State Tax Rulings
Free state tax letter rulings and advisory opinions with plain-English summaries, full citations, and the original source on every page.
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Would Virginia accept a retailer's electronic multipurpose exemption certificate and electronic customer signature?
Not as presented. Virginia was willing to accept an electronic resale certificate with an electronic signature if it captured all information and statements required by Form ST-10. The retailer's gene…
Were software license fees exempt when the vendor remotely installed every application and upgrade and emailed the documentation?
Yes. Although the agreement did not require a delivery method, emails showed that the vendor logged directly into the taxpayer's server to install every application and upgrade and sent the documentat…
Could a retail chain remove a large untaxed sale from Virginia's audit sample when it lacked a valid exemption certificate?
No. The retailer lacked a valid exemption certificate or other support for the untaxed sale, and the transaction appeared consistent with its normal business. A large dollar amount or large effect on …
Did a $40 federal digital-to-analog converter-box coupon reduce the box's taxable sales price in Virginia?
No. Because the federal government reimbursed the retailer for the $40 coupon, the retailer still received the full price. Virginia treated the coupon like a manufacturer coupon and taxed the cash plu…
When a software company bundles its core product with optional add-on components and charges one non-itemized price, does the $1,600 local-option and $3,200 state single-article sales tax cap apply to each component, or to the whole bundle?
The single article cap does not apply. Because the taxpayer negotiates and invoices one lump-sum price for its core software plus optional components without itemizing each product separately, the ent…
Does an out-of-state company that licenses billing software to wireless carriers, and also provides billing services and arranges third-party printing/mailing, owe Tennessee sales and use tax on any of its fees?
Only partly. The one-time software licensing fee is taxable as a lease of prewritten software, but the monthly billing-service fees and the printing/mailing reimbursements are not taxable because the …
Are updates to 'canned' software and the support services in an optional maintenance contract taxable in Colorado, when sales tax was already paid on the original software license?
It depends on whether an update merely repairs the existing software or is a new upgrade, and whether the maintenance contract is optional. Bug-fix updates that repair, correct, or maintain the origin…
When a customer returns goods in a later quarter and the retailer refunds the price plus the sales tax, how does the retailer recover that overpaid sales tax on its Colorado return?
Report the refunded gross sales on Line 3C ('Overpayment from previous return') of the Colorado sales tax return (Form DR 0100). Subtract it from net sales on Line 3 to get taxable sales on Line 4—but…
When a direct-sales company gives a party hostess 'hostess dollars' to apply against her purchases, and charges separately stated shipping, are those amounts included in the price on which Colorado sales tax is computed?
Yes to both. 'Hostess dollars' are credits, not discounts—the hostess earns them in a quid pro quo exchange for opening her home and generating sales—so Colorado sales tax is computed on the full purc…
Does a distance-learning company have to charge Colorado sales tax on the printed course materials (binders) it ships to students, or is it a nontaxable service?
They're taxable. The Department concluded that this distance-learning program is more like a home-study course than a traditional school: the true object of the transaction is the printed materials (t…
When a contractor builds a telecommunications tower attached to a carrier's property, who owes sales/use tax on the materials—and does it change with a lump-sum vs. time-and-material contract?
It depends on whether the tower becomes part of the real property and on the contract type. The general rule: a contractor is the CONSUMER of building materials that lose their identity by becoming an…
Does a company owe sales tax when it has customers' VHS tapes converted to DVD by a third party and hands over the DVD for a fee—and can it buy the conversion from the third party tax-free?
Yes, the sale to the customer is taxable, and the company should buy the conversion tax-free for resale. There are two sales: the third party's sale of the finished DVD to the company is an exempt who…
Does a for-profit daycare pay sales tax on the paper plates, plasticware, and similar supplies it uses to serve food to children?
The daycare pays the tax. A for-profit daycare is a service enterprise and is treated as the consumer of the tangible personal property it uses to run its business—paper plates, plasticware, crayons, …
Does Colorado sales tax apply to a company that only provides labor—merchandising, hanging signage, and assembling fixtures—for retail-store customers who own all the goods?
No. A company that provides only labor—stocking and arranging merchandise, hanging the store's signs, and assembling the store's display fixtures—is performing nontaxable services and owes no Colorado…
What happened to the Hampton Roads repair and fuel taxes after their start date was postponed from April to May 2008?
The bulletin originally moved the taxes' start from April 1 to May 1, 2008 to satisfy a 60-day notice period, with first returns due June 20. But the official source later added that the Supreme Court…
Which items on a medical-equipment company's product list — diabetic supplies, wheelchairs, braces, oxygen equipment, wound care supplies, and more — are exempt from Tennessee sales and use tax, and does a prescription, rental (vs. sale), or payment method change the answer?
It depends on the specific item: Tennessee exempts prosthetic devices and oxygen delivery equipment with no prescription needed, exempts durable medical equipment and mobility-enhancing equipment only…
Which South Carolina Department of Revenue regulations did the General Assembly approve in early 2008 (per SC IL #08-3)?
SC Information Letter #08-3 announces the Department of Revenue regulations the General Assembly approved on January 29, 2008, which became official upon publication in the State Register on February …
If a corporate parent moves its Tennessee operating LLCs under an out-of-state business trust instead of holding them directly, do the LLCs and the trust stay disregarded for Tennessee franchise and excise tax purposes the way they are for federal income tax?
No. Tennessee only disregards a single-member LLC for franchise and excise tax purposes if its sole member is a corporation — a business trust doesn't count, so once the trust owns the LLCs, both the …
Are external fixators used to stabilize open bone fractures exempt from Tennessee sales tax, and does a patient prescription have to be on file for the exemption to apply?
Yes, external fixators sold individually are exempt from Tennessee sales and use tax -- through 2007 as orthotics, and from January 1, 2008 onward as prosthetic devices, PROVIDED that as of that 2008 …
Is a wearable continuous glucose monitoring system for diabetics exempt from Tennessee sales tax as a prosthetic device or durable medical equipment?
No, the glucose monitoring system is fully taxable under both the old and new versions of Tennessee's medical-device exemption. It's NOT a "prosthetic" under either the pre-2008 or post-2008 definitio…
Does an Internet service provider owe Tennessee sales tax on the DSL lines, circuits, and other telecom services it buys wholesale to deliver Internet access to its customers?
No. An Internet service provider's purchases of telecommunications services (DSL, T1/DS3 lines, circuits) used to provide Internet access to its customers are NOT subject to Tennessee sales and use ta…
How could a certified project calculate the income attributable to it for Florida's Capital Investment Tax Credit?
Florida allowed the taxpayer's new-product methodology and required a pro-forma schedule that separately accounted for project revenues, direct and indirect expenses, and federal Schedule M adjustment…
Are motorized scooters and orthopedic items like a walker boot, post-op soft shoe, and suspension boot exempt from Colorado sales tax?
No—all are taxable. Motorized scooters don't qualify for the wheelchair exemption: exemptions are narrowly construed, and these aren't commonly understood to be wheelchairs (even the makers don't call…
Does an out-of-state limited partnership qualify as an exempt "family-owned" entity for Tennessee franchise and excise tax when a father's ownership only reaches the partnership indirectly, through a trust and a tiered second partnership?
No, the partnership does NOT qualify as an exempt family-owned entity. Tennessee's family-owned exemption requires that at least 95% of the entity's OWNERSHIP UNITS be held DIRECTLY by qualifying fami…
We're a not-for-profit local development corporation set up under section 1411 of the Not-For-Profit Corporation Law to manage and develop the Brooklyn Navy Yard for job creation. If we mortgage our leasehold interest to finance new industrial space, is that mortgage exempt from New York's mortgage recording tax?
Exempt. The Brooklyn Navy Yard Development Corporation is a not-for-profit local development corporation (LDC) incorporated under section 1411 of the Not-For-Profit Corporation Law, established to rel…
Does a conveyor that moves wet concrete aggregate from inside a plant to outdoor stockpiles, where it continues drying before sale, qualify for New York's production-equipment sales tax exemption?
Yes. Because the wet aggregate keeps drying to meet sale specifications after leaving the plant, the conveyor moving it to the stockpiles is still part of production, so it qualifies for the productio…
Is washing and disinfecting sports and protective gear (hockey pads, helmets, horse blankets, fire turnout gear) in an industrial machine a taxable 'maintaining/servicing' service or an exempt 'laundering' service?
No, this cleaning service isn't taxable. Washing, disinfecting, and deodorizing the fabric, leather, and padded portions of sports and protective gear counts as exempt laundering, not taxable maintain…
Does a nonresident investment fund that buys artwork outside New York and loans it, free of charge, to a New York museum owe New York use tax on that artwork?
No use tax is owed, as long as the fund was a nonresident (not doing business in New York) when it bought the artwork — the nonresident-purchaser exemption covers using the art here through a free mus…
For a smaller neighborhood health club charging initiation/membership fees plus separate charges for personal training, baby-sitting, and massage, which fees are subject to New York State or New York City sales tax?
Initiation fees, membership dues, personal training, and baby-sitting are not subject to any sales tax, but massage therapy sessions are subject to New York City's local service tax (though not New Yo…
For a large Manhattan health club charging an initiation fee plus per-service fees for personal training, sports leagues, child care, and locker rentals, which specific charges are subject to New York State or New York City sales tax?
Most of the club's fees -- initiation, dues, personal training, workshops, sports leagues, private lessons, guest fees, child care, and lost-card replacement charges -- are not subject to sales tax at…
For a large health club charging an initiation fee plus per-service fees for things like personal training, spa treatments, child care, and locker rentals, which specific charges are subject to New York State or New York City sales tax?
Most of the club's fees -- initiation, dues, personal training, workshops, sports leagues, private lessons, guest fees, child care, and lost-card replacement charges -- are not subject to sales tax at…
Are visco-elastic (memory-foam) mattresses, pillows, and cushions exempt from Colorado sales tax as therapeutic devices if a doctor prescribes them for pain management?
No, not on the facts shown. Visco-elastic memory-foam mattresses, pillows, and cushions don't qualify for Colorado's therapeutic-device exemption even with a doctor's prescription. Tax exemptions are …
Can an automotive-parts wholesaler accept a dealership's resale certificate—especially if it separately invoices the parts department—when some items will be consumed by the dealer and some resold?
Yes, with due diligence. A wholesaler can generally accept a Colorado retailer's sales tax license number as good proof of a wholesale (exempt) sale, and the retailer must make a good-faith estimate o…
Were Army and Air Force Exchange Service retirement benefits exempt from Louisiana income tax as federal retirement income?
Yes. The Army and Air Force Exchange Service was an instrumentality of the United States, so its pension system was a retirement system for U.S. government retirees. Benefits from that system qualifie…
Can a newly formed manufacturer that acquires a related company's New York operations qualify as a QEZE for the real property tax credit, wage credit, investment credit, and sales tax exemption?
Partly. Assuming Empire Zone certification, the company can claim the QEZE real property tax credit, the Empire Zone wage credit, and the EZ investment credit. But because it is substantially similar …
How did Virginia's move to December 31, 2007 federal conformity affect 2007 income-tax returns?
Virginia conformed to federal tax law as of December 31, 2007 for tax years beginning in 2007, except it still disallowed specified bonus depreciation and five-year carrybacks of 2001 or 2002 net oper…
When did a Louisiana employer have to withhold Louisiana income tax from resident and nonresident employees working in multiple states?
Withholding applied to wages for every service performed in Louisiana, even by a nonresident and even for a small number of hours; there was no de minimis rule. Nonresidents with no further Louisiana …
Was a carpenter paid on Form 1099 still an employee whose closely supervised wages were exempt from New Mexico gross receipts tax?
Yes, for the Sunrise Builders work. Although Dan Grubb supplied tools, received a Form 1099, and had no tax withheld, Sunrise controlled his hours, breaks, daily tasks, supervision, and time-card pay,…
Were physician-administered dermal fillers exempt from Louisiana state sales and use tax as medical drugs?
Yes. The Department classified dermal fillers as pharmaceutical drugs used to treat disease and abnormal conditions and said it would not collect state sales or use tax when a physician administered t…
Can someone use a vehicle titled to another consenting owner as a trade-in, or trade a personally owned vehicle toward a new lease?
Partially superseded. The letter's answer about untaxed out-of-state vehicles is no longer valid. Its remaining guidance allows a titled owner to consent to another buyer's trade-in and lets a lessee …
What did Virginia's January 2008 Motor Vehicle Fuel Sales Tax guidelines require, and which part was later invalidated?
These historical guidelines explained a 2% retail fuel sales tax, including tax base, exemptions, refunds, registration, monthly returns, collection, dealer discounts, penalties, records, and appeals.…
How does an estate or trust recompute the 2007 federal credit for prior year minimum tax to figure the Nebraska minimum tax credit on Form 1041N?
Revenue Ruling 23-07-2 directs that the federal credit for prior year minimum tax on an estate's or trust's 2007 return (Federal Form 8801) must be recalculated for Nebraska to determine the Nebraska …
How does an estate or trust recompute the 2007 federal alternative minimum tax to figure the Nebraska minimum tax on Form 1041N?
Revenue Ruling 23-07-1 directs that the alternative minimum tax (AMT) figured on an estate's or trust's 2007 U.S. Fiduciary Income Tax Return (Federal Form 1041, Schedule I) must be recalculated for N…
How do you recompute the 2007 federal credit for prior year minimum tax to figure the Nebraska minimum tax credit on Form 1040N?
Revenue Ruling 22-07-2 directs that the federal credit for prior year minimum tax figured on a taxpayer's 2007 federal return (Federal Form 8801) must be recalculated for Nebraska to determine the Neb…
How do you recompute the 2007 federal alternative minimum tax to figure the Nebraska minimum tax on the Form 1040N?
Revenue Ruling 22-07-1 directs that the alternative minimum tax (AMT) figured on a taxpayer's 2007 federal return (Form 6251, or the AMT worksheet in the Form 1040A instructions) must be recalculated …
Did an out-of-state jewelry seller create Florida sales-tax nexus through television, Internet sales, and its distribution relationships?
No, under the 2008 facts and legal standard applied in the advisement. The seller had no Florida property or employees, accepted orders outside Florida, shipped by common carrier, and used television-…
Which charges connected with renting, moving, and storing portable storage containers were subject to Florida sales tax?
Most charges were taxable. Mandatory transportation was part of the taxable container rental; container and equipment rentals, warehouse storage and access, damage waivers, moving supplies, and repair…
Were a nonprofit country club's membership dues, fundraising activities, and historic-building renovation materials exempt from Louisiana sales tax?
No. The private country club's membership dues were taxable because nonprofit status alone did not make it a qualifying nonprofit civic organization. Its property-tax exemption did not extend to sales…
Can the Nebraska Department of Revenue examine, copy, and keep copies of a taxpayer's records during an audit?
Yes. Revenue Ruling 99-08-1 concludes that the Tax Commissioner's statutory powers include the right to examine, inspect, and make and retain copies of taxpayer records relevant to an audit or review …
If an airport parking company also drives customers to and from the airport, can it split its charge into a taxable parking portion and a separate, nontaxable transportation portion?
No. Because the parking company never sells transportation independently of parking, its entire combined charge is a taxable parking charge, not a partly-exempt allocation.
Could an insurance group revoke its election to use Florida's alternative salary tax credit after audit changes affected the calculation?
No. The group timely elected the alternative salary tax credit with notice that its tentative 2002 factor could change, including through audit adjustments. Florida held that the statute made the elec…
Were a bank's loan agreement and unconditional guaranty subject to Florida documentary stamp tax when executed or delivered in Florida?
No, for the submitted documents and assumptions. Neither the loan agreement nor guaranty contained the required unconditional promise to pay a sum certain and borrower signature, and neither expressly…
Could a Florida water authority buy construction materials tax-free through its owner-direct-purchase procedures?
Yes, for direct purchases from suppliers under the stated procedures and controlling contract terms. The authority had to issue the purchase order with its exemption number, receive direct invoices, p…
Are washable fiberglass-reinforced plastic wall panels installed in a food-manufacturing production area exempt as manufacturing equipment?
No. Fiberglass-reinforced plastic panels installed as washable walls in a cookie plant were taxable construction materials that became real property, not machinery or equipment used to transform raw m…
Is a surgical laser used to create LASIK flaps, and its single-use interface (a milled glass part, like the blade in the traditional method), exempt from Colorado sales or use tax?
They're taxable. Colorado exempts drugs or materials a doctor furnishes to a patient (plus corrective eyeglasses, contacts, and hearing aids), but the rule turns on whether the item leaves with the pa…
How are South Carolina counties ranked for the job tax credit for 2008, and which counties qualify for the fee-in-lieu and tax moratorium (per SC IL #08-1)?
SC Information Letter #08-1 publishes South Carolina's 2008 county rankings for the job tax credit, plus the counties that qualify for a reduced fee-in-lieu investment threshold and for the tax morato…
Under the 2008 guidance, which pass-through income qualified for South Carolina's reduced active-business income-tax rate?
Eligible individuals, estates, and trusts could elect the reduced rate for South Carolina active trade or business income from a sole proprietorship, partnership, S corporation, or qualifying LLC. Pas…
Which limited South Carolina contacts did the Department say would not, by themselves, create income-tax nexus under its 2008 guidance?
Many isolated or passive contacts did not create income-tax nexus by themselves, including in-state product sales without other activity, bank accounts, certain loans, short internal meetings, and pro…
Did incomplete, outdated, or product-mismatched exemption certificates protect a Virginia hardware retailer from sales tax?
No. Virginia found that the retailer failed to exercise reasonable care because certificates were incomplete or outdated and often did not cover the products sold. Manufacturing certificates used for …
Did moving out of Virginia before an S corporation sold its assets keep the entire capital gain outside Virginia tax?
No. The couple moved in April 2004 and the S corporation sold its assets in September, but the corporation remained in operation for the entire year. Virginia required the pass-through capital gain to…
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