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Sales Tax Rate Changes: AL, CA, NM, VT & WA March 8, 2010  Feature Article  Is Everything Taxable? Big Changes in Washington -- Resale Certificate No Longer Valid. "Reseller's Permit" Now Required by Andrew Johnson Businesses Must Have a "Reseller's Permit" if They Hope to Buy Items for Resale. Effective Jan. 1, 2010, only businesses with a Department of Revenue-issued Reseller Permit can purchase items for resale without paying sales tax. The Old System in Washington Before this change, any business or individual can obtain a resale certificate from the Department's website, present that certificate at the point of sale, and avoid paying retail sales tax on the value of the goods purchased. Apparently, this very loose system has been costly for the State. According to the news release announcing the change, all kinds of abuses have been happening. "Examples of misuse of the self-issued resale certificates include a dentist buying a big screen TV for office or home use, a nonprofit corporation purchasing office equipment for its own use, and a janitorial firm buying cleaning supplies used in its business. Sales tax is due on all of these purchases because the materials aren’t being resold." This change is the result of legislation passed in September of 2009 and effective January, 2010. The legislature is trying to curb these abuses. The switch from the current resale certificate program is projected to recover up to $100 million annually in state and local sales tax revenue that is now lost when businesses buy items for their own use but don’t pay sales tax when due. You May Have to Register for this New Permit Or, you may be one of those businesses that automatically qualifies for the permit and will have it sent to you with no further action necessary on your part. The Department estimates that 30 percent of registered businesses in this state qualify for and will receive the new reseller permit. Businesses that do not report retail or wholesale sales generally will not be eligible for permits. According to the news release, more than 155,000 businesses were mailed permits automatically back in October, 2009. Another 330,000 were advised that they would not be sent a permit but could apply for one if they could demonstrate a legitimate business need. Contractors Targeted It's obvious that the Department feels like contractors are the biggest abusers of the old resale certificate system. As a result, they are making it difficult for contractors to obtain these new Reseller Permits. They certainly don't get any automatic permits although they may have been notified that they might qualify for permits depending on the nature of their work and to apply if they want one. Even if contractors get a Reseller Permit, it's only valid for 12 months. They have to reapply every other year. Other types of businesses generally only have to reapply every 4 years. According to Department estimates, about 326,000 registered non-reporters, who don’t file tax returns and don’t collect sales tax, will not qualify for permits. What Now? After Dec. 31, 2009, businesses that do not have a reseller permit will need to pay sales tax on products they purchase to resell, but can claim a deduction for sales tax paid at source on their state excise tax returns or seek a refund if you do resell them. More Information Available Follow this link to the State's website for much more information on this new permit. And of course, if you have any questions on this matter, do feel free to call and discuss it with us. You may also view more articles on our SALT Blog.  Sales Tax Rate Changes Mon, Mar 1, 2010 - Alabama Alabama—Sales and Use Tax: Town of Hamilton Increased General Local Rate The Alabama Department of Revenue has announced that the city of Hamilton increased its local sales and use tax rate for general items from 2% to 3%, effective February 1, 2010. The rates for machines, machinery, and equipment used in planting, cultivating, and harvesting farm products and the net difference paid for all automotive vehicles, truck trailers, semi-trailers, and house trailers remained at 0.50%. The rate for admissions to places of amusement and entertainment remained at 2%. The rate for retail sales of food for human consumption sold through vending machines remained at 0.75%. The rate for machines used in manufacturing tangible personal property remained at 0.375%. The withdrawal fee for automotive vehicle dealers remained at $1.25. Local Tax Notice, Alabama Department of Revenue, February 26, 2010 Next AL Rate Change Tue, Mar 2, 2010 - No Rate Changes Announced Wed, Mar 3, 2010 - CA, NM & WA California—Sales and Use Tax: New Rates Effective in Gustine and San Mateo Effective April 1, 2010, the California local sales and use tax rate in Gustine in Merced County is increased from 8.25% to 8.75% and the rate in San Mateo in San Mateo County is increased from 9.25% to 9.5%. The tax rate in areas of the county outside these cities remains the same. Special Notice L-244, California State Board of Equalization, March 2010 New Mexico—Multiple Taxes: Governor Calls Special Session to Address Specified Revenue Enhancements Since the New Mexico Legislature adjourned on February 18, 2010, without passing an operating budget for the state for fiscal year 2011, Gov. Bill Richardson called the Legislature back into a special session beginning March 1, 2010, to consider both expenditure reductions and specified revenue enhancements. Among other tax topics, the governor specifically instructed the special legislative session to consider, and possibly enact, the following tax proposals: the provision of a temporary tax amnesty program; an increase of the low-income comprehensive tax rebate; an increase of the gross receipts and compensating tax rates from 5% to 5.25%; a repeal of the gross receipts tax deduction for the sale of food at a retail food store; the provision of a credit against the state's share of the gross receipts tax for the sale of food at a retail food store; the provision of a tax levy for the payment of the principal, interest, and costs related to the issuance of designated general obligation bonds that would require the approval of registered voters during the state's 2010 general election; an increase of the cigarette excise tax; the provision of a tribal tax credit stamp for a tribe that imposes a tribal cigarette tax; and the amendment of the cigarette tax exemptions. Additionally, a previously proposed bill (S.B. 180) passed by the New Mexico Senate that would have authorized the state's Taxation and Revenue Department, with the governor's approval, to conduct a 90-day tax amnesty program applicable to numerous taxes failed to advance out of the House of Representatives before the regular legislative session ended. The proposal had been passed by the state Senate on February 15, 2010. Press Release, New Mexico Gov. Bill Richardson, March 1, 2010 Next NM Rate Change Washington—Sales and Use Tax: Bill to Increase Sales Tax Rate Introduced A bill has been introduced in the Washington Senate that would increase the state sales tax rate by 0.3% from June 1, 2010 to June 30, 2013. The bill also provides that the working families' tax exemption would be available to eligible low-income persons for sales tax paid after June 1, 2010. For remittances made in 2011 (for taxes paid in 2010), the exemption would be the greater of $25 or 5% of the earned income tax credit (EITC) granted. S.B. 6875, introduced in the Washington Senate on February 24, 2010 Thu, Mar 4, 2010 - New Mexico New Mexico—Sales and Use Tax: Senate Passes Bill Containing Rate Increase, Other Provisions The New Mexico Senate has passed a bill that would, among other things, do the following: increase the gross receipts and compensating tax rates from 5% to 5.125% (a previous proposal called for increasing the rates from 5% to 5.25%; repeal the gross receipts tax deduction for the sale of food at a retail food store; provide a credit against the state's share of the gross receipts tax for the sale of food at a retail food store; and clarify nexus regarding certain compensating tax transactions by redefining when the compensating tax can be applied to ensure that tangible personal property acquired from out-of-state sellers without physical presence in New Mexico is subject to the state's compensating tax. However, the bill has been tabled temporarily by motion in the House of Representatives. The bill as passed by the Senate also contains various income tax provisions that are discussed separately. S.B. 10, as passed by the New Mexico Senate on March 2, 2010; Fiscal Impact Report, March 2, 2010 Next NM Rate Change Fri, Mar 5, 2010 - AL, NM & VT Alabama—Sales and Use Tax: New Local Lodgings Tax Levy and Administration Changes Announced The Alabama Department of Revenue has announced the following new local lodgings tax levy and tax administration changes. The town of Bridgeport levied a new lodgings tax at the rate of 6%, effective August 1, 2009. Notice of this new lodgings tax was first posted by the department on March 3, 2010. Effective April 1, 2010, the town of Gantt will begin administering its local sales and use taxes previously administered by the department. Therefore, the last return filed with the department is for the month of March 2010, due on or before April 20, 2010. Effective with taxes for April 2010, which are due on or before May 20, 2010, taxes should be remitted to: Town of Gantt, c/o AlaTax, P.O. Box 830725, Birmingham, Alabama 35283-0725. Effective April 1, 2010, the department will begin collecting the city of Demopolis' local sales, use, rental, and lodgings taxes with a due date of May 20, 2010. The rates on general items; admissions to places of amusement and entertainment; and retail sales of food for human consumption sold through vending machines are all 3%. The rates for machines, machinery, and equipment used in planting, cultivating, and harvesting farm products; machines used in manufacturing tangible personal property; and the net difference paid for all automotive vehicles, truck trailers, semi-trailers, and house trailers are all 1%. The withdrawal fee for automotive vehicle dealers is $3.33. The general rental tax rate is 3% and the general lodgings tax rate is 7%. The notices can be found on the department's Web site. Local Tax Notices, Alabama Department of Revenue, March 2010 New Mexico—Sales and Use Tax: Legislature Passes Bill Containing Rate Increase, Other Provisions The New Mexico House of Representatives has passed a bill that would, among other things, do the following: increase the gross receipts and compensating tax rates from 5% to 5.125%; repeal the gross receipts tax deduction for the sale of food at a retail food store; provide a credit against the state's share of the gross receipts tax for the sale of food at a retail food store; and clarify nexus regarding certain compensating tax transactions by redefining when the compensating tax can be applied to ensure that tangible personal property acquired from out-of-state sellers without physical presence in New Mexico is subject to the state's compensating tax. As previously reported, the bill was passed by the New Mexico Senate on March 2, 2010. The bill also contains various income tax provisions that are discussed separately. S.B. 10, Second Legislative Session, as passed by the New Mexico Legislature on March 3, 2010; Fiscal Impact Report, March 2, 2010 Vermont—Sales and Use Tax: Rate Tables for Local Option Tax Updated The Vermont Department of Taxes has updated its sales and use tax rate tables showing the towns and zip codes for which the 1% local option tax are to be collected on sales. The local option tax is collected in addition to the 6% sales and use tax. Vermont Sales and Use Tax Rate Tables, Vermont Department of Taxes, February 27, 2010 Good Rule of Thumb in Sales Tax: If it Moves... It's Taxable. If it Doesn't Move... It's Taxable. By Brad Dent That's what we heard a New Mexico public official say about the nature of sales tax (gross receipts tax) in New Mexico. He was joking of course, but in every funny joke, there is truth. And, on further thought, it would be easier if you could use the moving/not moving test for determining sales taxability. But, sales tax laws are not that easy and just when you get it down in one state, they change it or you have to deal with a completely different set of laws in another state. Is everything subject to sales tax? Which answer would you choose?   A.  Yes B.  No C.  Sometimes D.  I don't know   Most would of have chosen answer A. "No"   Viewed as a whole, that would be the obvious answer. However, when it comes to individual states, the answer to what is taxable is almost never obvious. The complexities of sales tax compliance in multiple states is an ongoing challenge for all companies, and states are not making it any easier to apply logic in all areas.   So back to the Original Question: Is everything subject to sales tax? It sure seems like it is based on the following examples:   Pennsylvania Charges Sales Tax for Air Sales from compressed Air vending and vacuuming from vending machines are subject to sales tax.   South Dakota Taxes Ambulances That Use The Air In South Dakota sales tax is due on the use of an Air ambulance while the use of a ground ambulance is tax free. Alabama Taxes Playing Cards Maybe they're trying to discourage card playing in Alabama? I wonder how many people head out of state to buy their playing cards to avoid Alabama's 10 cent tax on decks of cards sold with less than 54 cards in a pack. Maybe it's time to look for that extra joker before you buy.   Canada Won The Gold in Hockey Yes, they won the gold, but what medal would they qualify for by favoring large purchases of donuts? In Canada, a package of six or more donuts are exempt from GST, while the sale of 5 or less are taxable.....   WISCONSIN -- Wins Their Own Medal Not to be outdone, Wisconsin wins the "What Were They Thinking?" award. Yogurt and raisins are exempt from sales tax, but yogurt covered raisins are taxable. I admit these examples may not be a universal problem for everyone, but it shows the variance in state laws and how companies find themselves in trouble. We Can Find & Fix Your State Tax Problems We can identify your tax over payments and get you refunds, or advise you on any tax liabilities, or help minimize your sales tax audit problems once and for all. Simply reply to this email or give us a call. Peisner Johnson & Co, LLP "Solving Your State Tax Problems" Call: 1-800-940-9433 Find Out How Affordable It Is To Outsource Your Sales Tax Return Preparation & Filing 3030 LBJ Freeway, Suite 1600 | Dallas | Texas | 75234 | PeisnerJohnson.com | 800- 940-9433  Copyright © 2010. 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