who have already paid sales taxes to their vendors on qualifying exempt software, they can complete and submit Georgia Form ST-12 , which is a Claim for Refund, to recover the sales taxes which have already been paid from the Georgia Department of Revenue. The ST-12 must be filed within three years after the date of payment of the tax to the Georgia Department of Revenue, otherwise the statute of limitations will have lapsed, and any taxes paid in error will not be eligible for a refund.

Additionally, the ST-12 requires purchasers to get a signed Georgia Form ST-12A Waiver of Vendor’s Rights for each seller that they are including in the refund claim. This ST-12A form is used to verify that the seller collected and remitted sales taxes on the purchases included in the refund claim and that the seller will not or has not already issued a credit or refund to the purchaser. If the seller is out of business, cannot be contacted, or declines to sign the ST-12A form, the purchaser can complete the Georgia Form ST-12B Purchaser’s Claim for Sales Tax Refund Affidavit in lieu of providing the ST-12A.

The ST-12B can only be completed if the purchaser has attempted to contact the seller for completion of the ST-12A. Both the ST-12A form and ST-12B form must be notarized to be accepted as valid by the Georgia Department of Revenue. The ST-12, ST-12A and ST-12B forms are all located on the Georgia Department of Revenue website. The experienced consultants at the Agile Consulting Group can provide expert guidance and assistance with the completion of all forms related to the exemption and refund claims.

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Sacramento Sales Tax Increase on 2020 Ballot?

Tue, 28 Jan 2020 19:14:00 GMT

Sacramento Sales Tax Increase 2020

A Sacramento sales tax increase may be on the November 2020 ballot for local residents. The draft proposal, referred to as Measure A, intends to raise $8 billion over the next 40 years to bring improvements to issues like transportation, climate change, and even homelessness. For voters, these developments come at a cost. In order to raise the necessary funds to cover everything within the proposal, city and county leaders propose increasing the local sales tax a half a cent . If approved, the new tax would increase the total Sacramento sales tax to a total of 9 cents per dollar.

However, the likelihood of this proposal even being placed on the November 2020 ballot is beginning to look very slim. Measure A is simply a revamp of Measure B, which was placed on the November 2016 ballot and received 65% of the vote, just 2% under the required 67% to pass by state law. Additionally, the new tax would be 3 ^rd active transportation related tax within the last two decades. Back in 2004, voters approved a 30-year Sacramento sales tax that increased sales tax by a half-cent. In 2018, California officials increased the state’s gas tax from 41.7 cents to 47.3 cents.

California sales tax issues will appear on a number of local ballots in the fall. Local advocates contend that another Sacramento sales tax hike is more than adequate coverage for the intended transportation projects. It is believed that the measure stands the greatest chance of receiving the required 67% by allocating the funds to what voters actually deem necessary for daily travel. Sacramento councilman Steve Cohn says he thinks the money would be better spent on car travel alternatives like light rail tracks and a downtown station. A recent poll showed that residents are more likely to support repairs and repaving of the streets. The Sacramento Transportation Authority will vote on a final project list which will then be presented to city councils for approval to be placed on the November 2020 ballot.

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Utah Sales Tax Reform Update

Mon, 20 Jan 2020 18:06:00 GMT

As 2020 beings, Utah residents are still trying to understand the impact of the Utah sales tax reform Bill. This Bill was approved by the Legislature on December 12, 2019 and was signed by Governor Gary Herbert on December 19, 2019, just days before the calendar turned to a new decade. This Bill, in essence, provides a net tax cut to Utah residents, but it is not quite that simple.

Utah Sales Tax Reform: An Overview and Update

The Bill cuts Utah income taxes by approximately $630M , by reducing the rate from 4.95% to 4.66%. The Bill also increases Utah sales tax by approximately $470M by both expanding the tax base to include new categories of taxable sales as well as repealing some existing sales tax exemptions. For example, the Utah sales tax reform now taxes unprepared food or groceries and additional services such as ride-sharing (think Uber & Lyft), pet boarding & daycare, cleaning services, parking and towing. It also has eliminated the sales tax exemption on locomotive fuel, ski-life electricity and other items and has enacted new excise taxes on fuel, which will work similarly to sales taxes.

The New Effort

The new effort at Utah sales tax reform comes after months of town hall meetings, and a failed prior effort at tax reform in May 2019. The December 2019 Bill has not been a universal crowd-pleaser as much criticism has been raised by both Utah residents and legislators. Some feel that the reform hurts low-income Utah residents and yet others feel that the Utah sales tax reform did not go far enough in taxing services that comprise more of the modern-day economy.

Addressing the Concerns

Governor Herbert said he understands the concerns of the opponents of the Bill and plans to publish a list of answers to frequently asked questions regarding the changes to Utah’s tax laws. It is possible that the new Utah tax reform Bill could be repealed. In fact, most of Utah’s gubernatorial candidates are on record supporting these repeal efforts. Additionally, Utah Republican leaders have already made it clear that the 2020 General Legislative Session will include additional changes to how the funds generated from these changes are earmarked. A movement is also afoot to have a referendum on the tax reform added to the November 2020 ballot. In order to do so, 115,000 signatures supporting the referendum need to be secured statewide by the Jan. 21st deadline.

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Illinois Vehicle Sales Tax: Deduction Cap on Vehicle Trade-Ins

Mon, 13 Jan 2020 20:03:00 GMT

When the final results are in, car dealerships in Illinois likely noticed a spike in revenue during December 2019 by customers looking to avoid increased Illinois sales tax. This increase is a result of a new Illinois sales tax law that is set to go into effect January 1, 2020. The tax law that was signed by Gov. J.B. Pritzker on June 28 ^th caps the sales tax deduction on the trade-in value of vehicles. Previously, Illinois had no cap on the sales tax deduction allowable on vehicles that are traded in as a part of the purchase of a new vehicle. State officials estimate that the change in Illinois tax law will generate roughly $60 million in additional revenue on an annual basis. Proceeds will go to funding roads and vertical infrastructure projects under the Rebuild Illinois Capital Plan.

Here a comparison that illustrates the difference between trading in a vehicle prior to and after January 1, 2020. Let’s say the vehicle you plan to trade-in has a value of $15,000 and the sticker price on the new vehicle you are purchasing is $35,000. Quick math tell you that you would owe the dealership the difference of $20,000. Under the old Illinois sales tax law, you would pay sales tax on the difference between the trade-in and new vehicle price – in this example $20,000. Beginning January 1, 2020 a maximum of $10,000 of the trade-in value of the old vehicle is exempt from Illinois sales tax. Therefore, sales tax is owed on $25,000 instead. With the average Illinois sales tax rate being approximately 8.75%, this change could mean thousands of dollars in additional sales taxes being owed on the purchase of a new vehicle.

Thinking of finding loopholes to get around paying the increased sales tax? Think again. Officials have evaluated nearly every possible avenue of avoiding this particular tax. For example, even if you were to go outside the state, to trade in your vehicle, the new sales tax rules would still apply when you register the vehicle. With this being the 20 ^th newly imposed tax in three weeks time span within the state of Illinois, residents could soon begin to search for gaps within the various tax provisions. For the state, it could backfire in a reduction in overall consumer spending.

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Illinois Marijuana Sales Tax Rate Decrease in Carpentersville

Fri, 03 Jan 2020 19:25:00 GMT

When the Illinois Cannabis Regulation and Tax Act was passed in June 2019 to legalize recreational marijuana use, it gave way for municipalities to establish a sales tax rate on Illinois Marijuana of up to 3%. Many cities within Illinois have opted to optimize this provision and to set their respective marijuana sales tax at 3%. However, there is one city that is hoping to gain a competitive advantage by applying a 2% marijuana sales tax, 1% lower than surrounding cities.

The City of Carpentersville is a small suburb in north Illinois with a population of roughly 37,000. After Jan. 1, 2020 officials plan to begin to issuing licenses for businesses to operate dispensaries within city limits. The aim is to attract companies, despite the low population, by applying the lower than normal Illinois marijuana sales tax. Not only does this mean a lesser charge on sales tax for companies that would operate in Carpentersville, but consumers would see a slight financial benefit as well.

In recent years, the legalization of marijuana has become a hot topic across the nation. Citizens of Carpentersville are wondering what type of crime related activities this new industry will bring to the town, but city officials seem to have a plan in place. In terms of enforcement, city manager, Eric Johnson was has said that “the tax revenue can also help fund the drug recognition training police officers are going to need and the purchase of emerging technology to better detect THC levels.” The question then to be answered is if the lower tax rate on Illinois Marijuana will generate enough revenue to offset these enforcement costs. Only time will tell during the upcoming new fiscal year, but luckily for Carpentersville, as a part of the Act, the freedom to increase the marijuana sales tax is at the city’s discretion, provided it does not exceed the 3% cap. This means that if Carpentersville does see a financial deficit with the 2% rate implemented Jan. 1, 2020, then the city can increase that rate up to 3% at any time.

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Sales Tax by State Information

Mon, 25 Nov 2019 20:40:00 GMT

Looking for information about sales tax by state? Our team of sales tax consultants have compiled simplified, user-friendly sales and use tax information and arranged that and more on our individual states’ webpages. Our sales tax by state pages are a helpful resource that provide a shortcut to answering your most pressing sales and use tax questions.

Here are some of the questions to which you will find answers on our sales tax by state webpages.

If you cannot find the answer to your sales tax questions on our sales tax by state pages, feel free to send a web inquiry or place a quick call to our sales tax consultants and we will help. We’ll even strive to get back to you with an answer on the same day you contact us.

Our sales tax by state pages were designed to be your single reference point, comprehensive guide to all things sales tax in that particular state. Our team of sales tax consultants are adding content to these pages on a monthly basis, so if you don’t see what you would like on those pages today, send us a suggestion and check back regularly.

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Wisconsin Sales Tax Exemption for Manufacturing

Wed, 20 Nov 2019 22:28:00 GMT

As part of an effort to create a more business-friendly corporate tax environment, the Wisconsin sales tax exemption for manufacturing allows qualifying manufacturers to claim an exemption on a wide variety of operating purchases. Wis. Stat. 77.54(6)(am)(1) provides a sales tax exemption for “machines and specific processing equipment and repair parts or replacements thereof, exclusively and directly used by a manufacturer in manufacturing tangible personal property . . . and safety attachments for those machines and equipment.” Per Wis. Stat. 77.51(7h)(a) , a manufacturer is defined as someone who produces by machinery, “a new article of tangible personal property . . . with a different form, use, and name from existing materials, by a process popularly regarded as manufacturing.” The manufacturing process is considered to begin with, “conveying raw materials and supplies from plant inventory to the place where work is performed in the same plant” and is considered to end, “with conveying finished units of tangible personal property . . . to the point of first storage in the same plant.” For the purposes of this exemption, manufacturing does not include the storage of raw materials, or processing activities that does not use machinery to produce a new article of tangible personal property with a different form or use from raw materials.

Since the Wisconsin sales tax exemption for manufacturing is only applicable for machinery and equipment exclusively and directly used in manufacturing, it is also important to understand how these terms are defined. Per Wis. Admin. Code Tax 11.40(1)(a) , machines and equipment are considered to be “used exclusively” when, “the machines and specific processing equipment and repair or replacement parts are used solely by a manufacturer in manufacturing tangible personal property or items or property, to the exclusion of all other uses, except that the sales and use tax exemption is not invalidated by an infrequent and sporadic use other than in manufacturing tangible personal property or items or property.” Essentially, this means that the primary use for the machinery and equipment must be in the manufacturing operation. For example, a forklift that is used to move work-in-process and used regularly or frequently in a warehouse to move and stock finished products is not considered to be used exclusively in manufacturing since it is regularly used in activities that are not part of the manufacturing process.

As defined in Wis. Admin. Code Tax 11.40(2)(c) , machines and equipment are used directly in manufacturing when they are involved in the “step-by-step processes by which an end product results, even though the machine and equipment are indirectly related to the step-by-step processes.” For example, machines and equipment that are incidental to the manufacturing operation, such as floor sweepers, plant HVAC, lighting equipment, and fire protection equipment is generally not considered to qualify for the Wisconsin sales tax exemption for manufacturing since they are not included in the step-by-step process to convert tangible personal property into a new article.

Additional Exempt Purchases

In addition to machines and equipment, some other examples of purchases that qualify for the Wisconsin sales tax exemption for manufacturing include the following:

Repair parts such as conveyor belts, grinding wheels, machine drills, auger bits, milling cutters, jigs, saw blades, machine tool holders, reamers, dies, and molds
Small tools such as drills, saws, micrometers and hammers. These are not exempt if used for machine repair and general maintenance
Items consumed or destroyed during manufacturing, such as acids, bleaching agents, chemicals, cutting oil, lubricants, fluxing material, grinding compounds, shielding gases, and purification agents
Worker apparel such as gloves, hair nets, beard nets, or facemasks that are used by employees on the production line to prevent product contamination
Fuel and electricity used to operate exempt production machinery and equipment, which includes oxygen, coal, gasoline, fuel oil, natural gas, and liquid propane gas. In situations where fuel or an electricity serves dual uses (i.e. an electric meter is used to operate machinery and provide electricity for the administrative offices), the manufacturer must compute an estimate of the percentage of fuel and electricity used by the exempt machinery on a meter-by-meter basis.

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Complete Wisconsin Form S-211 to Claim the Exemption

To claim the Wisconsin sales tax exemption for manufacturing, qualifying manufacturers need to complete Wisconsin Form S-211 , which is a Wisconsin Sales and Use Tax Exemption Certificate, and provide a copy of this certificate to their vendors. Wisconsin has made it easy for qualifying manufacturers to complete the S-211 exemption certificate by providing an electronic certificate option ( Wisconsin Form S-211E ). To complete this electronic certificate, the manufacturer needs to fill in the required information for the purchaser and seller, sign an acknowledgement, and then select the “Manufacturing – Fuel and Electricity” and/or “Manufacturing – Machinery and Equipment” boxes under the exemption section. If claiming the manufacturing fuel and electricity exemption, the exempt % of use must also be included. The S-211E form will then automatically populate for distribution to the purchaser’s vendors.

Submit Wisconsin Form BCR or S-220 to Request Sales Tax Refund

For manufacturers who have already paid sales taxes to their vendors, they can complete and submit Wisconsin Form BCR or S-220 , which is a Buyer’s Claim for Refund of Wisconsin State, County and Stadium Sales Taxes, to recover sales taxes on qualifying tangible personal property exclusively and directly in a manufacturing operation. The BCR must be filed within four years from the unextended due date of the buyer’s Wisconsin income or franchise tax returns, otherwise the statute of limitations will have lapsed, and any taxes paid in error will not be eligible for a refund. For example, a purchaser could file a refund claim for overpaid taxes from January 1, 2016 through December 31, 2019 if the claim is filed by April 15, 2020.

Additionally, the BCR requires purchasers to get a signed Wisconsin Schedule P for each seller that they are including in the refund claim. This Schedule P form is used to verify that the seller collected and remitted sales taxes on the purchases included in the refund claim and that the seller will not or has not already issued a credit or refund to the purchaser. The S-211, S-211E and BCR forms are all located on the Wisconsin Department of Revenue website. The experienced sales tax consulting team at the Agile Consulting Group can provide expert guidance and assistance with the completion of all forms related to the Wisconsin sales tax exemption for manufacturing and any associated refund claims.

Reach Out to Us with Questions

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consulting team can be found on our page summarizing Wisconsin sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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Tennessee Sales Tax Exemption for Manufacturing

Wed, 20 Nov 2019 22:26:00 GMT

The Tennessee sales tax exemption for manufacturing is available on industrial machinery purchased by a qualified Tennessee manufacturer that is necessary to the manufacturing process. Tennessee defines industrial machinery as “equipment used mainly to fabricate or process tangible personal property to be resold and consumed off the premises” per Tenn. Code Ann. §67-6-102(44) . The experienced sales tax consultants at Agile Consulting are available to assist Tennessee manufacturers take advantage of the Tennessee sales tax exemption for manufacturing and industrial machinery. See below for examples of items Tennessee manufacturers should be purchasing exempt from sales tax:

Exempt Industrial Machinery Per Tennessee Sales Tax Exemption for Manufacturing:

The Tennessee sales tax exemption for manufacturing also provides a reduced state sales tax rate to Tennessee manufacturers on purchases of energy fuel and water. All energy fuel and water purchased by Tennessee manufactures, regardless of use, is subject to a reduced state sales tax rate of 1.5% and 1%, respectively. All energy fuel and water purchased by Tennessee manufacturers that comes in direct contact with the product during the manufacturing process and is separately metered is completely exempt from sales tax.

There are two separate sales tax exemption certificates Tennessee manufactures can send to their vendors in order to purchase industrial machinery tax exempt per the Tennessee sales tax exemption for manufacturing. The first one comes directly from the state. To receive this exemption certificate Tennessee manufacturers must complete Tennessee Form RV-F1303101 “Application for Industrial Machinery, Energy Fuels and Water Sales and Use Tax Exemption” and send it to the Tennessee Department of Revenue. Once the state reviews and approves the application, the manufacturer will be given a sales tax exemption certificate that can be distributed to the manufacturer’s vendors.

The second option is for Tennessee manufacturers to bypass the state’s approval and fill out a Streamlined Sales Tax SSTGB Form F0003 “Streamlined Sales and Use Tax Agreement Certificate of Exemption.” That form can be sent directly to the manufacturer’s vendors to avoid sales taxes being charged on tax exempt items. Both Forms are viable options, however with the Streamlined certificate the purchaser assumes all liability if the certificate was presented inappropriately on non-qualifying items. The first option offers the purchaser the security of knowing the exemption has already been approved by the state of Tennessee.

Tennessee manufacturers can recover sales tax dollars erroneously paid on exempt items up to 3 years (36 months) after the sales tax was paid. In the state of Tennessee, only the entity that remitted the tax to the state can be refunded the tax dollars, therefore Tennessee manufacturers must request a sales tax refund directly from their vendors. The vendors then have two options. The first is to amend their sales and use tax returns and issue their customer a refund check. The second option is for the vendor to fill out, sign and send in form Tennessee Form RV-F1403301 “Claim for Credit or Refund of Sales or Use Tax” to the Tennessee Department of Revenue. Once the vendor’s claim for refund is approved by the state the vendor will issue the refund back to the customer. Please contact Agile’s experienced sales tax consultants to aid you in the recovery of sales tax refunds from the Tennessee sales tax exemption for manufacturing.

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Tennessee sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact any of Agile Consulting Group’s sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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Massachusetts Internet Sales Tax Compliance: Wayfair Tax Laws Explained

Wed, 20 Nov 2019 22:19:00 GMT

Since the 2018 Wayfair Supreme Court ruling, the State of Massachusetts sales tax receipts from online purchases have failed to meet earlier predictions. A November 2017 report by the US Government Accountability Office revealed that the state would generate $279 million in additional revenue. With actual Massachusetts sales tax receipts from online transactions totaling $60 million , leaders are scratching their heads about what has gone wrong.

Although many states anticipated higher sales tax revenues following the favorable outcome in the Wayfair ruling, Massachusetts was one state that did not take all aspects of the ruling into consideration. The main reason why Massachusetts sales tax receipts did not increase following the ruling is primarily due minimal impact on online retailers. Companies with national stature such as Amazon, are far more likely to generate more in sales tax revenue which is driven by their high volume of online sales. However, Amazon has been collecting Massachusetts state sales tax dating back to 2013. Jared Walczak, senior policy analyst at Tax Foundation stated that “…government officials didn’t have a good grasp of just how much they were already collecting in online sales taxes.”

So, does this mean that states such as Massachusetts are doomed? Not quite. The Wayfair ruling gives authorization for states to collect taxes from companies with over $100,000 in state sales or over 200 transactions. Prior to now, Massachusetts, under a separate tax provision had set the threshold to sales of $500,000 with 100+ transactions which excluded many online retailers. The Massachusetts Legislature has passed new laws that lower the revenue threshold to the court approved amount of $100,000 and also eliminates the transaction volume threshold. Additionally, the new rules also require online marketplaces to collect tax from third-party vendors who use their site to generate revenue. While you should not expect to see the hefty gains that the Wayfair ruling was expected to bring, there are brighter days ahead in the budget for expected Massachusetts sales tax receipts.

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Senate Bill 26: Tax Exemption Aims to Address Sexist Policy

Thu, 31 Oct 2019 14:24:00 GMT

Senate Bill 26 , which calls to exempt feminine hygiene products and some incontinence products from Ohio sales and use tax, passed the State of Ohio’s House in a unanimous vote on October 10. Pending the approval of the Senate in addition to Republican Gov. Mike DeWine, Ohio would become the 16 ^th state to exclude menstrual products from the list of items to which sales tax is applied . Consumers remain on edge though as a similar proposal [ House Bill 545 ] was rejected by the Senate last December. The tax on menstrual products, also known as the ‘Pink tax’ or tampon tax, which affects women, young girls, transsexual men, and non-binary people, was labeled as ‘institutional and systematic sexism’ by NBC News reporter Dasha Burns. This particular consumer group is compelled to purchase menstrual products and believe those products should not be taxed because they are necessary and not purchased or consumed for leisure. In return, a luxury tax is applied to these various types of products. A similar Ohio sales and use tax applies for male hygiene items that aren’t considered medically necessary.

Many wonder why menstrual products in the state are still not exempt from Ohio sales and use tax. With the capitalistic structure of most states, the potential loss in tax revenue is seen as more of a detriment than the offsetting financial burden of low-income individuals who are impacted the most. This debate is not unique to Ohio sales and use tax law . California Governor, Gavin Newsome, signed off on a menstrual product sales tax exemption earlier this year, but will only last for two years because “…the state might not be able to afford it past 2021.” Likewise, budget concerns arose as a result of Nevada’s newly implemented sales tax exemption for feminine hygiene products that went into effect January 1, 2019. Nevada estimates that it could lose between $4.96 million and $7.11 million in sales tax revenue per year from the new sales tax exemption for feminine hygiene products.

We are not yet certain when the next discussion or vote will take place on this bill, but with the previous [House Bill 545] being introduced and turned down the very next day that it passed the House, there is a chance that we may hear something from the Ohio Senate quite soon.

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Sales Tax Revenue Increases 9.51% because of Stellar Hall of Fame Class

Tue, 29 Oct 2019 14:58:00 GMT

MLB greats such as Ken Griffey Jr., John Smoltz, Bobby Cox, and Chipper Jones along with many others welcomed a new class of Baseball Hall of Fame Inductees to the City of Cooperstown, NY in July 2019. The 2019 Class included Mariano Rivera, Roy Halladay, Mike Mussina and Edgar Martinez.

We all knew they were gifted on the diamond, but apparently these legends have an additional talent set – generating increased sales tax revenue for Otsego County and the City of Cooperstown. The Otsego County Treasurer’s Office is reporting that sales tax revenue collected during the 2019 Hall of Fame Induction increased by 9.51% over 2018 levels . In 2018, Otsego County reported $3.4 million in sales tax revenue for the period ending the weekend of the induction. Until now, that amount had been the most generated since 2014.

The City of Cooperstown, New York is home to only about 1,850 individuals, and doesn’t receive much traffic on a day-to-day basis. However, Induction weekend, which is held in July, and the notoriety of the members of the 2019 class brought an influx of tourists willing to open their wallets to local businesses while coming to witness the ceremony. Cooperstown currently has an 8% sales tax rate. With tourists, media, and members of the Hall of Fame in attendance for the event, it’s no surprise as to why this is one of the city’s highest tax generating months.

As would be expected, the influx of people above the normal Induction weekend levels required the Otsego County and the City of Cooperstown to commit more resources to assure the safety of the crowds than it usually does Induction weekend. Having said that, the increase in sales tax revenue still resulted in a net positive for the county. Otsego County Board of Representatives Chairman David Bliss stated the sales tax increase was about $320,000, but the increased cost of public safety officers alone accounted for approximately $12,450.

Next year, officials estimate similar or even larger New York local sales tax revenue figures as one of the century’s most prolific players and beloved New York Yankee icon, Derek Jeter, is set to be inducted.

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Texas Sales Tax Collection Error Means Dallas Owes $5.2M

Thu, 17 Oct 2019 14:59:00 GMT

A Texas sales tax collection error, which was recently discovered in a sales tax audit, results in the City of Dallas owing $5.2 million to the state of Texas. The Texas Comptroller’s Office notified the City’s budget office in late-September 2019 that a retailer mistakenly reported all sales to the city rather than to the customer’s “ship to” address. This misallocation caused the state to make an overpayment of sales tax to the City of Dallas. Although at first glance the error seems like a large sum of money, the City of Dallas’ budget for 2020 includes receipts of $325 million in sales tax. In September 2019 alone, it is estimated that Dallas will receive $25.6 million in sales tax revenue.

Elizabeth Reich, Dallas’ Chief Financial Officer, plans to pay back the full balance to the state by deducting the amount from August 2019’s sales tax revenues. In a council memo, Reich suggested that the one-time payment would be more beneficial for Dallas as it would avoid additional interest expenses that would have accrued if the balance were paid back in installments. Many citizens have questioned how such a significant error occurred in the first place. Confounding people even more is the fact that the Texas sales tax collection error ran between the periods of July 2014 and July 2017. According to Kevin Lyons, a spokesman for the Texas Comptroller’s Office, in Texas sales tax compliance taxpayers reporting sales under the wrong address is a common mistake. Furthermore, the documents included with the filings are not detailed enough for the Texas Comptroller’s Office to determine an error was made without conducting a Texas sales tax audit of the taxpayer’s records. Whether these statements are accurate or not is debatable, but what we do know is that this is not the City of Dallas’ first omission pertaining to Texas sales tax collection in recent years.

Despite having routine audits, the City of Dallas has received other overpayments from the state. Dallas is currently under a Texas sales tax collection arrangement, paying monthly installments of $146,000 for a $3.7 million overpayment unrelated to this one. The City of Dallas is expected to have completed its payments for that obligation by October 2021.

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Arizona Online Sales Tax for Booking Agencies Upheld by Supreme Court

Fri, 13 Sep 2019 17:49:00 GMT

A new Arizona sales tax imposed by the Arizona Supreme Court calls for travel agencies to pay taxes to 11 cities. Those cities include Phoenix, Apache Junction, Chandler, Flagstaff, Glendale, Mesa, Nogales, Prescott, Scottsdale, Tempe and Tucson. The ruling comes after a 2013 effort in which the aforementioned cities requested that travel booking be assessed for taxes over an eight-year period ending April 2009. Although the fight to collect sales taxes during this time frame was sent back down to a lower court, it is believed that the cities are owed “millions of dollars.” With the Arizona sales tax rate at 5.6%, the hotel booking sites could be subject to pay a large portion back if the court rules in favor of the cities.

In efforts to collect on back taxes, the argument used in court was that a 2002 Scottsdale court ruling established online travel agencies acted as brokers and therefore generate income taxable subject to tax by the state. To support their claim, a 2007 letter from the City of Peoria to a key member in the online travel industry expressing the same material in the 2002 ruling was used as well. However the judge did not see that as substantial support to their assertion stating, “ one city’s ruling for one taxpayer doesn’t provide clear notice to all online travel companies on behalf of all the cities .”

The companies affected by this Arizona Supreme Court ruling include: Orbitz, Trip Network, Expedia, Priceline.com, Travelweb, Travelocity, Hotels.com, Hotwire and Internetwork Publishing. The Attorney representing the Arizona cities, John Crongeyer admits that the hotels booked through the online agencies have already paid their portion of Arizona sales tax, but the booking sites have failed to do so. Arizona’s Supreme Court was able to rule in favor of the cities due to a state law that categorizes booking agencies as brokers for hotels by offering services separate from providing lodging. Due to this position, the brokers as well are subject to Arizona sales tax.

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Agile as a Sales Tax CPA Partner

Mon, 26 Aug 2019 22:27:00 GMT

We have been partnering with CPA’s and in-house tax departments since 2005. Since that time, Agile Consulting Group has established its reputation as a sales tax CPA partner for forward-thinking, proactive CPA’s, in-house tax departments and CPA groups who want access to a cost-effective, experienced and knowledgeable sales and use tax specialist.

Sales tax is a specialized niche in the world of tax and accounting. Many do not have the expertise or first-hand knowledge to feel confident in this area. A sales tax consultant from Agile Consulting Group is always available to provide that sales tax assistance at a moment’s notice.

Are you a CPA or in-house tax department that doesn’t like dealing with these sales tax issues? Good news, they are our specialty:

Sales Tax CPA Services

Outsourced Sales Tax Compliance

Sales tax compliance is an ongoing challenge. Do you really enjoy it? Are you completing the filings correctly? Much has changed in the wake of the landmark Wayfair ruling in 2018. CPA’s and accountants are often expected to handle this function for their clients, but many are unsure or less confident about their sales tax knowledge than other areas of their practice. A sales tax CPA partner such as Agile Consulting Group can fill that gap. Consult with us about how best to advise your clients or allow us to interface with them directly. We can provide as much or as little support and assistance as you feel you need.

Sales Tax Audit Defense

If a company does not have an in-house tax team, their first call upon receiving a sales tax audit notification is often to their CPA. While CPA’s are expected to handle such audits, and many are quite capable of doing so, this is not the major focus of their practice. Partnering with a sales tax consultant can benefit both the CPA and the client by achieving better, faster results. Even for companies that have an in-house tax function, finding external assistance to help them through a sales tax audit enables the in-house team to focus on higher level initiatives and other areas of tax that best leverage their expertise.

Sales Tax Nexus Studies

Sales tax nexus has been a hot topic in the news as companies work to comply with the post-Wayfair nexus rules. Gone are the days when physical presence was the sole determinant for sales tax nexus. Now, both the dollars generated and the quantity of transactions within a state need to be analyzed. States continue to adapt and change their requirements as well. Regardless, a sales tax nexus study is often the first step in analyzing sales tax compliance requirements. A CPA or in-house tax department can benefit by partnering with a sales tax expert who can advise you of the most current and up-to-date guidelines relating to sales tax nexus.

Taxability Studies of Products and Services Offered

Sales and use tax laws change. Companies’ product and service offerings change. These are great occasions to initiate a taxability study. Allow a sales tax expert to guide you by analyzing law changes, and specific product and service offerings to ensure operations are collecting sales taxes appropriately. We will provide a custom-developed taxability matrix, or cheat sheet, complete with citations to support all taxable and non-taxable designations. A sales tax CPA partner, such as Agile Consulting Group, can help you and your clients get up-to-speed quickly.

Voluntary Disclosure Agreements (VDA’s) to Mitigate Prior Sales Tax Liabilities

You can find more in-depth writing about the ways a sales tax consultant can assist with VDA’s here . To summarize, VDA’s are the best way to disclose prior errors in sales tax compliance. Each state has unique and specific requirements to do so. Choose an experienced sales tax CPA partner upfront or you may find problems and stumbling blocks along the way.

Sales and Use Tax Research

Entering in to a new state or line of business? Have a specific question about a large dollar purchase? Have a sales tax consultant weigh in on the sales and use tax implications first. We will write up our analysis in a user-friendly format that cuts through the tax jargon, buzzwords and minutia so you can quickly and easily understand the sales tax implications.

Sales and Use Tax Reverse Audits or Recovery Reviews

When prompted, most in-house tax department and CPA’s initial thought about where a sales tax consultant can assist would likely be in a sales and use tax reverse audit, or what we here at Agile Consulting Group refer to as a recovery review. These reviews can be done at any time and are an excellent way to make sure you are maximizing the benefit of exemptions available, while at the same time gaining valuable feedback about the strengths and weaknesses of current sales and use tax systems and procedures. Recover refunds while gaining knowledge. It’s the ultimate win-win!

Sales Tax CPA Services at Agile Consulting Group

Remember, sales and use tax is driven by small details and nuances. We strive to identify those and share our expertise in a practical and accessible manner. Additional advice from an Agile Consulting Group sales tax consultant can be found on our pages summarizing each state’s relevant sales and use tax exemptions .

If you have questions, comments or would like to discuss the specific circumstances you are encountering in regard to any sales and use tax issue, please contact an Agile Consulting Group sales tax consultant at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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South Carolina Sales Taxes Embraced by Local Counties

Mon, 26 Aug 2019 17:56:00 GMT

South Carolina sales taxes are embedded in the very fabric of the communities it helps to serve, with all but three counties imposing sales taxes above the standard six percent collected by the state. Considering that the local sales taxes are around three percent, not including the two percent that gets collected for things like prepared meals, beverages, and hotel stays; it is easy to see why South Carolina sales taxes are 17 ^th in the nation’s rankings for the highest combined state and local sales tax rate.

The steady increase in state and local sales taxes began with a contested three percent statewide sales tax that was implemented in 1951 and currently stands at six percent today. This opened the door for local sales taxes to be imposed, which started at the county level as a local option for road and school improvements along with property tax relief. What you end up with is a general sales tax rate that falls between seven and eight percent for most counties.

One major downside is that South Carolina sales taxes are sensitive to hard economic conditions, which decrease revenue, creating budget gaps that need to be filled during an already difficult time. There is also a concern that the tax affects the working poor and senior citizens the most as the cost for purchasing items increases.

But for taxpayers, this looks to be a viable solution to increase funding since voter referendums are the primary way to get local sales taxes approved. The alternative options being an increase in property taxes or less funding for already overcrowded schools and damaged roads. Business and real estate groups are some of the more prominent advocates of sales tax increases as this helps alleviate the need to increase property taxes which makes owning real estate more costly. Many of the South Carolina sales taxes start off limited in scope and have expiration dates, but once they come up for renewal they are frequently re-approved by an overwhelming majority of voters, often at a higher rate than originally implemented in an effort to support continuous and necessary funding.

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Florida Tax Bill 126: New Sales Tax Bill Could Enforce Compliance

Thu, 22 Aug 2019 13:35:00 GMT

Online companies may be forced to collect and remit Florida sales tax on transactions with Florida customers based upon a Bill filed by Republican Sen. Joe Gruters of Sarasota, FL on August 14, 2019. The Bill, which will be considered in the 2020 Legislative Sessions, is the second effort Senator Gruters has made in relation to leveling the playing field between online retailers and traditional brick-and-mortar stores with physical locations in Florida.

The new Bill, Senate Bill 126 , would apply to all online companies regardless of physical presence in the state of Florida. The new proposal would target large online companies like Amazon that, for years have escaped paying Florida sales tax. Businesses must have at minimum of 200 annual sales transactions within Florida or generate over $100,000 in annual revenue within Florida for this Bill to apply to them.

With current procedures in place, customers are responsible for determining the Florida sales tax amount and then sending in a check to of that value to the Florida Department of Revenue as Florida use tax. In reality, consumers rarely follow this process. This lost Florida sales tax revenue is estimated to cost the state of Florida $700 million annually and that figure continues to grow.

The impetus for this change comes from the 2018 South Dakota v. Wayfair ruling which overturned the prior standard that a company needed to have a physical presence in a state for that state to collect and remit taxes. With Florida’s current general tax rate at 6%, this change would mean the competitive advantage of online companies would be stripped in comparison to the local retailers in the state. Sen. Gruters supports his decision to file the Florida tax bill 126 stating that “…this bill is about fairness; this is about collecting tax that’s already owed” insinuating that these online retailers should have been collecting Florida sales tax all along.

In addition to implementation of Florida sales tax for online retailers, according to floridapolitics.com, the bill would also:

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Ohio Sales Tax Exemption for Manufacturing

Fri, 16 Aug 2019 18:13:00 GMT

The Ohio sales tax exemption for manufacturing is broad and encompasses a wide array of purchases used in the manufacturing process. Ohio Revenue Code Ann. 5739.02(B)(42)(g) provides an Ohio sales tax exemption when the purpose of the purchaser is to “use the thing transferred primarily in a manufacturing operation to produce tangible personal property for sale.” It is important to note that only purchases used primarily in the manufacturing operation, which involves the change, conversion, or transformation of materials into a different state or form from which they previously existed qualify for this sales tax exemption per Ohio Administrative Code 5703-9-21(B)(1) . Purchases used in administrative, personnel, security, inventory control, ordering, billing, or other similar activities are not considered as part of the manufacturing operation and thus, will not qualify for the Ohio sales tax exemption for manufacturing.

Since the Ohio sales tax exemption for manufacturing will only apply for purchases used primarily in the manufacturing operation, manufacturers also need to understand when the manufacturing operation starts and finishes according to Ohio sales tax law. Per Ohio Administrative Code 5703-9-21(B)(1), the manufacturing operation begins when raw materials or parts are committed to the manufacturing process. The point of commitment occurs when, “the materials handling from such initial storage has ceased or the point where the materials or parts have been mixed, measured, blended, heated, cleaned, or otherwise treated or prepared for the manufacturing process, whichever first occurs.” This means that the initial storage of raw materials and parts, once they have been received at the manufacturing facility or any movement of those materials and parts prior to the point of commitment, is not part of the manufacturing operation. The manufacturing operation ends at the point where the product is completed, which occurs when the manufactured item is in the form or condition as it will be sold by the manufacturer. An item is completed when, “all processes that change or alter its state or form or enhance its value are finished, even though the item subsequently will be tested to ensure its quality or be packaged for storage or shipment.”

Examples of Purchases Which Qualify for the Ohio Sales Tax Exemption

Some examples of types of purchases that qualify for the Ohio sales tax exemption for manufacturing include the following:

How to Claim the Ohio Sales Tax Exemption for Manufacturing

To claim the Ohio sales tax exemption for manufacturing, qualifying manufacturers need to complete Ohio sales tax exemption Form STEC B, which is a Sales and Use Tax Blanket Exemption Certificate , and provide a copy of this certificate to their vendors. In addition to requiring purchaser information, such as name, address, and business type, Ohio Form STEC B also requires an explanation for why the purchaser is claiming an exemption. This explanation should include the qualifying exempt items (i.e. repair parts used for production machinery) as well as the specific statute in Ohio sales tax law that provides the exemption.

Maximize Your Sales Tax Savings with Agile Consulting Group

Manufacturers Can Recover Sales Taxes They Have Already Paid

For manufacturers who have already paid sales taxes to their vendors or self-assessed use taxes on their Ohio UUT 1 use tax return , they can complete and submit Ohio Form ST AR, which is a Sales/Use Tax Application for Refund , to recover sales taxes on qualifying tangible personal property used directly in a manufacturing operation. The ST AR must be filed within four years from the payment date of the tax, otherwise, the statute of limitations will have lapsed, and any taxes paid in error will not be eligible for a refund. The STEC B and ST AR forms are both located on the Ohio Department of Revenue website. The experienced consultants at the Agile Consulting Group can provide guidance and assistance with the completion of both forms.

Reach Out to Us with Questions

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Potential Utah Sales Tax Reform to Fix Broken Policies

Mon, 12 Aug 2019 16:39:00 GMT

Utah sales tax is a contested topic between members of the local community and Utah state officials who are at odds over what to do about current Utah sales tax policies. During recent town hall meetings across the state, many of the attendees publicly voiced their concerns about how data was being misused and the way information was being spread to rally support around overhauling the state’s tax system.

Utah Sales Tax Reform Overhaul

The tax reform task force is marketing the overhaul as an immediate need to avoid a financial crisis. The tax reform task force grew from the Utah Legislature’s failed attempt this past spring in House Bill 441 to apply Utah sales tax reform to a wide array of historically untaxed services.

There is a difference in opinion about how bad the issue really is with some members of the community stating that there has been an increase in Utah sales tax revenue over the years and an overhaul may not be justified. The tax reform task force, appointed by the state legislature, believes that the flow of sales tax revenue has slowed due to changes in consumer spending that are more geared towards untaxed services as opposed to taxed goods. This funding imbalance in the state’s budget has created a burden on other tax resources as they look to earmarks and laws to find creative ways to fund needed services for the state.

House Bill 441, which was proposed, but not signed in to law in March 2019, could have solved the revenue imbalance by increasing the Utah sales tax for previously untaxed services but was quickly dismantled as those impacted by the increase decried the bill.

As a result, the task force was formed and they have been on a statewide tour getting feedback from the town hall meetings to inform policy proposals that would be considered by the full legislature. While some would say that the budget is not in jeopardy and this does not warrant an emergency response, others believe the outdated sales tax code is not structured to keep up with demand. Regardless of the differing opinions, the risks must be weighed on whether to act or not.

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Sales Tax Free Weekend in Georgia

Fri, 02 Aug 2019 20:22:00 GMT

The biggest Georgia sales tax holiday that shoppers have seen in recent years may finally be coming to a halt following a 3-year hiatus.

The rush to shopping in stores became known to many Georgia residents as a “tax free weekend” which is a two-part holiday; the first segment typically held in the first weekend of August. As the name implies, this unofficial holiday primarily provides an exemption from Georgia sales tax on eligible purchases. Since it targets back-to-school shoppers , exempt items mainly consisted of school related products ranging from computer accessories to graduation caps and gowns.

During the month of October, shoppers would have another opportunity to take part in this holiday, this time applying tax exemptions for mostly energy and water efficient products.

Advocacy groups with ideologies from both sides of the political spectrum contend that this weekend is not conducive for the state, nor its shoppers. Neither see it as a boost to the growth of the state’s economy and say that it provides unrecognizable financial relief for consumers.

As a long-time resident who grew up here, the Georgia tax-free weekend was a norm amongst most. As the Tax Foundation mentioned in their 2016 report, this holiday never attracted new shoppers, it just incentivized buyers to purchase on these set weekends out of many others. Along with that, shoppers never saw significant savings in these tax exemptions. Furthermore, the Tax Foundation also suggested that many retailers would increase purchase prices to offset the loss on sales tax, thus resulting in a minimized saving for consumers.

With the state rate for Georgia sales tax currently set at 4%, these savings may seem small, but according to AJC, the holiday costs Georgia and local municipalities $70 million in lost revenue. With the last tax-free weekend occurring back in 2016, could this signal the end of a short-lived Georgia sales tax break for consumers?

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Colorado Sales Tax Compliance for Retail

Mon, 17 Jun 2019 20:44:00 GMT

Colorado sales tax compliance is among the most challenging in the U.S. because of the existence of “home-rule” taxing jurisdictions. Home-rule taxing jurisdictions collect and enforce sales tax on their own outside the scope of the Colorado Department of Revenue. This makes it cumbersome and difficult for taxpayers trying to comply with local Colorado sales tax compliance requirements because doing so for each jurisdiction varies.

Under Colorado Senate Bill 6, which signed by the Governor Jared Polis on April 12, 2019, home-rule jurisdictions are encouraged, but not required to be included in the Colorado Department of Revenue’s one-stop portal for sales tax reporting and collection. Some representatives and officials from home-rule jurisdictions have expressed concern about the viability and effectiveness of a one-stop portal as well as having the ability and authority to audit taxpayer records. Retailers, consumers and politicians alike would all benefit from the simplicity the one-stop portal would provide, but until it has been developed all these parties have more questions than answers.

Colorado, like most U.S. states, operates on destination-based sales tax law. That means that the sales tax that should be added to any taxable transaction is determined by the destination of the shipment. For retailers exclusively making sales from a fixed, physical location this is simple – it is the location of their brick and mortar storefront. For online retail sales, Colorado sales tax compliance is more complicated. In an online retail sale, this means that the retailer must determine the appropriate tax rate as well as the jurisdictions to which that sales tax revenue must be distributed.

A number of small business owners have admitted to struggling with how best to deal with Colorado sales tax compliance requirements at the local, home-rule level. Some have decided not to sell their products in to home-rule cities. That not only hurts the small business’ ability to grow, but also robs loyal customers located in these home-rule jurisdictions the opportunity to buy products they truly want. Other small business owners have decided intentionally not to comply with sales tax reporting duties in home-rule jurisdictions and instead to increase the amount set aside to settle future sales tax audits from these home-rule cities. Neither solution is ideal, but it is the choice facing a number of small businesses making online retail sales in Colorado. This will be the case until the one-stop portal for Colorado sales tax compliance is not only up and running, but also proves to the home-rule jurisdictions that it is a viable solution. To see if your business qualifies for money-saving tax exemptions such as those on manufacturing machinery and tools , and retailers in Colorado, consider consulting a sales tax expert today.

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VDA Tax Info: What is a Voluntary Disclosure Agreement?

Thu, 30 May 2019 01:11:00 GMT

Any sales tax consultant will tell you that a Voluntary Disclosure Agreement, also known as a VDA, is the best way to bring a company in to compliance with its previously unmet sales tax responsibilities. With the recent change in determining sales tax nexus as a result of the Wayfair ruling , many companies have found that they now have sales tax liabilities in states or other local jurisdictions where sales taxes were not previously collected. In other cases, a taxpayer may have collected the appropriate sales tax, but not yet be registered with the state to remit the sales taxes collected. Regardless of the reason for the outstanding tax liabilities, Voluntary Disclosure Agreements or VDA’s are a helpful method to initiate contact and communications with those states where a company needs to take action to become compliant for sales tax.

What is a Voluntary Disclosure Agreement, or VDA, as it relates to sales tax?

A Voluntary Disclosure Agreement is a legal agreement between a state revenue agency and a company who realizes that it has not met its obligations related to sales and use tax compliance. Through the Voluntary Disclosure Agreement, the company will complete all necessary registrations within the state and will satisfy any outstanding tax liabilities. Going forward, after completing the Voluntary Disclosure Agreement program, the company will have regular monthly, quarterly or annual sales tax reporting requirements with the state depending on the volume of activity within the state.

VDA Tax Info: What Are the Benefits?

Voluntary Disclosure Agreements have several major benefits. Depending on the state, Voluntary Disclosure Agreements will reduce or eliminate penalties and, on some occasions, interest due on uncollected or unremitted sales taxes. Don’t underestimate the savings these reductions or eliminations in penalties and interest can yield! This is especially true in comparison to the increased penalties and interest that can be assessed if a state identifies the company is not in compliance before a company comes forward under a VDA.

Voluntary Disclosure Agreements or VDA’s also limit the lookback period. The limited lookback period is generally 3 to 4 years, depending on the state. The limited lookback period will not apply to a company that has been collecting taxes and not remitting them. In those circumstances, the lookback period must include all periods for which the company has been collecting sales tax.

In Voluntary Disclosure Agreements, most states will allow a company to estimate its previous liabilities, which simplifies the process. With a few exceptions, Excel schedules calculating the tax liabilities will be accepted in lieu of filing all previous sales tax returns. States are willing to make these concessions to ease the process because the states’ main objective is to encourage voluntary compliance with future and ongoing tax collection and reporting responsibilities. In short, the state is willing to forego some of the formalities and even some revenue to bring new taxpayers in to the fold.

Assistance from a sales tax consultant is not necessary to file a Voluntary Disclosure Agreement or VDA application; however, there are benefits in choosing a sales tax consultant to help you through the process. For example, a taxpayer can remain anonymous during the Voluntary Disclosure Agreement request process if it uses a sales tax consultant as its representative. Using a sales tax consultant who is familiar and experienced with the policies of each state’s Voluntary Disclosure Agreement program can eliminate some of the following risks as well.

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What Are the Risks of a Voluntary Disclosure Agreement?

There are several pitfalls a company should be aware of when initiating a Voluntary Disclosure Agreement. The taxpayer must come forward and request the VDA with a state prior to receiving any inquiries, communications or audit notices from the state in question. Some states limit these inquiries, communications or audit notices to the specific type of tax being disclosed, while others expand this to include any taxes administered by the state. This is the most common misconception about Voluntary Disclosure Agreements. The key is that this be a “voluntary” admission…if the state is reaching out on its own to contact you about some tax deficiencies, the state does not view it as you coming forward voluntarily.

If a company’s Voluntary Disclosure Agreement or VDA is accepted there are strict deadlines that must be met in order to receive all the benefits of the Voluntary Disclosure Agreement program. Remember, a Voluntary Disclosure Agreement is a legal agreement between the company and the state. As such, there are very clear deliverables that need to be provided by the company as well as a strict timeline for when these items must be provided. Like nearly everything in sales and use tax, these deadlines vary from state-to-state, but an experienced sales tax consultant will know these deadlines and be sure his or her client meets them.

Each state has slightly different requirements for how to submit a request for a Voluntary Disclosure Agreement. Please see the analysis of the differences in Voluntary Disclosure Agreement policies and processes across U.S. States prepared by one of Agile Consulting Group’s sales tax consultants for more details.

Voluntary Disclosure Agreement policies and processes across U.S. States:

In closing, Voluntary Disclosure Agreements are a safe, effective, streamlined process for companies to become compliant with a state’s sales use tax reporting requirements while disclosing prior missteps the company may have made regarding sales and use tax compliance. While sales and use tax compliance can be a hassle or a challenge, leaving problems or unmet sales tax responsibilities unresolved will only lead to larger, more complex and costly issues in the future. A sales tax consultant can help navigate this process and even provide a turnkey solution to your company’s sales tax compliance challenges.

As with all sales and use tax research and advice, the specifics of each case need to be considered when determining taxability. Additional advice from a sales tax consultant from Agile Consulting Group can be found on our pages summarizing U.S. sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this issue or any other sales and use tax issue, please contact an Agile Consulting Group sales tax consultant by calling (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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Kentucky Sales Tax Exemptions for Manufacturing

Thu, 30 May 2019 01:10:00 GMT

Kentucky sales and use tax law offers a tax exemption for manufacturers for tangible personal property that is to be directly used in the manufacturing or industrial process that has a useful life of less than one year. Kentucky sales and use tax exemptions for manufacturing are an outlier when it comes to U.S. states sales and use tax exemptions for manufacturers as it exempts purchases with a useful life of less than one year, whereas most states provide a sales and use tax exemption for purchases with a useful life of more than one year.

Kentucky defines “directly used in manufacturing” as the process in a plant facility that starts with the movement of raw materials from storage into a “continuous, unbroken, integrated process” and ends when the finished product is packaged for sale. Agile Consulting Group’s sales tax consulting team is well equipped to help Kentucky manufacturers understand and apply this tax exemption. From our experience working Kentucky sales and use tax recovery reviews, our sales tax consulting team has compiled a helpful list of items purchased by many types of manufacturers that qualify for the Kentucky sales and use tax exemption for manufacturers.

Examples of Kentucky Sales Tax Exemptions for Manufacturing

Examples of non-taxable tangible personal property used directly in manufacturing include:

Exempt Tangible Personal Property

Industrial Supplies (Do not need to come in direct contact with manufactured product)

Industrial Tools (Required to come in direct contact with manufactured product)

Taxable Tangible Personal Property

Some common examples of taxable tangible personal property which does not qualify for the Kentucky sales and use tax exemption for manufacturers include:

Repair, Replacement, or Spare Parts

Replacement Machinery

Partial Exemptions for Energy & Energy Producing Fuels

Kentucky also offers a partial tax exemption for energy and energy producing fuels used in manufacturing, industrial processing, mining, or refining. However, this exemption only exists if the cost of the energy or fuels used exceeds 3% of the cost of production.

Our sales tax consulting team has found this to be a very beneficial Kentucky sales and use tax exemption for manufacturing. However, the calculations and documentation required to support the exemption are often challenging for taxpayers to substantiate on their own.

The Kentucky Enterprise Initiative Act (KEIA)

In order to spark growth and investment in the manufacturing industry in Kentucky, the Kentucky Enterprise Initiative Act (KEIA) was enacted July 1, 2018.

KEIA provides a Kentucky sales and use tax refund on the total amount of tax paid on building and construction materials over $500,000 that are permanently incorporated as part of an economic development project, research and development equipment, electronic processing equipment, or flight simulation equipment.

To qualify, an eligible company has to submit an application and be approved by the Kentucky Cabinet for Economic Development (KEDFA) .

To take advantage of these Kentucky sales and use tax exemptions for manufacturing, manufacturers must fill out and sign Form 51A111 “Certificate of Exemption Machinery for New and Expanded Industry” and distribute them to qualifying vendors. Once the vendor has the Kentucky sales and use tax exemption certificate on file, they can set up their customer’s account as exempt from sales and use tax moving forward.

Kentucky Sales Tax Exemptions for Manufacturing: Retrodate Limitations

The state of Kentucky allows for manufacturers to request a refund for sales and use tax paid on exempt items up to 48 months (4 years) from the date the tax was paid to the state. In Kentucky, only the entity that collected and remitted the sales tax to the state is able to get refunded the overpaid tax amount.

A Kentucky taxpayer cannot pursue sales tax refunds directly from the Kentucky Department of Revenue. The manufacturer will need to have their vendors fill out, sign, and send in Form 51A209 “Sales and Use Tax Refund Application” to the Kentucky Department of Revenue. Once the vendor secures the refund from the state they will then issue the refund back to the customer.

Alternatively, manufacturers can request a sales tax credit or refund check directly from their vendors if their vendors are willing to amend their sales and use tax returns with the state. For use tax self-assessed and paid directly to the Kentucky Department of Revenue, a taxpayer may file a refund claim directly with the state or it may amend its Kentucky sales and use tax returns.

Discover Additional Sales & Use Tax Exemptions with Agile Consulting Group

If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting teams at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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State and Federal Excise Tax Refunds on Clear Diesel Used in an Exempt Manner

Tue, 26 Feb 2019 14:28:00 GMT

When we go to fill up at the corner gas station nearby we’re all familiar with the choices of diesel and the various octane ratings of unleaded fuel. What your corner gas station may not have is a pump for dyed diesel. That isn’t really a problem for individual consumers, but it might be for business consumers who may qualify for excise tax refunds on clear diesel used in a qualifying manner.

What is Dyed Diesel Fuel?

Dyed diesel is called by a number of different names – off-road diesel, untaxed diesel, pink or red diesel – but the only real difference between it and the clear diesel is that dye has been added. The dye is added to distinguish it from the clear diesel because dyed diesel is taxed at a lower rate by both the state and federal government.

Dyed diesel is illegal for use on roads and highways because it is taxed at a lower rate than clear diesel. The taxes on clear diesel include both state and federal taxes for the maintenance of the roads and highways. Because dyed diesel is intended to be used “off-road” the taxes to offset the costs of the wear and tear caused by vehicles operating on the roads and highways are not included in the taxes levied on dyed diesel.

What Qualifies As Off-Road Use?

Approved off-road uses include agricultural or farming use, operation of heavy equipment, construction machinery or generators, cooling of space in refrigerated trucks or trailers or operation of other auxiliary truck equipment, and residential heating. It is important to stress that dyed diesel can only be used in a function whereby the power generated by the dyed diesel does not result in over-the-road transportation. For example, a traditional dump truck that is plated to operate on roads and highways cannot use dyed diesel even though it could be considered construction equipment. It would be acceptable to use dyed diesel in a front end loader or one of those giant ultra-class haul trucks used in mining that is not plated for on-road use.

Are the Tax Savings Significant Between Using Clear & Dyed Diesel?

Let’s look at an example of the difference in cost between using clear and dyed diesel in the four most populated U.S. states – California, Florida, New York and Texas:

Footnote: Pricing and tax data gathered from the U.S. Energy Information Administration and the Federation of Tax Administrators

What Happens If We’ve Been Using Clear Diesel In an Approved “Off-Road” Manner?

Then it’s time to file for refunds both at the state and federal level! The federal excise tax refunds are the easiest to pursue as the taxes are administered by the Internal Revenue Service. To file excise tax refunds at the federal level a taxpayer must file a Form 720 – Schedule C , or a Form 8849 & Form 8849 Schedule 1 .

Which form you file will depend on the nature of your business and whether you are reporting excise tax liabilities with offsetting credits (Form 720) or whether you are solely filing an excise tax refund claim (Form 8849).

To file for excise tax refunds as well as other tax refunds, including sales and use tax, at the state level you will have to file multiple refund requests because the taxes in the table above are aggregated and are actually comprised of multiple distinct taxes, some of which are collected and administered by different divisions of the state tax and revenue agencies.

For example, while the California Department of Tax and Fee Administration collects all these taxes, the sales and use tax division would be responsible for reviewing any refund claims related to the difference in sales tax rates between the clear and dyed diesel, and the diesel fuel tax division would be responsible for reviewing any refund claims related to state diesel fuel excise taxes.

Other states have similar arrangements to that of California therefore the refund procedures differ from state-to-state and even within each state from tax-to-tax. Agile Consulting Group’s sales tax consultants can help navigate this confusion to ensure taxpayers maximize the refunds for which they are eligible.

If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact one of Agile Consulting Group’s sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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Florida Sales and Use Tax Exemption for Manufacturing is Broad

Mon, 25 Feb 2019 20:31:00 GMT

Florida sales and use tax law offers a great tax exemption for manufacturers. There are actually several sections of the Statutes and Rules where the relevant Florida sales and use tax exemptions can be found. When one combines the relevant Florida sales and use tax exemptions for manufacturers, their combination results in one of the broader exemptions for manufacturers in the U.S.

Fla. Admin. Code Ann. §12A-1.063 provides the basis for a Florida sales and use tax exemption for industrial machinery and equipment purchases. In Florida, industrial machinery and equipment is defined as tangible personal property that has a depreciable life of three years or more and is a component or integral part of the manufacturing process. To qualify the manufacturer must be classified under a manufacturing North American Industry Classification System (“NAICS”) code (e.g. a code beginning with the two digits of 31, 32, or 33). Examples of qualifying machinery and equipment include: forklifts, conveyor belt systems, or machinery or equipment that shapes, cuts or forms the product being manufactured for sale.

Another significant part of the Florida sales and use tax exemption provided to manufacturers can be found in Florida Statute §212.08(7)(xx) , which states that repair and labor charges for exempt industrial machinery and equipment are also exempt from sales tax. This includes all labor charges for repairs and maintenance as well as any parts or materials used in the repair. Rather than being based on a company’s NAICS code as the industrial machinery and equipment exemption is, this exemption is tied to a company’s Standard Industrial Classification (“SIC”) code. SIC was the standard before the NAICS model came into effect. A handy crosswalk between the two systems can be found online. Florida’s sales and use tax exemption for repair and replacement parts for manufacturing equipment applies to taxpayers in SIC industry major group numbers 10, 12, 13, 14, 20, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, and 39 and 212.

Another exemption provided to manufacturers under Florida sales and use tax law is that found in Florida Statute §212.08(7)(b) and (hh). These two citations provide a comprehensive Florida sales and use tax exemption for utilities used to power machinery and equipment involved in the production of goods for sale. The exemption found in Florida Statute §212.08(7)(b) provides an exemption for “boiler fuels” and includes many types of combustible substances including, but not limited to: natural gas, solid waste, coal and wood. A similar exemption for the use of “electricity and steam” can be found in Florida Statute §212.08(7)(hh) .

In both circumstances, even if the fuel or utility is not being used exclusively by production machinery and equipment, a taxpayer can still claim an exemption. A taxpayer will need to determine the portion of the fuel or utility charges being consumed in a tax exempt manner. If 75 percent or more of the utility is being used to operate exempt machinery and equipment, then a 100 percent exemption may be claimed. If between 50-75 percent of the utility is being used to operate exempt machinery and equipment, then a 50 percent exemption may be claimed. If less than 50 percent of the utility is being used to operate exempt machinery and equipment, then a taxpayer is not entitled to a sales tax exemption on their purchase of fuel or utilities. In order to determine the percentage of the utility used in an exempt manner, a detailed energy study must be performed. This energy study is done by calculating the annual consumption for each piece of machinery and equipment using the utility and then determining which are used in an exempt manner. Agile Consulting Group’s sales tax consultants can assist with this energy study.

Florida Sales Tax Exemption for Manufacturing Equipment

In order to take advantage of any of these Florida sales and use tax exemptions for manufacturers, a company will need to complete and sign Florida sales and use tax Exemption Certificate Form DR-97 and distribute it to their suppliers or vendors from whom they are making qualifying purchases. Once a vendor or supplier has received this form, the account in question can be set up as tax exempt going forward.

What should you do if you realize after the fact that your company was entitled to a Florida sales and use tax exemption? The state of Florida allows for taxpayers to request a refund on all taxes erroneously paid within the prior 36 months. In order to do this, a taxpayer will need to complete Form DR-26S “Application for Refund – Sales and Use Tax Form” and submit it to the Florida Department of Revenue. This can either be completed in paper form or the taxpayer may submit an electronic request. Within the refund form, the manufacturer will need to indicate the type of tax, amount of refund requested, FEIN or sales tax certificate number, the time period of the refund request, and the reason for the refund request. The manufacturer will also need to gather an “Assignment of Rights to Refund of Tax” Form DR-26A from each of their vendors to whom taxes were paid in error. The Assignment of Rights Form DR-26A, can at first appear to be intimidating, however, it’s only role is to prevent the manufacturer from receiving a refund for the same item from both the FL Dept. of Revenue as well as their vendor or supplier – essentially it prevents “double dipping” on exemptions.

For larger volume based refund requests, manufacturers can sample their records as long as the taxpayer and Florida Department of Revenue agree on the terms of the sampled data. Once the Florida Department of Revenue has all the information needed, the refund request will be assigned to an auditor who will either approve, deny, or request additional information to complete the refund claim. For any denied refund claims, the taxpayer can file a protest up to 60 days from the denial letter. Protest procedures are outlined in Form DR-832R.

Why Choose Agile Consulting?

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Florida sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact any of Agile Consulting Group’s sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.

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Sales Tax Audit Defense: 5 Effective Tips You Need to Know

Mon, 19 Nov 2018 21:28:00 GMT

Sales tax audit defense is one of the cornerstones of our sales tax consulting practice. We’ve represented hundreds of clients who were undergoing sales tax audits. We’ve fought audit assessments in all 45 U.S. states that have sales tax . One of the most common questions we hear from taxpayers upon receiving the notification of a sales tax audit is, “What should we do now?” We’ve put together the following list of the best tips and tricks of the trade from our experience as sales tax consultants defending a sales tax audit.

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5 Sales Tax Audit Defense Tips

1. Relax

It’s never good news when you find out that your company has been selected for a sales tax audit. It seems like the initial reaction everyone has is to cringe and think “I wonder what the auditor is going to find?” Followed quickly by the second thought of “I wonder how much time this audit is going to take?” While no one will ever confuse a sales tax audit with fun, it’s important to remember that there is nothing you can do to avoid the process. Stressing about what prompted the sales tax audit is a useless endeavor and it’s important to remember that it doesn’t necessarily mean that the state suspects any wrongdoing by your company. In fact, I’d say from our experience that less than 10% of audits are generated because of some suspected liability. That means that 90% of the time the sales tax audit was triggered by normal auditing practices by the state. Many audits are indeed randomly selected. Others are set on a rolling calendar basis. Some audits are focused within a certain industry. Still others may be generated as a result of information gathered during a sales tax audit of one of your customers or suppliers. Sales tax audits are rarely initiated as a direct result of filing a refund claim. So…relax, the state auditor assigned to your file is likely not out to get you. It might just be time for some good old fashioned “tire kicking” by the state you operate within to see if you may owe any unpaid sales and use taxes.

2. Establish a single point-of-contact for the state auditor

After you take that deep breath, it’s time to start planning. The first matter of business is to decide who will be the main point-of-contact with the state auditor for the duration of the sales tax audit. Why establish a single point-of-contact? There are a number of great reasons. First and foremost, establishing a single point-of-contact ensures that no mixed messages will be sent to the state auditor. For example, prior to its recent revision, Florida’s sales tax exemption for manufacturing stated that replacements of machinery and equipment were taxable, but that the repair of machinery and equipment were non-taxable. Florida sales tax auditors would frequently ask leading questions of non-tax savvy staff that would elicit a response that certain items were replacements rather than repairs. If a single person controls the message (and that person understands the nuances of tax law) situations like this can be avoided.

Second, selecting a main point-of-contact will establish open communications between your company and the state auditor. Sales tax audits are often initiated with computer-generated form letters that request all sorts of documentation – most of which is unnecessary. These superfluous requests often overwhelm and distract from the key issues. Have the main point-of-contact call up the state auditor and talk through the list of items requested. If you don’t understand why the auditor would need to see something, ask them why they want it. What you’ll learn is that those computer-generated form letters include a comprehensive list of all the items that an auditor may want to see, but in reality the documents a retail business should provide in its sales tax audit are quite different from those that a manufacturer should provide.

One final note on state auditors: They aren’t the enemy, but they also aren’t there to do you any favors either and we all know who signs their paycheck. One false narrative we hear frequently is that “since the state recently audited us, there is no real potential for any sales tax refunds because the auditor would have found them during the audit.” That is absolutely false! While it is true that a state sales tax audit is intended to look for both sales tax liabilities as well as sales tax refunds, in practice a state auditor’s efforts are far more focused (often exclusively) on the liability side. For example, at a for-profit hospital located in Texas, the Texas Comptroller prepared a sales tax assessment for $2.1M. We were then engaged to defend that sales tax audit and not only did we reduce the assessment to zero; we actually turned that project into a net refund of $1.4M to our client.

3. Dedicate the necessary time to work the audit

This may seem like the most basic advice, but sales tax audit defense is a time-consuming process if done right. Prior to agreeing on a sample, study it to make sure it’s representative. When the auditor sends the audit assessment schedules, take the time to review all invoices on which taxes are being assessed. Go find any missing invoices or supporting documentation that will help argue your position. Research all issues cited by the auditor. Send back the schedules with additional notes, citations and any questions you may have for the auditor. After receiving updated audit assessment schedules back from the auditor, make a second pass through them. When it comes to reviewing schedules it always seems as if the audit assessment file can languish in waiting on the auditor’s desk when the “ball is in their court,” but that you are required to have a quick turnaround when it is sent back to you for your review. Don’t be afraid to ask for an extension if you have not been able to dedicate the appropriate time to it. Never agree to any audit findings that you have not had an opportunity to review in detail. If you do you pass up this chance, you might be foregoing an easy opportunity to have non-taxable line items removed from the assessment. One of the most time consuming, but essential parts of any effective sales tax audit defense is taking the time to…

4. Work up offsetting refunds to reduce liabilities

Sales tax refunds identified during the course of a sales tax audit defense project are more valuable to you then than at any other time. This is true because those sales tax refunds will be used to offset, reduce or possibly eliminate sales tax audit liabilities as well as any penalties or interest assessed on those liabilities. If your sales tax audit ends with a liability being owed to the state, the likelihood of the state conducting a future sales tax audit on your company is much higher than if the sales tax audit ends with the state owing you money. You want to do everything you can to end the sales tax audit in a net refund position. Creating a schedule of transactions on which sales tax refunds are due to your company is the best and most feasible method to make this happen.

5. Go find professional sales tax audit defense help

If you don’t feel like you have the time or experience to dedicate to tips 1 through 4, go hire someone to help with your sales tax audit defense . At Agile Consulting Group , we believe that sales tax audit defense should have a two-pronged approach. First, you must review the state’s work-papers and schedules to be sure you’re in agreement with any liabilities or deficiencies that have been identified. Second, all potential sales and use tax refunds should be quantified and included in the audit. We will handle all communications with auditors and work with you to develop an audit plan after performing our own initial audit review to identify both areas of exposure and opportunities. We have a proven track record of turning initial audit assessments into refund recoveries – what a great thing to go from owing the state for unpaid sales and use taxes to receiving a refund check from the state for overpaid taxes.

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If you follow these tips, your impending sales tax audit may not be more enjoyable, but you and your company are far more likely to emerge unscathed or with a much smaller assessment. In the end we all want to pay our fair share of sales taxes, but not a penny more, right?

The post Sales Tax Audit Defense: 5 Effective Tips You Need to Know appeared first on Agile Consulting Group .

Texas Sales Tax Exemption for Manufacturing

Fri, 16 Nov 2018 21:57:00 GMT

The Texas sales tax manufacturing exemption makes purchases that are necessary and essential to the manufacturing process non-taxable. Under the general heading of the Texas sales tax exemption for manufacturing, there are a number of subcategories of purchases which are designated as taxable or non-taxable by the Texas Comptroller’s Office. A manufacturer, as Texas defines, is a taxpayer who manufactures, fabricates or processes tangible personal property for sale. Texas Administrative Code 3.300 explains in detail what items specifically are exempt from sales tax and which items are not. This list is not intended to be exhaustive, but does provide taxpayers solid guidance about what may and may not qualify for the Texas sales tax exemption for manufacturing.

Exempt Items per the Texas sales tax exemption for manufacturing:

Ingredient or component tangible personal property that becomes a part of the final manufactured product
Items that are directly used or consumed during the manufacturing process if the use or consumption is necessary or essential to the manufacturing process
Services performed on the finished product to make the product more marketable
Actuators, steam production equipment, cooling towers, generators, heat exchangers, transformers, boilers, and power related accessories
Items consumed in the manufacturing process necessary and essential to pollution control
Lubricants, chemicals, gases or liquids that are necessary and essential to keep manufacturing equipment operational
Gases used to protect the raw material or finished product or to avoid hazardous or environmentally damaging situations
Items used that are necessary and essential for quality control or testing of the product
Safety apparel worn by employees (provided that the apparel is not sold to the employees by the taxpayer and that the manufacturing process would not be possible without the use of such apparel)
Items used to reduce, recycle, and treat water
Gas and electricity used directly in manufacturing
Labor charges for repair and maintenance
Packaging supplies
Display products provided they are used only for demonstration or display
Piping and conveyor systems for manufacturing equipment that are housed within a single machine or phase of production
Semiconductor fabrication and pharmaceutical biotechnology cleanrooms, equipment and associated materials to maintain such cleanrooms

Taxable Items per the Texas sales tax exemption for manufacturing:

Material handling equipment including conveyors, forklifts and cranes
Janitorial supplies
Hand tools
Office supplies and equipment
Machinery, equipment or repair parts that are rented or leased for less than one year
Machinery and equipment used to maintain or store tangible personal property
Items used in the transmission or distribution or electricity

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What is Divergent Use?

There is also an interesting exemption for divergent use. Divergent use is the use of property in a manner other than the way in which made that property exempt. After the 4 ^th anniversary of the property being used, it is exempt no matter what capacity the property is being used in. For any month prior, exempt property being used in a nonexempt way is taxed at 1/48 of the purchase price times the percentage of divergent use during that month times the tax rate applicable at the time of purchase. This way a small tax is assessed to the property for not being used in an exempt manner. Once the property has been purchased for more than 4 years though it is completely exempt no matter how it has previously been used. For example, a thermometer can have divergent use depending on what items’ temperature it is measuring.

Texas Manufacturing Exemption Certificate

In order to take advantage of the Texas sales tax exemption for manufacturing, taxpayers need to fill out and complete the Texas Sales and Use Tax Resale/Exemption Certificate (Form 01-339) and send to their vendors. The first page is the resale certificate which is needed for cost of goods sold items that are purchased and resold as part of the finished product. The second page is the exemption certificate which is needed for manufacturing machinery, equipment and repair parts. Once the vendor has this form on file a taxpayer’s account may be set up as tax exempt moving forward.

Request a Refund from the Texas Comptroller’s Office

Manufacturers can also request a refund from the Texas Comptroller’s Office on exempt items which were taxed in error prior to establishing the Texas sales tax exemption for manufacturing with their vendors or suppliers. The statute of limitations for filing sales tax refunds in Texas is 48 months. In order file such a claim, a manufacturer will need to send in a refund claim into the Texas Comptroller’s Office at refundreq.revacct@cpa.texas.gov that specifically states in writing the basis for the refund claim.

Taxpayers who do not have a valid 11-digit Texas Comptroller’s Taxpayer Number will also need to include Texas Assignment of Right to Refunds (Form 00-985) . The assignment of right to refund form needs to be signed by each and every vendor included in the refund claim. The form is needed to verify that tax was collected and remitted back to the state and to allow the Texas Comptroller to refund the manufacturer directly without going through the vendor. Once the claim has been reviewed, it will be approved, denied or deemed incomplete. For incomplete claims the Comptroller will notify the tax payer of additional information required, but the statute of limitations will not be tolled until all required information has been provided. Any denied claims can be contested by requesting a refund hearing within 60 days of receipt of the denial letter.

Reach Out to Us with Questions

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Texas sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact our sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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South Carolina Utility Tax Exemption Opportunities

Sat, 25 Aug 2018 18:23:00 GMT

In the state of South Carolina, utilities are typically subject to state and local sales and use tax rates. There are several industries, however, that are entitled to claim South Carolina sales tax exemptions on their utility usage. In South Carolina, utilities include electricity, gases such as natural gas, propane, butane and similar gases used for heating or power. Below, you will find more details about the South Carolina utility tax exemptions that apply to different industries.

South Carolina Utility Tax Exemption Opportunities by Industry

Manufacturing

Electricity is exempt for manufacturers in South Carolina as long as it is used in the manufacturing process. This includes electricity used to operate manufacturing machinery and the electricity used to provide plant lighting in production areas. It also includes the electricity used to control the temperature or atmospheric conditions within the manufacturing plant.

The exemption does not include electricity used outside of the manufacturing process, i.e. electricity used for administrative offices. There is also a South Carolina sales tax exemption for coal, coke or other fuels, including gas for use in manufacturing tangible personal property for resale.

Per S.C. Code Regs. 117-302.3 , this exemption also extends to fuel used to control plant temperature or atmosphere similar to the South Carolina sales tax exemption for electricity.

Residential Utilities

Electricity is exempt in South Carolina when used for residential purposes. “Residential Purposes” is defined as a space where a family lives for permanent residence such as a house or an apartment. It does not include temporary or transient residences such as hotels or dormitories, but does extend to apartment complexes, condominiums, duplexes, mobile homes and assisted living facilities.

Electricity that is centrally metered in apartment complexes is deemed a residential purpose and is not subject to South Carolina sales and use tax. Individual houses or properties with separate meters for additional buildings, such as a shed or pool house, are deemed to be used for residential purposes as well, and are also tax exempt.

Utilities metered to common areas of a residential community in a Homeowners’ Association (“HOA”) are not considered a residential purpose. South Carolina has issued SC Revenue Ruling #17-1 to provide more detailed information about how the residential utility exemption applies to common areas. South Carolina has determined that the exemption for “residential purposes” does not extend to businesses, institutions, or other non-residential properties such as hospitals or healthcare facilities, dormitories, schools, and prisons.

Natural gas, fuel oil, kerosene, LP gas, coal or any combustible heating material used for heating qualifying residential properties are eligible for this exemption. In order to claim the exemption, residential customers will need to send their utility provider an exemption certificate for sales and use tax ( SC Form ST-8 ).

Some utility providers in South Carolina have a misconception about what utilities qualify for the residential exemption and will deny requests for certain accounts or meters to be set up as non-taxable. On occasions such as this, our sales tax consultants strive to take the decision-making process out of the hands of the utility by filing directly with the South Carolina Department of Revenue.

The South Carolina Department of Revenue agrees with our reading and interpretation of the residential utilities exemption.

Farming and Agriculture (Certain Functions Apply)

The South Carolina sales tax exemptions for the farming andagriculture industry include the purchase of certain types of electricity and fuel. Per S.C. Code Regs. 117-301.7 , electricity that is used to irrigate crops is not subject to South Carolina sales and use tax. Electricity, natural gas or liquefied petroleum gas (“LPG”) used exclusively in animal husbandry for producing livestock, poultry, swine or on dairy farms to produce milk also qualify for the South Carolina sales tax exemption found in that section of the SC Regulations.

Additional South Carolina Sales Tax Exemptions

If you have questions, comments, concerns or would like to discuss the specific circumstances you are encountering in regard to this sales and use tax, please contact our sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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New York Utility Tax Exemption Opportunities

Sat, 25 Aug 2018 18:15:00 GMT

Utilities consumed in the state of New York are generally subject to sales and use tax. However, there are several utility tax exemption opportunities in the state of New York.

In New York, utilities include purchases of gas, electricity, refrigeration and steam. Below are discussions of some of the more common utility tax exemption opportunities in the state of New York categorized by three main industry groups.

Fuel and Utility Tax Exemption for Sales Tax by Industry

Manufacturing or Processing

Utilities, including fuel, gas, and electricity, sold to manufacturers within the state of New York are completely exempt from sales tax if they are directly and exclusively used in production.

The state of New York determines that a utility is used directly in production if it is either used to operate tax exempt equipment or machinery, used to create conditions necessary or required for production, or perform an actual step or part of the manufacturing or production process.

A utility is used exclusively in production if it is 100% used in the production process. Utilities used for lighting, heating or cooling of buildings, the storage of items of tangible personal property, and the preparation of food or drink do not qualify for New York sales tax exemption for manufacturing or processing. If the utility is not used 100% of the time in production, a manufacturer may allocate the use between exempt and non-exempt purposes.

In cases requiring allocation, the taxpayer must keep adequate records, such as a survey conducted by an engineer or the formula used in computing exempt usage.

More detailed information about how to compute the percentage of utilities used for exempt purposes can be found in New York Sales Tax Bulletin #TB-ST-917 .

When requesting a refund of sales tax paid on qualifying exempt utilities, the exact percentage of the exempt usage must be known and reported in order to receive any New York sales tax exemptions on utilities. A manufacturer must submit a complete and properly executed Exempt Use Certificate ( NY Form ST-121 ) to their utility provider.

Farming, Agriculture, or Horse Boarding

The New York sales tax exemption for utilities used in farming, agriculture or commercial horse boarding are broader than those offered to the manufacturing industry. Utilities including gas, electricity, refrigeration and steam are exempt for this industry.

In addition, purchases of non-highway diesel motor fuel will also qualify for the New York sales tax exemption. New York Sales Tax Bulletin #TB-ST-244 discusses the New York sales tax exemption for this industry, which include utilities as well as several other categories of purchases including machinery, equipment and supplies; vehicles; building materials; and some services.

To secure refunds for qualifying utilities, farmers and horse boarding entities should use NY Form ST-125 .

Residential Utilities

Utilities sold for residential purposes are exempt from the 4% New York state sales tax. As long as 75% of the energy being purchased is used for residential purposes, all of the energy is tax exempt. Residential customers must present their utility provider with a certification of residential use of energy ( NY Form TP-385 ) that shows that at least 75% of the utility being purchased is used for residential purposes. This will exempt residential utility customers from the 4% state tax rate.

Common areas of multi-family housing should be excluded from the calculations when determining the percentage of qualifying exempt residential usage. Common areas are excluded from the calculation because they are areas which are used for both residential and non-residential purposes.

While utilities used for residential purposes are exempt from the state portion of the sales tax rate, local taxes, including those for the city and county, are only exempt in certain locations. The state of New York allows localities to determine if residential utilities are exempt or not.

The complete list for local jurisdictions that tax residential utilities can be found in New York Publication #718-R .

If you have questions, comments, concerns or would like to discuss the specific circumstances you are encountering in regard to sales and use tax, please contact our sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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Illinois Sales Tax Exemption for Manufacturing Machinery and Equipment

Fri, 17 Aug 2018 15:23:00 GMT

There is a longstanding Illinois sales tax exemption for manufacturing machinery and equipment. In order for machinery and equipment to qualify for the Illinois sales tax exemption for manufacturing, the machinery or equipment must be used primarily in the manufacturing of tangible personal property for retail sale or lease. In Illinois, to be “used primarily” means that the machinery or equipment is used over 50% of the time in an activity or function qualifying as “manufacturing.” Illinois defines the term “manufacturing” to include assembly, processing, fabricating or refining, provided that the process in question causes “substantial and significant” changes to the material being processed.

Production Machinery and Equipment Exemption

The Illinois sales tax exemption for manufacturing machinery and equipment, found in Illinois Administrative Code 130.330 , specifically excludes several industries often considered to be “manufacturing” in other U.S. states. The agriculture and farming industry, the aggregate or mining industry, and the printing or graphic arts industry do not fall under the Illinois sales tax exemption for manufacturing machinery and equipment, however, each of those industries has a corresponding Illinois sales tax exemption for qualifying purchases of machinery and equipment.

The agriculture and farming industry’s exemption can be found at Illinois Administrative Code 130.305 . The exemption for agriculture and farming has many similarities to that of the Illinois sales tax exemption for manufacturing. The aggregate and mining industry’s exemptions can be found at Illinois Administrative Code 130.345 (oil) , Illinois Administrative Code 130.350 (coal) , or Illinois Administrative Code 130.351 (all other aggregates) depending on the specific type of resource being produced. These exemptions also have many similarities to that of the Illinois sales tax exemption for manufacturing. While the oil industry’s exemption is still in place, the exemptions for the coal and all other aggregates sunset on August 16, 2018. The printing or graphic arts industry’s exemption can be found at Illinois Administrative Code 130.325 and went into effect on July 1, 2017. Prior to that date, purchases of machinery and equipment by the printing or graphic arts industry did not qualify for an Illinois sales tax exemption.

In Illinois, the restaurant or food service industry is also not considered manufacturing, however unlike those other aforementioned industries, there are no relevant Illinois sales tax exemptions for equipment used in the processing or production of food or beverages for retail sale.

For Illinois taxpayers in industries that do qualify as manufacturing in IAC 130.330, “machinery and equipment” includes major mechanical machines and components of such machines used in the manufacturing process. It also includes machinery and equipment used in the maintenance or repair of exemption production machinery and equipment. Devices or tools separate from machinery or equipment, but essential to an integrated manufacturing process, computers which control production machinery or equipment, and repair or replacement parts also qualify for the Illinois sales tax exemption for manufacturing. Some chemicals, but only those that act as catalysts that effect a “direct and immediate” change to the product being manufactured, also qualify for this exemption. Illinois sales tax exemption certificate ST-587 can be provided to vendors to have Illinois sales taxes removed from any qualifying purchases.

The Illinois exemption for manufacturing does not extend to hand tools, consumable supplies, safety apparel, or machinery and equipment used to generate electricity, or to treat or generate water or gas which is delivered through pipelines or mains. Any components or parts used for facility lighting, ventilation, heating, cooling or climate control also do not qualify for the Illinois sales tax exemption for manufacturing.

With the sunset of the Illinois Manufacturer’s Purchase Credit (“MPC”) on August 30, 2014 many Illinois manufacturers believe erroneously that no Illinois sales tax exemption for manufacturing currently exists. However, the Illinois manufacturing industry is still entitled to purchase many items exempt from Illinois sales and use tax.

In addition to the Illinois sales tax exemption for manufacturing discussed herein, there are also additional sales tax exemptions and other credits and incentives available to taxpayers. Taxpayers located in Illinois Enterprise Zones or those qualifying for the High Impact Business (“HIB”) program are entitled to these additional exemptions including those for utilities or building materials used in real property projects.

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Illinois sales and use tax exemptions . If you have questions, comments, concerns or would like to discuss the specific circumstances you are encountering in regard to sales and use tax, please contact any of our sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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Supreme Court Rules Physical Presence Unnecessary to Create Substantial Nexus

Thu, 21 Jun 2018 21:38:00 GMT

Today the Supreme Court of the United States has voted 5-4 to overturn the “physical presence” rule decided in Quill Corp. v. North Dakota . According to the Supreme Court, “physical presence is not necessary to create a substantial nexus.” The Court says that it erred in its 1992 Quill decision and that the proliferation of e-commerce sales and the Internet revolution has exacerbated that error. As a result, South Dakota’s law relating to requiring certain remote sellers with “substantial nexus” to collect and remit sales tax is valid and Constitutional. That law requires out-of-state sellers that deliver more than $100,000 worth of goods or services in to South Dakota or engage in 200 or more separate transactions within the state in a calendar year to collect and remit sales tax.

While both Quill and National Bellas Hess, Inc. v. Department of Revenue of Illinois interpreted having an established “physical presence” to be determinative in whether a company had “substantial nexus,” the Court today ruled that the “physical presence” rule is not a necessary interpretation of the “substantial nexus” test as decided in Complete Auto Transit, Inc. v. Brady . “Though Quill was wrong on its own terms when it was decided in 1992, since then the Internet revolution has made its earlier error all the more egregious and harmful,” says Justice Kennedy in delivering his opinion of the Court in South Dakota v. Wayfair .

As a basis for their decision, the Supreme Court cited a number of facts to support how the modern-day economy has changed since its 1992 Quill ruling. In 1992, less than 2% of Americans had access to the Internet while today that number is nearly 90%. In 1992, it was estimated that states were losing between $694M and $3B per year in sales tax revenues because of the “physical presence” rule while today the estimates range between $8B to $33B in lost sales tax revenue. Since the U.S. Department of Commerce began tracking e-commerce sales in 1999, those sales have increased from a mere 0.8% of the total U.S. retail sales to 9.4% in the 1 ^st quarter of 2018 . In 2015, Amazon, a remote seller, became the world’s largest retailer by surpassing Wal-Mart.

Furthermore, the Court found that Quill “creates rather than resolves market distortions” by establishing a judicially-created tax shelter or loophole for businesses that limit their physical footprint. With the modern economy and the ease with which online storefronts are able to display and sell products to customers regardless of location, the “physical presence” standard encourages retailers to avoid the regulatory burdens of tax collection and puts in-state businesses at a competitive disadvantage. The “physical presence” rule essentially prevents states from their right to collect sales taxes which would otherwise be lawfully due. This shift to “substantial nexus” enables states to seek fair enforcement of sales taxes which are an indispensable, key source for raising revenue.

Finally, the Court found that the “physical presence” requirement established in Quill “imparts the sort of arbitrary, formalistic distinction” that the Court disavows. The Court illustrates this point by providing an example of two hypothetical situations which would result in different sales tax compliance obligations for the companies in question. In the example, the location of the hypothetical company’s warehouse is the determining factor as to whether it must collect and remit South Dakota sales tax. It goes on to discuss how a company that sells into a state still avails itself of the benefits the state offers even if it has no established physical presence within the state. Examples the Court provides include a solvent state and local government that provides its residents well-maintained public roads and other municipal services such as fire and police protection.

As we documented here during the oral arguments the Supreme Court heard on April 17, 2018, several Justices raised concerns about the burden that would be placed on small businesses if the Court overturned Quill . It seems that the Court resolved this issue in large part because of three key features of South Dakota’s law. First, “[t]he law at issue requires a merchant to collect the tax only if it does a considerable amount of business in the State.” The Court found this threshold key to establishing “substantial nexus” because only companies with a certain level of involvement with the state of South Dakota will be obligated to collect and remit sales tax. Second, “the law is not retroactive.” This means that taxes on previously untaxed sales within the open statute of limitations will not be pursued by the South Dakota Department of Revenue through sales and use tax audits of those prior periods. Some other states including Alabama and Georgia are also on record stating that they will not pursue retroactive taxes, but will only require companies to begin collection on a prospective basis. Third, “South Dakota is a party to the Streamlined Sales and Use Tax Agreement.” The Court found this to be helpful because membership in the Streamlined Sales and Use Tax Agreement (“SSUTA”) requires uniform definitions and taxability of products and services. States that are not members of the SSUTA can have widely varying definitions of terms and taxability of products and services making sales tax compliance an even greater challenge for companies. In short, the Court felt that South Dakota’s law requiring remote sellers to collect and remit sales tax offered small businesses a reasonable degree of protection from an undue burden of sales tax compliance.

As it did in its 1992 Quill decision, the Court invited Congress to “legislate to address these problems if it deems it necessary and fit to do so.” The Court also acknowledged that the current inconsistency of the laws that states have drafted, including Colorado, Massachusetts, New York, and Ohio in contrast to South Dakota, means that a great many issues remain undecided. However, the Court found that “these other issues need not be resolved here.” Regardless, the Court decided today that the era of “physical presence” being the determining factor as to whether a company has nexus in a state has come to an end. Going forward “substantial nexus” will be determinative. How each state will define “substantial nexus” remains to be seen.

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Michigan Real Estate Sales Tax: Determination of Property’s Taxability

Tue, 08 May 2018 14:08:00 GMT

In Michigan sales and use tax law, determining whether an item of tangible personal property remains tangible personal property or becomes a fixture affixed to real estate can significantly affect the taxability of the item in question. This determination may impact whether the taxpayer is considered a retailer or a contractor. There are also several exemptions in Michigan sales and use tax law for purchases of tangible personal property that do not apply if the item is instead a fixture. The Michigan sales and use tax exemptions for both the agricultural industry and the industrial processing or manufacturing industry include such language.

Michigan case law has long held that a three-factor test is applicable in determining whether property remains tangible personal property or becomes part of the realty. As explained in Michigan Revenue Administrative Bulletin 2016-4 from Feb. 1, 2016 the Michigan Department of Treasury acknowledges that it too uses the three-factor test established by the Michigan Supreme Court in Sequist v. Fabiano in making these determinations. In order for an item of tangible personal property to lose its characteristics and be considered a fixture, the item must satisfy all three factors of the test. No single factor alone is determinative.

Michigan Real Estate Sales Tax: 3 Determining Factors

The three factors to determine whether an item is tangible personal property or a fixture attached to real estate are:

Situations where the determination of whether an item is tangible personal property versus a fixture impacts taxability in Michigan:

Retailer vs Contractor

Retailers sell tangible personal property, while contractors install fixtures affixed to realty. If acting as a retailer, the taxpayer may distribute a resale certificate to its suppliers and pay no taxes on the purchase of goods acquired for resale. The retailer must then collect tax on its sales of those goods. If acting as a contractor, Michigan sales or use tax is due on the materials consumed in the project. A contractor should either pay sales tax to its suppliers or self-assess and report use tax on its Michigan sales and use tax compliance returns. A contractor should not collect sales tax from its customers.

Agricultural Industry – Nontaxable Tangible Personal Property vs a Taxable Fixture

Tangible personal property permanently affixed and becoming a structural part of real estate is not eligible for the agricultural producing exemption under Michigan sales and use tax law. A portable grain bin which can be disassembled and moved without significant damage to its parts or a grain bin on wheels would qualify for the exemption while a grain bin that was permanent or immovable would be taxable. Portable feeding troughs, water supply systems and other such movable equipment would qualify for the agricultural producing exemption while barns, fences or subsurface water supply systems that are a structural part of the real estate would be taxable.

Manufacturing Industry – Nontaxable Tangible Personal Property vs a Taxable Fixture

Tangible personal property permanently affixed and becoming a structural part of real estate is not eligible for the industrial processing exemption under Michigan sales and use tax law. An air compressor that is portable would qualify for the exemption while one that was incorporated into the realty as a central building system would be taxable. Ductwork for a piece of equipment would be exempt tangible personal property while ductwork for the building’s heat would be taxable as a fixture. A generator used to power production equipment would qualify for the Michigan sales and use tax exemption for manufacturing while a generator providing power to the building would be taxable as a fixture.

Mixed-use tangible personal property which qualifies for the agricultural producing exemption or the industrial processing or manufacturing exemption may be apportioned to account for the percentage of use in qualifying nontaxable activities. For example, if a manufacturer purchases a transformer that is connected to industrial processing equipment as well as office or administrative equipment such as a copier, then the transformer’s cost can be apportioned for tax purposes according to the percentage of the energy which is consumed by the industrial processing equipment.

It is important to note that this three-factor test applies to determinations of Michigan sales and use tax and should not be used for making ad valorem property tax determinations.

Determine your Michigan Real Estate Sales Tax with Agile Consulting Group

As with all sales and use tax research, the specific circumstances of each case need to be considered. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Michigan sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this issue or any other sales and use tax issue, please contact our sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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Alabama Sales Tax Return Procedures

Mon, 07 May 2018 17:11:00 GMT

The Alabama Department of Revenue has recently changed the way that taxpayers file sales tax refund requests. After recent changes, requesting a sales tax refund for erroneous or overpayments of an Alabama sales tax return has never been easier for taxpayers. Prior to March 8, 2018, a consumer or purchaser could only file for a sales tax refund in Alabama by filing jointly with the seller who collected and remitted the tax to the Alabama Department of Revenue. This required the consumer or purchaser to contact their vendor and procure a signature from an officer of that company before submitting a claim for refund of sales taxes paid on exempt items. This often led to disagreements between the parties as to whether or not Alabama sales taxes were appropriately charged in the first place. If the seller refused to sign the joint petition, the purchaser had no further recourse to pursue the Alabama sales tax return.

Alabama Sales Tax Return Procedures: 2018 Update

Effective March 8, 2018, Alabama Act 2018-180 (S.B. 63) repealed the original requirement that a consumer or purchaser must file for a sales tax refund jointly with the seller and allows the consumer or purchaser to file a sales tax refund claim directly with the Alabama Department of Revenue. Alabama Code 40-2A-7(c)(1) now states, “in the case of a petition for refund for…sales or use taxes pursuant to Chapter 23…a petition may be filed by the consumer/purchaser who paid the tax directly to the taxpayer that collected the tax, or by the taxpayer if the taxpayer remitted in excess of the tax due, however never collected the tax from the consumer/purchaser, or by the taxpayer if the consumer/purchaser paid the tax directly to the taxpayer, provided that a refund shall not be paid to the taxpayer until after the tax has been credited or repaid to the consumer/purchaser by the taxpayer.”

The consumer or purchaser can now complete form ST-6, Petition for Refund of Taxes Paid to Seller , which can be found on the Alabama Department of Revenue’s website. Although the ST-6 form does not need to be signed by an officer of the seller who collected and remitted the taxes, it does still require the seller’s legal name, Alabama sales and use tax account number, and FEIN before the consumer can file the sales tax refund claim with the Alabama Department of Revenue. It is important to note that this law change regarding sales tax refund petitions currently only applies for sales taxes that are administered by the Alabama Sales and Use Tax Division. Local jurisdictions who administer their own taxes may have different rules regarding refund claim filings. Agile’s sales tax consultants assume that these local jurisdictions will eventually revise their procedures to mirror that of the state, however as of May 2018 this has not yet happened.

Statue of Limitations in Alabama

The statute of limitations in Alabama allows the original consumer or purchaser to go back up to three years from the date the tax return was filed to recover overpaid Alabama sales and use taxes. The Alabama Department of Revenue then has six months from the date of the filing to either grant or deny the sales tax refund petition. The taxpayer will be notified via United States Postal Service of the Alabama Department of Revenue’s decision. If the taxpayer is not notified within six months, then the petition has been denied.

If the sales tax refund petition is granted, the taxpayer will receive a refund from the state, county, municipality, or other entity from which the overpayment was distributed, along with interest. If the taxpayer has any outstanding tax liabilities within those taxing jurisdictions, the refund will first go towards payment of that liability, otherwise a refund check will be sent directly to the taxpayer. If the petition is denied, the taxpayer can either file a notice of appeal with the Alabama Tax Tribunal or file a notice of appeal with the Circuit Court in whichever county the purchaser resides. The appeal must be filed within two years from the date the petition was denied. If no appeal is filed within two years of the denied petition, then any subsequent appeal will be dismissed for lack of jurisdiction.

As with all sales and use tax research, the specific circumstances of each case need to be considered. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Alabama sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this issue or any other sales and use tax issue, please contact our sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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Sales Tax Consultant Having Success Recovering Georgia Sales Tax Refunds for Hospitals & Healthcare Industry

Wed, 25 Apr 2018 14:49:00 GMT

Georgia sales tax exemption refunds for healthcare providers, including hospital, clinics, and medical practice groups include several categories of purchases. One Georgia sales tax exemption for healthcare providers that a sales tax consultant from Agile Consulting Group has been recovering a significant amount of refunds for relates to prosthetic devices. Georgia Code Ann. § 48-8-3(54) states that prosthetic devices that are sold or used pursuant to a prescription are exempt from Georgia sales and use tax. Our sales tax consultant has learned that the prosthetic device may be purchased exempt from Georgia sales and use tax by a hospital, clinic, or medical practice group if it is sold or used pursuant to a prescription under federal or state law and title and possession is permanently transferred to a natural person to whom a prescription for the device is issued, per Georgia Comp. Rules & Regulations § 560-12-2-.30(5)(a) .

A prosthetic device is defined in Georgia Comp. Rules & Regulations § 560-12-2-.30(2)(h)(1) as, “a replacement, corrective, or supportive device including repair and replacement parts for the same worn on or in the body to either artificially replace a missing portion of the body; or prevent or correct physical deformity or malfunction; or support a weak or deformed portion of the body.” An item does not need to meet all three of these criteria to qualify as a prosthetic device. As long as the item meets at least one of these criteria, it will qualify for a sales and use tax exemption in Georgia. Some examples of prosthetic devices include:

Additionally, our sales tax consultant has been successful recovering Georgia sales and use tax refunds for most types of wound care dressings as these items have been determined to qualify as prosthetic devices since they alleviate physical incapacity or injury. Some examples of wound care dressings that qualify are bandages, gauze sponges, gauze bandages, splint trapping material, barrier film spray, gel sheets, absorbent pads, packing strips, and closure strips.

In order to claim these Georgia sales tax exemption refunds on future qualifying purchases of prosthetic devices, Georgia healthcare providers must supply their vendors with a valid Georgia sales tax exemption certificate. The proper form that should be completed is the Georgia Streamlined Sales and Use Tax Certificate of Exemption (ST-5 SST). This certificate can be found at the Georgia Department of Revenue website. For healthcare providers who have already paid the Georgia sales tax to their vendors or remitted use tax to the Georgia Department of Revenue on qualifying exempt prosthetic devices, they can complete the ST-12 Claim for Refund form. For sales tax refunds, the applicant must also get an ST-12A Waiver of Vendors Rights for Refund form signed and notarized by each vendor that charged Georgia sales tax. An application for a refund must be submitted within three years from the date of payment. This refund claim form can also be found on the Georgia Department of Revenue website.

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultant can be found on our page summarizing Georgia sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this issue or any other sales and use tax issue, please contact a sales tax consultant at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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Sales and Use Tax Compliance: Ruling in South Dakota vs Wayfair Case Concerns Small Sellers

Fri, 20 Apr 2018 20:45:00 GMT

This past Tuesday April 17th the Supreme Court of the United States heard oral arguments in the case of South Dakota vs Wayfair, Inc. It’s not often that our country’s highest Court hears a case about state sales and use tax. In fact, the last significant sales and use tax case heard by the Supreme Court was Quill Corp. v. North Dakota in 1992 which set the precedent that out of state retailers are not required to register and collect sales and use tax unless they have a physical presence in a state. Obviously, much has changed in the online retail market since that landmark 1992 ruling.

In some ways it was a surprise that South Dakota vs Wayfair, Inc. was taken up by the Court because on its face the South Dakota law appears to clearly contradict Quill . In fact, the South Dakota Legislature acknowledged that the law may be unconstitutional at the time it was drafted. Regardless, the law was enacted, controversy arose and after a rather quick escalation through the state and U.S. Court Systems South Dakota petitioned the Supreme Court with a writ of certiorari in October 2017 . The petition was granted in January 2018. Because the Supreme Court accepted a case that appears to relate to a matter previously decided, much speculation abounds that South Dakota has the advantage and that the Court would like to overturn Quill .

Further support for this line of reasoning can be inferred from Justice’s Gorsuch’s concurrence in a 2016 case regarding Colorado’s requirement for out of state sellers to bear some responsibility for sales and use tax compliance reporting. At the time, Justice Gorsuch was a Judge at the U.S. Court of Appeals for the Tenth Circuit in Denver, CO. Additionally, the position taken by Justice Kennedy in his 2015 concurring opinion in denying the writ of certiorari in Direct Marketing Association v. Brohl clearly demonstrates his support to reconsider Quill noting the “changes in technology and consumer sophistication” which have taken place since 1992.

This past Tuesday there was much concern expressed by the Supreme Court Justices about “small sellers” and the sales and use tax compliance burden that may be placed on them if Quill were to be overturned. Much of the concern relates to whether the Wayfair ruling would be prospective or retroactive. South Dakota ceded ten of its thirty allotted minutes before the Court to Malcolm L. Stewart, Deputy Solicitor General for the U.S. When asked by the Court, Mr. Stewart left no doubt that in his mind the ruling would have to be retroactive. All businesses that currently sell to out of state markets and are relying on Quill’s physical presence test shudder at what this could mean for them financially.

The Court seems to be aware of this potential financial pitfall for businesses that would all of a sudden find themselves out of compliance with sales and use tax reporting requirements. Some Justices appear to feel that the problems of sales and use tax registration and ongoing sales and use tax compliance reporting would be solved in the marketplace by entrepreneurs through software or additional service offerings. Other Justices appear concerned about the potential for states and other jurisdictions to go back and try and recoup as much money as possible from businesses that previously had no requirement to report sales and use tax.

While it appears that the final decision is too close to call at this time, the discussion from the Courtroom this past Tuesday was very interesting. A ruling is expected near the end of June 2018.

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North Carolina Sales Tax Exemptions for Manufacturers

Fri, 23 Feb 2018 18:56:00 GMT

North Carolina sales and use tax law provides an exemption for sales of mill machinery, machinery parts and manufacturing accessories, however these items are subject to a 1% privilege tax with a maximum tax of $80 per article until June 30, 2018. The 1% privilege tax has been repealed effective June 30, 2018 by Senate Bill 257 from the 2017 Legislative Session. Beginning July 1, 2018 purchases of qualifying mill machinery, machinery parts and manufacturing accessories will be exempt from both North Carolina sales and use tax as well as the privilege tax.

The repeal of the 1% privilege tax, originally found in NC Gen. Stat. § 105-187.51 , was nearly prevented by Governor Roy Cooper’s veto of Senate Bill 257 on June 27, 2017. Governor Cooper cited budget concerns as his primary reason for vetoing the bill. However, the North Carolina Legislature voted on June 28, 2017 to override Governor Cooper’s veto and the bill was enacted.

In order to receive the have vendors or suppliers charge the reduced 1% privilege tax rather than the full North Carolina sales and use tax rate for periods prior to July 1, 2018 a qualifying manufacturer must supply their vendor with a Streamlined Sales and Use Tax Agreement Certificate of Exemption ( North Carolina Sales and Use Tax Form E-595E ). The same privilege tax rate is available to contractors and subcontractors in certain situations as well, and they may also use this form.

What is Mill Machinery?

The term “Mill Machinery” refers to the following items sold to manufacturers for use in the manufacturing process:

Motors for the production process along with their controls, connectors and repair parts
Engines and generators
Pumps for use in the industrial process
Moistening or humidifying equipment used for the conditioning of materials for processing
Boiler room machinery
Material handling equipment
Hand tools
Metal and wood cutting accessories
Quality control devices
Equipment cleaning devices, i.e. air compressors, steam hoses, etc.
Marking devices for ingredients in the production process
Explosives used in mining and quarrying as part of the production process
Packaging equipment
Pollution abatement equipment
Employee safety clothing worn to protect the quality of the manufactured product
Fuel consumed in production

Regarding the $80 cap on items subject to the 1% privilege tax, a person buying articles should not treat the articles as one whole unit capped at $80 when the working unit is comprised of multiple articles combined to make a functional unit or operating system. Each individual article purchased is subject to its own $80 cap.

Conversely, one single article that has to be shipped in multiple parts due to size or that must be disassembled for shipping purposes is still considered one article and the privilege tax would be capped at $80 on that item.

North Carolina Sales Tax Exemptions for Manufacturers

Beginning July 1, 2018 sales of the equipment listed below will be 100% exempt from both North Carolina sales and use tax as well as the privilege tax:

Fuel, piped natural gas or electricity consumed by a manufacturer in the operation of a manufacturing facility is exempt from North Carolina sales and use tax. For periods up to December 31, 2016 this exemption extended to fuel and piped natural gas used for comfort and heating of the facility. Effective January 1, 2017 fuel and piped natural gas not used in the manufacturing process is subject to the full North Carolina sales and use tax rate .

The statute of limitations for recovering North Carolina sales and use tax paid in error allows manufacturers to go back 36 months (3 years) from the date of the purchase. North Carolina will only issue sales tax refunds directly to the entity that paid the tax. Therefore manufactures must request a credit or check from their vendors who originally collected the sales tax. Once the vendor has the appropriate North Carolina sales tax exemptions certificate they can amend their sales and use tax returns and issue a sales tax refund to the manufacturer. For any use tax overpayments, the vendor may apply directly with the North Carolina Department of Revenue.

Navigate Sales and Use Tax with Agile Consulting Group

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing North Carolina sales tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact an Agile Consulting sales tax consultant at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

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7 Benefits of Sales Tax Compliance Outsourcing

Fri, 17 Nov 2017 22:29:00 GMT

There are a variety of reasons it makes sense for companies to look for assistance with sales tax compliance outsourcing . Fast growth which makes keeping up with ongoing compliance requirements a challenge, turnover in key positions or an unfavorable audit experience resulting in significant liabilities are a few of the possible reasons we have heard from our clients. Regardless of the reason, many companies are making the decision to look for outside assistance with their sales tax compliance. We explore the key benefits of opting for sales tax compliance outsourcing services.

7 Benefits of Sales Tax Compliance Outsourcing

#1. Focus In-House Efforts on Higher Leverage Initiatives

Sales tax compliance is the monthly treadmill that continues on in perpetuity. It can consume up to two weeks of an in-house staff’s time each month. Without the ongoing burden of sales tax compliance in-house staff and management can instead spend their time and resources working on more complex issues, revenue generating projects or proactive tax planning – activities which directly contribute to improved bottom line results.

#2. Reduce Costs

Cost reduction is an issue at the forefront of all well-run companies’ collective minds. Savings can come in a number of forms such as reduction in staffing and overhead, elimination of sales tax compliance training after turnover, and elimination of payment errors and late filing penalties to name a few.

#3. Streamline the Sales Tax Compliance Process

Companies who have made the transition to outsourced sales tax compliance have been shocked at the ease and simplicity of the new process in comparison to performing this function in-house. Companies can merely provide the data and allow your sales tax consulting firm’s experts to take it from there.

A number of our clients have even taken the additional step to set us up with remote access enabling us to pull the necessary data ourselves. By selecting the right sales tax consulting firm as your partner your company’s sales tax compliance function can transition from a burden to a breeze.

#4. Improve Accuracy and Consistency

Returns will be filed with accuracy with all the right figures getting into all the right fields on each return. Has the tax rate for a jurisdiction you report to changed? That’s a worry you’ll no longer have.

Your sales tax compliance outsourcing partner should provide you with a clear audit trail including quick and easy access to all sales tax returns, payment vouchers, backup work papers and other important documents related to your sales tax compliance.

#5. Know with Certainty That All Filing Deadlines Will Be Met

Returns will be filed on time. Some states such as Florida require tax returns to be filed prior the 20th of each month, which means when that date falls over a weekend or a national banking holiday that taxpayers must file early. The state of Washington requires monthly filers to submit their sales and use tax returns by the 25th day of each month while quarterly filers are required to submit their returns by the 30th day. These are all headaches which are eliminated with outsourced sales tax compliance.

#6. Minimize Sales Tax Audit Risk

Returns filed correctly and on time will result in fewer state sales tax audits because incorrectly or late filed returns are red flags to state and local taxing authorities. In the unfortunate event you are audited, have confidence that you have built-in complementary audit support as part of the sales tax compliance outsourcing agreement you have in place with your partner sales tax consulting firm.

#7. Leverage Your Sales Tax Consulting Firm’s Experience

Sales tax compliance is often merely the “tip of the iceberg” of the services provided by sales tax consulting firms. Nexus determinations, sales tax research, audit defense and representation, sales tax reverse audits and recovery reviews, and registering in new states or local home rule jurisdictions are just some other sales tax services that robust sales tax consulting firms offer. Working with an experienced, tax professional means that they will know the answers to your sales tax compliance questions.

Sales Tax Compliance Outsourcing with Agile

Only looking for help with preparing and filing your returns? Agile Consulting Group can do that for you. Looking for a more comprehensive sales tax compliance solution that will also evaluate your monthly accounts payable invoices to determine which transactions should be subject to use tax? We help a number of our clients in this way as well. If you’re considering outsourcing your company’s sales tax compliance function, make a call to us to see if we are the right solution for you.

The post 7 Benefits of Sales Tax Compliance Outsourcing appeared first on Agile Consulting Group .

Louisiana Medical Tax Exemption for Medical Devices

Thu, 09 Nov 2017 20:47:00 GMT

Louisiana sales tax exemptions for medical devices purchased by hospitals and health care facilities provide an opportunity for both Louisiana sales and use tax savings at the state tax rate of 5%. This Louisiana sales tax exemption applies to medical devices that are required to be issued under a physician’s prescription and are used personally and exclusively by a single patient.

Louisiana Medical Tax Exemptions: Prescription-Required Single-Use Medical Devices

Louisiana Rev. Stat. Ann. 47:305(D)(1)(s) states that “solely for purposes of the state sales and use tax, any and all medical devices used exclusively by the patient in the medical treatment of various diseases or administered exclusively to the patient by a physician, nurse, or other health care professional or health care facility in the medical treatment of various diseases under the supervision of and prescribed by a licensed physician” is specifically exempted from tax imposed by taxing authorities. These devices were exempt from the state rate of 4% through March 31, 2016.

The devices then became taxable at the state rate of 5% from April 1, 2016 through June 30, 2016 and then transitioned to being subject to a reduced state rate of 3% from July 1, 2016 through June 30, 2017. Effective July 1, 2017, this Louisiana sales tax exemption provides a complete exemption from taxation for these medical devices at the current state rate of 5%.

What Qualifies for A Louisiana Sales Tax Exemption?

The most effective way to determine if a medical purchase qualifies for this Louisiana sales tax exemption is to review the product label for the item in question. The FDA’s product labeling requirements necessitate that all medical device product labels must contain either symbols or statements that assures that the devices are used safely and effectively.

Designating Your Device with Single-Use Intention

To designate that a device is prescription-required the label most frequently includes the symbol. Alternatively, the product label may contain the following statement to indicate that a device is prescription required, “ Caution: Federal law restricts this device to sale by or on the order of a physician, dentist, or other licensed practitioner .”

The symbol most frequently used to indicate that a device is intended for use on a single patient appears as . Again, similar to the prescription requirement notice, there is an alternative statement that may be used to convey the single patient use message. The product label may instead contain one of the following two statements, “ For single patient use only ” or “ Do not reuse, this is a single use device .” On the rare occasion, when the product label does not contain the relevant symbols or statements, then the device’s Instructions for Use (“IFU”) that comes with most medical purchases will contain these symbols or statements.

Louisiana Sales Tax Exemptions for Medical Devices: Vendors and Distributors

Vendors and distributors making sales of these prescription-required, single-use items are often still charging tax to their customers. However, if the purchaser provides the vendor or distributor with the appropriate Louisiana sales tax exemption certificate R-1041 , the seller will stop charging sales tax on future purchases of medical devices that are prescription-required and single-use. This certificate may be found on the Louisiana Department of Revenue’s website. If sales tax has already been paid to vendors or distributors, or is remitted directly to the Louisiana Department of Revenue on a taxpayer’s own sales and use tax returns, the purchaser can apply for a sales and use tax refund from the Louisiana Department of Revenue.

As with all Sales & Use Tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Louisiana sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or any other Sales & Use Tax issue, please contact our sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

The post Louisiana Sales Tax Exemption for Medical Devices appeared first on Agile Consulting Group .

California Sales Tax Exemption for Manufacturing & Equipment

Thu, 09 Nov 2017 19:34:00 GMT

Last Updated: May 27, 2025

Beginning July 1, 2014 manufacturers in California are eligible for a partial exemption from state sales and use tax. This California sales tax exemption for manufacturing and research and development machinery and equipment reduces the state sales tax by 4.1875% from July 1, 2014 through December 31, 2016. From January 1, 2017 through June 30, 2022 the state sales tax rate is reduced by 3.9375%.

California Sales Tax Exemption for Manufacturing: Qualifying for the Exemption

In order to qualify for this exemption the “qualified tangible personal property” must be purchased or leased by a “qualified person” and used in one of four ways:

for manufacturing, processing, refining, fabrication, or recycling

for research and development

for maintaining, repairing, or measuring said property

or as a special purpose building

This California sales tax exemption for manufacturing provided in CA Rev. & Tax. Code 6377.1 includes “qualified tangible personal property” such as machinery and equipment, devices or software that help to run the equipment, pollution control devices, and special purpose buildings that are integral to the manufacturing process or are used for research. It does not include consumables with a useful life of less than one year, equipment used to store finished products that have completed the manufacturing process, or property used over 50% of the time in administration, general management, or marketing.

In addition to the California sales tax exemption for manufacturing, this exemption also extends to purchases of machinery and equipment used in research and development (“R&D”).

“Qualified person” means a company that is primarily engaged in those lines of business described in Codes 3111 to 3399, 541711, or 541712 of the North American Industry Classification System (NAICS) published by the United States Office of Management and Budget (OMB), 2012 edition.

What Does the Exemption Exclude?

This California sales tax exemption for manufacturing does not apply to any tangible personal property purchased within a single calendar year that surpasses $200M. It also does not include property that within one year from the date of purchase is removed from California or becomes used in a manner that is not exempt from sales and use tax.

Claiming the California Sales Tax Exemption for Manufacturing, R&D, and Equipment

In order to claim this exemption, California manufacturers must supply their vendors with a valid exemption certificate. This certificate can be found at the California Department of Tax and Fee Administration (CDTFA) website. The California Department of Tax and Fee Administration was born out of the July 1, 2017 restructuring of the State Board of Equalization. This restructuring split the State Board of Equalization into three separate entities to guarantee impartiality, equity, and efficiency in tax appeals, protect civil service employees, ensure fair tax collection statewide, and uphold the California Taxpayers’ Bill of Rights.

Once the vendor has the exemption certificate they can file a claim for refund for the overpaid portion of sales and use tax on your behalf up to the statute of limitations of 36 months. The California Department of Tax and Fee Administration prefers that vendors receiving customers’ partial exemption certificates claim the refund in the form of a deduction on their sales and use tax return under Section D. The vendor should issue the purchaser a credit for the sales tax paid in error and amend their California sales and use tax returns as instructed. For more detailed information about how to complete the return, please see the BOE-401-INST pages 10 & 14 .

If the transaction was subject to use tax, the purchaser may file a claim directly with the BOE.

Get Expert Guidance on California Sales Tax Exemptions Today!

As with all Sales & Use Tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing California sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or any other Sales & Use Tax issue, please contact our sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

The post California Sales Tax Exemption for Manufacturing and R&D Machinery and Equipment appeared first on Agile Consulting Group .

South Carolina Sales Tax Exemption for Drugs Paid for via Medicare Part A

Mon, 07 Aug 2017 19:24:00 GMT

South Carolina sales tax law provides an exemption for drugs dispensed to Medicare Part A patients residing in nursing homes. Facilities that were clearly organized exclusively as “nursing homes” have long claimed this exemption, however, the South Carolina Department of Revenue had failed to grant or extend this exemption to those facilities with more complex operations. In reality, many facilities have different segments or divisions that interact with patients in varied ways, including providing skilled nursing services. Many facilities organized in this manner have a portion of their total bedcount dedicated to providing these skilled nursing services. As a result of arguments presented by Agile Consulting Group in mid-2017, facilities organized in this multifaceted manner are now able to reap the benefit provided under this South Carolina sales tax exemption.

This particular South Carolina sales tax exemption is provided in SC Code Ann. §12-36-2120(28)(f) which states that “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.” This establishes a limited exemption for qualifying health care facilities because under South Carolina’s definition of “retail sale” the facilities are generally considered the consumers of the property they purchase and furnish to their patients as part of the health services rendered. See SC Code Ann. §12-36-110(1)(i) for South Carolina’s definition of the terms “retail sale” or “sale at retail” for healthcare entities.

The challenge Agile had to overcome was that the South Carolina sales tax statutes and regulations do not define the term “nursing home.” In the absence of a clear definition, the South Carolina Department of Revenue was reluctant to extend this exemption to facilities that carried registrations as hospitals or other health facilities. Agile argued that the South Carolina Department of Health and Environmental Control, also known as DHEC, who is the single entity responsible for the permitting and licensing of healthcare facilities within the state, should use the long-standing, preexisting standards already in place to determine which facilities qualified as “nursing homes.” Agile believed that the aforementioned South Carolina sales tax exemption should be granted to any facility that had received a valid license from DHEC to operate as a nursing home regardless of what other designations the facility may have.

After some deliberation and a reasonable compromise, the South Carolina Department of Revenue agreed to Agile’s proposal. The upshot of this victory is that many facilities who would not consider themselves to be traditional “nursing homes” can now qualify for this beneficial South Carolina sales tax exemption. The only caveat made by the South Carolina Department of Revenue is that the facility must be able to track the drug consumption to the portion of the facility licensed by DHEC as a nursing home. In other words, if the facility has a total of 100 beds and only 35 of them are licensed as nursing home beds then the exemption for drugs dispensed to Medicare Part A patients residing in a nursing home would be limited to those 35 beds, not extended across the entire facility’s footprint.

The DHEC nursing home licenses are issued on an annual basis and there are a number of guidelines which must be met for a facility to receive a valid license as a nursing home. The South Carolina nursing home guidelines and applications can be found online at DHEC’s website.

As with all Sales & Use Tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing South Carolina sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering about this issue or any other Sales & Use Tax issue, please contact us at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

The post South Carolina Sales Tax Exemption for Drugs Paid for via Medicare Part A appeared first on Agile Consulting Group .

Appeal of Louisiana BTA’s Ruling Regarding Sales Tax on Commercial, Non-Highway Fuel

Mon, 07 Aug 2017 16:40:00 GMT

Louisiana’s Board of Tax Appeals signed a Judgment on May 10th denying Agile’s refund claim for Louisiana sales and use tax per Louisiana Revised Statutes Section 47:301(10)(x) .

Appeal Fuels Sales Tax in Louisiana

On May 18th, Agile filed a Motion for Suspensive Appeal. Agile is pursuing an exemption for purchases of fuel including: jet fuel, aviation gasoline (avgas), off-road or dyed diesel, CNG, LNG, propane, butane, welding gases including oxygen, acetylene, etc.

In a related note on June 26th, Act 424 was signed into law by Governor Edwards. This Act amends the language in the section of the Statutes we had cited as the exemption for fuel. The revised law specifies that the exemption is now only for residential fuels. This strengthens our argument based on prior case law because it is a tacit admission that the “old” statute did not limit the exemption to residential fuel purchases.

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Agile Victorious in Ruling: South Carolina Exemption for Drugs Paid for by Medicare Part A

Mon, 07 Aug 2017 16:40:00 GMT

Agile Consulting has won its argument with the South Carolina Department of Revenue regarding whether hospitals and Long-Term Acute Care (“LTAC”) facilities can qualify for the South Carolina sales tax exemption for drugs paid for by patients with Medicare A coverage. Provided that the facility has a license as a skilled nursing facility, then it is properly licensed as a “nursing home” and is entitled to claim the benefit of the exemption provided in SC Code Ann. §12-36-2120(28)(f) . The certification required is issued on an annual basis by the SC Department of Health & Environmental Control and states the maximum licensed capacity of nursing home beds the facility is allowed to maintain and operate. Some facilities may only have a portion of the facility licensed in this manner. In cases such as that the drug purchases will need to be bifurcated and apportioned to only include Medicare A drugs within the nursing home portion of the facility.

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Virginia Bulk Medical Purchases Exemption for Hospitals

Mon, 07 Aug 2017 16:40:00 GMT

Virginia has long held the position that bulk purchases of prosthetic devices, orthopedic appliances, catheters, urinary accessories, and other durable medical equipment and devices are subject to sales & use tax because they were not “purchased on behalf of an individual.” Agile has filed a formal appeal of that interpretation.

The post Agile Challenges Virginia’s Exclusion of Bulk Medical Purchases from the Exemption Available to Hospitals appeared first on Agile Consulting Group .

Texas Comptroller to Issue Position Letter: Qualifying Orthopedic Purchases by Sept. 2017

Mon, 07 Aug 2017 16:39:00 GMT

May’s redetermination hearings on several of Agile’s hospital files concluded without any shift in the Comptroller’s position of what qualifies as exempt orthopedic purchases per the landmark Zimmer court ruling from 2012. Agile believes the Comptroller has taken too narrow of an interpretation of these purchases and has filed Statement of Grounds supporting our position that arthroscopes and other tools & instruments for orthopedic surgeries should be sales tax exempt. Comptroller Assistant General Counsel Jon Ross has been assigned and he has promised to deliver his initial Position Letter by early Sept.

The post Texas Comptroller to Issue Position Letter: Qualifying Orthopedic Purchases by Sept. 2017 appeared first on Agile Consulting Group .

Minnesota Sales Tax Exemption for Capital Equipment Now Valid at Time of Purchase

Mon, 07 Aug 2017 15:57:00 GMT

On July 1, 2015 Minnesota sales & use tax law changed to provide taxpayers with an upfront sales tax exemption on eligible capital equipment purchases. To claim this Minnesota sales tax exemption at the time of purchase, taxpayers should present a fully executed Minnesota sales tax exemption certificate . If Minnesota sales tax is paid at the time of purchase, taxpayers may still submit subsequent refund requests. Note that purchases of qualifying capital equipment made before July 1, 2015 are eligible for Minnesota sales tax refunds as well as long as they are within the 42-month open statute of limitations allowed under Minnesota’s sales & use tax law.

Minnesota Sales Tax Exemption Definitions

Minnesota sales tax law defines “capital equipment” as machinery or equipment that is bought or leased in Minnesota and used by the purchaser or lessee primarily for manufacturing, fabricating, mining or refining tangible personal property to be sold at retail. The machinery and equipment in question must be essential to the integrated production process.

The “integrated production process” is defined as the process or series of actions that result in the production of a product which will ultimately be sold at retail. The production process begins with the removal of raw materials from inventory and ends when the last process prior to loading for shipment has been completed.

Examples of activities that the Minnesota Department of Revenue considers to be part of the integrated production process are:

Minnesota provides taxpayers with a number of helpful, informative write-ups to help explain their sales & use tax exemptions including Minnesota Sales Tax Fact Sheet 103 about the capital equipment exemption. In that document, a comprehensive list of examples of qualifying machinery and equipment are provided. Some of the most commonly overlooked categories of qualifying machinery and equipment our sales tax consultants find in our reviews include:

The capital equipment must be used by the purchaser or lessee in order to qualify for the Minnesota sales tax exemption. However, if a manufacturer buys equipment and contracts with another party to use the equipment to produce the manufacturer’s product, the manufacturer can claim the exemption if there is a formal written agreement between the two parties. Also, if a contractor buys and installs equipment as an improvement to real property they are considered the purchaser, but ultimate user of the machinery and equipment may appoint a contractor or other person as an agent to buy capital equipment on its behalf.

Capital equipment v. capitalized assets. The term “capital equipment” is not the same as capitalized assets. Items capitalized for accounting purposes do not automatically qualify as capital equipment. Items that are expensed for accounting purposes, such as leased equipment, may be considered capital equipment.

In order to claim the capital equipment exemption on purchases on or after July 1, 2015 purchasers must give the supplier a completed ST3 form and a certificate of exemption with the reason “capital equipment.” In order to get a refund for Minnesota sales and use tax paid before July 1, 2015 purchasers must file a ST11 form and amend their tax returns for the allotted periods. Purchasers can also use the ST11 form to request a refund for tax paid in error after July 1, 2015. Purchasers may file no more than two capital equipment refund requests in a calendar year. A refund request must be filed within three and one half years or within 42 months from the 20th day of the month following the invoice date or within one year of the date of an order assessing liability, whichever is longer.

As with all Sales & Use Tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Minnesota sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or any other Sales & Use Tax issue, please contact us at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

The post Minnesota Sales Tax Exemption for Capital Equipment Now Valid at Time of Purchase appeared first on Agile Consulting Group .

Absorbable Medicine Tax Exemptions for Hospitals in Alabama

Fri, 28 Apr 2017 21:22:00 GMT

The state of Alabama is relatively limited when it comes to providing sales and use tax exemptions for medical purchases made by hospitals and health care facilities. However, there is an Alabama sales and use tax exemption available for medicines and other substances consumed by the body. The extent of the applicability for this sales and use tax exemption was clarified in Alabama Revenue Ruling 2012-002 , issued on 10/24/2012.

Alabama Code § 40-23-4.1(b) provides a sales and use tax exemption on, “medicines prescribed by physicians for human consumption or intake that are filled by licensed pharmacists or sold to the patient by a physician.” This Alabama sales and use tax exemption applies to, “medicines purchased by hospitals, infirmaries, sanitariums, nursing homes, medical clinics and physicians for use or consumption in rendering medical services to patients and sales of exempt medicines are exempt regardless of whether they are diagnostic in nature or they are used in preventing, treating or mitigating diseases.”

Absorbable Medicine Tax Exemptions: Defining the Term "Medicine"

While Alabama Code § 40-23-4.1(b) states that a sales and use tax exemption exists for medicines prescribed for human consumption or intake purchased by hospitals in the rendering of medical services to patients, the code did not clearly define the term medicine. Since there is no statutory definition for medicine provided in the Alabama revenue code, the word must be given its normal, generally accepted meaning.

The Oxford English Dictionary defines the term medicine as “a substance or preparation used in the treatment of illness; a drug; esp. one taken by mouth. The Black’s Law Dictionary defines medicine as “a substance intended for use in the diagnosis, cure, treatment, or prevention of a disease.” In Alcon Laboratories v. State of Alabama, Docket S. 06-910 , the court defined medicine as “an agent, such as a drug, used to treat disease or injury” and defined drug as “a substance used in the diagnosis, treatment or prevention of a disease.”

The Taxability of Different Materials

Alabama Revenue Ruling 2012-002 discusses the taxability of two products composed of different materials and whether either product can be considered a “medicine” thus qualifying for Alabama’s sales and use tax exemption for medicines purchased by hospitals or health care facilities. One of the products (Product X) is composed of calcium phosphate and collagen with the intended use to provide scaffold that supports bone remodeling. The other product (Product Y) is composed of recombinant human platelet-derived growth factor and beta-tricalcium phosphate with an intended use that is similar to Product X.

While both products are used to support bone growth, Product Y is composed of materials that are gradually absorbed and consumed by the body and replaced by bone. Product X is composed of materials that are merely providing a surface for bone growth and its properties are not changed within the body to promote absorption. Since Product Y is ultimately consumed by the body, it is considered a medicine under Alabama Code § 40-23-4.1(b).

Filing a Refund Claim

Most vendors making sales of these types of items are either not aware of this exemption, have not researched whether all products in their portfolio may qualify or do not have the capability in their tax systems to distinguish between absorbable and non-absorbable items. Consequently, vendors are generally still charging Alabama sales and use tax to their customers on absorbable items that would qualify for this exemption. Furthermore, the state of Alabama does not provide a sales and use tax exemption certificate that hospitals can issue to their vendors to stop charging sales and use tax on these items.

Purchasers of items that qualify for Alabama sales and use tax exemptions can file a refund claim to recover sales taxes already paid with the Alabama Department of Revenue and other local jurisdictions within the 36-month statute of limitations. If the tax was paid to the vendor, the purchaser must submit a Joint Petition for sales tax refund form , which needs to be signed for the purchaser and an officer of the vendor company. If the tax was accrued by the purchaser, then they can file a Direct Petition for use tax refund form without any consent from the vendor.

As with all Sales & Use Tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Alabama sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering about this issue or any other Sales & Use Tax issue, please contact us at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .

The post Absorbable Medicines Purchased by Hospitals Exempt from Alabama Sales and Use Tax appeared first on Agile Consulting Group .

Tax Exemption for Hospitals: Texas Orthopedic Appliances & Devices Exemption

Wed, 01 Feb 2017 22:32:00 GMT

In the state of Texas orthopedic devices and appliances are considered to be exempt from Texas sales and use tax based on the definition of the term “orthopedic appliance” from Rule 3.284 , which interprets Texas Tax Code Sec. 151.313 . As a result of the Zimmer court ruling in 2012 and the subsequent Texas Policy Letter Ruling #201304668L dated April 1, 2013 the TX Comptroller’s office provided guidance about the types of purchases that would qualify based on the Court’s ruling.

Our firm has filed refunds for a number of Texas hospitals and surgery centers based on this landmark ruling. In the 2012-2015 window of time the Texas Comptroller’s Office was honoring the exemption based on the Court’s guidance. From our experience beginning in 2016, Texas Comptroller’s Office has again taken a more limiting interpretation of these purchases. For example, we’ve had arthroscopes denied from refund claims because the Texas Comptroller’s Office has taken the position that those are merely to enable the surgeons to see into the joint to conduct repairs and that the arthroscope itself therefore is not an orthopedic device. Another example is that tools and instruments for rotator cuff surgeries have been deemed to not be exempt as orthopedic devices because those surgeries are not on the skeletal structure of the human body.

We believe that these examples are inconsistent with the intent of the language provided in the statutes. Agile Consulting Group has filed appeals for these and other denied items and are awaiting dates and times for redetermination hearings.

The post Texas Orthopedic Appliances & Devices Exemption appeared first on Agile Consulting Group .

Louisiana Road Use Tax: Commercial Non-Highway Fuel Exemption

Wed, 01 Feb 2017 22:22:00 GMT

Agile Consulting is appealing the Louisiana Department of Revenue’s application of sales and use tax on fuel taxed under the sales & use tax code based upon the language provided in Louisiana Revised Statutes Section 47:301(10)(x) . Examples of fuel covered under this Section of the law includes: jet fuel, aviation gasoline (avgas), off-road or dyed diesel, CNG, LNG, propane, butane, welding gases including oxygen, acetylene, etc.

We originally had a preliminary hearing scheduled before the Board of Tax Appeals on January 10, 2017 however; a continuance was issued which has rescheduled that hearing to March 7, 2017. We are fully prepared to present our argument against the Louisiana Department of Revenue’s position on this date and hope to have the matter resolved in our favor.

The post Louisiana Commercial Non-Highway Fuel Exemption appeared first on Agile Consulting Group .

California Proposition 30 Results: Statewide Sales Tax Decrease

Wed, 01 Feb 2017 21:54:00 GMT

Following California's proposition 30 results, residents will see statewide sales and use tax decrease from 7.5% to 7.25% beginning January 1, 2017.

The post California Sales Tax Rate Decrease appeared first on Agile Consulting Group .

New Jersey Sales Tax Rate Decrease

Wed, 01 Feb 2017 21:52:00 GMT

New Jersey sales and use tax has decreased from 7% to 6.875% beginning January 1, 2017. It will drop again to 6.625% starting January 1, 2018.

The post New Jersey Sales Tax Rate Decrease appeared first on Agile Consulting Group .

Texas Sales Tax Exemption on Rental Equipment

Sat, 12 Nov 2016 14:23:00 GMT

In the Texas equipment rental with operator exemption is only exempt from Sales & Use Tax under very specific circumstances. The state of Texas draws the line for this distinction based upon which type of property the equipment is working. Equipment rental with operator transactions are only exempt if the property that the work is being performed on is exempt tangible personal property.

The Rule relating to lease or rental of equipment with an operator, Texas Rule §3.294(c) reads as follows:

RULE §3.294 – Rental and Lease of Tangible Personal Property

(1) Receipts from the lease of tangible personal property without an operator are taxable.

(2) The furnishing of tangible personal property with an operator for which a single charge is made to the customer shall be presumed to be the performance of a service and no tax may be charged to the customer, unless the service is taxable under other provisions of the Tax Code, Chapter 151.

Sales or use taxes will be due on the original purchase price of the tangible personal property.

(A) The presumption set forth in subsection (c)(2) of this section may not be rebutted solely by one party to the transaction. The presumption may be rebutted by the following criteria which establish a lease of tangible personal property:

(i) the customer exercised direct control or supervision over the operator of the tangible personal property; and

(ii) the intent of the agreement was to lease a piece of tangible personal property and separately furnish an operator.

(B) If it is established that a lessor who made a single charge to customers did in fact make a lease of tangible personal property, the tax will be due on the fair market rental value of the tangible personal property. If this cannot be determined, the tax will be due on the total charge reduced by the charge attributable to the operator determined from lessor’s records. If the charge for the operator cannot be determined from the lessor’s records or if it seems unreasonable, the comptroller will make a determination of a reasonable operator charge.

(3) A transaction in which tangible personal property is furnished with an operator, and the customer is charged separately for tangible personal property and operator, shall be presumed to be the lease of tangible personal property and the separate furnishing of an operator; the receipts from the separate charge for the tangible personal property are taxable. The separate charge for the operator will not be taxable unless a taxable service is being provided.

(A) If a nontaxable service is being provided and it is established that the separate charge for the lease of tangible personal property is lower than the tangible personal property’s fair market rental value, sales tax will be assessed on the fair market rental value unless the lessor presents convincing evidence to the comptroller as to why the rental charge should be lower than fair market rental value.

(B) If it is established that a lessor who separated charges for tangible personal property and operator nevertheless used the tangible personal property to perform a service, sales tax will be assessed on the fair market rental value if the property was purchased under a valid resale certificate. See subsection (j) of this section.

The type of property is a factor in determining taxability because of the phrase, “unless the service is taxable under other provisions of the Tax Code, Chapter 151.” Texas Tax Code, Chapter 151 states that the following are taxable services:

(5) the repair, remodeling, maintenance, and restoration of tangible personal property, except:

(A) aircraft;

(B) a ship, boat, or other vessel, other than:

(i) a taxable boat or motor as defined by Section 160.001;

(ii) a sports fishing boat; or

(iii) any other vessel used for pleasure;

(D) the repair, maintenance, creation and restoration of a computer program, including its development and modification, not sold by the person performing the repair, maintenance, creation, or restoration service;

(11) real property services;

(13) real property repair and remodeling;

As a result, the exemption available for equipment rental with operator is quite restrictive. Examples of exempt tangible personal property include commercial ships, boats and vessels; or railcars and locomotives. For example, if you were renting a crane with an operator provided to re-rail a locomotive and railcars after a derailment, the rental of that equipment with an operator would be exempt. However, if that same crane was performing work on real property such as the tracks and roadbed on which the train travels, the transaction would be taxable.

As with all Sales & Use Tax research, the specifics of each case need to be considered when determining taxability. Agile Consulting Group’s sales tax consultants can be found on our page summarizing Texas sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or any other Sales & Use Tax issue, please contact us at (888) 350-4TAX or (888) 350-4829 or via email at info@salesandusetax.com .

Citations

Texas Rule §3.294

Texas Tax Code, Chapter § 151.0101

The post Texas Sales Tax Exemption on Rental Equipment appeared first on Agile Consulting Group .

Connecticut Manufacturing Sales Tax Exemption for Machinery

Sat, 12 Nov 2016 13:51:00 GMT

In accordance with Connecticut Agencies Regulations 12-412(34)-1 and Connecticut General Statutes 12-412(34), Connecticut offers a broad exemption for machinery used directly in a manufacturing production process.

For the purposes of this exemption, a business must substantially alter raw or finished materials into a product possessing new characteristics in order to be considered a manufacturer. Additionally, the production process must result in a good or product that is intended for resale. The following are guidelines in determining whether a process qualifies as manufacturing under the Connecticut manufacturing machinery exemption.

Connecticut Manufacturing Machinery Exemption

Key Considerations

A key concept in the application of the Connecticut manufacturing machinery exemption is “direct use.” Machinery and equipment that qualify for the Connecticut manufacturing machinery exemption must be used directly in the manufacturing production process. “Direct use” is determined by the following principles:

Businesses that qualify for this exemption can request a refund from the state of Connecticut for sales tax paid in error. Labor is generally taxable, only purchases of tangible personal property will qualify for this exemption. Additional industry specific exemptions are also available.

Why Choose Agile Consulting?

As with all Sales & Use Tax research, the specifics of each case need to be considered when determining taxability. Agile Consulting Group’s sales tax consultants can be found on our page summarizing Connecticut sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or any other Sales & Use Tax issue, please contact us at (888) 350-4TAX or (888) 350-4829 or via email at info@salesandusetax.com .

Citations:

Connecticut Agencies Regulations 12-412(34)-1

Connecticut General Statutes 12-412(34)

The post Connecticut Manufacturing Sales Tax Exemption for Machinery appeared first on Agile Consulting Group .