Your Cart is Empty
There’s always something changing in the world of tax, especially sales tax. Here’s a review of some of the recent changes and updates.
‘Fun’ with refunds. Two Penn State University students are using artificial intelligence to automate sales tax refunds for businesses, news reports said. The students designed a process with AI to remove the need of manually searching to find overpayment discrepancies.
Braeden Davidson, a second-year student majoring in corporate innovation and entrepreneurship, and Ryan Jai Hokimi, a third-year computer science major, won awards for the software and recently created a start-up company, Saveware, reports said. The company uses AI to identify and recoup overpaid sales taxes on past invoices, and then “produce a refund claim” that business owners can submit to the Pennsylvania Department of Revenue.
SasSy. The New York State Tax Appeals Tribunal recently upheld a sales tax assessment of a company that provided services to customers mostly through what the company described as a software-as-a-service (SaaS) model. Beeline.com Inc. charged vendor management service fees for a solution that included consulting services as well as a license to access the company’s proprietary software technology. The Tribunal concluded that when a single fee is charged for taxable tangible property and nontaxable services, the entire fee is subject to sales tax unless the taxable tangible property is merely ancillary or incidental to the sale of the nontaxable services.
Where the buck stops. The president of a now-defunct modular school building maker must pony up the company’s unpaid sales tax, the California Office of Tax Appeals has reportedly ruled in a case typical of states’ often-rigid responsible party laws. The state assessed tax of more than $600,000 plus interest and $82,000 in penalties on the company, Ecocrete Inc., for 2001-2003.
The company reportedly didn’t remit sales tax for those years, arguing that its contracts with the elementary school district in question were nontaxable transactions. The California Office of Tax Appeals ruled that the company’s former president, Keith Christian, is personally responsible for the company’s tax liabilities.
Buyer beware. Sales tax isn’t included in the advertised price quoted to consumers in the United States. (Value-added taxes, or VAT, are embedded into the price in most other countries.) A new paper posted by the Federal Reserve Bank of Atlanta investigates how the two different pricing structures and consumers’ decision-making process affect price competition.
For instance, the two pricing structures yield identical market outcomes with fast-computing consumers who recompute the exact sales tax with each price change. With “slow-computing” consumers, prices and profits are higher when sellers quote and compete in prices without sales tax.
Elsewhere
Alaska lawmakers have reportedly voted to move ahead in changing the state’s $50/ounce marijuana tax to a 7% sales tax. If House Bill 119 is accepted by the Senate and Gov. Mike Dunleavy, it would impose Alaska’s first statewide sales tax.
Arizona has enacted legislation that clarifies the timeliness of electronic tax payments. An electronic payment is deemed to have been made at the date and time that the taxpayer successfully authorizes the electronic funds transfer from the taxpayer’s financial institution to the Department of Revenue as evidenced by an authorized confirmation.
Colorado has enacted a Taxpayer Bill of Rights (TABOR) refund obligation for the refund of excess state revenues through a temporary reduction in state sales and use tax. Beginning with the 2024-25 TABOR surplus, if the surplus is at least $1.5 billion, Colorado will reduce the sales tax the following fiscal year if there’s sufficient surplus. If activated, the state sales tax rate would be temporarily drop 0.13% for the following fiscal year. This act is effective until July 1, 2035. The state has also modified the sales tax refund mechanism for TABOR refunds.
Illinois lawmakers have reportedly voted to end the state’s 1% grocery sales tax in 2026. Home rule communities would be allowed to pass their own grocery tax; non-home rule communities would be allowed to raise their sales tax rate 0.25% annually until it rises by 1 percentage point without going to a referendum.
Kentucky Gov. Andy Beshear has vetoed the state’s recently passed sales tax exemption for bullion and tax amnesty provisions.
Louisiana has added local sales and use tax exemptions for prescription drugs administered by infusion, injection or topical system for treatment of cataracts and ocular inflammation and pain following ophthalmic surgery. The law takes effect July 1.
Maine, effective next Jan. 1, will update definitions in its sales tax code to allow businesses who purchase property that will be rented to customers to use an exemption certificate; they will also be able to collect tax on the ongoing lease payments they collect from customers. The state has also added clarification on sourcing rules for lease payments.
Nebraska has enacted legislation that creates a sales and use tax exemption for diapers effective July 1, 2027.
New Jersey has approved a sales tax exemption for purchases of materials, supplies and services made by contractors or repairmen for the exclusive use on affordable housing projects. The law is in effect for purchases made on or after May 1, 2024. Qualifying purchases include construction materials, construction supplies and a few qualifying services; the exemption does not extend to equipment. Purchaser/contractors who paid sales tax erroneously may request a refund within four years.
Ohio has expanded its 2024 sales tax holiday to 12 a.m. Tuesday, July 30, through 11:59 p.m. Thursday, August 8. The holiday will apply to purchases made in-person or online on all eligible items of up to $500.
Oklahoma has clarified the definition of “prepared food” and added definitions for “bottled water” and “food sold with eating utensils provided by the seller” for its sales tax exemption.
The Tennessee Works Tax Act will, as of July 1, implement new sourcing rules for specific services in relation to sales and use tax: destination sourcing for sales of services performed on tangible personal property and computer software and for leased property (licensed software and specified digital products provided the primary property location moves out of Tennessee during the lease period); and sourcing to where the product is received by the purchaser for purchases from marketplace facilitators. The state’s magazine and book distribution exemption is discontinued.
Texas state sales tax revenue totaled $3.96 billion in April, 3.2% less than in April 2023. Receipts from online merchants were one of the few categories that increased, however, just slightly ahead of the rate of general inflation. State sales tax rebounded in May, hitting $4.01 billion and 4.5% more than May 2023. Total sales tax revenue for the three months ending in May was up 2.2% year over year.
If you think your business may be impacted by sales tax developments, contact TaxConnex. TaxConnex provides services to become your outsourced sales tax department. Get in touch to learn more.
About our Guest Author
Accountant, consultant and entrepreneur, Robert Dumas began his public accounting career on the tax staff at Arthur Young & Co., followed by a brief stint at Grant Thornton. In 1998, Robert founded Tax Partners, which became the largest sales tax compliance service bureau in the country, and later sold it to Thomson Corporation. Robert founded TaxConnex in 2006 on the principle that the sales tax industry needed more than automation to truly help clients, thus building within TaxConnex a proprietary platform and network of sales tax experts to truly take sales tax off client’s plates.
Comments will be approved before showing up.
