Category

Technology

Nov 19
0

California SBE makes finding sales tax rate a sinch!

By | Retail, Technology

Finding accurate sales tax rates has always been a challenge especially when you have a mixture of county, city, and district taxes.  The California SBE has just launched a great map-driven way to find the correct sales tax rate for a specific address.  Here is the link to this very creative tool.  I’m hoping more states will follow the lead and start using this type of technology to allow taxpayers to get the most accurate tax rate information.

https://maps.gis.ca.gov/boe/TaxRates/

Ned Lenhart, CPA
President

Interstate Tax Strategies

 

Apr 09
0

More Evidence that Congress Does not Understand Sales Tax!!

By | Legislative, Retail, Technology

Just saw that Senator Max Baucus of Montana added a provision to the Marketplace Fairness Act of 2013 that allows states to exempt “remote sales of business inputs from sales and use tax”.  What the heck is that all about?

The Senator must believe, or has been advised by his staff, that the state sales tax is like the value added tax which does allow for exemptions for business inputs because the total amount of the business revenue is subjected to VAT when sold.  No state that I am aware of has any broad sales tax exemption for “business inputs”, however there are countless examples of specific product level exemptions that will survive despite the passage of the Marketplace Fairness Act of 2013.

As a reminder, the vote the Senate took on the Act was not binding and really did nothing to impact that progress of the bill.  However, this addition to the bill shows how little the U.S. Congress knows about state sales tax and why they really have no business tying to micromanage what the states may or may not do.  In Sen. Baucus’ addition, there is no definition of what a “business input” is and it does not require state to actually provide an exemption for business inputs. As I have written about before, though, the passage of this kind of bill would potentially allow Congress to set state sales tax policy or allow the Streamlined Sales Tax Project to dictate to states what is taxable and what is not taxable.  Based on the trajectory of these types of non-governmental groups, the states are slowly losing their ability to legislate tax policies that are specific to their states.

Ned Lenhart, CPA
President Interstate Tax Strategies
https://www.salestaxstrategies.com/index.html

 

Oct 28
0

“Taxing the Cloud”-Excellent Article

By | Tax Audit, Technology

I don’t often find really good articles about the sales tax implications of SaaS transactions, but the following link takes you to an excellent article in CFO.com.  This article outlines the real and significant sales tax issues and risks associated with providing SaaS or other “Cloud Computing” services.  I am working with many companies on similar issues and plan on using this article to help solidify the need for these services. 

http://www.cfo.com/article.cfm/14605332?f=search

Please contact me if you have any consulting needs in this area

Ned Lenhart, CPA
Interstate Tax Strategies, P.C.

Apr 20
0

Sales Tax Issues with Groupon and Similar Services

By | Retail, Technology

My wife recently started using Groupon to get some good deals at restaurants and for some other services.  I started to explore this site a bit more and saw some very interesting and attractive deals.  As a sales tax consultant, I tend to look at these situations with a curious eye on what type of sales tax consequence could be involved.

As I understand Groupon, they are an electronic marketing co-op that offers discount coupons and discounted prices for good and services.  Groupon charges the merchant a commission or placement fee and then sends the retailer the difference.   For example, a local restaurant recently was selling $20.00 coupons for $10.00.  This was a great deal since we go there all the time.  For sales tax purposes, this coupon was treated as some type of gift card.  When we used the card our bill was $35.00 plus 6% sales tax for a total of $37.10.  We used the $20.00 Groupon and paid the cashier $17.10.  In this case, the retailer handled all the sales tax on the transaction.

In other Groupon situations, the services offered are not coupons but are the direct purchase of the item.   For example, we recently bought a carpet cleaning service for $50.00.  That’s all we pay.  This is not a coupon but is just a discounted purchase of a product.  There are also haircuts for discounted price, moving services, inflatable toy rentals, bed & breakfast rentals, and hotel stays.   These are not just coupons, but are the payment for the service.  My question is how sales tax is or should be handled?

We have yet to purchase a taxable service on Groupon.  In the list above, hotel rentals are clearly taxable in Georgia.  As I looked at the site, I didn’t see any mention of sales tax.  Because this is not a coupon, I think a strong argument could be made that Groupon is acting as a retailer of hotel rooms and should be collecting sales tax and lodging tax on these transactions.  I know nothing about Groupon’s nexus footprint, so it’s impossible for me to say that they have the obligation.  However, I’m curious how the hotel is handling these situations.  Are they paying sales tax only on what Groupon sends them as their portion of the sale or are they remitting tax on the full sales price of the transaction?  Hard to tell.

I’d love your comments on this topic.  I can see that this model is going to be building quickly.  As such, the sales tax folks can’t be far behind.

Comments please

Ned Lenhart

Groupon Sales Tax

Nov 17
0

IT Staffing Servcies Can be Taxable

By | Retail, Technology

As state move into taxing more service, I’m getting more calls from companies that provide various types of staffing services.  Many of these are IT related.  This could include computer programming as well as IT administration services.

As odd as it may sound, a handful of states may consider this staffing to be a taxable service under a couple of different theories.  First, some states tax almost all kinds of “staffing services”.  PA for example, has a broad tax on “help services” and that can subsume the IT staffing folks.

Other states tax certain kinds of IT services when performed by independent contractors and not employees.  This could include custom programming, IT administration, and various consulting services.  Even thought these services are arranged for in a loan staffing format and not a consulting format, these states may still consider this services to be taxable.
If you provide any type of IT loan staffing service, you need to evaluate the rules in the states where you conduct business.  Even in those states that tax these services, there are exemptions that could apply

Ned Lenhart
President

Loan Staffing Services

Nov 15
0

New York Continues to Tax ASP/SaaS servcies

By | Technology

A couple of years ago, the New York Department of Taxation and Finance issued a string of rulings concluding that the provision of ASP/SaaS software that was accessed only through the Internet was the sale of software and not a non-taxable data processing services.  There has not been much discussion on that point during 2010 and I thought they had retrenched on their position.  Not so!!  On Oct. 18, the New York Commissioner issued his latest in a string of rulings that seems to increase the scope of the NY sales tax as it applies to almost any type of on-line data access or data processing.  Here is a very brief summary of the case and my comments.

TSB-A-10(52)S   October 18, 2010

Company is a provider of various information technology management serves to the railroad industry.  The company is located in Atlanta and customers access Company’s services through the Internet.  There is no downloading of software to the customer’s location.  There is no specific license of software by the Company to their customers.  In their ruling request, the Company listed 9 separate services they provide. Each services provides some blend of information retrieval and manipulation.  Each service is billed uniquely based on the type of service provided. Of the 9 online services provided by the Company, the Commissioner determined that 4 of these constitute the taxable sale of software. These are briefly discussed below.

1. e-Repair and e-Bol Services: Allows customers to generate repair cards for the repair of rail cars.  Customers enter data through website.  The repair card is generated and transmitted to rail carrier.  Customer is charged for service based on number of repair orders submitted.

Held: Taxable sale of computer software.

2. Business Intelligence: Allows customers to access data to extract information on railroad and various information.  Most information is related to customer’s own data.  Company charges flat fee for service.

Held: Taxable sale of computer software.

3. Transportation Management Services: Provides customer with information to enable them to manage their railroad operations, car inventory, yard control, train operations, and management reporting. Customers can monitory and query information, and generate reports on specific cars, shipments, and equipment.

Held: Taxable sale of computer software

4. Electronic Data: Company purchases and resells data to customers in order for it to provide the other services.  The cost of the data is passed to customers in addition to the cost of the underlying purchase of the service.

Held: These charges are taxable when provided in conjunction with at taxable information service.

Conclusion

This case is another example of how aggressive NY is in taxing ASP/SaaS services as computer software even when there is no license for the software use and when there is no actual transmission of computer software.  If you company provides any type of SaaS service and has New York customers, you need to immediately evaluate the application of this case and the others to your situation.  The NY auditors are taking this position on audits.  Further, more states are taking this same position.  After two years of publishing these notices, taxpayers are on notice that the state is serious about its position.

Please contact me if you have any questions or need help with this issue.

Ned Lenhart
President
New York Taxation of SaaS

Sep 24
0

“Load and Leave” exempt in Missouri!!

By | Technology

On August 20, 2010,  the Missouri Administrative Hearing Commission issued a 27 page ruling which concluded that software transferred under the “load and leave” method is not a taxable sale of software in Missouri.  The Department had issued a few rulings stating that “load and leave” was a taxable transfer of software.  In this case involving Filenet Corporation (part of IBM) the tax assessment was over $770,000 so the issue was worth litigating.

In reaching its decision, the AHC did an excellent job at outlining Missouri’s history of taxing software.  This started back in 1982 with the Tres computer case.  In short, for software to be taxable in Missouri there must be a transfer of tangible property from the seller to the purchaser.  So long as the purchaser does not take possession or control of the media that has the software before it is loaded onto the computer, then there is no taxable sale.  Under the facts in his case, the Filenet employee had control and possession of the software at all times and no one from the purchaser’s company ever touched the hard drive that held the software.

If your company has paid tax or has been assessed tax on “load and leave” software, now is the time to file a refund claim.

Ned Lenhart
President
Missouri Load and Leave Software

Jul 01
0

Missouri Adds Data Center Sales Tax Exemption

By | Legislative, Technology

In a move to attract and to retain data centers and other high-tech companies, the Missouri General Assembly just passed House Bill 2 in a Special Session.  This makes Missouri one of the few states that has this type of exemption.  From recall, i believe that NY, VA, WA and GA also have some type of data center exemption once certain limits are met.  This bill provides a very wide rage of sales tax exemptions for new and for expanded data centers.  Here a some of the bill’s highlights:

1. Applies to new or expanded data centers in Missouri after 8-28-10
2. New facilities must apply to department of economic development and receive conditional approval for exemption
3. New facilities must spend $5 million over a 36 month period to get exemption.  Once amount is spent, DOR will give refund.
4. Includes cost of equipment, building supplies, used to build or remodel the center
5. Applies to electrical and telecommunications cost
6. For expanded facilities, companies must spend $1 million more than the average spend for past 3 years (or available years if less than 3)
7. Must apply for conditional approval and get refund of tax once paid.

This sounds like a very attractive offer but the bill seems to lack clarity on a couple of points.

1. What about leased hardware?  How is that to be valued for purposes of meeting the investment test.
2. There is no real definition of the terms “machinery, equipment and computers” so that will need to be clarified in regulation.
3. There is no mention of software to run the equipment.  I’m hopeful that is exempt as well as maintenance agreements

If you are planning any type of data center investment you may want to consider Missouri.  If you already have a data center in the state, this may be a good way to get some savings for future investment.

Ned Lenhart
President
Missouri Exemption for High-Tech Equipment