House Passes Florida Sales Tax Holiday Legislation for 2012

The Florida sales tax holiday approval by the House has gotten quite a bit of press. “The bill establishes a 3 day non-recurring Sales Tax holiday for the weekend of August 3-5, 2012,” according to CBS Miami.  The sales tax holiday would exempt clothing priced at $75 or less and school supplies costing $15 or less.

First Coast News reports that “[t]he sales tax holiday is always very popular among families and it proved very popular in the Florida House on Wednesday. Lawmakers passed the bill on a vote of 115 to 0.” The past few years have seen a reduction in the length of time allowed for the sales tax holiday. Since 1998, the holiday has been known to last 7-10 days in some years, “…but the last two years, it has been reduced to a three-day period.”

The cost to “…state and local governments [is] an estimated $31.8 million.” However, the Florida Retail Federation says that a 2010 study “…shows that the Back-to-School Sales Tax Holiday is a true win-win for Floridians.” The Federation states that the legislation saves money for families and increases revenue for the state.

State Representative Elizabeth Porter feels that residents of Florida have looked forward to the sales tax holiday each year and that this is a valuable opportunity for them to stretch their dollars. She states, “…not only is it a savings for the families but it’s also a boon for the retailers as well. So it stimulates the economy and helps out the families.”

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MA rules that prepackaged salads are taxable at local store

Food taxability continues to baffle businesses. The latest evidence comes from the Massachusetts Department of Revenue, in a letter ruling clarifying the taxability of prepackaged salads. 

The ruling responds to a query from a Massachusetts supermarket: Are the prepackaged individual salads sold at our deli subject to sales tax? The answer: ” . . .  it is ruled that sales of the salads at issue are subject to the Massachusetts sales tax.”

Why the confusion? Under Massachusetts’ General Law, “sales of food products for human consumption are exempt from sales tax,” while ” . . . meals sold by restaurants are taxable” (emphasis added).

According to the Massachusetts Department of Revenue, the salads are meals. “The determinative factors in concluding that the salads at issue here are taxable are . . . that (1) the salads are packaged in a quantity appropriate for consumption by one individual, (2) the salads contain combinations of  ‘fixings’ or food items, and (3) the salads are packaged in a manner that provides ease of immediate consumption.”

Although the Massachusetts ruling has nothing to do with health, it is interesting to note that some states tax “unhealthy” food items at a higher rate in order to fight obesity. The various definitions and taxes associated with food continue to make this topic a difficult one for businesses to swallow.

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New Jersey Starts Amazon Specific Bill Regarding Internet Sales Tax Down the Legislative Road

Just as Tennessee’s legislation that passed the House enables Amazon to legally place fulfillment houses without incurring the liability to collect and remit sales taxes for a specified amount of time, New Jersey has started General Assembly Bill 2608 (A2608) down the road for approval.

New Jersey’s Internet sales tax bill “with a twist” specifically defines the following requirements be met in order to qualify as a business who is “…deemed not a seller for the purposes of the tax imposed by the Sales and Use Tax Act.”:

• “…places one or more customer operations and processing facilities in service within this State on or after January 1, 2012 but before September 1, 2013;
• makes, or causes to be made, a capital investment of not less than $65,000,000 within this State on or after January 1, 2012 but before December 1, 2013;
• Creates not fewer than 1,500 full-time jobs within this State on or after January 1, 2012 but before December 1, 2013;
• And, after meeting the full-time job creation requirement provided by this subsection, maintains not fewer than 1,500 full-time jobs within this State for at least fifty-nine months following the month in which the full-time job creation requirement provided by this subsection is first met.”

The bill also allows that the company deemed not a seller for sales and use tax purposes must inform the customer that their online purchase did not have sales tax charged and is subject to use tax. They must include a link to the New Jersey Department of Revenue website where the taxpayer can file their use tax.

The Legislature also has written in requirements for commuting and transportation needs of employees of any said company that fits their description in the bill. In addition, penalties will be required if the company fails to comply with all the requirements for the duration noted in the bill. This bill also defines a company as having nexus (physical presence) when they have affiliates in the state similar to New Jersey Senate Bill S905, submitted earlier in the year, which does not provide for a temporary exemption for companies meeting the above characteristics. 

The expiration date of the deferral of sales and use tax collection obligations for a business that qualifies as a seller for nexus if September 1, 2013. New Jersey’s law with a twist.

For additional research, here is the list of current bills before the New Jersey legislature that address Internet sales tax: Assembly Bill 2003 (A2003), Senate Bill 1305 (S1305), Senate Bill 905 (S905), and the latest Amazon focused bill, Assembly Bill 2608 (A2608).

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Idaho Internet Sales Tax Measure Approved by House Revenue and Taxation Committee

Idaho State’s House Revenue and Taxation Committee approved by a vote of 12-6 to introduce a measure allowing the state to require Internet retailers to collect Idaho state sales tax. But will it go any farther? Governor C.L. “Butch” Otter supports the measure but “[a] similar 2012 push made it this far…but was shelved by House Speaker Lawerence [sic] Denney without testimony.”

Newspapers and online news media are saying that, “House lawmakers want to hear from businesses in Idaho about the latest plan to join a national effort to tax Internet sales.” One report states that “…there’s strong sentiment among some lawmakers that collecting sales tax on out-of-state Internet purchases will level the competitive playing field for Idaho brick-and-mortar businesses that must collect sales tax when they make a sale.”

On the flip side, there seems to be “strong resistance” from at least one House Representative, Lenore Barrett, who is reported to have “…complained that bringing this up again this year is like beating a dead horse.”

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New York Gradually Climbing to Pre-recession Numbers

New York “State Comptroller Thomas DiNapoli said sales tax collections grew by 5 percent last year, raising that revenue in many parts of the state above 2008 levels.” Although the comments that the growth seems “sluggish and unevenly distributed throughout the state,” DiNapoli feels the “economy has improved over the past two years,” and that “higher sales tax collections are a good sign for the economy.” However, MyFoxNY.com reports DiNapoli “…says Tuesday’s figures reflect continued slow recover, which is even slower than in 2010.”

In 2009, county government sales tax revenues dropped by nearly 6 percent. This year, they have seen, in general, a “…4.1 percent increase in county collections in 2011 over the year before.” New York State’s “…sales tax rate if 4 percent, but counties and cities can set their own rates, usually 3 percent to 4 percent.”

One gain was attributed to construction due to summer flooding from tropical storms. But sales tax revenues are eaten up rather quickly as those communities strive to recover from “…damage to homes, schools and services that far exceeds the sales tax revenue.” According to the associated press report, “..the storms are blamed for more than $1 billion in damage to upstate New York, little of which was covered by individual or business insurance.”

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West Virginia update to food taxability

The West Virginia Tax Department has updated Publication TSD-419, a document that explains how to apply the state sales tax rate to food “intended for human consumption.“

The primary update involves the reduction of the sales tax applied to “Food Items” from 3% to 2%. Thus, “Food Items fall within the definition of ‘food and food ingredients’ and are subject to the Sales Tax at the reduced rate of 2% effective January 1, 2012 and Prepared Food Items, food sold through vending machines and soft drinks are subject to the Sales Tax at the regular rate of 6%” (emphasis added).

The following examples fall into the “Food Items” category:

• Baby food
• Candy
• Flour
• Ice (except dry ice)
• Water

While, these fall into the “Prepared Food Items” category:

• Bakery items sold in a heated state
• Drinks prepared by the seller (for instance, coffee or tea)
• Party Trays
• Rotisserie chicken
• Warmed nuts

The document lists more examples, but cautions that the lists are not “all-inclusive.” 

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Amazon Gets Free Ride On Sales Tax Liability For Two Years

February 16, 2012, the Tennessee House of Representatives “…pushed legislation through the House…that will help Tennessee develop and maintain 3,500 jobs in the State.” House Bill 2370 (HB2370), “…establishes requirements for determining whether certain affiliates have physical presence in this state sufficient to establish nexus for sales and use tax purposes.”

This bill has an expiration date. According to the introductory paragraph, this will is to be repealed January 1, 2014. So what does the bill actually state?

In general, according to Tennessee State law, “…an affiliate is a business that, through one or more intermediaries, controls, is controlled by, or is under common control with another business. A business controls another business if that business holds more than a 50 percent ownership interest in the other business.”

Although this definition would fit Amazon, the bill specifically delays the sales tax collection requirement of those businesses fitting the description of having an affiliate in the state. The bill states, “…the activities of a business’s affiliates in Tennessee, including the sale of tangible personal property for resale and other non-retail activities, may not be considered in determining whether the person has a physical presence in Tennessee sufficient to establish nexus for sales and use tax purposes.”

The bill is “…an effort to codify the agreement reached last year between Governor Bill Haslam and officials from Amazon.com Inc.” The bill is intended to ensure the Internet retailer continues with their plans to build several fulfillment houses and bring up to 3,500 new jobs to the state by delaying the requirement to charge, collect and remit sales tax on purchases by Tennessee residents.

The bill gives Amazon specifically and any other internet retailer with physical presence (nexus) in Tennessee who meets the criteria, a holiday from collecting taxes until January 1, 2014, when all businesses that fall under the affiliate definition mentioned above will be required to collect and remit sales tax. According to the Chattanoogan, “…this legislation will ensure the online retail giant will pay Tennessee sales taxes if a national online sales tax law is not passed by the federal government by 2014.” The bill clarifies that “…the new Amazon fulfillment centers located across the State will meet the requirement for establishing nexus in Tennessee.”

Internet Retailers Without Nexus Required to Notify Purchasers

In addition to the specifics that came from Governor Haslam’s agreement with Amazon, the bill specifies that online retailers who have no nexus affiliation with the state must “…notify such purchasers in a confirmation email that the purchaser may owe Tennessee use tax on the total sales price of the transaction,” and include a link to the Tennessee Department of Revenue’s website. The business must also “…provide to each purchaser to whom tangible goods were delivered in this state a statement of the total sales made to the purchaser during the preceding calendar year. The person must provide the notice for calendar year 2011 within 60 days after the effective date of this bill and by February 1 of each subsequent year.”

The bill is now being considered by the Tennessee Senate.

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High Sales Tax Angers Tribal Members in Tuba City, Arizona

Arizona residents are apparently taking out some of their angst about sales taxes on innocent cashiers. As previously reported on Avalara.com, Tuba City has been identified as one of the highest sales tax locations in the nation—after you add in tribal sales tax—and this year’s Tax Foundation report is no different. Vans Trading Co. is located in Tuba City. After more than 60 years in business, “…it’s only in the last decade that customers at the Tuba City general store have yelled at the cashiers after they get their receipts.”

Vans owner, Lucky Mokhcia says, “They just yell at my cashiers. They’re saying it’s too much.” But Mokhcia has no control over sales taxes.

Arizona Chamber of Commerce and Industry spokesman, Garrick Taylor says “[s]ales taxes are … less likely to scare off potential businesses than property and corporate income taxes.” But Arizona Capitol Times reports, “…while Arizona’s sales tax is not necessarily driving away businesses, it could be driving away their customers – or at least driving down sales.”

Kevin McCarthy, president of the Arizona Tax Research Association, states, “[w]e’ve always been heavily reliant on sales taxes,” rather than income or property taxes. A recent Tax Foundation report states that thirty-six percent of Arizona’s revenue comes from sales taxes; 13 percent comes from income taxes, but the national average is 22.9 from sales tax to 21.3 income tax.

McCarthy indicates that residents approve the balance in Arizona as “…polls have shown that property and income taxes tend to be less popular with people than sales taxes, so when Arizona has needed money, that’s where its lawmakers have turned.”

Senior economist Stephen Slivinski, of the Goldwater Institute, expresses that you can have a high sales tax rate and still have a good system but his concern would be that, “Arizona has a tendency to just look at one tax at a time and make policy on an ad hoc basis, and that’s just not good for anybody.”

In the meantime, Lucky Mokhcia’s business hurts. The tribal members who must pay the highest sales tax noted in the U.S., “…don’t shop here anymore,” says Mokhcia, because the town’s people don’t mind driving 80 miles to Flagstaff to avoid the high taxes at home. According to Mokhcia, “This is a low-income community,” and the sales tax rate “…creates a bad situation.”

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Nebraska Debating Giving Authority to Local Jurisdictions to Impose Up to 2% Sales Tax

The state of Nebraska imposes a 5.5% state sales tax and allows local jurisdictions to impose up to 1.5% in addition to the state rate for local services. Food and prescription drugs are exempt. This session, Legislative Bill 956 (LB956), has been introduced to allow “[a]ny incorporated municipality by ordinance of its governing body…[to] impose a sales and use tax…” of up to 2%.

Any increase would have to be approved by voters during a primary or general election. Per the bill, “[a]ny such tax or increase shall terminate no more than ten years after its effective date.” In addition to this restriction, “[a]t least some of the revenue would have to go toward long-term development projects, in partnership with a county or school district.”

It’s been reported that many of the 530 Nebraska cities are urging the Legislature to advance this measure to allow them to increase local sales tax rates up to 2%. “Supporters said it would allow cities to offset property taxes and collect revenue from out-of-town residents who benefit from city roads, businesses and other amenities.” Previous bills such as this one have not gained sufficient majority approval of the Legislature to override any Governor veto. “Republican Gov. Dave Heineman has said he would veto a bill that could lead to tax increases, and called on cities to trim their budgets.”

City leaders have commented that cuts have already been made. In Lincoln, “…Mayor Chris Beutler pointed to cuts that his city has made in library hours, senior center services, and a retirement match for municipal employees. But…cuts to state aid last year have created pressure to raise property taxes….” In addition to state aid cuts, “Lincoln is also scheduled to lose $1.5 million in federal funding this year for its popular Community Learning Centers.” However, “[i]ncreasing Lincoln’s sales tax to 2 percent, up from its current 1.5 percent limit, would generate an estimated $19 million for the city.”

Not all cities are ready to jump on the tax increase bandwagon yet. West Point, in northeast Nebraska has not imposed the maximum limit of 1.5% sales tax rate yet. Mayor Marlene Johnson says, “I don’t know at this point in time if the city would ever go after a half-cent sales tax. But thought is, if it is there, and we’re in desperate times, it would be a nice thing to present to voters.”

Of the 194 cities that currently impose local sales tax, 86 have reached the 1.5% maximum. Not all cities that are struggling are doing so because of poor budgeting. Omaha’s Chief of Staff, Steve Oltmans says “…his city is still struggling with $22 million in expenses from last year’s Missouri River flooding.”

When all is said and done, Lincoln Mayor Chris Beutler expresses that having this bill pass gives “…the most flexibility to let the community decide the fairest combination” of sales tax rates and residential tax burdens.

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Steamboat Springs Colorado Managing Well For 2011 Revenues

Steamboat Springs, Colorado is looking pretty positive for their fiscal review. The final revenue report released this past week shows “Steamboat Springs’ 2011 sales tax collections increased about $12,000, to $17.3 million.”

According to the report, “December 2011 sales tax collections increased by 3.69% from sales tax collections for the month of December ’10. Year-to-date total sales tax collections are 4.38% higher than those of 2010 year-to-date.” Of the various sales categories, miscellaneous retail (sales tax) is the highest source of sales tax revenue overall at 47%. Retail sales tax collections increased by 5.08% overall for the calendar year. Second highest source of sales tax revenue was from lodging and amenities, showing a 5.85% increase. However, retail sales brought in 1.1 million, while lodging and amenities netted $464,000—less than half of the total revenue collected from retail.

The city originally budgeted “…for a 10 percent decline in 2011, …[and ended up] collecting in excess of $2.7 million more than the nearly $14.6 million it projected to generate in sales taxes last year.” Budgets change, and in Steamboat Springs “…a supplemental budget request in July to use nearly $750,000 in excess revenue to pay for some unexpected higher costs of providing services” bit into that unexpected increase. Those costs included “…revenue paid for increased fuel costs, additional snowplowing and mitigation for last year’s high spring runoff.” Additional funds beyond that supplemental budget request included supporting “…the Bike town USA Initiative, …capital expenditures at the Mountain Fire Station, …Transit and Parks, Open Space and  Recreational Services departments and …unplanned maintenance.”

The city plans to budget for a 5% reduction in revenues based on 2011 results.

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