Articles Tagged with “Florida Fuel Tax Attorney”

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Over the past several years software as a service (“SaaS”) has been a booming industry.  Pioneers in the cloud computing industry, like Salesforce, have developed web based applications that offer a wide range of services to the user.  Driven by competitors such as Microsoft, Adobe, Sap, ADP, Oracle, IBM, Intuit and Google, the SaaS industry has become a $204 billion industry and grown by more than 16% last year.

Traditionally, from a sales tax perspective, states tax the sale of tangible personal property but not services.  While many states adhere to that mantra, several states have moved towards taxing software despite being intangible in nature.  Still, it can be difficult to determine whether SaaS is more like a software, which may be taxable, or if it feels more like a service provided, which is not taxable in many states.

States have been consistently inconsistent across the country in determining whether to tax SaaS.  States often have similar statutes and reach completely different conclusions in their quest to analyze SaaS.  Further, many situations occur in which a state can treat two seemingly similar SaaS companies differently within their own state.  In an attempt to comply, companies often struggle with charging the appropriate sales tax in the correct state and/or their state income tax obligations, with respect to SaaS.

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If states could impose tax on every company that makes a sale within its borders, they would. Luckily, the Commerce Clause of the Constitution requires something known as “nexus,” or a connection, between a company and state in order for that company to be subject to state and local taxes. The standards for nexus can be ambiguous, particularly in recent years as a result of the radical changes to traditional business models that have occurred with the internet.

While nexus may seem easy to determine using the physical presence test, the definition of physical presence has in fact been something that courts across the country have struggled with since the beginning. That struggle has only become increasingly complicated with the internet and virtual marketplaces that no longer require a company to open a brick and mortar shop everywhere it wants to sell its products.

Recently, Washington state has found nexus with a company that made wholesale sales through infomercials. This particular company sent employees to Washington to participate in trade shows and other promotional events. However, they did not have a physical business location within the state.

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With the every-so-exciting Florida Sales Tax Holiday (“Holiday”) running August 7th through August 16th, all Floridians must become knowledgeable so that we can maximize our savings as buyers. The Holiday does not solely apply to Parents and Students looking for their essential pencil sharpeners, the Holiday applies to all sales throughout Florida–so thrilling! Just think about all the wonderful school supplies you could stock up your office drawers this upcoming week. Like everything that seems too good to be true, this 10 day Holiday has a few rules that must be discussed. The following are the limitations for the Holiday:

• Clothing selling for $100 or less per item;
• Footwear selling for $100 or less per item;
• Certain Clothing Accessories selling for $100 or less per item;
• Certain School Supplies selling for $15 or less per item (Note – This does not include books); and
• Personal Computers and Certain Computer-Related Accessories on the first $750 of the sales price, when purchased for noncommercial home or personal use.
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Over the past few years, we have been intricately involved in ongoing litigation with the Department of Business and Professional Regulation, Division of Alcoholic Beverages and Tobacco (“ABT”). There still remains ongoing litigation in connection with the Micjo issue. Micjo dealt with whether non-tobacco charges, such as federal excise tax and shipping charges, are subject to Florida Other Tobacco Products Tax and the Surcharge on Other Tobacco Products (“OTP Tax”). Down another path there is current litigation in Brandy’s, which deals with cigar wraps, or blunt wraps, which are subject to Florida’s OTP Tax. Recently, however, another case was filed in late 2014 that has a far broader reach than any other case filed to date.
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It never ceases to amaze me, the wide variety of companies that state agencies attempt to extort money from. I mean, how could a portable toilet company possibly have a sales tax problem? Most states impose a sales tax on the sale or rental of tangible personal property, but do not tax services. From the perspective of a toilet industry, if a venue rents a toilet, it is clearly a rental of tangible personal property subject to tax. If the same venue pays a fee to clean the toilets, then it sounds like a nontaxable service. But what happens when the venue rents the toilet and purchases the cleaning service along with it? In this part tangible personal property rental, part service transaction (known to the sales and use tax attorney as a “mixed transaction”), is only part of the transaction taxable or is the entire charge subject to sales tax? Many states take the incredibly helpful “it depends” approach, and look to an even more helpful “object of the transaction” test. In reality, it truly seems like state agencies and courts reach a conclusion first and fill in the reasons later.
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The Supreme Court of the United States (“SCOTUS”) has had its hands full with tax cases this year. Although largely unpopular and unexciting for the general public, SCOTUS find tax cases even less appealing. In fact, since 1992 in Quill, SCOTUS has not heard a case dealing with sales tax nexus. Despite its unpopularity, the nexus issue is an important one since the advent of the Internet. However, every statistic has its anomaly. From a state tax perspective, SCOTUS issued two opinions in 2 days, which is impossible. The first case, the DMAcase came down yesterday, March 3, 2015, ruling that a taxpayer could embark on a constitutional challenge to a state tax in federal court. Even more riveting, SCOTUS ruled today, March 4, 2015, in theCSX case.

By way of brief background, federal law prohibits states from imposing taxes that “discriminate against rail carriers.” With that in mind, Alabama decided to impose a 4% tax on diesel fuel purchases made by a rail carrier and exempt similar purchases made by other competitors, namely motor and water carriers. However, motor carriers pay 19 cents per gallon of fuel tax on diesel purchases and water carriers don’t pay tax on diesel fuel purchases. Is this the type of discrimination the feds were talking about? Does anyone really care?
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Most states attempt to encourage manufacturers to set up a business in their state. Manufacturers typically provide numerous benefits to a state’s economy such as job creation. One of the carrots typically used by a state is to offer sales and use tax incentive for a manufacturing company. In almost every state with a sales and use tax, machinery and equipment purchased for use in the manufacturing process is exempt from tax. What if a glass manufacturer purchased chemicals, such as nitrogen and hydrogen for use in its glass manufacturing process? Would that be a tax exempt purchase of equipment?
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In order to limit liability, many tax professionals and attorneys offer simple advice to their business clients who also own real estate. In order to avoid exposure to valuable real estate, many business owners are advised to segregate the risky business operations into its own legal entity separate from the real estate. While it may be worthwhile from a business liability standpoint, it is often a recipe for disaster for Florida sales tax purposes.

Florida is the only state that taxes commercial rent. In fact, many tax professionals take it a step further. Man times, for federal tax and cash flow purposes, attorneys set up a lease between the real estate entity and the business entity, often equal to the mortgage, insurance, and property tax costs. In other situations, and often with no formal lease in place, the corporate attorney will just have the business entity pay the mortgage, property insurance, and real estate taxes directly on behalf of the real estate company. Whether there is a lease, or if the tenant company pays the expenses directly, or even if the companies are related then Florida sales tax still applies. Below are 4 simple rules to keep in mind when it comes to Florida sales tax on commercial rent Continue reading

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Many state and local tax (“SALT”) practitioners often refer to state and local transaction taxes as “gotcha” taxes. Over ambitious state agencies seek to extort money from businesses all the time by using fire first, ask question later type tactics. SALT auditors write up whatever they can as taxable and force businesses to prove them wrong. Similar to state and local sales and use taxes, motor fuel tax can often be a mine field for the unsuspecting business. In a 2014 decision, a Pennsylvania court agreed with the revenue agency’s “gotcha” mentality in Luther P Miller Inc v. Pennsylvania, 88 A. 3d 304 (Pa. Comm’w Ct 2014).
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Anytime a state agency, such as the Florida Department of Revenue (“FL DOR”) gets their hands on third party reporting, you can rest assured they will be coming after that industry in full force. In 2011, the FL DOR passed a law that required wholesalers of alcohol and tobacco to report all of their sales to retailers directly to the FL DOR. Being that the FL DOR knew what each convenience store, liquor store, restaurant, and bar bought by way of beer and cigarettes, they could easily compare them to the same retailer’s sales tax returns. For those that the FL DOR suspected of underreporting or just pocketing the sales tax, the investigation letters started in late 2011 followed by some 200 audit notices per quarter in early 2012. Now about three years later, one can only suspect that the next FL DOR “campaign” will be focused on the next industry in which the FL DOR could most easily get it hands on. So who’s next?

For years the Department of Revenue had access to DMV reports that could show the cars being sold by a retailer with a Florida dealer license. In late 2013 through early 2014, our friends in Tallahassee formulated a methodology that more quickly, efficiently, and accurately compared the DMV reports and warned us the notices were coming. With that in mind, we knew the auto industry was next on the FL DOR’s hit list.
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