How to Determine Taxability of Services, Part 2
A couple of weeks ago we introduced the general guidelines surrounding taxability of services. Because taxability varies by state, we wanted to share a few examples of how selected states determine if a company is responsible for sales and use tax on their services.
Arizona’s Take on Taxability of Services
In Arizona, transactions that include both tangible personal property and services may be subject to sales and use tax collection (note that AZ has what is called the Transaction Privilege Tax, which is similar to a sales tax for purposes of this example). So, for example, a company that sells a physical widget and then operates it for you would need to charge taxes on the entire transaction.Read more
FOCUS ON MISSOURI
This month we travel to the “Show Me” state of Missouri. The people of Missouri have earned their motto as the “Show Me” state for their very practical skepticism of the fads that sweep other parts of the country. This attitude manifests itself in the state government’s approach to business encouragement and regulation. So, let’s look at the state and see how their approach could help your business.
The state is the 21st most extensive by area and is geographically diverse. North of the Missouri River, the state is primarily composed of rolling hills of the Great Plains and south of the Missouri River, the state is dominated by forests. The Mississippi River forms the Eastern Border of the State, eventually flowing into the swampy Missouri Bootheel.
How to Determine Taxability of Services, Part 1
If you followed our recent series about multi-state tax facts for various types of technology companies, you likely noticed a common theme: it's important to determine which states a business has created in so that they know which sales and use tax laws to follow. Although it can be tricky, the good news is there are some generalities that can help get a company started with the process.
Sales and Use Tax in Regards to Services
In general, the sale of tangible property starts out as subject to sales tax, but then may ultimately be non-taxable as a result of statutory exemptions. On the other hand, services are generally non-taxable unless specifically delineated by a state’s statutes as taxable. Bloomberg BNA* does a good job of describing the general rules around taxation of services.Read more
7 Important Multi-State Tax Facts for BioTech and Pharmaceutical Companies
If you’ve been following our series about multi-state tax facts for various facets of the technology industry, you may be aware of one more niche we haven’t discussed yet: BioTech and Pharmaceutical companies. While both these categories fall under scientific research and medicine, they’re integral to technology as well.
- BioTech organizations research living cells, studying and discovering ways to duplicate or modify them so they’re more predictable. This research has a lot of potential for curing or improving the lives of those with all sorts of diseases and conditions, and is at the forefront of scientific discovery, which is reliant on top-of-the-line, innovative tools and technology.
- Pharmaceutical companies specialize in everything surrounding drugs, specifically in-house research and licensing from academia and other businesses (including BioTech companies).
7 Multi-State Tax Facts BioTech and Pharmaceutical Companies Need to Know About
Fact 1: BioTech companies need to be aware of where they’re creating nexus beyond where the company is physically located. Many BioTech firms keep the research in their primary location, which limits instances of nexus being established in other states; however, some companies outsource some aspects of the research, which means nexus could be established beyond their home state.
Fact 2: Pharmaceutical companies may establish nexus in states in which sales representatives visit, even if they don’t complete a sale. In many states common sales activities may trigger nexus.Read more
6 Important Multi-State Tax Facts for Semiconductor Manufacturing Companies
As a semiconductor manufacturing company, what do you need to know about nexus and multi-state tax laws? Despite the fact that much of the manufacturing is often done in other countries (often by third party contract manufacturers), many of these businesses engineer and test the devices domestically, which often makes them subject to a wide range of laws from various states across the country.
6 Multi-State Tax Facts Semiconductor Manufacturing Companies Need to Know About
Fact 1: Nexus extends beyond states in which companies manufacture semiconductors. If they send sales representatives or store inventory across state lines, they may establish nexus without realizing it. Businesses need to be aware of what types of activities create a taxable presence from state to state; we can help with that!
Fact 2: In addition to knowing in which states they’ve established nexus, companies need to note if they’re selling directly to consumers or to resellers. If selling to the end consumer in a state where they have nexus, they’ll need to collect and remit sales tax, whereas if they’re predominantly selling to resellers it’s important they acquire valid resale certificates from their customers. Either case could result in having to file monthly or quarterly sales tax returns. Many businesses miss this step and end up facing headaches under audit, which could have been avoided altogether with proper documentation up front.Read more
FOCUS ON VIRGINIA
This month we travel across the country to Virginia. One of the original 13 colonies, Virginia possesses a lot of living history with the Jamestown Settlement and Colonial Williamsburg being notable historic landmarks.
The Shenandoah National Park lies in the eastern part of the state deep in the Blue Ridge Mountains. Mostly forested, the park features wetlands, waterfalls and rocky peaks, like Hawksbill, and Old Rag mountains. It is also home to many bird species, deer, squirrels and the elusive black bear.
3 Important Multi-State Tax Facts for Medical Device Companies
If you’ve been following these series about multi-state tax facts, you know we’ve already covered software and SaaS companies. What about medical device companies?
Because the term “medical device” covers a wide range of instruments, machines, accessories or other tools that can be used both externally (such as tongue depressors) or internally (like pacemakers), there are a lot of multi-state tax questions that arise in this industry.
3 Multi-State Tax Facts Medical Device Companies Need to Know About
Fact 1: As with so many other areas of state tax, a key driver is “nexus,” or taxable presence. Employees of medical device companies often travel frequently to trade shows, doctors’ offices, and for other demo and training opportunities. But because they may not actually sell their products at these events, they often aren’t even aware their business has established nexus across state lines. It’s important to note that third party representatives (beyond just a company’s own employees) can create nexus, as can the presence of tangible property in a state. So, if a doctor’s office maintains piece of demo equipment in his/her office and the medical device company retains title to that equipment, nexus has been created. Or if the doctor helps to engage in the sale of the equipment, she may have become an agent of the company, thereby creating nexus.Read more
3 Important Multi-State Tax Facts SaaS Companies Need to Know
Last week we discussed various multi-state tax issues software companies often overlook. This week we look at another industry that often misses sales and use tax ramifications on their sales: Software-as-a-Service (SaaS). Many think that because it’s not a tangible product or even clearly defined as a service (at least according to traditional definitions), these companies don’t need to worry about state sales tax. Keep reading to find out why this could be a costly mistake.
3 Multi-State Tax Facts SaaS Companies Need to Know About
Fact 1: SaaS companies regularly establish nexus. Just as every business that engages in various activities across state lines, SaaS companies need to be aware of how they may be establishing a taxable presence, or nexus, across the country. For SaaS companies specifically, this is often done in a few ways:
- Sending employees or third-party contractors to customers in other states as a “traveling salesforce.”
- Renting server space in various states across the country.
- Housing servers in more than one state.
3 Important Multi-State Tax Facts Software Companies Need to Know
What do software companies need to know about when it comes to multi-state tax issues? Last year we shared an overview of nuances many in the field don’t think about, but need to consider when it comes to their organization. As a large portion of the technology industry, it is important that software companies are aware of how matters such as nexus, as well as individual state sales tax and income tax laws, may affect them.
3 Multi-State Tax Facts for Software Companies
Fact 1: Even if you don’t create and sell a physical product, your company may still have "nexus" (or physical presence) in multiple states, making you responsible for following their state’s tax laws (both for income tax and sales tax). We often ask questions like these to determine if a software client may have nexus in multiple states:
- Do your employees travel to other states for anything related to sales, including software installation and training?
- Does your business either have servers or rent server space outside of your home state?
- Does your company have or rent property in multiple states?
FOCUS ON CALIFORNIA
This month, we travel back to the mainland (and the home state of Miles Consulting Group) to the 3rd largest state in the country and the 6th largest economy in the world- the Golden State of California! With its sunny and dry coastal climate year round (except for January 2017!) and easy access to the ocean and mountains, California has always been seen as an ideal resort destination. In the 1960s, popular music groups such as The Beach Boys promoted the image of Californians as laid-back, tanned beach-goers - which, of course we all are!
California is home to the second most populous city in the United States- Los Angeles, which is home to the Hollywood entertainment industry. San Francisco, 400 miles to the north, is where you will find the Golden Gate Bridge, Alcatraz Island and cable cars.
