Ask the Experts – Southeast*
Randy Holloway
Principal
Grant Thornton LLP
Atlanta, GA [email protected]Robert S. Goldman
Partner
Madsen Goldman &
Holcomb, LLP
Tallahassee, FL
[email protected] *Note: This is an update to the original slide deck. Slides 10, 11 and 15 are revised, Slide 12 is new, and slides beginning with 13 are renumbered.
Recent Developments - GA
• Georgia Tribunal Court Decisions
• Georgia Legislative Session Results
• Georgia Rules and Regulations
• Georgia Policies
Georgia Tribunal Court Decisions
• Georgia Power Company v. MacGinnitie
– Addresses manufacturing activities v. transmission and distribution ("T&D") activities
• T&D was not used to manufacture but to deliver electricity • T&D facilities do not comprise a single manufacturing plant
• Inglett & Stubbs International, LTD., v. Riley
– Contractor's purchases of TPP for military contracts in Afghanistan are subject to GA tax
– O.S.G.A. Sec. 48-8-63(b) and (c) contractor is consumer of TPP for contracts performed in this state
June 28 - July 1, 2015 IPT Annual Conference * San Diego, California 4
Georgia 2015 Legislative Session Results
•
House Bill 277 – Passed
-
expands the favorable sales
and use tax treatment of no-charge carpet samples to all
other floor coverings
•
House Bill 415 – Did not pass
– provides an exemption
for machinery, equipment and supplies used in R&D
•
House Bill 170 – Passed
– provides for approximately
$900M in transportation funding
•
House Bill 292 – Passed
– conforms the GA tax code to
the federal tax code to increase to $500k (from $250k)
the amount spent on TPP that can be expensed
Georgia 2015 Legislative Session Results
•
House Bill 170 – Transportation Funding
• Eliminate state sales tax on gasoline and combine it with
an increased excise tax
• $5-per-night hotel/motel tax statewide
• Annual user fees on drivers of alternative fuel vehicles -
$200/personal; $300/commercial
• Eliminate $5k state tax credit on electric vehicles
• Eliminate aviation fuel credit
June 28 - July 1, 2015 IPT Annual Conference * San Diego, California 6
2016 Legislative Focus
•
House Bill 415 –
Research & Development exemption
•
House Bill 265
– reduce interest on assessments and
refunds from 12% to 3%
•
House Bill 208
– increase in state sales tax rate
• Job and investment tax credits applied against
withholding taxes
• B-to-B exemption for unclaimed property
• Temporary storage exemption from use tax
Georgia Rules and Regulations
• Manufacturing Industry 560-12-2-.62
– Consumable Supplies – exempt as of 7/1/2014
– Energy Sources – Phase out continues through 2015 – Packaging materials
– Floorcovering Samples – 2015
– R&D exemption – pending legislative approval
• Computer Equipment 560-12-2-.107
– High Technology Company qualification based on NAICS code vs. facility basis
June 28 - July 1, 2015 IPT Annual Conference * San Diego, California 8
Policies and Procedures - GA
• Contractor v. Dual Operator
– Change to Resale Certificate
• Verify a Purchaser's sales tax number http://dor.georgia.gov/resources
• Georgia LR SUT No - 2014-02-28-01 Government and Gov't Contractors – public gas, water or sewage system
• Agriculture "GATE" Cards – Georgia LR SUT- 2014-04 • Service Provider used parts – Georgia LR SUT - 2014-11
Recent Developments - Florida
• Florida Litigation
• Florida Legislative Session Results
• Florida Rulemaking
Florida Litigation (selected)
•
Alachua County v. Expedia, Inc.,
2015 WL 3618004
(Fla. Supreme Court 6/11/2015)
– County Tourist Development Tax applies only to funds
online travel companies send to hotels for reserved rooms, not to additional compensation retained by the OTCs.
– Taxable privilege is exercised by hotel renting room to a guest, not by the guest who rents the room.
– Motion for rehearing pending as of July 2, 2015.
Florida Litigation (selected)
•
Verizon Business Purchasing v. Dept. of Revenue,
2015 WL 3622356 (Fla. 1
stDCA 6/11/2015)
– Notice of Proposed Assessment (NOPA) is NOT an
“assessment” that satisfies statute of limitations (sol) within which sales tax may be “assessed.” Assessment must
become final within sol to be timely.
– Agreed extension of sol for assessment to date certain did NOT extend sol for each reporting period to different
extended date. Assessment which did not become final by agreed date was untimely for entire audit period.
– Decision likely to accelerate issuance of NOPAs and increase DOR demands for agreements to extend sol.
Florida Litigation (selected)
•
DirecTV v. State of Florida Department of Revenue,
2015 WL 3622354 (Fla. 1
stDCA 6/11/2015)
– Higher state communications services tax rate on direct-to-home satellite service than on cable television service is facially unconstitutional as discriminatory against interstate commerce, in violation of Dormant Commerce Clause.
– Use of extensive local infrastructure by cable companies is an in-state economic interest that is favored by the
application of a higher CST rate to satellite service.
– Local CST imposed on cable service but not on satellite service is not properly considered in the comparison of tax burdens.
Florida Litigation (selected)
•
American Business USA v. Dept. of Revenue,
151
So.3
rd67 (Fla. 4
thDCA 2014)
– Sales tax assessment against in-state Internet vendor of flowers selling to non-Florida customers violated dormant Commerce Clause, where vendor maintained no inventory in Florida, flowers were not grown in Florida, and deliveries did not occur in Florida. No “substantial nexus” with
transactions.
– Assessment of prepaid calling arrangements sold over the Internet upheld, where delivery was completed by sending authorization code directly to customer, and Taxpayer’s records inadequate. “Substantial nexus” present.
Florida Litigation (selected)
•
American Import Car Sales, Inc., v. Dept. of
Revenue, 2015 WL 1870646 (DOAH Case No.
14-3115, Rec. Order entered April 17, 2015)
– Department estimated sales tax assessment using bank statements, as Taxpayer records inadequate. However, Taxpayer had produced G/L, which auditor did not attempt to reconcile with bank statements. ALJ concluded
assessment was flawed. Also noted that statutes lack
guidance regarding proper methodology for “testing” where records are inadequate, or regarding Department
discretion concerning which available records the Department may accept or reject.
– This is an ALJ recommended order; Department may accept, reject, or modify.
Florida Legislative Update
• No significant sales tax legislation in Regular Session. Chapter 2015-221, Laws of Florida enacted in Special Session June 1-20, 2015. Selected sales tax &
communications services tax (CST) highlights:
– agricultural exemptions: add aquaculture products to “livestock” definition; expand power equipment exemption; exempt certain
trailers. See Tax Information Publication (TIP) 15A01-09, 15A01-10, 15A01-11
– extend and prescribe limits on community contribution tax credits. See TIP 15ADM-03
– exempt admissions to gun clubs
– reduce CST rate by 1.73%. See TIP 15A19-01
– authorize off-calendar month reporting of CST; limit denial of collection allowance. See TIP 15A19-02
– re-enact Energy Economic Zone Pilot Program for limited purposes – sales tax holiday (clothing, school supplies, personal computers).
Florida Rulemaking (selected)
•
Rule 12A-1.070 real property rent tax (in process since
2011)
– Ports
– Rights of way used by utilities and telecom providers
– Food and drink retail concessionaire services in publicly-owned facilities – Space flight business
– Telecom, data systems management, or Internet services at a convention hall, civic hall, or meeting space at public lodgings
– Entertainment qualified production company
– Privilege, franchise, concession fees paid to an airport – Events of not more than seven days
– Improvements to leased property – Proration of leased hotel space
Other Florida Rulings (selected)
• Technical Assistance Advisement TAA 14A-021
–
Self-service key-cutting machines not entitled to exemption for industrial machinery and equipment used in an expanding
business. Taxpayer contracts with big-box stores to locate self-service key duplication machines for consumer use. Machines are free-standing and do not become part of realty. Taxpayer derives revenue from sale of duplicate keys produced by the kiosks. DOR concluded that Taxpayer is not a “new business.” Placement of kiosk in store does not constitute the “opening of new facility” for purposes of exemption. Taxpayer is not
manufacturing, processing, compounding, or producing the key - the machines are self-service machines that do not require
Other Florida Rulings (cont’d)
• TAA 14A-023
– Provider of food, beverage and retail
services in airports and highway service plazas paid rent
on prime lease that was the higher of a “Minimum Annual
Guaranty” or % of its gross receipts. Rent charged to some
sublessees (vendors, concesssionaires) was based on
square footage. Where tax paid on prime lease on sq. ft
basis exceeded tax collected from subleases, Taxpayer
was due full credit for tax collected from sublessees.
Other Florida Rulings (cont’d)
• TAA 15A-002
– Leases of dark fiber are not
communications services subject to CST. Fiber was fixture
to real property because buried underground or bolted in
place and intended to remain for extended period. Leases
of real property are subject to sales tax unless exempt.
Other Florida Rulings (cont’d)
• TAA 14A-010
–
Membership program available for annual fee, includes services such as expedited shipping, streaming video, and borrowing or permanent download of electronic books. Sales tax did not apply. CST did not apply to shipping charges or downloads of books, which are information services. CST applied to portion of membership fee allocated to videoservices if allocation supported by Taxpayer’s books. Otherwise, entire membership fee is subject to CST.
• Result reaffirmed in TAA 14A19-006, which also determined that Taxpayer’s music service was subject to CST as a video service because it could be played on a compatible device and downloaded or streamed.
Other Florida Rulings (cont’d)
• TAA 14A19-004
- Outbound notification services via
Internet-based software system, and automated inbound
and outbound call management services using interactive
voice response (“IVR”) system for delivery of recorded
voice messages to answering devices and live call
recipients. In general, services not subject to CST but
Taxpayer was consumer of telecom. Inbound IVR service
was subject to CST.
Other Florida Rulings (cont’d)
• TAA 14A19-005
– Rentals and sales of digital video not
tangible personal property and not subject to sales tax.
However, rental of digital video was “video service” and
therefore subject to CST.
Sale
of digital videos, in contrast,
is sale of information service, which is not subject to CST.
Other Florida Rulings (cont’d)
• TAA 14A19-001
– Cloud computing. Remote access to
computing infrastructure for storage, retrieval of data not
subject to CST, but were information services. Sales tax
also inapplicable as there was no purchase or license to
use real or tangible personal property.
Remote access to other computing resources (IaaS) also
not subject to CST.
Other Florida Rulings (cont’d)
• TAA 14A19-002
– Virtual Call Center (VCC) softwareprovides call bridging, on servers outside Florida. VCC enables user to process data and deliver and/or accept text, recorded messages and/or voice conversations by telephone. Call
bridging is communications service, but not subject to CST as bridging software is outside Florida.
Sales of 800 service or a local line to connect consumers to Taxpayer’s call center are communications services, but not subject to CST as call origination location is unknown.
VCC provider was not seller but consumer of communications services used to send pre-recorded messages to its customers’ consumers.
Other Florida Rulings (cont’d)
• TAA 15A19-001
– Domestic wireless carrier’s charges
to foreign carriers whose customers roam in Florida are not
subject to CST.
Other Florida Rulings (cont’d)
• TAA 14A19-003
- Service allowing users to receive and
send “digital” fax documents as electronic messages
directly to and from email accounts received by or routed to
a “traditional fax machine” is subject to CST.
Service automating creation and delivery of customized
outbound high volume emails not subject to CST.
EDI VAN service not subject to CST or sales tax.
VPN service subject to CST if service originates or
terminates in FL and is charged to FL service address.
