Exemption certificates need to be reviewed for validity

Exemption certificates

Do you know the validity period of your exemption certificates? Did you know that each state treats them differently and that you should review them periodically to make sure they are still good?

It is a good business practice to periodically review exemption certificates because quite a few states claim their exemption certificates are good until the business has a change, the business closes, or the certificate is revoked. You won’t know if these conditions are met unless you check with your customers and vendors regularly and request updated exemption certificates from them.

Some states have no stated expiration for their exemption certificates but they recommend regular or periodic updates. In these cases we listed the least amount of time between recommended updates. In cases where the state listed “good until the exemption no longer applies” we stated that there was no expiration date. Other states note that exemption certificates are good forever however “exempt status must be renewed”, or they “recommend” updates. In these cases we noted the recommended update or renewal timeframe.

Exemption Certificate Validity

State Abbrev. Validity Period
Alabama AL Till Changed Or Revoked
Alaska AK NA – No Certificates
Arizona AZ Date On Certificate
Arkansas AR NA – No Certificates
California CA Till Changed Or Revoked
Colorado CO No Expiration
Connecticut CT 3 Years
Delaware DE NA – No Certificates
District Of Columbia DC Till Changed Or Revoked
>Florida FL 5 Years
Georgia GA Till Changed Or Revoked
Hawaii HI Till Changed Or Revoked
Idaho ID No Expiration
Illinois IL 5 Years
Indiana IN No Expiration
Iowa IA 5 Years
Kansas KS Till Changed Or Revoked
Kentucky KY Till Changed Or Revoked
Louisiana LA 3 Years
Maine ME Till Changed Or Revoked
Maryland MD 5 Years
Massachusetts MA No Expiration
Michigan MI 4 Years
Minnesota MN 3 Years
Mississippi MS NA – No Certificates
Missouri MO 5 Years
Montana MT NA – No Certificates
Nebraska NE No Expiration
Nevada NV 5 Years
New Hampshire NH NA – No Certificates
New Jersey NJ 5 Years
New Mexico NM No Expiration
New York NY Till Changed Or Revoked
North Carolina NC No Expiration
North Dakota ND No Expiration
Ohio OH No Expiration
Oklahoma OK 3 Years
Oregon OR NA – No Certificates
Pennsylvania PA 3 Years
Rhode Island RI No Expiration
South Carolina SC Till Changed Or Revoked
South Dakota SD 1 Year
Tennessee TN Till Changed Or Revoked
Texas TX No Expiration
Utah UT 1 Year
Vermont VT No Expiration
Virginia VA Till Changed Or Revoked
Washington WA 1 Year
West Virginia WV 1 Year
Wisconsin WI 5 Years
Wyoming WY No Expiration

Back To School sales tax holiday list for 2015

Back To School sales tax holiday

Back To School Sales tax holidayThe most complete list of all 17 states holding a Back To School sales tax holiday for 2015, updated July 14, 2015.  This list is complete with items sales tax will be suspended on, the upper price limit, the sales date ranges, when the sales were first initiated, and a link to where you can get more information.

The 2015 Back To School sales tax holiday will be held in Alabama, Arkansas, Connecticut, Florida, Georgia, Iowa, Louisiana, Maryland, Mississippi, Missouri, New Mexico, Ohio, Oklahoma, South Carolina, Tennessee, Texas and Virginia.

Keep in mind that while some states suspend the state portion of the sales tax during these Back To School specials, but county, city, or other local sales taxes might still apply if those municipalities are not participating the sales tax holiday.

Also consider that not all items are viewed equally in the eyes of the tax adjuster. Shoes may be considered an item of clothing in one instance, but “track shoes” may be considered sporting goods and not included along with the tax-free items during this Back To School sales tax holiday.

State Items Included Max Price 1st Year 2015 Dates Information Links
Alabama clothing $100 2006 August 7-9 http://www.revenue.alabama.gov/
computers $750
school supplies $50
books $30
Arkansas clothing $100 2011 August 1-2 http://www.dfa.arkansas.gov/
school supplies
Connecticut clothing and footwear $300 2001 August 16-22 http://www.ct.gov/drs/
Florida school suppies 2007+ August 7-16 http://dor.myflorida.com/
clothing $100
supplies $15
computers $750
Georgia school supplies 2012+ July 31 – August 1 http://dor.georgia.gov/
clothing $100
supplies $20
computers $1,000
Iowa clothing $100 2000 August 7-8 https://tax.iowa.gov/
Louisiana all taxable personal property $2,500 2007 August 7-8 http://www.revenue.louisiana.gov/
Maryland clothing & footwear $100 2010 August 9-15 http://www.marylandtaxes.com/
Mississippi clothing & footwear $100 2009 July 31-Aug. 1 http://www.dor.ms.gov/
Missouri clothing $100 2004 August 7-9 http://dor.mo.gov/
computers $3,500
school supplies $50
New Mexico clothing $100 2005 August 7-9 http://www.tax.newmexico.gov
computers $1,000
computer equip. $500
school supplies $30
Ohio clothing $75 2015 August 7-9 http://www.tax.ohio.gov/
school supplies $20
instructional material $20
>Oklahoma clothing $100 2007 August 7-9 http://www.tax.ok.gov/
>South Carolina clothing 2000 August 7-9 http://www.sctax.org/
school supplies
computers
other
Tennessee clothing $100 2006 August 7-9 http://tn.gov/revenue/
school supplies $100
computers $1,500
Texa clothing, backpacks and school supplies $100 1999 August 7-9 http://comptroller.texas.gov/
Virginia clothing $100 2006 August 7-9 http://www.tax.virginia.gov/
school supplies $20
energy star products $2,500
hurricane preparedness items $60
generators $1,000

Source: Federation of Tax Administrators

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.

Texas sales tax relief

Texas sales tax relief on the legislative agenda

Sales tax relief is on the agenda for the state’s legislature with two bills presently under consideration. The first would lower the general sales tax rate for the first time in the state’s history, while the other would provide a unique tax “holiday” for hunters and gun enthusiasts.

Texas House Bill 32

On April 29, the Texas House of Representatives unanimously passed House Bill 31, which would reduce the statewide sales tax rate from 6.25% to 5.95%. This is only a floor, as individual cities, counties, transit authorities and other “special purpose districts” may impose additional sales tax. Under current law, the maximum sales tax in any Texas jurisdiction is 8.25%, according to the Texas Comptroller of Public Accounts.

If agreed to by the Texas Senate and signed into law by, House Bill 31 would take effect on January 1, 2016. The House concurrently passed a separate bill reducing the state’s franchise tax on business receipts. Texas Rep. Mark Keogh, a principal sponsor of both bills, said taxpayers would save nearly $5 billion if the two bills become law. “[S]ales and franchise tax cuts passed by the house will allow all Texans to retain more of their liquid cash in the immediate while extending tax cuts permanently into the future.”

Texas sales tax relief

The Texas Senate has proposed a “Second Amendment Sales Tax Holiday” for August 29 – 30 this year that, if passed, would repeal the general sales tax from firearms and hunting supplies.

Texas Senate Bill 228

Meanwhile, the Texas Senate passed its own, narrower sales tax break on April 30. Dubbed the “Second Amendment Sales Tax Holiday Act,” Senate Bill 228 proposes an annual two-day lifting of the state’s sales tax for purchases of firearms and “hunting supplies,” which would include “ammunition, archery equipment, hunting blinds and stands, hunting decoys, firearm cleaning supplies, gun cases and gun safes, hunting optics, and hunting safety equipment.” The tax holiday would take place on the final full weekend of August – this year, that would be August 29-30 – and is timed to coincide with the start of hunting season in Texas on September 1.

A Senate report argued the tax holiday is necessary because “retailers in East and Southeast Texas have been at a competitive disadvantage as it relates to their Louisiana counterparts.” Louisiana already has a sales tax holiday for firearms and hunting supplies during the first weekend of September. Mississippi and South Carolina also have similar holidays, according to the National Rifle Association. If signed into law, the Texas sales tax holiday is expected to reduce state revenues by about $3.6 million annually.

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

Determining the tax base on a purchase can be a tricky business

tax base on a purchase

tax base on a purchase

Coupons, rebates, credits, deductions, discounts, trade-ins and payment terms may – or may not – change the tax base on a purchase

A customer pays sales tax on the purchase price of an item. But what if the price is reduced thanks to “trade-in” credit? A Louisiana court recently considered this question as applied to video games.

GameStop, Inc. v. St. Mary Parish Sales and Use Tax Department

GameStop is a Texas-based retail chain that sells video games and related items in over 6,600 stores worldwide. GameStop is well known for accepting previously used games from customers, who can either receive cash or apply a predetermined “trade-in” value to the purchase of a new game. If the customer chooses the trade-in, he or she can either receive the discount right away or use an “Edge Card” to apply the credit at a later date.

Taxability of discounts

This chart indicates whether or not a certain type of discount or refund is part of the tax base. N = Not taxable; Y = Taxable; Blank = Not Specified

When a customer purchases a game with an Edge Card, GameStop deducts the value of any credit from the price of the game before calculating sales tax. Thus, if a game costs $20 and a customer has $5 on his Edge Card, Game Stop only charges sales tax on $15.

St. Mary Parish, a county in Louisiana, audited the local GameStop store’s sales tax records for 2006 and 2007 and determined the company should have paid sales tax on the full, pre-discount prices of its games. The Parish’s Sales and Use Tax Department accordingly ordered GameStop to pay an additional $5,258 in sales taxes plus penalties and interest. GameStop paid the additional tax under protest and filed a lawsuit in Louisiana state court to overturn the Department’s decision.

A district court entered judgment for GameStop. The department appealed, but the Louisiana 1st Circuit Court of Appeals upheld the district court’s decision. Judge John Michael Guidry, writing for the appeals court, said under Louisiana law, sales tax is assessed on the “sales price” of an item. The law expressly states the “sales price” excludes “the market value of any article traded in.”

Here, the department argued the trade-in exclusion did not apply to the Edge Card, because it was a discount applied to a future purchase. Guidry said that did not matter. State law does not restrict the definition of “trade-in” to same-day discounts, and in Louisiana, sales tax exemptions must be construed “liberally” in favor of the taxpayer. “[T]o the extent that a trade in occurs when GameStop accepts a customer’s merchandise and stores the predetermined market value of the item and/or items on an Edge Card,” Guidry said, “we find the subsequent application of the market value of the trade in by the customer toward the purchase of a new item of tangible personal property at GameStop comes within the statutory exclusion from sales price.” The department must therefore refund GameStop the additional tax paid under protest.

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

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