What You Need to Know About Sales Tax Holidays
Although not all states offer sales tax holidays to consumers, 17 states across the country (as well as Puerto Rico) currently offer specific dates where shoppers can buy certain items without paying the sales tax on them. While they’re designed as an incentive for consumers to support local businesses, and they’re an interesting approach some states take, it’s difficult to know if they’re really all that effective in driving the local economy – plus these holidays can cause quite a headache for retailers.
Which States Offer Sales Tax Holidays?
Avalara has a nice list of all the 2019 sales tax holidays by state, but here’s a quick summary:
- Alabama: Severe weather preparedness, February 22-24 and back to school, July 19-21
- Arkansas: Back to school, August 3-4
- Connecticut: Clothing and footwear, August 18-24
- Iowa: Clothing and footwear, August 2-3
- Florida: Disaster preparedness, May 31-June 6 and back to school, August 2-6
- Louisiana: Second Amendment (e.g. ammunition and firearms), September 6-8
- Maryland: Energy efficiency (Energy Star products), February 16-18 and Shop Maryland Tax-Free Week (apparel, footwear, backpacks and book bags), August 11-17
- Massachusetts: Single items of tangible personal property, August 17-18
- Mississippi: Clothing and footwear, July 26-27 and Second Amendment, August 30-September 1
- Missouri: Energy efficiency, April 19-25 and back to school, August 2-4
- New Mexico: Back to school, August 2-4 and small businesses, November 30
- Ohio: Back to school, August 2-4
- Oklahoma: Clothing and footwear, August 2-4
- Puerto Rico: Back to school, January 4-5
- South Carolina: Back to school and bed & bath items, August 2-4
- Tennessee: Back to school, July 26-28
- Texas: Emergency preparedness, April 27-29, energy and water efficiency, May 25-27 and back to school, August 9-11
- Virginia: Back to school, energy efficiency, emergency preparedness and more, August 2-4
Focus on Washington
Washington is a state in the Pacific Northwest. It is the 18th
largest state and the 13th most populous state. The state was
admitted to the union as the 42nd state in 1889.
The Puget Sound in Washington is an inlet of the Pacific
Ocean consisting of numerous islands, deep fjords, and bays carved out by
glaciers. The remainder of the state consists of deep temperate rainforests in
the west; mountain ranges in the west, central, northeast and far southeast;
and a semi-arid basin region in the east, central and south, given over to the
intensive agriculture. Washington is the second most populous state on the West
Coast, after California. Mount Rainier, an active stratovolcano, is the state’s
highest elevation, at almost 14,411 feet, and is the 2nd
topographically prominent mountain in the continental United States, the first
being Denali in Alaska.
What You Need to Know About the Taxability of SaaS in 9 Eastern States
Updated July 21, 2020
Are you curious if you need to be paying taxes on or charging your customers sales tax on your sales of these revenue streams: Software-as-a-Service (SaaS), cloud computing and electronically downloaded software? The answer is, maybe. Because these three areas are defined differently by each state, it’s important to understand how each state’s tax codes approaches them.
Being aware of the tax ramifications in any state your company has established nexus is incredibly important, especially considering last summer’s Wayfair decision. While the U.S. Supreme Court’s decision may seem like it was only directed at online sellers, the truth is that multi-state sellers (such as those generating revenue from SaaS and software) are also affected. Because of the ruling, it will be even easier to establish nexus in more states across the country; companies need to know which taxes they’re responsible for in regards to SaaS, cloud computing and electronically downloaded software.
Here’s a guide to the taxability of SaaS in these nine key eastern states:
California: Relief for Marketplace Sellers?
The state of California is at it again! But this time offering some relief for out of state sellers. In a continuing quest to require out of state sellers who created nexus as a result of engaging in programs like Fulfillment by Amazon (FBA) to register and retroactively file in the state, CA has passed SB 92 and the California Department of Tax and Fee Administration (CDTFA) has issued guidance. On July 1, 2019, the CDTFA issued Special Notice L-681 pertaining to Senate Bill 92 that discusses a special tax relief program. This program is only available for “qualifying retailers.”
What You Need to Know About the Taxability of SaaS in 9 Western States
Updated July 21, 2020
When it comes to Software-as-a-Service (SaaS) companies, there’s often confusion regarding both nexus and the taxability of this revenue stream.
And while the Wayfair decision seems like it’s directed only at online sellers, traditional multi-state sellers (including those that generate revenue from SaaS and software) are also affected, as nexus is now easier to establish. Once it is established – either by traditional physical presence or by sales volume – then companies will need to consider the taxability rules of SaaS in each state in which they have nexus.
Is SaaS even taxable? Because SaaS and cloud computing don’t always clearly fall into existing tax definitions, different states interpret its taxability in different ways. Some regard it as similar to electronically downloaded software, while others consider it a service, which may be taxable or not. And what about electronically downloaded software? Is it treated differently from SaaS?
Here’s a guide to the taxability of SaaS in these nine key western (and some mid-western) states:
Focus on Ohio
Ohio is a Midwestern state in the Great Lakes Region of the
United States. It is the 34th largest state by area, the seventh
most populous and the 10th most densely populated. Ohio is
historically known as the “Buckeye State” after its Ohio Buckeye trees and
Ohioans are also known as “Buckeyes.”
Much of Ohio features glaciated till plains, with an
exceptionally flat area in the northwest being known as the Great Black Swamp.
This glaciated region in the northwest and central part state is bordered to
the east and southeast by a belt known as the glaciated Allegheny Plateau, and
then the unglaciated Allegheny Plateau. Most of Ohio is of low relief, but the
unglaciated Allegheny Plateau features rugged hills and forests.
Sales Tax Issues Your Corporate Controller Needs to Know About
If your company is set up like most, the sales tax burden probably becomes yet another area piled onto the already busy plate of the corporate controller. This is especially true at small and middle market businesses. These organizations often don’t have a tax department that includes sales tax, so all accounting-related matters fall to the controller.
He or she is usually a financial accounting person and probably doesn’t enjoy dealing with tax anyway, but now they are stuck with trying to figure out the complications of sales tax. Unfortunately, due to the complicated nature of sales tax issues – especially now that the recent Wayfair case has complicated state-to-state commerce even more, the results could be costly for your business.
Important Sales Tax Issues Your CFO May Be Missing
In our multi-state tax consulting practice in Silicon Valley, we often see that sales tax is an afterthought in companies’ finance departments. Many companies have net operating losses (NOLs) for income tax purposes, and they often don’t consider the ramifications of sales tax.
Further, many of our clients sell intangible products – like software, SaaS platforms or digitally downloaded information – and those items don’t SEEM to be taxable. Plus, in California most of those items do qualify for sales tax exemptions; but that’s not the case in all states.
As such, with an already long “to do” list, CFOs and corporate controllers may not put sales tax concerns on the front burner. In another blog post, we explained why it’s not a good idea for a company’s corporate controller to take on the burden of sales tax. In some organizations, however, these responsibilities fall to the CFO. This post explains why this likely isn’t the best option, either.
FOCUS ON NEVADA
Nevada is a western U.S. state defined by its great expanses
of desert, and by the 24-hour casinos and entertainment for which its largest
city, Las Vegas, is famed. Las Vegas is home to elaborate themed hotels and luxury
resorts that line its main thoroughfare, the Las Vegas Strip. The city is also
home to museums such as the Mob Museum, extravagant live shows and upscale
shopping malls and restaurants.
Nevada is largely desert and semi-arid, much of it lies within
the Great Basin. Areas south of the Great Basin are within the Mojave Desert,
while Lake Tahoe and the Sierra Nevada lie on the western edge. About 86% of
the state’s land is managed by various jurisdictions of the U.S. federal
government, both civilian and military.
Nevada is the driest state in the United States. It is made
up of mostly desert and semi-arid climate regions, and, with the exception of
the Las Vegas Valley. While winters in northern Nevada are long and fairly
cold, the winter season in the southern part of the state tends to be of short
duration and mild. Most parts of Nevada received scarce precipitation during
the year. Most rain that falls in the state falls on the lee side (east and
northeast slopes) of the Sierra Nevada.
Business Climate
The economy of Nevada is tied to tourism (especially
entertainment and gambling related), mining, and cattle ranching. Nevada’s
industrial outputs are tourism, mining, machinery, printing and publishing,
food processing, and electric equipment.
Mining shaped Nevada’s economy for many years. However,
mining declined in the late 19th century. However, the rich silver
strike at Tonopah in 1900, followed by strikes in Goldfield and Rhyolite
boosted Nevada’s economy yet again.
In portions of the state outside of the Las Vegas and Reno
metropolitan areas mining plays a major economic role. By value, Gold is by far
the most important mineral mined. Other minerals mined in Nevada include
construction aggregates, copper, gypsum, diatomite and lithium. Despite its
rich deposits, the cost of mining in Nevada is generally high, and output is
very sensitive to world commodity prices.
Cattle ranching is a major economic activity in rural
Nevada. Nevada’s agricultural outputs are cattle, hay, alfalfa, dairy products,
onions, and potatoes. Over 90% of Nevada’s 484,000 acres of cropland is used to
grow Hay, mostly alfalfa, for livestock feed.
Tax Climate
Nevada does not administer an individual income tax, nor
does it facilitate a corporate income tax.
To compensate for not having a corporate
income tax, Nevada administers a gross receipts tax (Commerce tax). This is
modeled after the gross receipt taxes in Ohio, Texas and Washington state. This
Commerce Tax is a tax on the privilege of engaging in business in Nevada. It is
an annual tax that was passed by the state legislature in 2015. Business
entities engaged in business in Nevada are subject to the Commerce Tax. Each
business entity engaged in business in Nevada is required to file the Commerce
Tax return regardless of whether there is tax due or not. Some examples of
business entities include C and S corporations, limited liability companies and
partnerships and sole proprietorships, just to name a few. Some organizations
are exempt from this tax, such as government entities, non-profit organizations
pursuant to section 501(c) of the Internal Revenue Code and passive entities.
$4,000,000 is the standard amount a business entity is
allowed to deduct from its Nevada gross revenue before the Commerce Tax is
imposed. It reduces the business entity’s subject to tax, but it does NOT
exempt the business entity from the filing requirement.
Sales Tax Structure
Nevada’s average sales tax rate is 6.85%, which ranks 7th
in the nation.
Nevada has enacted economic nexus legislation. Remote
sellers are required to register to collect and remit NV sales tax if the
company’s gross revenue is more than $100,000 from the retail sale of tangible
personal property or makes 200 or more retail sales of tangible personal
property for delivery into NV. This legislation went into effect on Oct. 1, 2018.
Nevada is not very aggressive in its approach to the taxation
of technology products for sales tax purposes. All digital content is exempt
from taxation. Prewritten computer software that is electronically downloaded
is exempt and so is custom computer software that is electronically downloaded.
Lastly, all cloud services are exempt. How products are produced, sold and
delivered is critical to determining their tax status.
Many states have annual sales tax holidays, during which
certain items the state wants to promote the purchase of (like school supplies,
emergency preparedness supplies, or energy efficient appliances) can be purchased
sales tax free. Nevada, however, does not currently have any scheduled sales
tax holidays.
Random Facts
- Nevada takes its name from a Spanish word
meaning snow-capped. - Nevada is the largest gold producing state in
the nation. It is second in the world behind South Africa. - It would take 288 years for one person to spend
one night every hotel room in Las Vegas. - U.S. route 50 is known as the loneliest road in
America. - Construction worker hard hats were first
invented specifically for workers on the Hoover Dam in 1933. - In Death Valley, the Kangaroo Rat can live its
entire life without drinking a drop of liquid.
Our team at Miles Consulting Group
is available to discuss the specifics of your state tax situation, whether in Nevada
or other states, we can help you navigate the complex tax structures arising
from your multistate operations. Call us to help you achieve the best tax
efficiencies.
What You Need To Know About State Tax Issues During M&A Negotiations
Is your company facing a merger or acquisition? Is state tax part of the negotiations? It needs to be! Whether you’re the company buying or selling, state tax issues often arise during the process – even more so now that so many states have enacted economic nexus laws. How should you plan ahead? It begins with due diligence!
Discovering State Tax Issues During Due Diligence
It’s not uncommon for state tax issues to be uncovered during the due diligence phase of an M&A deal as both companies look at ramifications of additional states coming into play.
Often, when a major buyer is looking into a target company, its CPA firm has already addressed it, whereas the seller company (which is usually smaller) generally hasn’t dealt with the ramifications of selling their products across state lines because they often have little or no representation.
The good news is this is where we can assist! Miles Consulting Group works with many companies on the selling side of M&A deals, and can help dispute or reduce the estimates the acquiring company’s CPA firm provides.
