This has been an unusual year in more ways than one, and while I had intentions of running our Sales Tax Tuesday 2018 series in a fashion similar to our original Sales Tax Tuesday series, the vast number of changes and important sales tax related news has meant a lot of variations from my intentions.
With major happenings not to mention the least of which was the recent Supreme Court Decision in effect reversing the physical presence requirement of Quill v. North Dakota, as well as the number of states who had preliminarily taken steps to assess their states' rights in terms of economic nexus, this series has been kicked off course a number of times. Still it is my intention to try to cover 'the news that is the news' when it comes to sales tax, and also still ultimately get through our sales tax travel log of all 50 states.
Because I had to preempt last week the scheduled state which was to experience changes in Sales Tax, and since there as another states in the same situation this week, I've combined them together in shorter than normal state summaries, but we will try to re-visit these states a little more in-depth later in this series.
With all of that said let me remind you that Sales Tax Tuesday 2018 is a joint venture between Insightful Accountant and Avalara, the sales tax people. For many states sales and use tax are one of the single biggest sources of revenue. The same holds true for many local governments including counties, cities and towns. Without sales tax revenues these governmental entities simply wouldn't have sufficient revenues to provide all of the services they provide.
In many instances states and local governments have experienced substantial downturns over the least several years in their economies, and that has meant that sales and use tax revenues also declined. With increased purchasing via the internet the impact upon local merchants has not only resulted in a number of business failures but also sales and use tax shrinkage.
Many states responded with increased sales taxes and/or sales tax compliance enforcement. They also passed new legislation which sought to challenge the traditional limitations on imposing sales tax filing, collection and remittance requirements by out-of-state sellers to in-state buyers, something known as 'economic nexus.'
Some states were just in the process of either passing, or implementing economic nexus provisions at time of the recent Supreme Court Decision. While all the ramifications of the decision are still being debated, many states are continuing in light of their earlier adoptions, and others are actively making plans to begin collection of what they view as their 'rightful' sales tax dollars.
The implications are profound for everyone, and be certain that a lot of merchants doing on-line sales will for the first time be required to collect and remit sales taxes based upon the final destination of the products they sell in other states. That's a big job especially for small merchants who don't have a clue where to begin compliance efforts for tens of thousands of tax jurisdictions in which they sell.
Our job here at Insightful Accountant will continue to be to help educate you and your clients with these requirements and the demands they will place on everyone. In that light here are a couple of states 'in transition' already.
Connecticut - changing Sales Tax and Diapers too
Connecticut spouts 'still revolutionary' as their tourism slogan, and you may think them to have some revolutionary sales tax ideas when you read these interesting developments. But before you do, think about heading over to their Kent Falls State Park one of the most interesting and beautiful places you could 'hang out' this summer.
Connecticut just implemented a most distinctive sales tax change on July 1, both diapers and feminine hygiene products were exempted from sales tax on that date. They obviously intend to make up for the difference with their previously implemented guidelines (promulgated a few months ago) for taxing on-line retailers selling to residents and businesses within the state. As a result of last week's Supreme Court decision supporting states' rights to require internet sales to meet sales tax requirements it's likely that there will be far more of a windfall from their new collection efforts than the revenue decline they would see from their July 1 exemptions.
But Diapers and FHPs are not the only changes to float your boat when it comes to sales tax exemptions. As of July 1st the sales tax on boats, boat engines and boat trailers dropped from 6.35% to only 2.99% and if that doesn't get you thinking nautical just figure in that diesel sold to marine fuel docks for marine purposes is now exempt from Connecticut's motor vehicle fuel tax. Anchors away 'me hearties' you may find boat life the most economical way to live in Connecticut, but if that doesn't 'ring your dingy' then here are some other key sales tax facts regarding Connecticut:
- Sales and Use tax managed by the Department of Revenue Services.
- Connecticut has only one sales tax jurisdiction. The state rate at 6.35%.
- Sales tax is sourced at the destination address.
- Some common nexus creating activities are: sales solicitation, contract workers, preforming services, various forms of physical advertising (billboards, print, and even television), selling at a trade-show, craft show, or flea market.
- Affiliate relationships with retailers in excess of $2,000 in the previous year will create nexus. This includes, links on a website that drive traffic to your website (click-through nexus).
- Connecticut has a 1% rate that is charged on most technology related products instead of the 6.35% rate. This includes data processing, digital goods (books, audio, and video), downloadable software, SAAS, software implementation and support.
- Connecticut completely exempts sales tax on the following products and services: medical goods, magazine subscriptions, college textbooks, weatherization products, shoe repair services, and antique coins.
- Exemptions certificates are valid for the following business: non-profits, farmers, commercial fisherman, and for purposes of resale.
- When initially registering with Connecticut returns are required on a monthly basis, and then downgraded to quarterly or annual filing depending on sales for the first 12 month period.
Of course, if you can afford more than a dingy, then perhaps you might want to check into the Lockwood-Mathews Mansion built in 1864 with a grand 44,000 square feet in which to get lost this summer. Kind of reminds me of my 'summer place'....NOT!
Vermont - Never say Never when it comes to their Economic Nexus Act
Vermont's economic nexus law was set to take effect on 'the later of July 1, 2017, or beginning on the first day of the first quarter after a controlling court decision or federal legislation abrogates the physical presence requirement of Quill v. North Dakota.' Accordingly remote sellers doing a specified amount of business in Vermont must now register and remit sales and use taxes to the State of Vermont as of July 1, 2018. In this case if a remote vendor has sales of at least $100,000 from outside Vermont to destinations within Vermont, or at least 200 individual sales transactions to Vermont destinations, they must register, collect and remit tax on their Vermont sales.
Of course you can simply not worry about out-of-state sales if you head to Vermont for their best known product...."Maple Syrup", that may not be on my diet right now but you can count on the fact that when late-fall and winter pancake and waffle time gets here I will be pouring on the sweet sticky stuff that is the nectar of those majestic maple trees. You would think with all that 'goodness' so prevalent in the state that it would 'sweeten' up' the tax man...as I said, you'd think.
Maybe they did limber up a few tax restrictions because if you buy Maple Syrup at a grocery store in Vermont in sizes intended for personal consumption you won't pay a cent of Sales tax because of the state's exemption of food from sales taxes. On the other hand if you order Maple Syrup in bulk quantities and have it shipped anywhere you rightfully should owe Vermont some tax revenues on their delicious syrup that goes great on corn cakes, toast, grits, ham, sausage, bacon and almost everything else.
But Maple Syrup is not the only highly sought after commodity from Vermont. Did you know that one of the most sought-after beers across our entire United States comes from a brewery located in Waterbury, Vermont. You can take in the brews of master John Kimmich at their brewpub, the Prohibition Pig which is also noted for having the best Bar-b-que in the state along with other local favorites, most of which comes from locally owned farms that supply fresh farm-to-table every day.
What you want to bet that they add Maple Syrup to their Bar-b-Que sauce, just like I do?
Well unfortunately we don't have enough time to go over any more details about Vermont then to offer you up some of their Sales Tax Facts:
- Sales and Use tax managed by the Vermont Department of Taxes.
- Vermont is a full member of the SST.
- Vermont has 12 different sales tax jurisdictions.
- The state rate is 6% and the total rate can range as high as 7% when including local jurisdictions. The average is 6.078% (with local).
- Local taxes are imposed by 14 municipalities at 1%. A separate sales tax of 9% is imposed on prepared foods, restaurant meals, and lodging. A 10% rate is imposed on sales of alcohol in restaurants.
- Sales tax is sourced at the destination address.
- Some common nexus creating activities are: place of business, systematic or seasonal sales solicitation (display advertisement, distribution of print, radio or television media), this can be performed by employees, independent contractors, agents or other representative of a business.
- Vermont will tax pre-written software (maintenance contracts associated), SAAS, digital goods (if sold to the end user), sporting equipment and grooming products.
- Vermont does not tax custom software (maintenance contracts associated), clothing (unless considered an accessory or equipment), health related products (with or without prescriptions), or installation services associated with tangible property.
- Vermont has exemption certificates including but not limited to resale, agriculture, manufacturing, publishing, research and development, or packaging. The certificate for fuel and electricity must be renewed every three years.
- Sales tax returns for Vermont may be completed online or by paper, and are due either monthly quarterly or annually depending on the amount of tax due.
We will let you know about the economic nexus 'compliance particulars' in an upcoming Sales Tax Tuesday (2018).
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