Multistate Tax Update -- July 30, 2015
Numerous states offer sales tax holidays in the coming weeks
Many states are holding sales tax holidays to give consumers a tax break on back-to-school clothing and other purchases.
Some are limiting the list of tax-exempt items to clothing, footwear, and accessories, while others have expanded the offering to items other than back-to-school goods. For example, Virginia’s sales tax holiday also exempts hurricane and emergency preparedness items, Energy Star and WaterSense items. Mississippi offers a Second Amendment sales tax holiday on firearms during the weekend after its back-to-school tax holiday.
The Plain Dealer reported that for the first time Ohio will join the list of states offering such a holiday. It is expected to be a boon for the 14 percent of families that have students going back to school this fall. Nationwide, consumers are expected to spend more than $68 billion for back-to-school items.
Despite the savings, not everyone thinks sales tax holidays are the right way to give consumers a break. In The Truth About Sales Tax Holidays, the Tax Justice Blog contends that these holidays are costly gimmicks that distract “from the bigger picture problem with regressive state tax systems.” The blog argues this happens because the temporary suspension of sales taxes disproportionately benefits wealthy families that can time their purchases to coincide with the tax holiday, a luxury that those living paycheck to paycheck cannot afford.
In addition, the blog points out that sales tax holidays will collectively cost states more than $300 million this year. The blog contends that it is better to spend resources to create “long term solutions with real benefits for working families.”
Nevertheless, there are 18 states offering a sales tax holiday. Below is a list of certain states and details of the sales tax holiday.
Dates of holiday
Items free from tax collections
|Florida||Aug. 7-16, 2015||• Clothing, footwear, and certain accessories selling for $100 or less per item
• Certain school supplies selling for $15 or less per item
• Personal computers and certain computer-related accessories on the first $750 of the sales price, when purchased for noncommercial home or personal use
|The Florida Department of Revenue provides details, like lists of exempted items, and FAQs|
|Georgia||July 31-Aug. 1, 2015||• Clothing and footwear with a sales price of $100 or less per item
• Computers, computer components, and prewritten software purchased for noncommercial home or personal use with a sales price of $1000 or less per item
• School supplies purchased for noncommercial use with a sales price of $20 or less per item
|The Georgia Department of Revenue provides detailed lists of exempted and taxable items, here|
|Maryland||Aug. 9-15, 2015||• Clothing and footwear priced at $100 or less. This does not include accessory items, the first $100 of a more expensive single article or set (like a suit), or special clothing or footwear designed for protection, like football pads||The Comptroller of Maryland has posted other details pertaining to its Tax Free Week, including FAQs, lists of exempted items, and links to merchandising materials that retailers can print and display|
|Mississippi||July 31-Aug. 1, 2015 and Sept. 4-6, 2015||• Clothing and footwear priced at $100 or less. Accessories including jewelry, handbags, luggage, umbrellas, wallets, watches, backpacks, briefcases, and similar items do not qualify||Mississippi’s Official Guide to the Sales Tax Holiday explains how to apply to tax holiday to pairings of eligible and ineligible items, buy-one-get-one-free promotions, and the like. In addition, Mississippi offers a Second Amendment Sales Tax Holiday from Sept. 4-6, 2015, during which the sale of firearms, ammunition, and certain hunting supplies are tax exempt|
|Missouri||Aug. 7-9, 2015||• Clothing—any article having a taxable value of $100 or less
• School supplies—not to exceed $50 per purchase
• Computer software—taxable value of $350 or less
• Personal computers—not to exceed $3,500
• Computer peripheral devices—not to exceed $3,500
The Missouri Department of Revenue’s Back to School Sales Tax Holiday web page contains links to information for vendors and consumers, FAQs, lists of cities and counties that have chosen not to participate, tax rate tables, and rate cards
|Ohio||Aug. 7-9, 2015||• Clothing priced at $75 per item or less
• School supplies priced at $20 per item or less
• School instructional material priced at $20 per item or less
• Items used for trade or business are excluded from the tax holiday
|The Ohio Department of Taxation provides consumers with a list of FAQs on its website|
|Oklahoma||Aug. 7-9, 2015||• Sales of any article of clothing or footwear designed to be worn on or about the human body, and the sales price of the article is less than $100||Like the other states, the Oklahoma Tax Commission has provided more particulars on its website|
|South Carolina||Aug. 7-9, 2015||• Clothing and clothing accessories (hats, scarves, hosiery, and handbags)
• School supplies (pens, pencils, paper, binders, notebooks, books, bookbags, lunchboxes, and calculators)
• Computers, printers and printer supplies, computer software
• Bath wash clothes, blankets, bedspreads, bed linens, sheet sets, comforter sets, bath towels, shower curtains, bath rugs and mats, pillows, and pillow cases
|The South Carolina Department of Revenue has published Revenue Ruling 10-7 that provides a list of exempt and taxable items, and Revenue Ruling 10-8 that answers questions|
|Tennessee||Aug. 7-9, 2015||• Clothing, school, and art supplies that cost $100 or less per item
• Computers that cost $1,500 or less
|Tennessee’s Department of Revenue has posted links to lists of exempt and taxable items, FAQs, and additional information on its website|
|Texas||Aug. 7-9, 2015||• Most clothing, footwear, school supplies, and backpacks priced under $100||In the Fine Print, the Texas Comptroller of Public Accounts provides information for its sales tax holiday, including lists of items, prohibited advertising, and reporting requirements for sellers|
|Virginia||Aug. 7-9, 2015||School supplies, clothing, and footwear:
• Qualified school supplies—$20 or less per item
• Qualified clothing and footwear—$100 or less per item
Hurricane and emergency preparedness items:
• Portable generators—$1,000 or less per item
• Gas-powered chainsaws—$350 or less per item
• Chainsaw accessories—$60 or less per item
• Other specified hurricane preparedness items with a sales price of $60 or less per item
Energy Star and WaterSense items:
• Qualifying Energy Star items include dishwashers, clothes washers, air conditioners, ceiling fans, light bulbs, dehumidifiers, and refrigerators
• Qualifying WaterSense items include bathroom sink faucets, faucet accessories such as aerators and shower heads, toilets, urinals, and landscape irrigation controllers
|The Virginia Department of Taxation’s Sales Tax Holiday page incorporates links to detailed lists of applicable items, product specific information, guidelines, and information for consumers and retailers|
Washington enacts tax legislation that addresses critical infrastructure and agricultural issues
The federal government has struggled for years to pass measures that could help address the nation’s infrastructure problems. Similarly, lawmakers in many states are at odds with each other over the best way to address crumbling roads and bridges. The situation has become increasingly problematic over time.
In Bumpy Roads Ahead: America’s Roughest Rides and Strategies to Make our Roads Smoother, the national research group TRIP reported the following:
More than a quarter of the nation’s major urban roadways, which includes highways and major streets that are the main routes for commuters and commerce, are in poor condition. These critical links in the nation’s transportation system carry 53 percent of the approximately three trillion miles driven annually in America.
The average motorist in the U.S. is losing $516 annually—$109.3 billion nationally—in additional vehicle operating costs as a result of driving on roads in need of repair.
Driving on roads in disrepair increases consumer costs by accelerating vehicle deterioration and depreciation, increasing the frequency of needed maintenance and requiring additional fuel consumption.
Heavy trucks stress the nation’s roads to a greater extent that cars. Travel by large commercial trucks in the U.S. increased by seventy-nine percent from 1990 to 2013, and the level of heavy truck travel nationally is anticipated to increase by approximately seventy-two percent from 2015 to 2030.
A properly implemented pavement preservation approach to keeping pavements in good condition has been found to reduce overall pavement lifecycle costs by approximately one-third over a 25-year period.
Washington stands out as one jurisdiction that has come to terms with tax increases as one way to address the issue. The Evergreen State is also using tax policy to encourage reliance on alternative forms of transportation and alternative fuel vehicles, thereby approaching the dilemma from all angles. Thus, it may not be a coincidence that there are not any Washington cities on TRIP’s top 25 urban regions with a population of at least 500,000 where motorists pay the most in additional vehicle maintenance. The top five cities on this list include:
Los Angeles-Long Beach-Santa Ana, California
Oklahoma City, Oklahoma
Earlier this month, Gov. Jay Inslee signed transportation revenue legislation into law, with most of the provisions taking effect on July 15, 2015. According King5News, the legislation represents the largest investment in transportation in state history, providing $16.1 billion of funding for the completion of the North Spokane Corridor, and dozens of other maintenance and construction projects across the state. In addition, the law allocates $1 billion to rail, transit and bike path projects, and $16 million to improve the Burke-Gilman trail on the University of Washington campus so it can accommodate increased bike and pedestrian traffic when light rail service begins at the university in 2016.
Residents will see a 7 cents-per-gallon increase in their gas taxes starting in August 2015, and another 4.9 cents a gallon in July 2016. The American Petroleum Institute’s July 15, 2015, state motor fuel tax rates report shows that Washington’s total state gas tax is 37.50 cents, versus the national average of 30.48 cents per gallon.
Other provisions of the new transportation law include the following:
An alternative fuel commercial vehicle tax credit against the business and occupation tax and the public utility tax, purposed in increasing sales of commercial vehicles that use clean alternative fuel to 10 percent of commercial vehicle sales by 2021
An extension of the existing sales and use tax exemption on certain clean alternative fuel vehicles, in order to reduce the price of alternative fuel vehicles
A credit for employers against any business and occupation taxes and public utility taxes for amounts paid to employees as incentives for ride sharing, using public transportation or non-motorized commuting methods
The Northwest Progressive Institute believes that the new law is a mix of good and bad. As for the good, it contains funding for new ferries, freight mobility improvements, additional rail infrastructure, and safer right-of-ways for bicyclists and pedestrians. There is also new revenue authority for the Sound Transit, subject to voter approval, which would build upon the existing mass transit system of light rail, commuter rail and bus services, and identifies options for expanding and improving the system in King, Pierce and Snohomish counties.
On the other hand, the institute takes the position that “[e]nlarging highways is wasteful and problematic because it encourages people to drive more, which only makes traffic and pollution worse…adding lanes to gridlocked highways…is utterly pointless.”
The Spokesman-Review blog revealed that “the package took nearly three years of negotiations, compromises, false starts and debates in the Legislature.” Governor Inslee called it a “monument to the optimism of the state.”
The plight of the honey bee is a significant problem that affects virtually everyone. The New York Times recently ran on op-ed written by biologist and director of the Center for Dialogue at Simon Fraser University Mark Winston, in which he asserted that agriculture is heavily dependent upon honey bees, whose “tumultuous demise…should alert us that our own well-being might be similarly threatened.” The biologist decried the fact that bee colonies are collapsing at alarming rates for thousands of little reasons, like the increasing use of pesticides, pests, diseases, nutritional deficiencies, the lack of diverse flowering plants, and ironically, the commercial beekeeping industry, which moves colonies around to pollinate crops, and in so doing, harms them.
Washington’s legislature has a specific public policy to support the honey bee industry and provide tax relief to eligible apiarists, and 2015 in particular is “a good year to be a honey beekeeper,” according to Taxrates.com.
To provide a helpful hand to the honey bee, the Washington State Department of Revenue issued a Special Notice that accomplishes the following:
Includes eligible apiarists in the definition of “farmer” for excise tax purposes
Includes honey bee products in the definition of “agricultural products”
Exempts, from the business and occupation tax, bee pollination services provided by an eligible apiarist to a farmer, and bee sales by eligible apiarists to farmers for providing bee pollination services
Renders honey beekeepers eligible for retail sales tax exemption on replacement parts and repair services
With these changes, beekeepers can now receive the same tax benefits as other farmers.
California: Franchise Tax Board responds to issues with its web portal
On July 23, 2015, in response to ongoing security and privacy concerns, the California Franchise Tax Board (CFTB) announced that it was delaying the launch of its enhanced web portal, MyFTB, until January 2016, so it has more time to implement additional identity verification during the registration process. The CFTB originally planned to launch the portal this summer.
MyFTB allows taxpayers to perform numerous tasks, like filing and paying taxes, and accessing tax information. One enhancement will be that users can choose how they want the CFTB to communicate with them; a taxpayer can choose to receive notifications by mail, email, or text.
The CFTB disabled the registration feature for a MyFTB account, which also precludes one from registering for CalFile and Web Pay for Businesses. Taxpayers and practitioners that already have an existing account can continue to log in, though when the system is up and running in January, such users will need to re-register.
For taxpayers and practitioners who are not registered MyFTB users, the CFTB suggests contacting a call centers for assistance with any of these services:
Verify estimated tax payments
View recent payments
View account summary and tax year detail
View California wage and withholding information for up to four years
View FTB-issued 1099 information
Numerous services remain available, including the following:
Check refund status
Web Pay for Individuals (pay without logging in to MyFTB)
Pay by credit card
Apply for an installment agreement
Use Live Chat
Calculate their tax
Take Head of Household self-test
Ask a tax question by e-mail
Get an e-mail reminder to file/make estimate payments
Use subscription services
Access MyCOD account
Report tax fraud
Get an entity status letter
File 199N e-post card
The CFTB website also contains information about how it goes about collecting unpaid taxes, in an effort to help taxpayers avoid scams. Most recently, in mid-July, it issued a press release revealing that it would be sending letters to more than 46,000 California firms that have not filed their 2013 state income tax returns.
The CFTB gives business non-filers 30 days to either file a tax return or show why one is not required. It warned that businesses that disregard the letter will get a tax assessment, which includes interest, fees, and penalties, based on income and other information reported to FTB. In turn, businesses can request more time to respond and get information to help file a return, among other things.
For additional information regarding these subjects, or any other multistate tax issues, please contact:
David M. Kall
David H. Godenswager, II
Susan Millradt McGlone
Multistate Tax Services
Businesses must be vigilant and careful in managing their state and local tax liabilities and exposures. We understand this can be a daunting task. McDonald Hopkins Multistate Tax Services provides a broad range of state and local tax services including tax controversy, tax evaluation, tax planning, and tax policy. With professionals who have worked both inside and outside government agencies, our multistate tax team leverages its knowledge and experience to help clients control their complex multistate taxes.