Sales tax change frequency by state

Zip2Tax compares the sales tax change frequency of the states. Ever wonder how your state measures up?

It’s generally accepted that there are around 11,000 sales tax jurisdictions across this great and diverse country of ours. This fact alone would seem to be a fairly reasonable argument for the outsourcing of sales and use tax rates from a company such as Zip2Tax. As the head of marketing for Zip2Tax I am always trying to understand our customer’s needs better. I found myself wondering about the sales tax change frequency for all these jurisdictions. I mean, 11,000 rows in a document might be manageable if they only changed their rates every few years or so, right?

So I sat down and with my trusty Excel spread sheet and a large cup of strong coffee and started going back through our research documentation counting the number of months that there had been any sales tax changes in each state. I wanted to determine which states had the highest sales tax change frequency. I sampled a three-year period from December 2015 going back through January 2013.

… fully one-third of the time that these states CAN make sales or use tax rate changes, they DO.

When the numbers were crunched I had some surprises in store, to be sure. For one, the states that provide Zip2Tax with the most new customers have no obvious correlation with which states had the highest sales tax change frequency. In fact, California and New York were only slightly above average.

The standout in this sample was Alabama which turned out to be far and away the leader with changes in 30 out of the 36 months – that’s 83% of the time. This also helped to dash my hopes of discovering a hotbed of customer need for our product since Alabama has so far not proven to be a great source of new business.
sales tax change frequency

Arizona came in second with 14 changes over that same period. Georgia, Louisiana, Oklahoma and Texas all tie for third place with 13 sales tax rate changes over 36 months. That translates to mean that fully one-third of the time that these states CAN make sales or use tax rate changes, they DO. Not to overstate the obvious, but that is more frequently than quarterly updates.

… more than two-thirds, updated that tax a minimum of once a year, and by the end of 3 years, 86% of the states had made changes…

In fact, 68% of the states that collect a sales tax, that’s more than two-thirds, updated that tax a minimum of once a year, and by the end of 3 years, 86% of the states had made changes.

So as I drained the last of my cold coffee I felt some gratification in that even though sales tax will remain an extremely complex moving target in nearly all 50 states, at least it should mean a steady supply of customers for sales tax rate providers like Zip2Tax for the foreseeable future.

Fill in the sign up form below this blog to receive our monthly newsletter and get alerted when one of these states makes a sales or use tax change or other important tax-related information.

 

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

StateAbbrev.Validity Period
AlabamaALTill Changed Or Revoked
AlaskaAKNA – No Certificates
ArizonaAZDate On Certificate
ArkansasARNA – No Certificates
CaliforniaCATill Changed Or Revoked
ColoradoCONo Expiration
ConnecticutCT3 Years
DelawareDENA – No Certificates
District Of ColumbiaDCTill Changed Or Revoked
>FloridaFL5 Years
GeorgiaGATill Changed Or Revoked
HawaiiHITill Changed Or Revoked
IdahoIDNo Expiration
IllinoisIL5 Years
IndianaINNo Expiration
IowaIA5 Years
KansasKSTill Changed Or Revoked
KentuckyKYTill Changed Or Revoked
LouisianaLA3 Years
MaineMETill Changed Or Revoked
MarylandMD5 Years
MassachusettsMANo Expiration
MichiganMI4 Years
MinnesotaMN3 Years
MississippiMSNA – No Certificates
MissouriMO5 Years
MontanaMTNA – No Certificates
NebraskaNENo Expiration
NevadaNV5 Years
New HampshireNHNA – No Certificates
New JerseyNJ5 Years
New MexicoNMNo Expiration
New YorkNYTill Changed Or Revoked
North CarolinaNCNo Expiration
North DakotaNDNo Expiration
OhioOHNo Expiration
OklahomaOK3 Years
OregonORNA – No Certificates
PennsylvaniaPA3 Years
Rhode IslandRINo Expiration
South CarolinaSCTill Changed Or Revoked
South DakotaSD1 Year
TennesseeTNTill Changed Or Revoked
TexasTXNo Expiration
UtahUT1 Year
VermontVTNo Expiration
VirginiaVATill Changed Or Revoked
WashingtonWA1 Year
West VirginiaWV1 Year
WisconsinWI5 Years
WyomingWYNo 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.

StateItems IncludedMax Price1st Year2015 DatesInformation Links
Alabamaclothing$1002006August 7-9http://www.revenue.alabama.gov/
computers$750
school supplies$50
books$30
Arkansasclothing$1002011August 1-2http://www.dfa.arkansas.gov/
school supplies
Connecticutclothing and footwear$3002001August 16-22http://www.ct.gov/drs/
Floridaschool suppies2007+August 7-16http://dor.myflorida.com/
clothing$100
supplies$15
computers$750
Georgiaschool supplies2012+July 31 – August 1http://dor.georgia.gov/
clothing$100
supplies$20
computers$1,000
Iowaclothing$1002000August 7-8https://tax.iowa.gov/
Louisianaall taxable personal property$2,5002007August 7-8http://www.revenue.louisiana.gov/
Marylandclothing & footwear$1002010August 9-15http://www.marylandtaxes.com/
Mississippiclothing & footwear$1002009July 31-Aug. 1http://www.dor.ms.gov/
Missouriclothing$1002004August 7-9http://dor.mo.gov/
computers$3,500
school supplies$50
New Mexicoclothing$1002005August 7-9http://www.tax.newmexico.gov
computers$1,000
computer equip.$500
school supplies$30
Ohioclothing$752015August 7-9http://www.tax.ohio.gov/
school supplies$20
instructional material$20
>Oklahomaclothing$1002007August 7-9http://www.tax.ok.gov/
>South Carolinaclothing2000August 7-9http://www.sctax.org/
school supplies
computers
other
Tennesseeclothing$1002006August 7-9http://tn.gov/revenue/
school supplies$100
computers$1,500
Texaclothing, backpacks and school supplies$1001999August 7-9http://comptroller.texas.gov/
Virginiaclothing$1002006August 7-9http://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.

High taxes on prepared meals leaves a nasty aftertaste for RO

taxes on prepared meals

taxes on prepared meals

prepared foods

While meals tax, or prepared food tax, advocates call it a “luxury tax,” detractors point out that it applies equally to cheap takeout well as fine dining thereby affecting the poor more dramatically than the rich.

Sales taxes are not always uniformly applied to all goods. Some states impose a “meals tax”, which is a type of additional sales tax applied only to prepared foods served in restaurants and similar establishments. According to a 2012 survey by the nonprofit Tax Foundation, localities in 15 states and the District of Columbia charge some form of meals tax. Among the 50 largest U.S. cities, Virignia Beach, Virginia, had the highest taxes on prepared meals at 5.5%. This was in addition to Virginia’s then-statewide sales tax of 5%, for a combined rate of 10.5%. Only Minneapolis reported a higher combined rate at 10.775%. (Virginia Beach’s combined rate is actually higher now – 10.8% – as Virginia subsequently raised its base sales tax to 5.3%.)

Teachers and police v. small business owners

Virginia Beach is not the only Virginia city struggling with high taxes on prepared meals. In Charlottesville, a small city of about 45,000 residents and home to the University of Virginia, the combined sales-and-meals tax rate is currently 9.3%. Last month city officials proposed adding another 1% to the meals tax, bringing the rate to 10.3%.

50 cities with high taxes on prepared meals

Chart courtesy the Tax Foundation.
The top 50 cities ranked for high combined meals and general sales tax rates in 2012.

Charlottesville Mayor Satyendra Huja said the additional 1% would add $2.1 million to the city’s coffers, providing additional funds for the city’s schools and police without increasing property tax rates. City Council member Kristin Szakos added the meals tax “is not a tax on necessities, it’s a luxury tax.”

Several restaurant owners have circulated a petition in opposition to the proposed 1% increase, which the City Council is expected to vote on in mid-April. The owners argue their customers have been unfairly singled out and asked to pay nearly double the general sales tax rate. Restaurants must also pay a processing fee on each credit card transaction based on the entire amount of the sale, including any meals tax. This can have a significant impact on the already thin profit margins of smaller, independently owned restaurants.

Is that chicken a “meal”?

Although meals tax enthusiasts like Charlottesville’s Szakos claim it is a “luxury tax,” the Tax Foundation’s 2012 report argued otherwise. The tax applies just as much to cheap takeout as it does fine dining. As the Foundation noted, “One could say that it is a tax on individuals with less flexible schedules or who do not like to cook – rich or poor.”

The meals tax also creates some odd legal hair-splitting over what exactly constitutes a “meal.” Virginia law says the tax applies to any “prepared food (including, without limitation, sandwiches, salad bar items sold from a salad bar, and prepackaged single-serving salads consisting primarily of an assortment of vegetables) and beverages … offered or held out for sale by a restaurant or caterer for the purpose of being consumed by an individual or group of individuals at one time to satisfy the appetite.” This definition excludes most foods sold at grocery stores, although it does apply to certain types of prepared foods sold within such stores. For example, if you buy an already cooked rotisserie chicken from a grocery store deli counter, that item is subject to the meals tax. But frozen chicken you have to reheat is not.

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

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