| Zip2Tax News Blog

Lucinda

Lucinda Rowlands has been the general manager at Zip2Tax since 2010. She has extensively researched sales and use tax regulations in order to help small businesses navigate complicated tax rules. Lucinda's Google Profile

North Carolina Senate unveils plan to reduce sales tax rate but expand sales tax base

Field Notes No Responses »

May 132013

This past week Republicans in the North Carolina Senate released a plan to revamp the state’s tax code. This new plan slightly reduces the sales tax rate across the state while also expanding the tax base by removing many sales tax exemptions.

Right now, consumers pay a combined state and local sales tax rate of 6.75% in most North Carolina counties. This bill would lower the total rate to 6.5 percent. However, more sales would be taxable. Right now, North Carolina only charges sales taxes on about 30 services. This bill would add another 100 or so to the taxable list. Services like repairs, haircuts, legal services, and window cleaning would all become taxable under this new law.

In addition, this bill removes the sales tax exemption for groceries, prescription drugs, and insulin. Republicans believe that by adding new transactions to the taxable base, they would bring in hundreds in millions of dollars of new annual revenues while creating a fairer tax code.

The Republicans want to use this extra money to finance cuts in the North Carolina’s income and corporate tax rates as well as to completely remove the state’s estate tax.

Democrats argue that this new tax code reduces taxes for the wealthy while raising them for the lower and middle class. Republicans believe it would not, as they point out low income residents receive government benefits that are tax free.

This is still just a proposal and the Republicans won’t have the exact plan finalized until late May or early June. North Carolina GOP leaders expect that a new tax code will be in place by the end of the year.

Maine lawmakers considering raising and expanding sales taxes

Field Notes No Responses »

May 132013

On May 1^st, a bipartisan group of Maine lawmakers released a plan to both raise and expand sales taxes in the state. These extra revenues would be used to reduce the state income tax rate and provide tax relief to Maine homeowners.

Under this new law, Maine would raise its sales tax from 5 to 6 percent. It would also expand the taxable base to more services and products. Items like groceries, haircuts, cooking and heating oil, and funeral services would all become taxable. Nearly all consumer purchases would be taxed under this law, with a few exceptions for education and healthcare purchases.

In exchange, this bill would cut the state’s maximum income tax rate for individuals down from 8 to 4 percent. It lowers the corporate tax rate down from 8.93 percent to 7.5 percent and removes Maine’s estate tax. This bill also raises the state’s homestead exemption from $10,000 to $50,000 so Maine homeowners would owe less in property taxes.

Lawmakers will review this bill extensively over the next few weeks until the current legislative session ends in June. Republican Gov. Paul LePage is unenthusiastic about this new plan, so lawmakers need to win him over before any changes will go into effect.

How to file a sales tax return

Helpful Guides, Tax Specialist No Responses »

May 132013

As a business owner, it is your responsibility to collect sales taxes from your customers and submit the money to the appropriate state(s) along with a sales tax return. To avoid audit problems and penalties, you need to make sure you file your return according to each state’s rules and filing schedule. While each state has a slightly different process, here are some general guidelines that can give you an idea of what to expect.

Filing frequency

Every state has different rules for when and how often you need to file your sales tax returns. It is common to see an annual, quarterly, or monthly filing frequency. Generally, the more money your business collects in revenues, the more often you have to file a sales tax return.

For example, in New York there are three filing periods: annually, quarterly, and monthly. Businesses that owe less than $3,000 a year in sales taxes can file annually during the period of March 1^st through February 28^th, February 29^th on leap years. Businesses that make less than $300,000 of sales that are subject to sales taxes need to file quarterly whereas a business that has more than $500,000 in annual sales taxable revenues needs to file monthly. Even if you don’t owe any sales taxes for a given period, you still need to file your return.

E-filing

Most states allow business owners to submit their sales tax returns electronically. This is actually a requirement in many states to save time and money. There are a few exceptions when a business needs to file a paper return. For example, in California you can’t e-file if you are submitting an amended return, if your business is registered to a permanent location but you are making sales from another temporary location, or if you are reporting on a schedule other than Schedule A, B,C, E, or G. The vast majority of business owners will e-file though.

Late filing penalties

If you don’t file your sales tax return on time, you may owe extra money as a penalty. Some states don’t charge a penalty if you are late with your return, but you don’t owe any money in sales taxes. However, if you do owe taxes, the state will penalize your late return.

For example, if you are late with your sales tax return in North Carolina, the state will charge an extra 5% per month up to a maximum 25% as a failure to file penalty as well as another 10% as a failure to pay penalty. In addition, the state will charge interest on your unpaid balance.

Since each state has its own unique process, it is always a good idea to review your state’s sales tax filing process with a tax professional to make sure your business is in compliance. This way, you can avoid costly filing mistakes.

David Rodeck

Oregon lawmakers discuss state sales tax

Field Notes No Responses »

Apr 262013

Oregon Governor John Kitzhaber hasn’t said whether he supports or opposes the proposed state sales tax in one of just five remaining states without a sales tax.

Oregon is currently one of only five states without a sales tax. This may change though with upcoming legislation. On April 15th, Oregon lawmakers held a hearing to discuss whether the state should add a 5 % sales tax on most goods and services. As written, this proposal would exclude a few items like food and medicine.

Oregon Governor John Kitzhaber didn’t give a clear opinion on where he stands on this new sales tax. He admits that Oregon needs to revise its current tax system and that a sales tax could be part of a solution. However, he also commented that he is looking at other financing alternatives.

This bill is still under discussion by Oregon legislators. However, a vote could go to the Oregon public later this year to decide whether or not the state should add a sales tax.

Temporary Kansas sales tax may become permanent

Field Notes No Responses »

Apr 262013

Kansas Gov. Sam Brownback is pushing to keep a temporary sales tax to help fund schools.

Nearly three years ago, Kansas temporarily increased its sales tax to 6.3 percent up from 5.7 percent. This tax increase is set to expire this July 1st. Governor Sam Brownback is now pushing to keep this tax increase permanent to help Kansas fund its public school system.

Kansas is currently facing a school financing lawsuit in the Kansas Supreme Court. If the state loses this case, it will need to increase K-12 per student funding by 17%. Brownback argues that Kansas needs higher sales taxes to prepare for this extra cost. He also believes the state needs more sales taxes to balance the budget.

Kansas lawmakers from both parties are reluctant to increase the sales tax rate. Democrats argue that the budget shortfall came from Brownback cutting income taxes. They worry that Brownback would use the extra sales tax revenue as an excuse to further reduce income taxes. Republicans would rather see more budget cuts instead of increasing sales taxes.

If no agreement is reached by July 1st, Kansas will return to its 5.7 percent tax rate.

Desktop widget version 1.2 released

Zip2Tax Company News No Responses »

Apr 262013

Download the Zip2Tax desktop widget today and get instant tax rates without having to open your internet browser.

We’ve made a few more upgrades to our desktop widget that allows subscribers to look up sales and use tax rates from their computer’s desktop.

1) Bug fix: corrects inproper rounding off to two digits when calculating dollar amounts by tax rate with more than two decimal places.

2) Allows use with all three subscription levels: ZIP Code, ZIP+4, and PinPoint. Remember, the widget only provides results by ZIP code, not the full street address.

To upgrade, just go to your control panel and uninstall the old Zip2Tax widget. Then follow the instructions to download and install the updated version.

Thanks for growing with us!

Lucinda Rowlands

The taxability of warranty repairs

Helpful Guides No Responses »

Apr 162013

As a vendor, it is your job to collect sales taxes according to state laws. This can seem a bit confusing for a service like warranty repairs that is sold and delivered at different times. If your business handles repairs in multiple states, these transactions can be even more confusing because of nexus rules. Fortunately, the sales tax laws for warranty repairs are relatively consistent.

Sales taxes for warranty repairs

Warranty repairs are subject to sales tax and will probably create nexus for your business if you perform the repairs across state borders.

The time to collect sales taxes is when you sell a warranty repair contract to a customer. Later, when the customer comes in for a repair covered under the warranty, you don’t charge sales taxes. However, if the customer must pay a deductible as part of the contract, you need to charge sales taxes on the deductible.

If you don’t handle the repairs yourself but pass them off to a third-party, the third-party should charge you sales taxes on the repair. Since you’re reselling the repair to the customer, you’ll get a sales tax exemption on this transaction.

Determining your nexus for warranty repairs

Generally, you need to collect sales taxes in any state where your company has nexus, which is a connection or tie to the area. In the past, this meant having a physical location in a state. Today, this definition has been expanded quite a bit.

Regarding warranty repairs, most states consider just the act of providing warranty repairs within that state as enough to create nexus. This means that you generally need to collect and file sales taxes for every single state that your company provides warranty repairs in.

Exceptions

A few states have exceptions to the standard nexus rules for warranty repairs. In Arizona, your repairs only create a nexus if you have an employee in the state for more than two days. In California, you don’t create nexus if you hire an independent third party to handle your repairs in the state.

Utah considers your business to have nexus if you “regularly perform repairs” in the state. Since this is open to interpretation, you may want to contact the Utah Department of Revenue to see if your repair activity is enough to create nexus.

Besides these few exceptions, your business has a nexus anywhere it performs warranty repairs. Be sure to register your business with those states and collect appropriate sales taxes on all qualifying transactions so your business stays in compliance with state law.

David Rodeck

The basics of exemption certificate validity periods

Helpful Guides, Sales Tax Exemptions No Responses »

Apr 102013

As a vendor, there are a number of times when you can make sales without charging sales tax. Before you can make these transactions, you need to have a valid exemption certificate from the purchaser. Each state has different rules for the validity periods of its exemption certificates. It’s your responsibility to keep track of these rules to avoid having your exemption certificates expire.

Types of exempt sales

Each state exempts different types of transactions from sales taxes. Generally, states waive sales taxes when the purchaser plans on reselling the item; the state will just collect taxes on this later sale.

Each state also exempts taxes on various categories of purchases. It is common to see purchases for agricultural, construction, or manufacturing purposes have eligibility for a sales tax exemption. Lastly, certain organizations, like non-profits, are also eligible to make tax-exempt purchases. Each category of exemption uses a different exemption certificate that you need to keep on file.

Renewing

Scheduling the renewal of an exemption certificate can be quite confusing. Some states set a definite expiration date for their exemption certificates. For example, in Illinois and Nevada, a certificate expires in five years. This makes renewing fairly straightforward, just follow the timeline. Other states list a specific event that would cause an exemption certificate to expire. In Tennessee, an exemption certificate is valid until a business changes its status or character.
Where exemption certificates start to get complicated is when they don’t have a set date or situation that causes the certificate to expire. Since most states have the ability to revoke certificates at their discretion, it’s important to have a system to store and update your certificates regularly.

When state regulation is vague and doesn’t tell you specifically what to do, you generally need to make a judgment call. You need to decide how frequently to renew your certificates. The more often you renew, the better prepared you would be for an audit.

Tracking exemption certificate validity periods

If you make tax-exempt sales, you must keep your records up-to-date for all your exemption certificates. Be sure to keep track of every customer that uses an exemption certificate and list whether their certificate has a definite expiration date. For states that have a set expiration date, make sure to renew by that time. For states that don’t require a set expiration date, set a renewal date according to the schedule you decided was appropriate.

Keeping track of your exemption certificate validity periods is a bit of a hassle, but you’ll be thankful you did when your next audit comes around. By maintaining accurate records, you’ll be able to continue making tax-exempt sales without running into problems.

David Rodeck

Monitor your Online Lookup usage

Zip2Tax Company News No Responses »

Mar 282013

Log in to your account and you can now see your Online Lookup usage for each day. You can also see what ZIP codes were looked up and what IP address the request was sent from.

See who, when and where your lookups are being used.

Zip2Tax has added functionality to allow Online Lookup subscribers to have access to see their account usage details. Now you can instantly see how many lookups you made each day, which ZIP codes were looked up, and what IP address the requests came from.

The IP address can help you ensure that no unauthorized users have compromised your account. If you suspect that someone is using your account without authorization, just give us a phone call and we can reset your username and password.

To access this information, just log in to your account and go to My Account/Lookup Usage.

If you have multiple users with individual log-ins, each user’s lookups will appear individually.

We are working to make this service available to Database Interface subscribers and we will notify everyone when that is ready for release.

Please call us toll-free at 866-492-8494 or e-mail us if you have any questions or concerns.

Thank you for growing with us!

Lucinda Rowlands

Tennessee exemption certificate authentication

Field Notes No Responses »

Feb 182013

The Tennessee Department of Revenue has made it easier for merchants to verify the sales tax exempt status before a transaction has been completed. They are offering an online search at their web site, www.TN.gov/revenue, to verify the status of exemption certificates by typing in the account number and selecting the type of certificate.

The vendor is still held responsible to maintain a valid copy of the certificate for their files as this online verification keeps all business details private.Certificates of resale, nonprofit exemption certificates, and agricultural exemption certificates can be verified using this site.

Other types of exemptions may be verified by contacting the department of revenue’s contact center at 800-342-1003 (toll-free within Tennessee) or 615-253-600 (Nashville and out-of-state) from 7:00am-5:00pm, Central time, Monday through Friday, excluding holidays.

Charles F. Spielmann

Older Entries