Internet Sales Taxes and Remote Sellers

internet shopperInternet Sales Taxes

The United States Supreme Court ruled in South Dakota v. Wayfair on June 21, 2018, that states can require remote sellers to collect and remit sales tax on items delivered to locations within their state regardless of physical presence.

Remote Sellers

If you sell to a state, but do not have a physical presence in that state, you are now a Remote Seller.  As a remote seller, you will need to check with each state to determine if you are required to register in that state.

Who-What-Where-When-Why

Registration requirements, small business exemptions, effective dates, and other factors all vary by state.  Some states have not published their rulings yet; and other states don’t have plans to implement a ruling in the near future.

The following chart will be updated regularly as new information becomes available.  It is not legal advice, but it is an informative reference with links to the departments of revenues and their publications on the topic.

STATE$ Gross Receipts
Limit
# Retail Sales
Transactions
EFFECTIVE DATEMember of SSTRS?
Department of Revenue Links
Alabama$250,000October 1, 2018NoAL DOR Announement
Colorado$100,000200December 1, 2018No
Connecticut$250,000200December 1, 2018NoCT DOR Announcement
Georgia$250,000200January 1, 2019YesGA Requirements
Hawaii$100,000200July 1, 2018NoHI DOR Announcement
Indiana$100,000200October 1, 2018YesIN DOR Tax Bulletin
Iowa$100,000200January 1, 2019YesIA DOR Announement
Kentucky$100,000200July 1, 2018YesKY Ruling FAQs
Maine$100,000200July 1, 2018NoME Help for Remote Sellers
Maryland$100,000200October 1, 2018NoMD DOR Tax Alert
Massachusetts$500,000100October 1, 2017NoMA DOR rule has been in effect since 2017
Michigan$100,000200October 1, 2018YesMI DOR Document
Minnesota$100,000100October 1, 2018YesMN Bulletin for Remote Sellers
Mississippi$250,000September 1, 2018YesMS DOR Guidance for Online Sellers
Nebraska$100,000200January 1, 2019YesNE DOR News Bulletin
New Jersey$100,000200October 1, 2018YesNJ DOR Notice for Remote Sellers
North Carolina$100,000200November 1, 2018YesNC DOR Directive
North Dakota$100,000200October 1, 2018YesND DOR
Pennsylvania$10,000March 1, 2018NoPA DOR
Rhode Island$100,000200YesRI DOR FAQs for Remote Sellers
South Dakota$100,000200October 1, 2018 NoSD DOR Remote Seller Law
Vermont$100,000200July 1, 2018YesVT DOR
Washington$100,000200October 1, 2018YesWA DOR
Wisconsin$100,000200October 1, 2018YesWI DOR FAQs
Wyoming$100,000200Date TBDYesWY DOR Page

We Have The Tax Rates

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Use this handy comparison chart to match our services to your needs.  Then give us a call, email or Chat!

 

 

Sales Tax Holidays for 2018

Sales Tax Holidays

Sales Tax Holidays

STATEITEMS INCLUDED / MAXIMUM COSTMONTHDAYSLink to MORE DETAILS
AlabamaHurricane Preparedness
Generators - $1,000
Supplies - $60
February23-25Alabama Department of Revenue
AlabamaBack to School
Clothing - $100
Computers - $750
School Supplies - $50
Books - $30
July20-22Alabama Department of Revenue
ArkansasBack to School
Clothing - $100
School Supplies
August4-5Arkansas Department of Revenue
ConnecticutBack to School
Clothing and Footwear - $100
August19-25Connecticut Department of Revenue
FloridaDisaster Preparedness
Generators - $750
Other Supplies - $50
June1 - 7http://floridarevenue.com/
FloridaBack to School
Clothing - $60
School Supplies - $50
August3 - 5http://floridarevenue.com/
IowaBack to School
Clothing - $100
August3 - 4Iowa Department of Revenue
LouisianaAnnual Sales Tax Holiday
All TPP - $2,500
August3 - 4 Louisiana Department of Revenue
LouisianaHurricane Preparedness
Supplies - first $1,50(2% rate reduction)
May26 - 27Louisiana Department of Revenue
LouisianaFirearms
Ammunition
Hunting Supplies
September7 - 9Louisiana Department of Revenue
MarylandEnergy Star ProductsFebruary17 - 18Maryland Department of Revenue
MarylandBack to School
Clothing and Footwear - $100
August12 - 18Maryland Department of Revenue
MississippiBack to School
Clothing and Footwear - $100
July27 - 28Mississippi Department of Revenue
MississippiFirearms
Ammunition
Hunting supplies
August / Sept31 - Sept 2Mississippi Department of Revenue
MissouriEnergy Star Products - $1,500April19 - 25Missouri Department of Revenue
MissouriBack to School
Clothing - $100
Computers - $1,500
School Supplies - $50
August3 - 5Missouri Department of Revenue
New MexicoBack to School
Clothing - $100
Computers - $1,000
Computer Equipment - $500
School Supplies - $30
August3-5New Mexico Department of Revenue
OhioBack to School
Clothing - $75
School Supplies - $20
August3-5https://www.tax.ohio.gov/
OklahomaBack to School
Clothing - $100
August3-5http://www.tax.ok.gov/
South CarolinaBack to School
Clothing
School Supplies
Computers
Other
August3-5South Carolina Department of Revenue
TennesseeBack to School
Clothing - $100
School Supplies - $100
Computers - $1,500
July27-29Tennessee Department of Revenue
TexasHurricane Preparedness
Generators - $3,000
Storm devices - $300
Preparedness items - $75
April28-30Texas Department of Revenue
TexasEnergy Star Products
Air conditioners - $6,000
Other - $2,000
May26-28Texas Department of Revenue
TexasBack to School
Clothing, backpacks and school supplies - $100
August10-12Texas Department of Revenue
VirginiaBack to School
Clothing - $100
School Supplies - $20
Energy Star Products - $2,500
Hurricane preparedness items - $60
Generators - $1,000
August3-5Virginia Department of Revenue
WisconsinBack to School
Clothing, Supplies - $75
Computer Supplies - $250
Computers - $750
August 1-5https://www.revenue.wi.gov/

For further tax holiday information check out this article.

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

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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