Articles Tagged with “Tampa Sales 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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On December 14, 2015, the Supreme Court of the State of Utah issued its ruling in the case of DIRECTV and DISH Network v. Utah State Tax Commission. At issue in this case was a tax scheme that provided a sales tax credit for “an amount equal to 50%” of the franchise fees paid by pay-TV providers to local municipalities for use of their public rights-of-way.

The franchise fees were imposed for the running of cable and the construction of hubs on public property. Therefore, it is exclusively cable providers who pay franchise fees and qualify for the credit. Meanwhile, satellite providers such as DIRECTV are not subject to franchise fees and do not qualify for the tax credit.

DIRECTV argued that the tax credit was a violation of the dormant commerce clause of the Constitution. The dormant commerce clause is a legal term that means that states cannot either discriminate against interstate commerce or unduly burden interstate commerce because the power to do is in the hands of Congress. From a practical perspective, allowing 50 states to regulate interstate commerce differently would cause complete chaos, so the federal government wants to reserve that power for itself. Furthermore, states’ motivation to help their own local businesses would weaken the national economy as a whole.
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Yet another state jumped on the band wagon to force out-of-state companies to collect and remit state tax. Specifically, South Dakota recently passed legislation adding sales and use tax collection requirements for out-of-state businesses conducting sales within the state. The legislation continues the trend of states enacting aggressive nexus statutes aimed at out-of-state online retailers.

The concept of nexus is derived from the Commerce Clause and the Due Process Clause of the United State Constitution. Essentially, these Federal limitations limit the ability of a state to tax business that takes place outside of the state. However, if a business has enough of connection to a state, then the state can force the business to abide by its state and local tax laws.

In Quill Corporation v. North Dakota (U.S. 1992), the U.S. Supreme Court held that nexus required a physical presence of the business within the state to require a business to follow a state’s state and local tax laws. The physical presence requirement has resulted in much litigation throughout the country. Essentially, there has been confusion as to how much of a connection to a state is required before a physical presence is established.

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I have been writing about the taxability of the online travel companies for some time. Recently, the Florida Supreme Court case of Alachua County v. Expedia, Inc., ruled that the local bed tax should be imposed on the amount the hotel received rather than the higher amount the customer pays the Online Travel Company (“OTC”). Similarly, the Court of Appeal of Wisconsin recently held that reservation facilitation services are not among the taxable services enumerated in section 77.52(2)(a)1, Wisconsin Statutes.

In the Wisconsin case, the Wisconsin Department of Revenue (“WDOR”) attempted to assess tax on any “internet service provider” that provides lodging throughout Wisconsin. The WDOR argued that the markup amount retained by the internet service provider is subject to tax under section 77.52(2)(a)1, Wisconsin Statutes.

However, the law worked very differently. Specifically, in Wisconsin, section 77.52(2)(a)1, Wisconsin Statutes, tax is only imposed on “the furnishing of rooms or lodging to transients by hotelkeepers, motel operators and other persons furnishing accommodations that are available to the public, irrespective of whether membership is required for use of the accommodations.” The crux of this case turns to the word “furnishing.” Is an online travel company “furnishing” a hotel room?

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Few understand or even bring up sales tax issues when they order pizza. The next time you order pizza, take a look at the receipt and see if the pizza shop charges you for the delivery. Taking it a step further, what happens if you purchase an item and pay for shipping charges? Is tax due on just the item, or is it also due on the delivery charge as well? The answer depends largely on whether the delivery charge is separately stated and if it is optional. This issue will be in center stage for a recent class action filed in Broward County against Pizza Hut.

Lauren Minniti, the class representative, purchased a pizza from Pizza Hut and had it delivered. Pizza Hut allegedly charged her tax based on the charge for the pizza and for the separately stated delivery fee instead of tax on the pizza alone. Was this correct?
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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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As an avid sports fan and season ticket holder, I have now become more accustomed to seeing fellow fans smoking vapor products–a battery powered pen-like device that heats liquid nicotine into vapor-in the stadium seats. While some may wonder how people can possibly get away with smoking vapor products at stadium seats, or even at restaurant tables, I often ponder about how the vapor products are taxed at the state level. Are vapor products really tobacco products, are they cigarettes, or are they something completely different, and if so, are vapor products taxed at the wholesale level, as a sales tax, or some combination thereof?
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In 2012, a case shook the tax world for Florida’s wholesale tobacco distributors. Specifically, a case called Micjo was decided in favor of tobacco distributors at Florida’s appellate court level. Micjo taught us that if a taxpayer disagrees with a department’s tax decision, then it should fight for its money that is not due. Since the Micjo ruling, we have been filing refunds for many other tobacco distributors and fighting tax assessments based on the appellate case. After filing several Micjo refund cases, we discovered another Micjo case in Oregon. If the taxpayer is successful then it would put another chink in the armor of the state tobacco taxing agencies.
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As the internet becomes essential to our everyday lives, states are consistently inconsistent in their attempt to tax cloud computing systems. Cloud computing is “the practice of using a network of remote servers hosted on the Internet to store, manage, and process data, rather than a local server or a personal computer.” Essentially, the term “Cloud” is a metaphor for the internet. Cloud computing allows the user to access data over the internet without storing data on a hard drive. In fact, most internet users rely on these cloud computing systems as an essential tool in their everyday lives.

How should a cloud computing provider determine whether their object is subject to sales tax? A simple two-part test may allow a cloud computing provider a proper vantage point on whether they are subject to sales tax. First, apply a test. Second, ask whether the product is a software or a service? Think of this test as a simple flow chart.
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