Alabama - Exemption for Diabetic Supplies
SALT Report 1520 - The Alabama State Legislature recently passed legislation that provides a sales tax exemption for items used to treat diabetes. Under current law, the sale of prescription drugs is exempt from sales tax. However, HB307 specifically states that any items used for the treatment of diabetes that are purchased by or on behalf of an individual with a valid prescription are exempt from all state, county, and municipal sales and use taxes.
The exemption includes, but is not limited to, the following items:
- Insulin,
- Insulin syringes,
- Equipment,
- Supplies,
- Devices,
- Chemical reagents, and
- Any items that may be used by a diabetic to treat diabetes or to test or monitor blood or urine
This exemption will apply retroactively to all open tax periods. However, refunds will not be given for purchases made before the effective date of August 1, 2012.
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South Carolina - Bill to End Exemptions
SALT Report 1519 - The South Carolina House of Representatives has approved a bill that would repeal several sales and use tax exemptions. The bill, H 4995, also requires the state to lower the overall sales tax rate by the amount of revenue generated, which is estimated to be $12,877,500 per year.
The following items would be no longer be exempt from sales and use tax:
- Railroad cars and their parts,
- Vessels and barges of more than 50 tons,
- Depreciable assets, used in the operation of a business, pursuant to the sale of the business,
- Motor vehicles sold to nonresident active duty service members located in South Carolina,
- Postage purchased by a person selling advertising services such as the mailing of printed advertising material directly to a client's customers or potential customers,
- Office supplies and services resold by the Division of General Services of the State Budget and Control Board to departments and agencies of the state government,
- Machinery, equipment, building materials, and electricity used in the operation of a facility owned by a tax exempt organization that researches and tests the impact of natural hazards such as wind, fire, water, earthquake, and hail,
- Petroleum asphalt products transported and used outside the state, and
- Motor vehicle extended service contracts
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Georgia - Packaging Exemptions
SALT Report 1518 - The Georgia General Assembly passed legislation that creates a sales and use tax exemption for the sale, use, consumption, or storage of materials, containers, labels, sacks, or bags used for packaging tangible personal property for shipment or sale.
To qualify for the exemption, all items must be used exclusively for packaging and cannot be purchased for reuse. Materials purchased at a retail establishment for consumer use are excluded from the exemption.
These exemptions will be effective July 1, 2012.
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Michigan - Exemption for Sales to Prison Inmates Eliminated
SALT Report 1517 - The Michigan State Legislature recently passed legislation that eliminates the sales tax exemption for purchases of tangible personal property by prison inmates effective October 1, 2012.
The bill, HB 4658, amends the General Sales Tax Act which provides a sales tax exemption to inmates in a penal or correctional institution. The items must be purchased items with scrip which is issued and redeemed by the correctional institution. By eliminating the exemption, the state will increase sales tax revenue by approximately $500,000 annually.
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Colorado - Remote-Seller Reporting Requirements Unconstitutional
SALT Report 1516 - A federal court in Colorado ruled that a 2010 Colorado law unfairly discriminates against out-of-state businesses and is in violation of Article 1 of the US Constitution.
The 2010 law requires all out of state business that do not collect Colorado tax do the following:
- Notify Colorado customers of their obligation to self-report and pay use tax,
- Provide Colorado customers with an annual report detailing the customer’s purchases, and
- Provide the Colorado Department of Revenue with an annual report that includes the name, address, and total amount of purchases of each of the seller’s Colorado customers
In his opinion, Judge Robert Blackburn wrote, “The state cannot require out-of-state retailers…to collect and remit sales tax on sales those retailers make to residents of Colorado... Such a system imposes a burden on out-of-state retailers because the different burden is imposed precisely because the retailer is an out-of-state retailer entitled to the protection of Quill. Quill creates the in-state versus out-of-state distinction, and the dormant Commerce Clause prohibits differential treatment based on that distinction.”
Judge Blackburn also noted that “enforcing a reporting requirement on out-of-state retailers will, by definition, discriminate against the out-of-state retailers by imposing unique burdens on those retailers.” Therefore, Judge Blackburn issued a permanent injunction based on the fact that the regulations set forth in the 2010 law are unconstitutional.
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Indiana - Tax Guidance for Nonprofit Organizations
SALT Report 1515 - The Indiana Department of Revenue has updated its bulletin regarding the application of sales tax for nonprofit organizations. The bulletin discusses when sales tax must be collected by nonprofit organizations and when Indiana sales and use tax must be paid for purchases.
Registration
All nonprofit organizations must be registered with the Nonprofit Section of the Indiana Department of Revenue. After registration, the organization will be provided with a taxpayer identification number that must be used on all sales tax exemption certificates. Nonprofit organizations can register for a sales tax exemption by filing Form NP-20A.
Sales by Qualified Nonprofit Organizations
Sales of tangible personal property by nonprofit organizations that are held no more than 30 days per calendar year are exempt from sales tax if they are represented as a fundraising activity designed to raise funds to further the nonprofit’s purpose.
Purchases by Non-Indiana Nonprofit Organizations
Nonprofit organizations not registered with the Indiana Department of Revenue and located in another state may use Form ST-105, or Streamlined Sales Tax Form F0003, to purchase items exempt from sales tax.
Purchases for Resale
Tangible personal property purchased for resale by a nonprofit organization is eligible for the sales tax exemption.
Additionally, all exempt purchases by nonprofit organizations must be directly invoiced to the organization and paid via the organization’s funds.
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Virginia - Plastic and Steel Strapping Materials
SALT Report 1514 - The Virginia Tax Commissioner determined that plastic and steel strapping materials used by a yarn manufacturer were not subject to Virginia retail sales tax because the manufacturer qualified for the resale exemption.
The Taxpayer used the strapping materials in two applications. First, the strapping was used to reinforce and strengthen the structural integrity of the corrugated boxes that were used to ship the yarn to the Taxpayer’s customers. Second, the Taxpayer used the strapping to bundle bales of waste yarn.
Virginia Code § 58.1-609.3 2 (iv) provides an exemption for “materials, containers, labels, sacks, cans, boxes, drums or bags for future use for packaging tangible personal property for shipment or sale.” The exemption is available only to industrial manufacturers or processors of products for sale or resale and applies whether the materials are returnable or nonreturnable.
Title 23 VAC 10-210-400 also addresses containers, packaging materials, and equipment and “transportation devices” which are defined as “items which are used to transport and protect products for sale and to restrain product movement in a single plane of direction. Examples of such items are pallets, dunnage, strapping and similar materials used to brace or secure cargo for transport.” This regulation goes on to provide that “transportation devices” are not considered packaging materials and may not be purchased tax exempt unless purchased for resale.
Based on the above regulations the Tax Commissioner determined that the taxpayer’s plastic and steel strapping was nonreturnable and as such, became the property of the Taxpayer’s customer. Furthermore, the taxpayer was a dealer registered to collect sales tax and was entitled to use of the resale exemption certificate, Form ST-10.
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Minnesota - Guidance for Nurseries and Greenhouses
SALT Report 1513 - The Minnesota Department of Revenue issued sales and use tax guidance for nurseries and greenhouses. Minnesota provides an exemption to qualified “agricultural production” businesses that purchase items to be used or consumed in the production process, whether or not they become part of the product produced.
Agricultural production includes the following activities when they result in a product that will be sold at retail:
- Floriculture – cultivating flowering plants
- Horticulture – cultivating fruits, vegetables, and plants
- Silviculture – the care and cultivation of forest trees
Items that Qualify for the Exemption
Crop Inputs
- Seeds, trees, fertilizers, and herbicides, including when purchased for use by farmers in a federal or state conservation program
- Chemicals used in agricultural production
- Materials, including chemicals, fuels, and electricity purchased by persons engaged in agricultural production to treat waste generated as a result of the production process
- Soil and soil amendments including peat
- Machinery and greenhouse fuel
- Petroleum products and lubricants
- Fuels, electricity, gas, and steam used or consumed in the production process. Specifically, the energy used for climate control or specialized lighting necessary to produce agricultural products
Farm Machinery
A sales tax exemption applies to new or used machinery, equipment, implements, accessories, and contrivances used directly in nursery and greenhouse production of plants for sale at retail. To qualify, the machinery must meet the definition of “farm machinery” and must be used directly in “agricultural production.”
The Fact Sheet also discusses the taxability of repair and replacement parts, ATV’s, accessories, and other items sold with nontaxable products.
To claim the exemptions use Certificate of Exemption, Form ST3.
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California - BOE Mobile Services
SALT Report 1512 - The California State Board of Equalization has two new mobile applications: the BOE ePay and the BOE Application. The BOE ePay app offers an easy way to manage your personal account details. It is compatible with any mobile device that has a browser, other than Internet Explorer, simply log in with your eClient ID or Express Login code.
With the BOE ePay app you can:
- Create an eClient ID for your BOE account
- Register your business
- Make electronic payments to your BOE account either through bank debit or with a credit card,
- View your ePayment history, and
- Manage your eClient User ID, Password and Email address
The BOE Application
This app can be used on all mobile devices and allows you to do the following:
- Verify the status of a seller's permit number,
- Verify a cigarette or tobacco products license,
- Verify an ewaste recycling fee license, and
- Find a BOE office's address and phone number, or open its location in the Maps application to get driving directions
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Nevada - State and Amazon Reach an Agreement
SALT Report 1511 - Nevada Governor Brian Sandoval announced that the state has reached an agreement with Amazon.com in which Amazon will voluntarily begin to collect and remit Nevada sales tax beginning January 1, 2014, or as of the effective date of federal legislation, whichever is earlier. Additionally, Amazon will collect sales and use tax in the same manner as traditional brick and mortar retailers, relieving Nevada residents from having to self-report use taxes to the state.
Nevada and Amazon have also agreed to work together to push Congress to enact legislation that would create a simplified framework for collecting and remitting sales tax that addresses the needs of states, retailers and consumers.
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