Retailers with business operations in the United States and around the world rely on Taxware’s products and services to ensure they are in compliance with the latest legal, regulatory, and policy changes. Our team of tax experts maintains the accuracy of millions of taxability rules (which include rates, product taxability, place of supply rules, rounding rules, forms, and more).
The following domestic changes affecting the retail industry at the time this piece was written are just a very small sample of sales and use tax changes that occur throughout the year.
E911 Fees Over the past few years, using the point-of-sale E-911 fee has become an increasingly popular revenue producing tool. These fees, which are imposed by state and county governments, require retailers to collect and remit a determined fee, either percentage based or a specific monetary amount, at the retail point-of-sale. The money collected and remitted from the fees fund computer software and hardware upgrades for public safety answering systems which help locate cellular callers who dial 911. The following states either began imposing an E911 fee on January 1st, 2014 or changed the amount of the fee already being imposed. Arizona House Bill 2094, enacted during the 2012 legislative session, allows for the imposition, collection and distribution of a new E-911 Excise Tax on prepaid wireless services of .80% in Arizona, per transaction, to be collected at the retail point of sale. The imposition of this tax is outlined in A.R.S. §§ 42-5401 through 42-5404 and applies to the sale of items like prepaid cellular callings cards. The tax is to be reported under Business Class 912. Arkansas Arkansas began requiring retailers of prepaid wireless communications to collect a $0.65 fee on each sale of telecommunications service. The types of wireless telecommunications subject to the fee include calling cards for cellular phones, recharging of a reusable cellular phone calling card and sales of cellular phones preloaded with more than 10 minutes of wireless service. Idaho Idaho began imposing a new prepaid wireless E911 fee. The fee is 2.5% and applies to purchases or prepaid wireless service, sold in predetermined units or dollars. The 2.5% fee is in addition to the sales tax currently imposed, and is not included in the taxable base. Minnesota Minnesota began applying E911 and TAM (Telecommunications Access Minnesota) fees to the sale of prepaid wireless phone and calling cards that are sold in set unit or dollar amounts or provide for unlimited use for a set period of time. The E911 fee is $0.78 and the TAM fee is $0.06, bringing the total fee to $0.84. Nebraska On October 11, 2013 the Nebraska Tax Commissioner issued a news release which reduces the prepaid wireless surcharge of 1.1% to a rate of 1.0% as of January 1, 2014. The surcharge is imposed on the gross receipts from the retail sale of prepaid wireless services including prepaid wireless airtime cards and prepaid wireless plans and minutes. The 1.0% surcharge is in addition to the sales tax currently imposed. North Dakota Senate Bill 2261, enacted during the 2013 legislative session, allows for the imposition, collection and distribution of an E911 fee on prepaid wireless services of 2% in North Dakota, per retail transaction to be collected at the retail point of sale effective January 1, 2014. The imposition of the fee is explained in the July 2013 Sales Tax Newsletter and outlined in N.D.C.C. Chapter 57-40.6-14. The E911 fee should be reported on the same schedule as the sales, use, and gross receipts tax return. Ohio Ohio House Bill 360 imposes a wireless E-911 Fee on prepaid wireless service subscribers. The fee is 0.5% of the sales price for the service. The Bill references a July 1, 2013 effective date. However, House Bill 472 modifies the effective date, changing it to January 1, 2014. Washington Washington law requires sellers of prepaid wireless services to collect and remit the state and county enhanced 911 excise taxes (E911 taxes). The tax is collected on each retail sale of prepaid wireless services or prepaid wireless products. The E911 tax is imposed at a state rate of $0.25 and a county rate of $0.70 per retail sale of prepaid wireless services or products. WA HB1971 S2.SL. Prepaid wireless services and products include: prepaid wireless phone cards; recharge or refill authorization codes for wireless service; cell phones bundled with prepaid service; and other prepaid wireless devices preloaded or bundled with wireless airtime minutes. Prepaid wireless services do not include: prepaid long distance telephone cards marketed and used for landlines and payphones or, prepaid paging services. Other Notable Tax Changes In addition to E911 fees, there are several other changes occurring already this year that affect retailers including sales tax holidays occurring in February; Alabama Severe Weather Preparedness Sales Tax Holiday / February 21 – 23, 2014 Alabama will hold their 3rd Annual Severe Weather Preparedness Sales Tax Holiday beginning Friday, February 21, 2014 at 12:01 a.m. and ending Sunday, February 23, 2014 at 12 midnight, CST. The holiday will give shoppers the opportunity to purchase certain severe weather preparedness items free of state and certain local sales tax when the cost is $60 or less, or $1,000 or less for portable generators and power cords. For more details on this holiday please see: http://www.revenue.alabama.gov/salestax/WPSalesTaxHol.htm. Phoenix, Arizona The Phoenix City Council approved an ordinance to amend the city tax code in order to decrease the tax rate charged on food for home consumption to 1% effective January 1, 2014. The taxability of food for home consumption is addressed in Model City Tax Code Section 14-462(a) which allows cities to adopt an option to apply tax to food for home consumption. This type of food is exempt from state tax, but if the option is adopted, can be subject to local city tax. CA Bag Fees A number of cities in California have enacted ordinances to ban the use of plastic bags and impose a fee on paper bags used in retail stores. In January, the following cities have started imposing fees: January 1, 2014 – El Cerrito, Richmond, and San Pablo, 5 cents January 15, 2014 – Pittsburg, 10 cents January 27, 2014 – Campbell, 10 cents Maryland Energy Star Sales Tax Holiday / February 15 – 17, 2014 Effective February 15, 2014 through February 17, 2014, qualifying Energy Star products will be exempt from sales and use tax in Maryland. Maryland’s Shop Energy Weekend will exempt the purchase of air conditioners, clothes washers, clothes dryers, furnaces, heat pumps, standard size refrigerators, compact fluorescent light bulbs, dehumidifiers, boilers, and programmable thermostats which exceed or meet Energy Star requirements. North Carolina This past year the Governor of North Carolina signed into law various tax reforms, some of which affect the state’s sales and use tax laws. As of January 1, 2014, a variety of goods and services are now taxable in the state, with even more items becoming taxable on July 1, 2014. Newspapers: North Carolina has eliminated the exemption previously provided under G.S. 105-164.13(28) for the sale of newspapers by street vendors and newspaper carriers making door to door deliveries. These sales are subject to sales tax effective January 1, 2014. Service Contracts/Warranties: North Carolina has enacted a privilege tax, applicable at the state and local level, taxing service contracts. This change is part of comprehensive tax reform passed in the summer of 2013, which is detailed in full by Form E-505 (9-13), a form published by the NC DOR in September 2013. Directive SD-13-5, entitled Service Contracts, clarifies how service contracts are treated under the new law. Manufactured Homes: G.S. 105-164.4(a)(1a) has been amended to provide that the 4.75% general state rate applies to the sale of each manufactured home sold at retail and the maximum tax of $300 per article has been eliminated. G.S. 105-467(a) has been amended and now eliminates the state and local taxes on the sale of manufactured homes. These changes were effective January 1, 2014. Modular Homes: G.S. 105-164.4(a)(8) has been amended to provide that the 4.75% general state rate applies to the sale of each modular home sold at retail. G.S. 105-467(a) has been amended and now eliminates the state and local taxes on the sale of modular homes. These changes were effective January 1, 2014. As noted, several portions of the North Carolina sales tax reform legislation are not scheduled to go into effect until July 1st, 2014. Impacted goods will include electricity, piped natural gas and breads, rolls, and buns sold at bakery thrift stores. The annual August back to school sales tax holiday and November Energy Star sales tax holiday have also been repealed. Ohio A recent change in Ohio law requires a change in the tax treatment of digital products. Ohio House Bill 59 specifies that retail sales of and the storage, use or other consumption of digital products on or after January 1, 2014 is subject to sales and use tax. The definition of “digital products” complies with the Streamlined Sales Tax Project Agreement. Items that will now be taxed include audiovisual products, audio products and books delivered electronically. The tax will applies to both temporary and permanent transfer. Digital products delivered via cable television systems are not be subject to sales tax. The purpose of the law change was to level the playing field with physical goods that are currently taxed, such as printed books, CDs and DVDs, whether rented or owned. For more details, please refer to the Sales and Use Tax Changes section of Ohio House Bill 59.