Are Pumpkins Tax Exempt in the Fall?

pumpkins

In three states, Pumpkins Are Exempt from Sales Tax…Unless They’re For Carving.

Sometimes, sales tax laws just don’t seem to make sense. Like, who in Indiana thought it was so important to make a distinction between marshmallows and marshmallow creme?  Well, in Indiana, you’ll have to pay sales tax on your marshmallows, but your marshmallow creme gets off tax-free.

Pumpkins are exempt from sales tax in Iowa, Pennsylvania, and New Jersey, but only if the pumpkins are for food rather than jack-o-lanterns.  Sounds like someone likes Thanksgiving more than Halloween!

To check out more weird tax laws click here.

10 weirdest sales tax laws pumpkins from zip2tax

Tax Changes for September 2017

Tax Changes for September 2017

Tax Rate Changes for September 2017

Only two states have tax changes for September 2017.

Sales Tax Rate changes in West Virginia

Tax rates changes were noted in Wayne and Wardensville counties effective September 1, 2017.

Find more information on West Virginia Sales Tax Rates:

West Virginia Sales Tax Rates 

September Sales Tax Rate Changes in Alabama

In the State of Alabama tax rate changes in September include the counties of Allgood and Greenville.

For the latest sales tax rates by state, visit our interactive sales tax rates by state page.

Find more information on Alabama Sales Tax Rates:

Alabama Sales Tax Rates 

ZIP Code Changes by State

There were 8 states with ZIP code changes effective after August 2017. These states with ZIP code changes include Colorado, Florida, Georgia, Illinois, Minnesota, Ohio, Puerto Rico and Texas.

Tax Rate Changes for September 2017

Sales Tax Calculator & Software

To easily calculate sales tax rates by state for your business, visit Zip2Tax.com.  Let Zip2Tax be the tax specialist for your company, freeing you to concentrate on what you are good at – growing your business.

For August’s changes click here.

In the State of Alabama tax rate changes in September include the counties of Allgood and Greenville.

State Sales Tax Holidays in 2017

Tax Holidays in 2017

Tax Holidays in 2017

STATEITEMS INCLUDED / MAXIMUM COSTMONTHDAYSLink to MORE DETAILS
AlabamaHurricane Preparedness
Generators - $1,000
Supplies - $60
February24 - 26Alabama Department of Revenue
AlabamaBack to School
Clothing - $100
Computers - $750
School Supplies - $50
Books - $30
August4 - 6Alabama Department of Revenue
ArkansasBack to School
Clothing - $100
School Supplies
August5 - 6Arkansas Department of Revenue
ConnecticutBack to School
Clothing and Footwear - $100
August20 - 26Connecticut Department of Revenue
IowaBack to School
Clothing - $100
August4 - 5Iowa Department of Revenue
LouisianaAnnual Sales Tax Holiday - $2,500
(2% rate reduction)
August4 - 5Louisiana Department of Revenue
LouisianaHurricane Preparedness - $1,500May27 - 29 Louisiana Department of Revenue
LouisianaFirearms
Ammunition
Hunting Supplies
(2% rate reduction)
September1 - 3Louisiana Department of Revenue
MarylandEnergy Star ProductsFebruary18 - 20Maryland Department of Revenue
MarylandBack to School
Clothing and Footwear - $100
August13 - 19Maryland Department of Revenue
MississippiBack to School
Clothing and Footwear - $100
July28 - 29Mississippi Department of Revenue
MississippiFirearms
Ammunition
Hunting supplies
August25 - 27Mississippi Department of Revenue
MissouriEnergy Star Products - $1,500April19 - 25Missouri Department of Revenue
MissouriBack to School
Clothing - $100
Computers - $1,500
School Supplies - $50
August4 - 6Missouri Department of Revenue
New MexicoBack to School
Clothing - $100
Computers - $1,000
Computer Equipment - $500
School Supplies - $30
August4 - 6New Mexico Department of Revenue
South CarolinaBack to School
Clothing
School Supplies
Computers
Other
August4 - 6South Carolina Department of Revenue
TennesseeBack to School
Clothing - $100
School Supplies - $100
Computers - $1,500
July28 - 30Tennessee Department of Revenue
TexasHurricane Preparedness
Generators - $3,000
Storm devices - 300
Preparedness items - $75
April22 - 24Texas Department of Revenue
TexasEnergy Star Products
Air conditioners - $6,000
Other - $2,000
May27 - 29Texas Department of Revenue
TexasBack to School
Clothing, backpacks and school supplies - $100
August11 - 13Texas Department of Revenue
VirginiaBack to School
Clothing - $100
School Supplies - $20
Energy Star Products - $2,500
Hurricane preparedness items - $60
Generators - $1,000
August4 - 6Virginia Department of Revenue

For further tax holiday information check out this article.

Virtual Currency: Subject to Sales Tax or Not?

Subject to Sales Tax or Not

What is virtual currency? Is it subject to income tax? Is it subject to sales tax? Is it currency? What is it?

Bitcoin

We started talking about Bitcoin a few years ago (first launched in 2009) and how techies were getting rich with it. My question was, what is it and how can you get rich with it? Then, since my world revolves around indirect taxes, I began to wonder if its purchases were subject to sales and use tax. But first I had to understand the basics.

Virtual Currency 101

Bitcoin is a decentralized digital currency through peer-to-peer computer networks, mathematically generated for mining of virtual currency. Bitcoin was initially set up with a limit, which is still in place today, to the amount available for mining (funding) to prohibit devaluation of those already in circulation. Bitcoin was the leader of the process and now there are many followers: Litecoin, Darkcoin, Peercoin, Dogecoin, and Primecoin to name a few.

The prebitcoin-transactionmise of virtual currency is through digital wallets on your computer or mobile phone allowing you to transfer funds to and from other wallet holders. The transaction is included in the block chain – a shared public ledger – with a private key used to sign the transaction, then mined to confirm the transaction. Virtual currency can be bought and sold in return for traditional currency and goods and services.

IRS Definition

The IRS determined that virtual currency is not a real currency with legal tender status, but considered property (IRS Notice 2014-21, 3/25/2014). As of now, no country accepts virtual currency as legal tender; therefore, general tax principles apply to virtual currency same as property transactions. Wages paid by virtual currency is subject to income and payroll taxes at the fair market value and reported on Form W-2.  Goods and services purchased or sold for virtual currencies are considered gross income at fair market value.

Sales Taxes

The Merriam-Webster Dictionary definition of sales tax is “a tax levied on the sale of goods and services that is usually calculated as a percentage of the purchase price and collected by the seller”. Virtual currency is considered a barter or exchange transaction for goods or services. The value of the transaction is the retailers or service providers selling price.

Many states are grappling with providing regulations and rules for taxing virtual currency transactions. In New York, purchases of goods or services with virtual currency must have the sales tax in US dollars separately listed on the sales slip or invoice. Wisconsin computes sales tax on the value of consideration by the seller in US dollars. The state of Washington subjects virtual currency transactions to sales and use tax as well as the retailing Business and Occupational tax, in US dollar values.

States are determining purchases with virtual currency do not change the tax classification of the bitcoin-taxpurchase. States are adopting the notion of paralleling virtual currency transactions to barters or exchanges for sales and use tax purposes. The measure of tax is on the amount of the sale in US dollars, regardless to any fluctuation in the virtual currency value. Record keeping of virtual currency transactions should be the same as legal tender transactions.

What this means for retailers or service providers accepting virtual currency –the retailer must either collect sales tax on taxable transactions or the purchaser is liable for the use tax. Under audit, the retailer will most likely be held responsible for non-collection. The sales tax should not be recorded in virtual currency value, but in US dollar values. The same liabilities and penalties will apply to virtual currency transactions as to legal tender transactions if they are not handled properly.

Bottom Line

The calculation of virtual currency is not easy to understand or to use. More retailers and service providers are accepting virtual currency for payment. Hotel rooms, online purchases, sports event purchases are becoming more popular among a certain technical population.

Remember:

  • Purchases of goods and services with virtual currency are generally subject to applicable sales and use tax rules at the fair market value of the purchase.
  • The purchase of virtual currency is generally non-taxable and considered a purchase of intangible property.

Questions still at large, at federal and state levels:

  • Regulations and licensing for virtual currency transactions
  • Foreign monetary issues
  • Income taxes are still vague
Laura_Hoffman_photo

Laura Hoffman

Services – The New Sales Tax Target

services

services target

The new year comes with new attempts to expand the sales tax base. Services are on the dart board!

Cities, counties, and states need funds to maintain and enhance their infrastructures and provide much needed services to their citizens. One area that has been a hotbed over the past years is the inclusion of services to sales tax bases. Traditionally, services have not been subject to sales tax since no tangible personal property is provided. However, our business model has changed from a production model to a service provider model. Today, more and more business is in the service sector and the possible sales tax revenues from those businesses are appealing to taxing authorities to increase revenues.

Some states have already included many services into their sales taxability matrices. Hawaii, New Mexico, West Virginia and South Dakota tax most, if not all, services. Still some states have tried to pass legislation to tax various services, only to receive backlash so harsh, they had to repeal or remove the attempts.

2017 will most likely see more attempts to expand the definition of services, as well as inclusion into taxability matrices.

Services generally fall into five main categories. How a state defines each category can determine how that state determines taxing or trying to tax that category. The five main service categories are Services to Tangible Personal Property, Services to Real Property, Business/Professional Services, Personal Services, and Bundled Services. Each definition within these categories can affect if the services provided could become subject to sales tax or not.

Services to Tangible Personal Property:

These include services to tangible personal property (“TPP”), which include repairs, installation, maintenance, inspection and upkeep of TPP. Generally, most states will not tax these services if separately stated on the invoice. The TPP is taxable therefore the theory could be that the service provided is secondary to the purchase of the TPP.

Services to Real Property:

This category becomes trickier. These are the trade services such as electrical, plumbing, heating and air conditioning, painting, brickwork and roofing. Most of the time, these services will fall under a construction tax category and depending on the state and how the invoice is presented will determine the taxability or who is liable for the tax. Many states tax the materials and not the actual “service/labor”, others will tax the prime contractor or the subcontractor. This is a category that is subject to taxability expansion over the year(s). Arizona is currently trying to figure out its new construction tax classification by expanding the tax base through new definitions of prime and sub contractors.

Business/Professional Services:

Accounting, advertising, consulting, computer, security, medical, engineering, data processing and staffing services are some of the components in this category. Many states already tax many business/professional services: Connecticut, Washington DC, Hawaii, Iowa, New Mexico, New York, Ohio, South Dakota, Texas and West Virginia. Some states differentiate business service from professional service by requiring specific educational, licensing or certification designations. In today’s world, these can be done remotely creating a problem for sourcing the actual taxable service. The consumer rarely receives any type of substantial TPP of material value.

Personal Services:

The services comprising this category generally are based on personal consumption to an individual and not a business. Services included here include photography, hair salons and barber shops, tanning, cleaning, landscaping, hunting and fishing guides, bookkeeping and dance lessons. Personal services seem to attract attempts at taxation, yet have managed to keep out of the taxable base in almost all states. States receive major push back when attempts are made to inclusion into the tax base; although, some states such as Iowa taxes many personal service businesses.

Bundled Services:

This category includes contracts or invoices that include taxable and nontaxable items together at a single price, sometimes called lump sum contracts. Most common are warranty and maintenance contracts. There is no distinction between retail and labor or service on the invoice. Generally, this becomes 100% taxable since it is all-inclusive, although some states will only charge partial tax to the bundled/lump sum to account for tax previously paid on materials by the contractor.

yoga servicesSome of the new and broader based services getting subject to sales taxes are interesting. With the popularity of fitness and wellness services comes inclusion into sales tax base. A hot debate has been around for Yoga instruction. Depending on where the instruction is held, the purpose of instruction, and the state may determine whether or not it is taxable. Fitness and health facilities generally are subject to sales tax in many states. That may explain why membership fees are high.

On-line travel services are another hot bed under scrutiny for inclusion into sales tax bases. Many states are going after on-line travel service companies to subject booking service fees to sales tax. Montana won its battle in charging sales tax on hotel and car rental booking fees to on-line travel companies. The real issue is the difference between the rate charged by the on-line travel service and the commercial rate by the hotel or car agency. The difference is the amount currently not subject to sales tax by most states, but that may be changing very soon.

The bottom line: Most think services are considered a labor endeavor and therefore not subject to sales tax. That is no longer true. With the amount of on-line and remote business transactions today, it is logical that tax authorities want to tax those services as their revenues from manufacturing and tangible products deteriorate.

Stay tuned and alert to see the changes. The cost of that next hair cut could be increased to include sales tax.

For further information check out this article.

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Laura Hoffman is an Indirect Tax Specialist living in Las Vegas, Nevada. Laura retired from a multi-state natural gas distribution company after specializing in sales & use taxes, franchise fees, business licensing, property taxes, excise and utility taxes for over 15 years. 

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