Posted on August 31, 2021
Items given as gifts by a Charitable Organization in Colorado: Taxable or Exempt?
The Colorado Department of Revenue (CDOR) has issued a general information letter discussing sales and use tax on items given as gifts by a charitable organization. CDOR provides the general rule that charitable organizations engaging in the business of selling at retail are considered retailers and must collect tax on any retail sales made. However, a bona fide gift of tangible personal property is not considered a sale and sales tax does not apply to the act of gift giving.
Instead, the gift giver is considered the user and consumer of the property and is liable for sales or use tax. If the giver did not pay sales tax when acquiring the property with the intention of reselling it, the giver is liable for use tax on the item.
Generally, the use of tangible personal property by a charitable organization is exempt from use tax if the property is used in the conduct of its regular charitable functions and activities. However, the exemption does not apply to property a charitable organization transfers to anyone else for personal use if all or part of the price of the good is recouped from the transferee.
Arizona Provides TPT Guidance for Manufacturing Businesses
The Arizona Department of Revenue (DOR) has issued a ruling on the scope of the state transaction privilege tax (TPT) deduction for qualified smelting or manufacturing businesses for state and county privilege taxes levied under the “utilities” classification.
The definition of manufacturing used for purposes of the utilities TPT deduction is broader than the definitions of manufacturing used for Arizona retail TPT and use tax. Although mining activities are excluded from the scope of qualified manufacturing activity for the purposes of the deduction, a mining operation that also engages in metallurgical activities may qualify for the TPT deduction.
The DOR stated that it may apply, and taxpayers are authorized to utilize, the provisions of the ruling retroactively to adjust a billing or assessment relating to application of the deduction for periods from and after August 1, 2014, if such adjustment will benefit the business and the applicable limitation period has not expired.
Online Instruction Classes in Washington: Subject to Sales Tax or B&O Tax?
Washington Department of Revenue has recently issued guidance on the taxability of online instruction classes. It stated that an online class is not subject to sales tax if the presenter is live and allowing a real-time interaction between the presenter and the participants. The revenue generated from these classes is instead subject to the state’s business and occupation (B&O) tax under the Service and Other Activities Classification. If the presentation is prerecorded or does not allow real-time participation, then the class is subject to both retail sales tax and B&O tax under the Retailing classification.
Washington Establishes New Excise Tax to Fund 988 Crisis Hotline
Effective October 1, 2021, Washington Department of Revenue will impose a new excise tax on every telephone line and prepaid wireless retail transaction sourced to Washington. The revenue from the tax will fund a new 988 behavioral health crisis hotline.
From October 1, 2021, through December 31, 2022, the tax rate will be $.24 per line or retail sale of prepaid wireless service. The tax will be collected by telephone service providers or by retailers in which wireless services are purchased from. Providers and retailers will be responsible for reporting the number of lines or prepaid wireless service transactions sold each month to the state.
The tax rate is expected to increase to $.40 effective January 1, 2023.
SaaS and Free Mobile App’s in Indiana: Taxable or Exempt?
The Indiana Department of Revenue has ruled that a company’s internet fleet management services or the free mobile app are not subject to Indiana sales and use tax.
Because the company's services were composed of remotely accessed software and free mobile app were each individually not subject to sales tax, their bundling into one transaction did not make them taxable. Likewise, because the mobile app was provided for free and not part of the transaction for fleet management services, it did not impact the taxability of the fleet management services.
There are multiple questions that must be asked to accurately determine the taxability of a good or service including: 1) what is the product or service being provided? 2) how is the product or service being delivered to the consumer? And lastly, 3) how will the end consumer use this product or service?
Often times, it’s difficult for businesses to determine the taxability of their products and services, especially if there is nexus present in multiple states, where taxability laws vary greatly.
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Contributor: Courtney Sboro
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