The World of Computer Software/World_Of_Computer_Software-02-385-Vol-1of3.iso/s/sbadv64b.zip/F265.SBE

Text File | 1992-12-01 | 21KB | 541 lines

@109 CHAP 11
@CODE: HI
@CODE:EN

          ┌───────────────────────────────────────────┐
          │      SALES AND USE TAXES (IN GENERAL)     │
          └───────────────────────────────────────────┘

             The Three Golden Rules of Governance:

               1.  If it moves, tax it.
               2.  If it's big, regulate it.
               3.  If it's really huge, subsidize it.

@CODE: NM
Unlike most states, New Mexico does not have the typical
sales and use tax that applies mostly to sales of tangible
personal property.  Instead, New Mexico has a "gross re-
ceipts tax" on virtually all forms of gross income, includ-
ing income from services as well as from the sale of goods.
As such, it is a much broader and more pervasive tax than
the sales tax imposed in all but a handful of the other
50 states.  It applies to all gross receipts of all persons
(including corporations, associations, etc.) selling pro-
ducts or furnishing services within the state, but allows
a number of deductions and exemptions.

The tax rate is currently 5% (as of 7-1-91), but cities and
counties are allowed to add on local gross receipts taxes,
so that rates range from as low as 5.125% to as much as
6.75% in different localities.  As a seller subject to the
tax, you must register on Form RP-31 with the New Mexico
Taxation and Revenue Department.  Businesses are generally
required to file monthly returns on Form CRS-1, which is
used to report gross receipts tax and, if applicable, state
income tax withheld from wages.

Major exemptions from the gross receipts tax include wages,
salaries and commissions paid to employees; receipts of
growers, producers, or nonprofit associations from selling
livestock, poultry and unprocessed agricultural products;
interest or dividend income; receipts from sales of stocks,
bonds or other securities; and receipts from the sale or
leasing of oil, natural gas, or mineral interests.

Sales of various goods and services for resale are usually
deductible from the gross receipts tax base, if the buyer
gives the seller the appropriate type of Nontaxable Trans-
action Certificate.

@CODE:EN
@CODE: OR AK MT NH DE
         @STATE doesn't impose a sales or use tax.

         Accordingly, the following general discussion of
         sales and use taxes will be of interest to your
         company based in @STATE only if you also
         operate in other states.

____________________________________________________________

@CODE:OF
With a limited number of exceptions, every business that
will sell tangible personal property (such as merchandise)
to customers must obtain a seller's permit from the state
sales tax agency.  A separate permit may be necessary for
each place of business where property subject to tax is
sold.  In many states, certain kinds of services are also
subject to sales tax.

In general, as a wholesaler (or manufacturer) you will not
have to collect sales tax on goods you sell to a retailer
for resale, if the retailer holds a valid seller's permit
and provides you a "resale certificate" in connection with
the transaction.  Likewise, if your business, as a retail-
er, buys goods for resale, you need not pay sales tax to
the wholesalers if you provide them with resale certifi-
cates.

While the sales tax generally applies to the sale or rental
of tangible personal property (other than for resale) with-
in the state, a "use tax" or compensating tax, applies to
the storage, use or other consumption of such property pur-
chased from a retailer for such storage, use or consumption.
The use tax generally applies to purchases made OUTSIDE the
state for use within the state.  The use tax also applies,
generally, when a retailer buys goods ex-tax (for resale),
and instead uses or consumes some of the goods rather than
selling them.

Note that if you sell across state lines to customers in
states where you have no offices, employees or other pres-
ence, the sale is usually not subject to sales tax in ei-
ther state, since it is an interstate sale.  However, tech-
nically, such sales are subject to "use tax" (which is sort
of a "shadow" of the sales tax, which applies where the
sales tax doesn't in most states) in the customer's state.
The U.S. Supreme Court and other courts generally have not
supported attempts of the various states to force out-of-
state retailers to collect use tax on mail order or other
sales made to residents of the taxing state, so that most
mail order firms tend to treat such interstate sales as
being tax-free, or tell the customers that it is up to
them to report the purchase and pay the use tax (which
they almost never do).

Unfortunately, in just the last 5 or 6 years, many states
have enacted new and broader sales and use tax laws that
require out-of-state retailers who advertise in the local
media or send substantial amounts of direct mail/catalog
solicitations into the state to register as retailers sub-
ject to sales or use tax in the state, treating such di-
rect sales as taxable.  Some states have been aggressively
enforcing these new laws, which will definitely cramp the
style of many mail order firms if these laws stand up in
court.

BOTTOM LINE:  Don't assume that such interstate sales are
still "sales tax-free," at least in many states.  (A
Tennessee law even imposes use tax on free mail order cat-
alogs shipped into the state, whether or not any sale is
made!)

RECENT UPDATE:  Just recently, the U.S. Supreme Court
has ruled, on May 26, 1992, in the case of Quill Corp. v.
North Dakota, that a state may not force out-of-state mail
order retailers to collect use tax on sales to residents of
the state, where the company had no presence in the state,
under the U.S.  Constitution.  Thus, it appears that many
of the broad new mail order use tax laws, targeted to hit
mail order firms, which have been adopted in some 34 states
in recent years, may be invalid.  While this is good news
for mail order retailers, the bad news is that the court
also indicated in its decision that Congress could, if it
chooses to do so, constitutionally enact legislation that
would permit the states to require use tax collection on
mail order and similar sales by out-of-state retailers.
Expect something along these lines to be passed in the next
year or two, possibly after the November election.  At
least if a federal law authorizing such use tax collections
is enacted, it will most likely provide some exemption for
smaller retailers and a simplified, state-wide tax rate and
payment method for sellers with only minimal sales in each
of a number of states.

@CODE: CA
        ┌──────────────────────────────────────────────┐
        │       CALIFORNIA SALES AND USE TAX LAW       │
        └──────────────────────────────────────────────┘

California requires virtually every business that will sell
tangible personal property (even wholesalers) to obtain a
seller's permit from the state Board of Equalization office
nearest the place of business.  A separate permit is re-
quired for each place of business where goods subject to
tax are sold.  To obtain a permit, it is necessary to sub-
mit a completed registration form, Form BT-400 or BT-403.
There is no fee for obtaining a permit, but you may be re-
quired to post a bond as security for payment of tax.

However, the State Board of Equalization has recently
dropped the requirement that most new businesses regis-
tering for the sales tax post a deposit (except for re-
tailers who have established a poor record of paying sales
tax to the state).  In the past, most new businesses in
California were required to post a bond or deposit to-
talling 3 times their estimated monthly sales tax col-
lection (up to $10,000).  Dropping this requirement is in-
tended to lower one barrier to the creation of new small
businesses.

Sales tax rates in California range from 7.25% in most ru-
ral counties to as high as 8.25% in some of the urban coun-
ties, such as Alameda and Santa Clara counties, and San
Francisco voters have approved an additional 0.25% sales
tax increase, effective February 1, 1992, to be in effect
for 17 months.  This raises the sales tax rate to 8.5% in
San Francisco (City and County), the highest in the state
of California.  There is some doubt about the constitution-
ality of this increase, under Proposition 13.

Numerous types of transactions and categories of property
are exempt from the tax.  Perhaps the main type of exempt
property is food (although this exemption does not apply to
restaurant sales or to liquor, nor, after July 15, 1991, to
"snack foods" or to bottled water).  One-half of one per-
cent of the current state wide sales tax rate (after July
15, 1991) is theoretically "temporary," but we suggest you
do not hold your breath waiting for this temporary tax to
expire.

In addition, recent sales tax law changes will permit coun-
ties to increase the local sales tax to as much as 1.5%
(versus the current limit of 1%), starting January 1, 1993.

California sales and use tax returns usually must be filed
and tax paid within one month after the end of each calen-
dar quarter, although larger businesses may be required to
make more frequent payments of tax.

@CODE:EN

(NOTE:  Not every state has a sales and use tax law.
Oregon, Montana, Alaska, Delaware and New Hampshire do
not.  However, there is a sales tax in @STATE.)

@CODE: DC
The general sales and use tax rate in D.C. is 6% of retail
sales for sales or rentals, or for storage, use or consump-
tion of tangible personal property, including prepared
food and drink and materials used to repair or alter real
property.  In addition there are special sales tax rates
that apply to transient accommodations, prepared food and
drink, alcoholic drinks sold for on-premises use, and for
rental vehicles and trailers.

D.C. sales tax also applies to certain services, including:

  . The production, fabrication, or printing of tangible
    personal property on special order;

  . fuel and utility services;

  . repairing, altering, or fitting tangible personal
    property, or applying and installing same as repair
    or replacement parts of other tangible personal
    property;

  . duplicating, copying, addressing and mailing services,
    and public stenographic services;

  . commercial textile rentals that include recurring
    laundering or cleaning service;

  . real property maintenance and landscaping services;

  . data processing and information services;

  . parking, storing or keeping motor vehicles or
    trailers; and

  . local telephone service.

Persons selling taxable property or services at retail and
anyone buying taxable property for resale or other nontax-
able purposes is required to first obtain a certificate of
registration from the Department of Finance and Revenue.

@CODE:EN
The general state wide sales/use tax rate in @STATE is:
@CODE: CO
3 percent.  Denver has a 3.5% sales and use tax rate, plus
a 0.6% Regional Transportation District Sales Tax.  While
city and county sales and use taxes are generally collected
by the state, you must report and remit local taxes to
Denver and other "home rule" cities.

The Colorado sales tax applies to:

  .  sales and purchases of tangible personal property at
     retail (with certain exceptions, like newspapers);

  .  food or beverages that are served or furnished in or
     by restaurants or other eating establishments where
     food or drink is regularly sold;

  .  gas, electric, and intrastate telephone and telegraph
     service; and

  .  furnishing rooms or accommodations in hotels and
     similar places (including an additional tourism tax
     over and above the regular sales tax rate).

Sellers must register to obtain a Colorado sales tax li-
cense, for which there is a $16 fee (which must be renewed
every 2 years), plus a $50 tax prepayment or deposit.

@CODE:EN
@CODE: WY
3 percent.  Wyoming counties impose sales and use taxes at
1% or 2% (administered by the state) on retail sales of
tangible personal property, admissions, and services, and
counties or localities within counties can also levy an
extra 1% or 2% lodging tax.

The sales tax applies to:

  . retail sales and rentals of tangible personal property;

  . utility services, including gas, electricity and heat;

  . transient accommodations;

  . admissions to places of amusement, recreation, games
    or athletic events;

  . services in the nature of repair, alteration, or
    improvement of tangible personal property (such as
    laundering, dry cleaning, etc.);

  . intrastate telephone services;

  . transportation of passengers; and

  . meals and alcoholic beverages.

Vendors must register and obtain a sales tax license in
order to do business in Wyoming, and are required to make
a tax prepayment of $150 at such time.

@CODE:EN
@CODE: LS
300 percent.  Take it or leave it.

@CODE:EN
@CODE: VA
3.5 percent.  In addition, every county and city levies
a 1% local sales and use tax, administered and collected
by the State Department of Taxation along with the state
sales and use tax.

Sellers must obtain a certificate of registration from the
Tax Commissioner in order to engage in a taxable business,
one for each place of business.  There is no fee for the
registration.

@CODE:OF
@CODE: AL GA LA MI NY NC SD
4 percent.

@CODE:OF
@CODE: AL
Many Alabama counties, cities and towns also impose sales
and use taxes, most of which are collected along with the
state sales tax.  Sellers must obtain an annual sales tax
license (no fee) from the Department of Revenue.

Alabama is the only state which exempts "canned" (non-
custom, off-the-shelf) computer software from sales tax.

@CODE:OF
@CODE: GA
Counties and cities in Georgia impose a 1% local-option
sales and use tax, and counties can also adopt a 1% Special
County Sales-Use Tax.  In addition, in the Atlanta area,
Fulton and DeKalb Counties levy a 1% rapid transit district
sales and use tax.

Retailers must apply to the State Revenue Commissioner for
a certificate of registration for each place of business in
Georgia.  There is no fee for registration.

@CODE:OF
@CODE: LA
In addition, local sales taxes are imposed at the parish
and municipality levels, and by school boards, at rates up
to 4% (5% in New Orleans), which is added to the state
sales tax.  There is also a 10% tax on hotel and motel
room rentals in the city of New Orleans.

Sellers and auctioneers are required to register with the
Department of Revenue and Taxation.

@CODE:OF
@CODE: MI
There are no local sales taxes in Michigan.  However, in
addition to the state sales tax, Michigan also imposes a
2.35% value-added tax, misnamed the "Single Business Tax"
(since there are also sales and use taxes, property taxes,
an individual income tax, and other taxes on businesses in
the state of Michigan). The value-added tax, which applies
to all but relatively small businesses, is sort of a cross
between an income tax and a sales tax, with many deductions
allowed, except for some of the more important ones, like
wages and interest expense.

Sellers must register for a sales tax license with the
Revenue Division of the Michigan Department of Treasury.
Licenses expire annually on June 30 and can be renewed for
a $1.00 fee.

@CODE:OF
@CODE: NY
Localities are also allowed to impose sales and use taxes
of 1% to 3% (4% in some areas).  The total rate in New York
City is 8.25%, consisting of the 4% state rate, a 4% local
tax, and a 1/4% Metropolitan Transit tax.

Sellers are required to register and obtain sales tax cer-
tificates of authority from the Department of Taxation and
finance within 20 days of starting business, generally.

Sellers are generally required to file quarterly sales tax
returns (Form ST-100), or monthly returns (Form ST-810) if
taxable gross receipts were $300,000 or more in any of the
four preceding quarters.  Permission to file annual returns
only (Form ST-101) may be granted for some firms with under
$250 tax liability.

@CODE:OF
@CODE: NC
Various classes of taxable items are subject to tax at re-
duced rates of 1%, 2% or 3%, and most such items are fully
exempted from the 1% local option (county) sales taxes.
Certain of such items also have a maximum sales tax amount
per item, such as $80 on certain farm equipment.

Sellers are required to register with the Sales and Use Tax
Division of the State Department of Revenue and obtain a
sales tax identification number.

@CODE:OF
@CODE: SD
The South Dakota sales tax is quite broad, as it applies to
gross receipts from most kinds of service businesses, ex-
cept certain exempted services, such as health and educa-
tional services. (Wages paid to an employee are also exempt.)
Sales tax also applies to sectional homes, which are pre-
built homes for placement on foundations, not mobile homes.

While the general state sales tax rate is 4%, a 3% rate
applies to farm machinery and irrigation equipment, oil and
gas field services, and gross receipts from amusement de-
vices.  A 2% tax applies to gross receipts of contractors
engaged in real estate improvement contracts, in addition
to the retail sales tax.

In addition to the state sales tax, cities and towns can
impose local sales taxes of up to 2%, and a number of cities
also impose lodging taxes at rates of 2% to 3%.

A seller is required to obtain a sales tax permit from the
Department of Revenue for each place of business.  No fee is
charged for the permit.

@CODE:OF
@CODE: MO
4.225 percent (plus a local use tax of 1.5%, making the
total use tax rate 5.725% after June 30, 1992 -- Missouri
is the only state with a use tax rate that differs from the
sales tax rate).

A number of Missouri cities and counties also have local
sales taxes.  City rates are generally 1%, while county
rates are mostly 1/2%.  The local taxes are also collected
and administered by the Missouri Department of Revenue.

Persons responsible for collecting the sales tax must reg-
ister for a retail sales tax license with the Department of
Revenue.  There is no registration fee, but a bond must be
posted.  Anyone purchasing a business must notify the
Department of Revenue, and must obtain a Certificate of
No Tax Due from the seller, or withhold any such tax as
is due from the purchase price of the business.

@CODE:OF
@CODE: KS
4.25 percent.  However, legislation passed by the Kansas
legislature recently has increased the tax rate to 4.9
percent, effective June 1, 1992.  Many cities and counties
also impose sales taxes of 1/2 or 1%, which are adminis-
tered and collected along with the state sales tax by the
Kansas Department of Revenue.  The tax applies to a number
of kinds of services, including dry cleaners, laundries,
carwashes, cable and other subscriber radio and TV services.

Retailers and persons selling taxable services are required
to obtain a sales tax registration certificate for each
place of business.  No fee is charged for the certificates,
which must be displayed at the place of business.

@CODE:OF
@CODE: AR OK
4.5 percent.

@CODE:OF
@CODE: AZ ID IN NB ND OH SC MD MA UT WS
5 percent.

@CODE:OF
@CODE: VT
5 percent until June 30, 1993, 4% thereafter.

@CODE:OF
@CODE: IA
5 percent, effective July 1, 1992 (4% previously).

@CODE:OF
@CODE: TN
6 percent.  Tennessee has also recently enacted a separate
tax on certain types of services, of 6.75%, repealing the
sales tax on such services.

@CODE:OF
@CODE: FL
6 percent.  Effective September 1, 1992, the sales tax is
also imposed on detective, burglar protection and other
protective services, and on nonresidential cleaning and
pest control services.

@CODE:OF
@CODE: CT KY WV PA
6 percent.

@CODE:OF
@CODE: ME
6 percent (dropping to 5%, effective July 1, 1993).

@CODE:OF
@CODE: MN
6 percent (6.5% between July 1, 1991 and December 31,
1991).

@CODE:OF
@CODE: IL TX
6.25%.

@CODE:OF
@CODE: NV
5.75% (6.5%, effective October 1, 1991).

@CODE:OF
@CODE: WA
6.5% (8.2%, counting local taxes, in the Seattle area).

@CODE:OF
@CODE: MS
7 percent.

@CODE:OF
@CODE: NJ
7 percent, dropping to 6% on July 1, 1992.

@CODE:OF
@CODE: RI
7 percent. (A scheduled reduction of this rate in 1991 and
1992 has been repealed.)  A 5% additional tax applies to
transient room rentals.

@CODE:OF