Happy Halloween! State Tax & Its Effect On Popular Treats
Halloween is right around the corner. As you prepare to greet trick-or-treaters or dress in costumes for a party with friends, I thought it would be fun to look at how states are benefitting from the holidays, specifically through sales tax.
Obviously, certain Halloween items fall under standard taxes (e.g. Halloween costumes). But what about those treats? From candy for the kids to soda and adult beverages for the grown-ups, keep reading to learn how these sweets and drinks fall under state tax provisions.
Trick Or Treat! Candy Meets Sales Tax Laws
It’s estimated Americans will spend $2.6 billion dollars on Halloween candy this year. Although candy itself is small and fairly inexpensive, when you add up how many consumers are buying it, you can see why it becomes a state tax issue.
To determine if sales tax should be applied, the question is, “Is candy food or not?” The answer determines if candy is taxed the same way food is within the state.
Update on Economic Nexus Around the Country
Economic nexus continues to be a hot topic in the sales tax
world. Since the U.S. Supreme Court Case of South Dakota v. Wayfair
(June 2018), almost all states have enacted economic nexus laws as they want
their share of revenue from businesses selling to customers in their state. In
this week’s blog, we’ll take a look at Kansas and their struggle to get an economic
nexus law on their books as well as an update on other states that have
economic nexus laws.
Reminder- What is Economic Nexus?
In the past, companies needed to have physical presence, or
“boots on the ground,” in a state in order to have nexus (or taxable presence)
in a state. This meant that a company needed to have offices, inventory, employees,
or contractors in a state for a certain amount of time. Companies now don’t
necessarily need to have physical presence in a state in order to create nexus;
they now can have nexus in a state by virtue of economic nexus. Economic nexus
means that companies need to have sales of a certain dollar amount or needs to
have a certain number of transactions within a state. Some states require both
criteria.
How Does Economic Nexus Apply To More Than Just Sales Tax?
Last year’s Wayfair v. South Dakota decision changed the way states define nexus for sales tax purposes. In the past, a business needed to establish physical presence, but the Supreme Court’s decision set precedent for states to establish economic nexus parameters, thereby mandating a certain percentage of sales made within the state are subject to sales tax.
However, it’s important to note that economic nexus doesn’t only affect sales tax. If your company conducts a certain amount of business within the state, it may also be responsible for collecting and remitting all applicable taxes, not just sales tax.
AccountingWeb does a terrific job explaining the following ways states and cities are applying economic nexus to their jurisdiction. Note that some are not necessarily new, but more states ARE considering economic nexus in areas beyond sales tax. Here’s a quick summary to get you started.
Focus on Utah
Utah is a state in the western United States. It became the
45th state admitted to the union on January 4, 1896. It is the 13th
largest state by area, the 30th most populous and the 11th
most densely populated state.
Utah is known for its natural diversity and is home to
features ranging from arid deserts with sand dunes to thriving pine forests in
the mountain valleys. It is a rugged and geographically diverse state that is
at the convergence of three distinct geological regions: the Rocky Mountains,
the Great Basin, and the Colorado Plateau.
The Chicago Lease Tax: Important Details For SaaS Companies
Understanding sales tax compliance for SaaS companies is difficult. Some states tax it, some don’t. But what about cities?
Although Illinois doesn’t tax SaaS at the state level, Chicago’s Personal Property Lease Transaction Tax (or Chicago lease tax) is one that these types of businesses need to know about. While it’s not a sales tax, it’s applicable to any entity leasing personal property – including cloud services – to customers in the city.
What Is The Chicago Lease Tax?
Chicago’s lease tax applies to businesses or individuals that either have a lease or lease out personal property that’s used in the city.
Why not just charge a sales tax like other jurisdictions? As the Chicago Bar Association’s Samantha Breslow explains on BloombergTax.com, “Chicago is barred from taxing services, causing it to develop tax rules capturing transactions for the usage of property through a lease or license.”
Economic Nexus and Exempt Sales?
If you’re an avid reader of our blog, you know that economic nexus is the hot topic when it comes to determining if a company has created taxable presence in a state. Since the Supreme Court’s decision in South Dakota v. Wayfair Inc. in June 2018, we’ve been helping clients to make sense of this somewhat confusing concept. While physical presence nexus (employees, inventory, office space) in a state is also still in play and creates a filing requirement, companies find themselves tripping into nexus much more quickly now because of the sales and transaction thresholds of economic nexus legislation, which varies from state to state.
Background
Any company that sells products into a state and exceeds
that state’s economic nexus threshold (either based on volume of sales or
number of transactions), needs to register in that state, collect and remit
sales tax to the state. Companies that make some sales into a state but do not
exceed the state’s threshold, do not need to immediately register, collect and
remit sales tax. But we recommend that clients monitor the thresholds (which
are often $100,000 of sales OR 200 transactions, but often vary) in any state
where they have significant sales transactions.
New State Tax Laws Effective October 1, 2019: What You Need To Know
Are you curious what state tax updates are on the horizon? October 1, 2019 is a big date coming up; numerous states have new online sales tax provisions, amnesty programs and other legislative changes going into effect in just a few weeks. Keep reading for a quick summary of new laws and programs to keep an eye out for beginning next month.
Alabama’s Simplified Sellers Use Tax
As of October 1, Alabama requires remote retailers selling more than $250,000 in total sales (taxable and nontaxable) to begin collecting and remitting sales tax. Although sellers need to file their Alabama state tax returns monthly, these sales and use taxes fall into the “simplified” category because they’re a flat 8 percent on all purchases, regardless of the shopper’s locality in the state.
Focus on South Carolina
South Carolina is a state in the Southeastern United States
and the easternmost state of the Deep South. The state can be divided into
three geographic areas. From east to west: the Atlantic coastal plain, the
Piedmont, and the Blue Ridge Mountains. Locally, the coastal plain is referred
to as the Low Country, and the other two regions as the Midlands and the
Upstate respectively. The Atlantic coastal plain makes up two-thirds of the
state. Its eastern border is the Sea Islands, a chain of tidal and barrier
islands.
The state has a humid subtropical climate, although high
elevation areas in the upstate area have few subtropical characteristics than
areas on the Atlantic coastline. In the summer, South Carolina is hot and humid.
Winter temperatures are much less uniform in South Carolina. Snowfall is
somewhat uncommon in most of the state, while coastal areas receive less than
an inch annually on average.
Important State Tax Requirements You Need to Know for Recreational Marijuana
The cannabis industry has grown over the past several years as more states have legalized recreational use. This means that new companies are popping up to fill the demand, translating to higher revenue from the additional state and local business taxes.
What exactly do state tax requirements look like for the cannabis industry? This guide will provide a quick overview of the states where recreational marijuana is currently legal.
Alaska’s State Tax Requirements for Marijuana
State tax rates for retail cannabis actually increased in Alaska earlier this year. As of January 1, 2019:
- Mature buds or flowers are taxed at $50 per ounce
- Trim is taxed at $15 per ounce
- A bud or flower that is considered immature or abnormal (because it didn’t fully develop, it contains seeds or it failed testing) is taxed at $25 per ounce
- Clones are taxed at a flat rate of $1 per clone and not included on the estimated weight
Introduction to the California Cannabis Industry
The cannabis industry is the new hot evolving industry in CA.
California became the first state to legalize medical marijuana in 1996. On
November 8, 2016, the state’s voters chose to legalize recreational use of
marijuana.
The California Tax and Fee Administration (CDTFA) has put together an online guide to help business owners better understand the tax obligations specific to their cannabis business. In the following article, we will summarize these nuances that business owners need to know about this industry. Also, stay tuned for future articles on this topic.
