Sales tax rate changes for September 2015

sales tax rate changes

Sales tax rate changes for September include two states: Alabama and New York; along with Zip code changes in 12 states in Zip2Tax products since August 2015.

In Alabama, tax rates changed for Midway.

In New York, tax rates changed for Yonkers.

There were 12 states with ZIP code changes effective after August 2015 including Alaska, Arizona, DC, Florida, Illinois, Massachusetts, Michigan, North Carolina, North Dakota, Ohio, South Carolina and Virginia. A PDF document enumerating ZIP code additions and deletions can be made available upon request.

For August’s changes click here.

Angel Downs, Zip2Tax's ead tax researcher

Angel Downs, Zip2Tax’s lead tax researcher

Feminine hygiene (tampon tax) sales tax exemption debated

“Tampon tax” on feminine hygiene necessities called unfair

tampon taxStarting July 1, Canada will exempt products “marketed exclusively for feminine hygiene purposes” from the federal government’s 5% goods and services tax (GST). Members of Canada’s Parliament had lobbied Prime Minister Stephen Harper’s government for years to abolish what they deemed an unfair “tampon tax” that discriminated against women. On May 25, the government responded by presenting a motion to Parliament to formally exclude “sanitary napkins, tampons, sanitary belts, menstrual cups or other similar products” from the GST. Parliament unanimously approved the motion on June 1. Subsequently, at least one Canadian province, Newfoundland and Labrador, announced plans to exempt feminine hygiene products from its provincial sales tax, which is currently 8% and scheduled to rise to 10% next year.

Fighting tampon taxes in the United States and around the world

According to a June 3 article by Taryn Hillin for the website Fusion, only five U.S. states  – Maryland,Massachusetts>, Pennsylvania, Minnesota and New Jersey – specifically exempt feminine hygiene products from state sales tax. Although most states exempt “necessities” such as toiletry and health care items from sales tax, the majority do not classify tampons as such. But as Hillin observed, “feminine hygiene products are not a choice; they’re a required part of being a woman.”

Canada’s recent action may spur some U.S. states to reconsider their own “tampon taxes.” For instance, on May 21, >New York Assemblyman David I. Weprin introduced a bill to exempt all feminine hygiene products from sales tax, which is as high as 8.875% in some parts of the state. It is unlikely, however, the full legislature will act upon the bill before the scheduled end of its session later this month.

The movement to abolish the “tampon tax” has also spread outside of North America. Joe Hockey, the Treasurer for Australia’s federal government, said in a May 25 interview he would support exempting feminine hygiene products from the country’s 10% goods and services tax. But Hockey’s boss, Prime Minister Tony Abbott, later said his government had no plans to push for an exemption at this time, adding GST rules are largely determined by the individual Australian states.

Meanwhile, in the United Kingdom, Prime Minister David Cameron said last April he would support exempting feminine hygiene products from the country’s goods and services tax, but his government could not do so unilaterally because of European Union regulations, which sets a minimum 5% tax on “sanitary products.”

S.M. Oliva is a writer living in Charlottesville, Virginia. He edits the international legal blog PrivyCouncil.info

Should you charge sales tax on shipping?

Sales tax on shipping

Whether or not you should charge sales tax on shipping charges depends on several factors

Shipping charges may be exempt from sales tax if some or all of the following apply:

  1. Delivery by common carrier or USPS
  2. Charges stated separately and not bundled with other charges such as handling
  3. Shipping charges are not included in the price of the item
  4. Purchased items are tax exempt
  5. If shipment includes both exempt and taxable property the seller should allocate the delivery charge and tax the non-exempt portion.
  6. Charges paid by purchaser
  7. Delivery and billing by independent contractor who is not the seller and paid by the purchaser
  8. Delivery charges are optional
  9. Delivery is separately contracted
  10. Items delivered outside the state
  11. Retailer is engaged in a separate delivery business
  12. Shipment is made direct to the purchaser
  13. Shipment occurs after title passes to purchaser

 

Taxability of shipping rules by state

Some states apply sales tax on shipping based on the shipping agreement in relation to the item’s transfer of title to the purchaser while others treat shipping as a non-taxable service if contracted for independently. Some states try to merge these two approaches thereby creating a patchwork of regulations and opaque rules.

While not a fail-safe approach, here are a few best practices to improve your company’s chances of avoiding having to collect sales tax on shipping: Have the buyer pay the freight charges; bill the transportation charges separately following the sale; pass the title to the purchaser before shipping; and use a common carrier or the US mail.

Following is a list of the basic tax on shipping rules for each state and a few of their most general exceptions and caveats.

Refer to the numbered exemptions listed above

Alabama – Shipping is not taxable in Alabama (AL) if 1 and 2.

Arizona – Shipping is not taxable in Arizona (AZ) if 2.

Arkansas – Shipping is taxable in Arkansas (AR).

California – Shipping is not taxable in California (CA) if 1, 2, 7 or 13.

Colorado – Some shipping is taxable in Colorado (CO) except if 2, 3 and 8; certain localities may tax all shipping.

Connecticut – Shipping is taxable in Connecticut (CT) except 4.

District of Columbia – Some shipping is taxable in the District of Columbia (DC) except when 2 and 13.

Florida – Some shipping is taxable in Florida (FL) except when 2 and 8 or 2 and 13.

Georgia – Shipping is taxable in Georgia (GA) with certain exceptions.

Hawaii – Shipping is taxable in Hawaii (HI) except 10.

Idaho – Shipping is not taxable in Idaho (ID) if 2.

Illinois – Some shipping is not taxable in Illinois (IL) if 9.

Indiana – Shipping is taxable in Indiana (IN) but 5.

Iowa – Shipping is not taxable in Iowa (IA) if 2 or 9 but 5.

Kansas – Shipping is taxable in Kansas (KS) but 5.

Kentucky – Shipping is taxable in Kentucky (KY)

Louisiana – Shipping is not taxable in Louisiana (LA) if 2 and 13.

Maine – Some shipping is taxable in Maine (ME) except when 1 and 2 and 12 all apply.

Maryland – Shipping is not taxable in Maryland (MD) if 2.

Massachusetts – Some shipping is taxable in Massachusetts (MA) except when 2 and other exceptions.

Michigan – Shipping is taxable in Michigan (MI) except when 11 or 13 but 5.

Minnesota – Shipping is taxable in Minnesota (MN) but 5.

Mississippi – Shipping is taxable in Mississippi (MS)

Missouri – Some shipping is taxable in Missouri (MO) except when 2 and 8.

Nebraska – Shipping is taxable in Nebraska (NE) but 5.

Nevada – Some shipping is taxable in Nevada (NV) except 2 and 13.

New Jersey – Shipping is taxable in New Jersey (NJ) except when 4.

New Mexico – Shipping is taxable in New Mexico (NM)

New York – Shipping is taxable in New York (NY)

North Carolina – Shipping is taxable in North Carolina (NC) but 5.

North Dakota – Shipping is taxable in North Dakota (ND) but 5.

Ohio – Shipping is taxable in Ohio (OH) but 5 and except 6.

Oklahoma – Shipping is not taxable in Oklahoma (OK) if 2 and 3 but 5.

Pennsylvania – Shipping is taxable in Pennsylvania (PA) except when 4 or 7.

Rhode Island – Shipping is taxable Rhode Island (RI) except 7.

South Carolina – Shipping is taxable South Carolina (SC) except 13.

South Dakota – Shipping is taxable in South Dakota (SD) except 7 but 5.

Tennessee – Shipping is taxable in Tennessee (TN) except 7.

Texas – Shipping is taxable in Texas (TX) except 7.

Utah – Some shipping is taxable in Utah (UT) except when 1, 2 and 3 but 5.

Vermont – Shipping is taxable in Vermont (VT)

Virginia – Shipping is not taxable in Virginia (VA) if 2.

Washington – Shipping is taxable in Washington (WA) except 13.

West Virginia – Shipping is taxable in West Virginia (WV) except 1 , 2 and 7.

Wisconsin – Shipping is taxable in Wisconsin (WI) but 5.

Wyoming – Shipping is not taxable in Wyoming (WY) if 2.

As always, we recommend you consult with the department of revenue for any state in which your company has nexus and ask for a determination in writing whenever the rules are confusing or contradictory.

Lawsuits in FL and NY highlight differences sales tax refund

New York State court case highlights differences between states when it comes to sales tax refund procedures

Class actions seeking sales tax refunds are becoming more prevalent. As noted in “Papa John’s in lawsuit over sales tax on delivery fees,” back in July a federal judge in Miami denied a motion to dismiss a class action against pizza-delivery giant Papa John’s over allegations of improperly charged sales tax on its $3 delivery fees. More recently, on Sept. 30 a federal judge in New York dismissed a similar lawsuit against Home Depot. The New York decision illustrates the difference in state approaches to addressing claims for sales tax refunds.

court favors Home Depot in NY sales tax refund caseThe lead plaintiff in the New York case is a man who rented three pieces of equipment from a Home Depot. He was charged 63 cents under a “tool rental agreement” with Home Depot. The plaintiff contends this was an unlawful sales tax collection, and he filed suit on behalf of any New York customer who signed a similar tool rental agreement.

In his Sept. 30 decision, U.S. District Judge William R. Skretny of Buffalo granted Home Depot’s motion to dismiss the class action complaint outright. Sketny said even if Home Depot incorrectly or illegally charged sales tax on its tool rental agreement, the plaintiff had to first seek a sales tax refund from the State of New York. State law allows any taxpayer to file a refund claim with the Department of Taxation and Finance within three years of the alleged improper payment. If the department rejects the sales tax refund, the taxpayer must then pursue an administrative appeal through the Department of Taxation, and if necessary, the New York State courts. Ultimately, Skretny said “the question of whether a vendor is collecting and remitting sales taxes in accordance with state law is a question that has been entrusted to the Department of Taxation in the first instance.”

In contrast, the federal judge who allowed the Papa John’s class action to proceed said it was unnecessary for the plaintiffs to pursue an administrative remedy before filing a lawsuit. Under Florida law, a person who makes an improper sales tax payment to a vendor must seek a sales tax refund from that vendor rather than the state. The judge explained Florida law allowed taxpayers to seek an administrative refund only when they directly paid the sales tax to the state. In contrast, Judge Skretny found New York law imposed an exclusive requirement to seek an administrative sales tax refund regardless of whether the tax was paid to the vendor or directly to the state.

S.M. Oliva is a writer living in Charlottesville, Virginia. He edits the international legal blog Bonham’s Cases.

Supreme Court supports click through nexus rule

click through nexus rule

click through nexus rule

U.S. Supreme CourtThe Supreme Court has recently bolstered state efforts requiring remote vendors to collect sales tax. In a recent ruling, the court declined to review a case challenging New York State’s click through nexus rule. The New York law finds that a remote or Internet seller establishes physical presence when in-state retailers refer clients to the site through advertisements. This technique is called “click-through” or attributional nexus. Nexus is established because the in-state vendor’s presence is attributed to the remote vendor. For example, if a New York based company advertises a product and allows completion of the purchase via a link with Amazon, Amazon must collect sales tax on the purchase.

The denial of certiorari is at odds with previous opinions from the Supreme Court. Historically, the court has found that states lack the power to require vendors to collect tax unless the vendor has a “physical presence” in the state. Moreover, the court has narrowly interpreted the “physical presence” requirement, usually requiring a building or in-state personnel. The court’s interpretation was strict enough that Illinois the Supreme Court found that “click-through” nexus was unconstitutional. The Illinois court’s ruling focused on the lack of physical connection through a web link.

As a result, the court’s refusal to overturn New York’s law creates the opportunity for states to expand their collection efforts over at least some remote vendors. The New York win aids states in collecting tax from remote Internet vendors at a time when Internet sales are at an all time high. Without comprehensive legislation detailing the limits of state taxing powers, vendors may be subject to unpredicted tax collection requirements. Retailers may face increased tax risks as states increase enforcement efforts related to attributional nexus.

Chris Saddock

Chris Saddock

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