2020 Sales and Use Tax Technical Update

STATE UPDATE

California

Diapers and Feminine Products – Effective January 1, 2020 through December 31, 2021, California enacted a sales and use tax exemption for diapers for infants, toddlers and children. California also enacted a sales and use tax exemption for feminine products.

State Holds CEO Liable – The California Office of Tax Appeals (OTA) upheld an assessment against the CEO of an online retailer. The OTA confirmed the original notice of determination totaling close to $270,000 was issued timely within the statute of limitations. Sufficient evidence proves the taxpayer had knowledge of the unpaid liabilities. The OTA confirmed the CEO would be held liable for the outstanding sales and use tax liabilities of the company. A link to the formal opinion can be found here.

Michigan

Breast Pumps – Effective August 1, 2020, the Michigan Department of Treasury updated its streamlined taxability matrix to list the sale of breast pumps, breast pump storage supplies and breast pump kits as taxable.

Nebraska

Utilities – Effective August 16, 2020, Nebraska excludes the following from the definition of gross receipts: gross income received by an electric cooperative, an electric membership association or by a contractor for construction or services provided on electric generation, transmission, distribution, street lighting or facilities owned by the cooperative or electric membership association.

Ohio

CARES Act – The Ohio Department of Taxation updated its frequently asked questions (FAQs) to reflect economic injury disaster loan advance grants authorized by the CARES Act are included in gross receipts for purposes of the Commercial Activity Tax. However, employee retention tax credits authorized by the CARES Act are excluded from gross receipts. The full list of FAQs can be found here.

Pennsylvania

Accelerated Payments – The Pennsylvania Department of Revenue (DOR) is reminding businesses required to make Accelerated Sales Tax (AST) prepayments that they should resume making AST prepayments by July 20, 2020. Previously, the DOR forgave the prepayment requirement during March, April, May and June 2020 in order to provide relief to business taxpayers during the COVID-19 pandemic.

South Carolina

COVID-19 Fees – South Carolina released an Information Letter on August 5, 2020 reminding taxpayers a COVID-19 surcharge or fee is taxable as part of the sales price.

South Dakota

Telecommunications – In August 2020, the South Dakota Department of Revenue issued a fact sheet explaining the application of sales and use tax related to telecommunication and ancillary services. The fact sheet can be found here.

Tennessee

Breast Pumps – Effective August 1, 2020, the Tennessee Department of Revenue updated its streamlined taxability matrix to list the sale of breast pumps, breast pump storage supplies and breast pump kits as taxable unless the items are prescribed by a doctor and paid for directly by Medicaid.

Texas

On Highway Vehicles – In August 2020, the Texas Comptroller published guidance on the application of tax for the sale of motorcycles, autocycles and off highway vehicles based on whether the vehicle is designed for on highway use or off highway use. The full guidance can be found here.

Resale vs. Exemption Certificates – The Texas Comptroller of Public Accounts published the Tax Policy News for August 2020, which includes information on the sales and use taxability of bakery items. The policy also provides information regarding differences between a sales tax resale certificate verse an exemption certificate.

Remote Seller – Remote sellers have collection and reporting obligations if they create economic nexus within the state. A remote seller includes any out of state seller whose sole activity within the state includes shipping products to customers located in Texas. Remote sellers outside of Texas may create economic nexus if they surpass $500,000 in sales. Instructions on how to register as a remote seller, as well as details on local tax that must be collected can be found on the Texas Comptrollers website here.

Voluntary Disclosure Agreement – The Texas Comptroller of Public Accounts provided updated guidance related to the voluntary disclosure agreement (VDA) program for taxpayers to report previously unpaid or underpaid taxes. The program provides taxpayers the opportunity to pay taxes voluntarily with relief from penalties and, in some cases, interest. Statutory penalties and interest will be waived, except interest on taxes collected and not remitted. For more information on the VDA program, click here.

Utah

Electronic Filing – Effective November 1, 2020, the Utah State Tax Commission announced all businesses must file their sales and use tax returns electronically using the Taxpayer Access Point.

Vermont

Breast Pumps – Effective August 1, 2020, the Vermont Department of Taxes updated its streamlined taxability matrix to list the sale of breast pumps, breast pump storage supplies and breast pump kits as taxable.

Virginia

BPOL – The Virginia Circuit Court determined Chesapeake’s business, professional and occupational license (BPOL) tax is a tax on internet access and is preempted by the Internet Tax Freedom Act.

Complimentary Meals – The Virginia Tax Commissioner provided guidance surrounding taxability of complimentary meals served at a restaurant. If a restaurant provides complimentary meals to employees as part of the employee benefit, the meals are exempt from tax under state law. However, if a restaurant provides complimentary meals to employee family members as part of the employee benefit, the meals are considered taxable withdraws from inventory and use tax must be accrued on the cost of the meal. If a customer receives a free meal due to poor quality or visit, use tax must be accrued on the cost of the meal.

Photo Booths – The Virginia Tax Commissioner deemed rentals of photo booths used for entertainment as taxable tangible personal property regardless if the fee is combined with other nontaxable fees, such as a DJ fee. The taxpayer claimed the photo booth fell under the primary objective of entertainment services and should not be considered taxable since the main interest of the contract was to provide entertainment services. The taxpayer felt the photo booth would be considered incidental under this view. Under the true object test, the state confirmed the photo booth would not fall under entertainment services as it was separately stated on the customers contract. Thus, the rental of the photo booth would be taxable.

Washington

Resale Certificates – The Washington Department of Revenue issued guidance related to reseller permits for sales and use tax purposes. Guidance includes details around permit numbers, effective dates, expiration of permits, misuse of the reseller permit, penalties associated with misuse of the reseller permit and steps to follow when receiving a permit from a vendor. For additional guidance on resale certificates, click here.

Wisconsin

Breast Pumps – Effective August 1, 2020, the Wisconsin Department of Revenue updated its streamlined taxability matrix to list the sale of breast pumps, breast pump storage supplies and breast pump kits as taxable unless the items are prescribed by a doctor and paid for directly by Medicaid or Medicare.

Garage Sales and Flea Markets – The Wisconsin Department of Revenue (DOR) provided information on the taxability of garage sales, flea markets, rummage sales and swap meets. The DOR clarified any personal household items sold are not taxable provided the total sales are less than $2,000 for the entire calendar year. If sales are greater than $2,000 in a calendar year, the taxpayer is engaged in business or the taxpayer is required to hold a seller’s permit, sales tax must be included on the sale of taxable products and services. Additional details can be found here.


Previous Updates

August 2020 Updates

STATE UPDATE

Alaska

Remote Seller - Additional Alaska localities have adopted the Remote Sellers Sales Tax. The updated list of localities can be found on the Alaska Remote Seller Sales Tax Commission website here. There is currently no statewide sales tax in place in Alaska, however, localities may still impose a local sales tax. Remote sellers outside of Alaska may create economic nexus if they surpass either $100,000 in sales or 200 transactions into the state.

Arkansas

Services - In a recent letter ruling, the State of Arkansas Department of Finance and Administration clarified services of bookkeeping, project management, business analysis, email management, research and customer service are not specifically enumerated services subject to sales tax regardless of whether they are performed virtually or in person.

Georgia

Medical Records - The Georgia Department of Revenue released a letter ruling providing guidance on the application of sales and use tax for charges to maintain and distribute medical records. Charges for medical records delivered in any tangible format are subject to Georgia sales and use tax, while charges for the production of records that are delivered electronically are not subject to sales and use tax. Charges for coding, formatting, data storage and abstraction services are exempt from sales and use tax, however, tangible personal property purchased for use in performing these services are subject to sales and use tax.

Signage - The Georgia Department of Revenue released Letter Ruling SUT-2019-05 providing guidance on the application of sales and use tax for sales of signs and sign installation. This ruling illustrates the difference between a sale of tangible personal property and real property. The Department states "a sign held in place only by the force of gravity remains tangible personal property after installation. A sign that is attached to real property and is intended to remain in place is deemed to be used in performance of a real property contract." If an item remains freestanding after installation, the item will be classified as tangible personal property after being installed on land, building or structure attached to the land. An item which remains tangible personal property includes those held in place only by force of gravity and not otherwise constrained from moving. Further, attaching an item to real property purely for the purpose of preventing theft does not cause the item to lose its identity as tangible personal property.

Leased Equipment - The Georgia Department of Revenue released a letter ruling providing guidance on the application of sales and use tax of leased equipment that is lost in a casualty event. The taxpayers contract stipulates in the event of a total loss, the lessee must pay to the taxpayer/lessor the total amount due under the contract. In exchange for such payment, the lessor will convey all rights, title and interest in the property to the lessee. The taxpayer/lessor must charge tax or absorb the tax on the sales price (i.e., the proceeds received from the customer as part of a loss event).

Iowa

Hospitality - Effective July 1, 2020, Iowa House File 760 increased the number of consecutive days the same person must rent lodging for the sales price to be exempt from state and local hotel and motel taxes. The new law increases the requirement to 90 days of a stay, whereas it was formerly 30 days. The law also creates a sales tax exemption for the sales price of lodging furnished to the guests of an Internal Revenue code (IRC) Section 501(c)(3) nonprofit lodging provider for friends and family of a hospital patient during a time of medical need of the patient with the exempt length of stay based upon the needs of the friends, family or patient.

Indiana

Bundled and Unitary Transactions - In Indiana Informational Bulletin No. ST94, dated June 1, 2020, the Indiana Department of Revenue issued guidance concerning recent updates to bundled and unitary transactions legislation. Indiana sales tax is measured by the “gross retail income” received by a retail merchant in a retail unitary transaction. A person is a retail merchant making a retail transaction when the person sells tangible personal property as part of a bundled transaction. If a transaction involving personal property and services (or some other combination of taxable and nontaxable goods or services) sold for a single price met one of the exceptions, it would not be considered a taxable transaction. If a transaction otherwise meets the definition of a unitary transaction but also meets one of the exceptions to a bundled transaction, it will not be considered a taxable unitary transaction. If a transaction meets the definition of a unitary transaction, also meets the definition of a bundled transaction and does not meet one of the exceptions to a bundled transaction, then the transaction is subject to sales tax as both a bundled transaction and a unitary transaction. A transaction that is a combination of services and tangible personal property and meets the definition of a unitary transaction and does not meet the definition of bundled transaction will still be taxable as a unitary transaction.

Louisiana

Cable Equipment - Effective July 1, 2020, Louisiana provides a sales tax exemption on certain fiber optic cable equipment. A winning bidder that is awarded a census block by the Federal Communications Commission in the Rural Digital Opportunity Fund Auction will be eligible for a rebate of sales and use tax paid by the winning bidder on fiber optic cable equipment used to distribute fixed and mobile broadband networks to eligible rural unserved areas in Louisiana. The rebate amount will be 50 percent of the sales and use tax paid by the winning bidder on fiber optic cable equipment. Each item of fiber optic cable equipment will be eligible for only a single rebate and that subsequent sale or resale of the item will not be eligible for the rebate. The rebate will not be allowed for purchases of fiber optic cable equipment that are paid for with state or federal funds, unless the state or federal funds are reported as taxable income or are structured as repayable loans.

Maine

Various State Updates - Maine Revenue Services issued a tax bulletin on July 14, 2020, which includes a new exclusion of oxygen delivery equipment from retail sales for sales tax purposes. Additional items noted in the bulletin include changes in hospitals taxable years and a new pesticide container fee. An exemption from sales tax for purchases made by nonprofit youth camps, pet food assistance organizations and community-based worldwide charitable organizations. Lastly, the repeal of the payment voucher submission with a health care provider's estimated monthly payment.

Mississippi

Marketplace Facilitator - The Mississippi Marketplace Facilitator Act of 2020 is effective July 1, 2020. The bill defines a marketplace facilitator as any person who facilitates a retail sale by (1) listing or advertising for sale by the retailer in any forum, tangible personal property, services or digital goods that are subject to tax under Mississippi sales tax law and (2) either directly or indirectly, through agreements or arrangements with third parties, collecting payment from the customer and transmitting that payment to the retailer regardless whether the marketplace provider receives compensation or other consideration in exchange for its service. Marketplace facilitators who facilitate sales into Mississippi that exceed $250,000 in any consecutive 12-month period are required to register for a Mississippi use tax account and begin collecting and remitting use tax on Mississippi sales of taxable services, tangible personal property and specified digital products.

Telecommunications - The sales tax exemption of half the sales tax on sales of equipment to telecommunications enterprises that is installed in tier one areas and used in the deployment of broadband technologies was set to expire on July 1, 2020, and has now been extended until July 1, 2025.

North Carolina

Various State Updates - House Bill 1080 in North Carolina provides for several changes. Nonprofit and governmental entities may apply for a state and local sales tax refund for sales tax paid on certain digital property, applicable to purchases made on or after July 1, 2020. In addition, for sales occurring on or after July 1, 2020, the legislation replaces the economic nexus threshold requirement with a requirement that the marketplace facilitator be “engaged in business” in North Carolina. Further, effective June 30, 2020, clarification is provided that a digital code is taxed in the same manner as certain digital property for which the digital code relates. Lastly, for sales occurring on or after July 1, 2020, retailers who are required to remit the state and local sales and use tax to the Department of Revenue must remit the local meals tax on prepared food and beverages to the taxing county or city on and after the effective date of the levy of the local meals tax. To read more about these changes, click here.

South Carolina

Electric Charging Stations - The South Carolina Department of Revenue issued a private letter ruling related to the sale of electricity to a company who owns and operates electric vehicle charging stations. Sales of electricity to the taxpayer by a utility company are classified as wholesale sales and are not subject to sales tax. Sales of electricity by the taxpayer to its customers are classified as retail sales, which are subject to sales tax. Any additional fees associated with the sale, such as idling fees, are included in the tax base and subject to sales tax should the sale be considered a retail sale.

Tennessee

Digital Products - The Tennessee Department of Revenue provided Revenue Ruling #20-03 related to on-hold messaging (OHM), overhead music and videocast programming (VCP) services. The state ruled the OHM and VCP services as taxable as they fell under licensing for specified digital products. The state ruled the overhead music as taxable as it fell under access to specified digital products. All findings were determined based on the fact the taxpayer provided the equipment at no charge to its customers, therefore the taxpayer was determined to be the user and consumer of the equipment.

Economic Nexus - The Tennessee Department of Revenue issued new guidance on the sales threshold required to establish economic nexus within the state. Previously, out-of-state dealers with $500,000 or more in sales to Tennessee crossed the threshold and created economic nexus. Beginning October 1, 2020, the threshold will reduce from $500,000 to $100,000 in sales.

Out of State Dealer FAQs - The Tennessee Department of Revenue provided clarification on frequently asked questions (FAQ’s) related to the sales and use tax obligation by out of state dealers and marketplace facilitators. The various FAQ’s can be found here. Tennessee also issued an additional notice #20-24 for marketplace facilitators with further detail on qualifications, thresholds and requirements.

Virginia

Various State Updates - The Virginia Department of Taxation issued a list of new tax laws taking effect July 1, 2020. Cigarette and tobacco product tax will double from $0.30 to $0.60 per pack. Gun safes with a selling price of $1,500 or less are now exempt from sales tax. The litter tax will double to $20 per business location with an additional $30 for specific sellers. The late payment penalty related to the litter tax is increasing by $100 as well. The complete list of changes can be found here.

Washington

Solar and Renewable Energy - The exemption provided by the Washington Department of Revenue for certain solar and other renewable energy systems has been extended to January 1, 2030. This exemption applies for any qualifying items purchased or installed after January 1, 2020. If a buyer paid tax on these items, they may request a refund directly from the Department of Revenue if they meet certain qualifications. In order to qualify for the exemption the seller must be registered with the Department of Labor and Industries as a contractor, possess a current state unified business identifier number, possess proof of industrial insurance coverage, possess an Employment Security Department number and have no findings of violations of federal or state wage and hour laws and regulations in the past 24 months.

Voluntary Disclose Agreement - The Washington Department of Revenue has temporarily expanded eligibility criteria related to the voluntary disclosure agreement program. This program includes an avenue for both sales and use tax and business and occupation tax. The temporary expansion is valid July 15, 2020 through November 30, 2020. The temporary expanded eligibility includes certain instances where a taxpayer was previously registered with Washington, as well as businesses that may have received some level of enforcement notices in prior years. For more information on the expanded eligibility, click here.

Wyonming

Breast Pumps - Effective August 1, 2020, the Wyoming Department of Revenue updated its streamlined taxability matrix to list the sale of breast pumps, breast pump storage supplies and breast pump kits as taxable.

July 2020 Updates

STATE UPDATE

Arkansas

The Arkansas Department of Finance and Administration issued a letter opinion stating a seller who transacts entirely as a marketplace seller is not required to obtain a sales tax license. Specifically, a marketplace seller in this scenario would not have any sales to report. The marketplace seller “is not required to obtain a gross receipts tax permit or file the sales tax returns that are typically required of taxpayers” who sell tangible personal property in Arkansas. Click here to view the opinion.

District of Columbia

The District of Columbia Office of Tax and Revenue (OTR) has issued a notice regarding the sales tax treatment of restaurant sales of food, drinks or alcohol made through a marketplace facilitator. If a marketplace facilitator takes orders and accepts payment for delivery or pick-up at a restaurant of food, drinks or alcohol, the marketplace facilitator is required to collect sales tax from customers at the proper rate and remit sales tax to the OTR. Marketplace facilitators are required to collect and remit DC sales tax on restaurant sales at the rate of 10% (10.25% for alcoholic beverages to be consumed off premise).

Nevada

The Nevada Department of Taxation announced additional fees attributed to COVID-19 charged by businesses are subject to Nevada sales tax.

Ohio

Effective April 1, 2020, the Ohio Department of Taxation announced sales and use tax exemptions for feminine hygiene products and sales of diapers or incontinence underpads sold by a Medicaid provider for the benefit of a Medicaid recipient with a diagnosis of incontinence and pursuant to a prescription.

South Carolina

Amazon filed its final opening brief with the South Carolina Court of Appeals on June 11, 2020. In relation to the Amazon Services LLC v. South Carolina Department of Revenue case, Amazon asserted it does not sell third-party sellers’ products on its online marketplace, rather it receives compensation only for services provided to the sellers, which are not taxable. Amazon is requesting the Court reverse its decision, arguing that taxing Amazon’s marketplace facilitation service is unconstitutional.

Tennessee

On May 20, 2020, the Tennessee Department of Revenue issued a response to a Frequently Asked Question (FAQ) clarifying a car wash facility that offers both taxable and tax exempt car washes should separately examine the application of sales and use tax to each type of car wash sold and only collect sales tax on the taxable car wash. As noted in Notice 19-12, which provides guidance on the taxability of car washes, a car wash is subject to sales tax if the service provider takes custody of the vehicle at any time or performs the majority of the cleaning activities for the customer. In contrast, a car wash is not subject to sales tax if the customer remains in custody of the vehicle and the majority of the wash and related cleaning activities, such as rinsing, drying, polishing and vacuuming are completed by the customer or automated equipment.

Texas

Telecommunications – Although Texas state law provides that telecommunications services are subject to sales and use tax but are exempt from local taxes, the city, county or transit authorities may vote to impose sales tax on intrastate telecommunications services. Publication 96-339, revised in June 2020, lists all cities, counties, transit authorities and other special purpose districts imposing sales tax on telecommunications services. The updated list can be found here.

Equipment Rentals – In a Texas Private Letter Ruling dated May 5, 2020, the Texas Comptroller of Public Accounts determined the sales and use taxability of charges for equipment rentals and bypass pumping services. Taxpayer deployed pump equipment and accessories for a flat weekly or monthly fee, as well as certified pump operators if requested. Taxpayer also provided trucks, trailers and crews to deliver and temporarily install the equipment at the customers job site. The comptroller determined the charges for equipment, including delivering, installing, dismantling and removing the equipment, were subject to the tax as a rental or lease of tangible personal property when the taxpayer did not provide the pump watch service. However, the charges for the equipment and the service are not subject to tax when the taxpayer provides the pump watch service.

Data Center FAQs – The Texas Comptroller published Qualifying Data Centers Frequently Asked Questions (FAQs) in relation to sales and use tax, including the various qualifications and rules. These FAQs can be found here. Similar to other states, qualifying occupants may also claim the sales and use tax data center exemption, and the certification requirements may be met by including the qualifying occupant’s job creation and capital spend. The certification requirements can be found here.

Washington

Nexus-Creating Activities – The Washington Department of Revenue clarified physical presence is a nexus-creating standard, and even the slightest bit of activity within the state may create physical presence for a taxpayer. The expanded list of nexus-creating activities can be found here.

Feminine Hygiene – As of July 1, 2020, the Washington Department of Revenue declared feminine hygiene products exempt from sales and use tax. Sellers may claim a deduction for feminine hygiene products from their retail sales; however, no correlating deduction is available for the Business and Occupations tax.

Wisconsin

The Wisconsin Department of Revenue issued a list of repeals, amendments and new tax laws taking effect July 1, 2020. Changes include the following:

  • Building materials that become an integral part of a facility for a non-profit or government organization are now exempt.
  • All receipts from a self-service laundry machine are exempt, including coin and credit card- operated machines.
  • Music sold to be played in a jukebox is now exempt.
  • The taxable sales price of heavy trucks and trailers no longer includes the federal excise tax in the tax base.
  • Building materials, supplies or equipment used during the development or construction of a sports or entertainment arena facility are now exempt.
  • Diabetes equipment used to inject insulin qualifies for an exemption so long as the equipment meets the definition of durable medical equipment.

The complete list of changes can be found here.

West Virginia

The West Virginia State Tax Department published general information around sales and use tax exemptions for medical goods. The publication confirmed the “purchases of drugs, durable medical equipment, mobility enhancing equipment and prosthetic devices to be dispensed upon prescription and intended for use in the diagnosis, cure, mitigation, treatment or prevention of injury or disease” are exempt from WV sales and use tax. The tax exemption also applies to the sale and installation of mobility enhancing equipment to be used in vehicles by the physically disabled.

June 2020 Updates

STATE UPDATE
Alabama In a recent Alabama case, the sale of coffee and brewing equipment by a manufacturer was found to be subject to the reduced manufacturing sales and use tax rate of one percent. The products qualified as machinery used to process tangible personal property.
District of Columbia, Georgia, Indiana, Maryland, Massachusetts, Minnesota, Mississippi, New Jersey, North Dakota, Pennsylvania, South Carolina Potential Nexus Relief: Due to the COVID-19 pandemic, many employees are working remotely from their homes instead of working from their respective offices. Given the hopeful temporary nature of this remote environment, certain states have recently published guidance to alleviate concerns for businesses on changes in their Nexus footprint. Further guidance on state specific rules can be found here.
Rhode Island In a recent Rhode Island case, penalties associated with a delinquent prepaid wireless 911 charge, also known as an E911 tax, could not be imposed due to the absence of state statute to support such penalty. The court determined the taxpayer owed the delinquent E911 tax, as well as interest associated with the unpaid taxes. However, the tax division ruled the taxpayer did not owe penalties associated with failure to file or pay the respective E911 tax as there is currently no RI statute to support such penalty for the specified tax.
Tennessee The Tennessee Department of Revenue clarified the taxability of sales, installation and repair of restaurant equipment for sales and use tax purposes. The sale, installation and repair of restaurant equipment is taxable so long as the equipment remains tangible personal property even after installation is complete. Restaurant equipment that is intended to be removable, capable of being easily relocated or used elsewhere should a restaurant relocate is classified as tangible personal property after installation. The sale, installation and repair of restaurant equipment is exempt if the equipment becomes part of realty upon installation. Any parties installing or repairing restaurant equipment that becomes part of realty upon installation must pay sales tax as they purchase property being installed or repair parts.
Virginia
  • In a recent Virginia case, the court determined that the business, professional and occupational license tax was a tax on internet access, which is a violation of the Internet Tax Freedom Act (ITFA). An internet service company sought a refund of tax paid on gross receipts from internet access services. The court ruled in the taxpayer’s favor, noting that this was indeed a tax on gross receipts from providing internet access, which is in violation of the ITFA.
  • Virginia approved a bill to authorize counties to impose admission tax, transient occupancy tax and food and beverage tax, all subject to certain limits. The effective dates vary by county.
Vermont The Vermont Department of Taxes clarified the taxability of common seasonal items. Food purchased from a retail store is exempt from sales and use tax. Ice is not considered food and therefore is taxable, even when the ice is intended to keep food cold or will be incorporated into beverages for sale. Business purchasing ice to be used in beverages, napkins, cups and straws must pay sales tax on those purchases even though they will ultimately be used by the consumer. Propane sold in a free-standing container is taxable, even when the consumer purchases a new container prefilled or exchanges an empty container for a full one. On the other hand, sales tax is not due if the consumer purchases propane to refill its own container.
Washington
  • Related to the COVID-19 pandemic, Washington clarified sales of alcohol used for sanitizing purposes and sold to hospitals, clinics and first responders are subject to both Washington retail sales tax as well as the business and occupations tax. Any sale of alcohol to a free hospital is exempt so long as the free hospital does not charge patients for health care provided. Donations of alcohol are also exempt.
  • The Washington Department of Revenue published guidance for restaurants and similar businesses. Taxpayers are advised that meals sold directly to the American Red Cross or to the U.S. Government are exempt from retail sales tax if supported by proper documentation but are still subject to the retail B&O tax. However, sales made to employees of the American Red Cross or U.S. Government are subject to retail sales tax. In addition, sales to state and local governments, the National Guard and first responders are subject to retail sales tax unless the buyer is reselling the meals and has a reseller permit, in which case the restaurant would be subject to B&O tax under the wholesaling classification. Free meals provided by any restaurant to non- employees are not subject to retail sales tax but use tax must be paid by the restaurant on any soft drinks, beer or wine that is given away. Sales tax on delivered meals should be applied based on where the customer receives the meal. Although uncooked meal kits sold by restaurants are typically subject to sales tax, certain exceptions apply. Washington’s full guidance can be found here.

May 2020 Updates

STATE UPDATE
Alaska As of January 6, 2020, the Alaska Remote Seller Sales Tax Commission approved a uniform Remote Sellers Sales Tax Code, which allows local municipalities in Alaska to require out of state sellers with $100,000 or more in statewide gross sales or 200 or more separate transactions to register to collect and remit local sales tax.
Arizona As of January 1, 2020, businesses with an annual transaction privilege tax or use tax liability of $5,000 or more in Arizona must file and pay returns electronically. The threshold has decreased from $10,000 in 2019. In 2021, the threshold will decrease again to $500. Failure to file electronically will result in a penalty of five percent of the tax due ($25 minimum penalty) and five percent of the payment amount made by cash or check.
Georgia As of April 1, 2020, marketplace facilitators are required to collect and remit sales tax on behalf of third party sellers. A marketplace facilitator is defined as a person who contracts  with a seller for consideration, to make available or facilitate a taxable retail sale on the seller’s behalf by directly or indirectly facilitating the retail sale in any manner. This includes advertising, marketing, promoting, taking orders or providing the physical or electronic infrastructure that brings purchasers and marketplace sellers together and collecting, charging, processing or otherwise facilitating payments for such retail sales on behalf of the marketplace seller.
Hawaii, New Mexico, Ohio, South Dakota, Texas and Wisconsin As of July 1, 2020, internet access fees will be exempt from sales and use tax, as mandated by the Internet Tax Freedom Act.
Idaho As of July 1, 2020, Idaho will exempt certain server equipment and new data center facilities based on certain qualifications. Eligible server equipment includes “new server equipment that is maintained and operated in an Idaho data center for the sole purpose of data transmission and storage services, providing data and transaction processing services, information technology services or computer colocation services. The term includes servers, rack servers, chillers, storage devices, generators, cabling and enabling software integral to or installed on the equipment. In order to qualify for the exemption, the business must make capital investments of at least $250 million in at least one Idaho data center after July 1, 2020, within the first five years after construction begins and create and maintain at least thirty new jobs at the data center within two calendar years after operations begin.”[1]
Louisiana The Louisiana Supreme Court denied local taxing authority from claiming a marketplace facilitator is liable for local sales tax on third party retailer online sales. The court found the online marketplace facilitator did not have an obligation to collect and remit local sales tax from end customers who purchased merchandise available on the online platform via third party retailers.[2]
Maryland Maryland issued an updated list of tangible personal property and services subject to sales and use tax. The complete list can be viewed in the online publication here.
New Jersey As of January 21, 2020, the sale or use of energy utility services to qualified recovered material manufacturing facilities are exempt from sales and use tax in New Jersey if used directly in the production of tangible personal property. Providers must collect and remit the tax and the tax will be refunded to the purchaser after the purchaser files a claim. The exemption applies for seven years and the beginning date must be in calendar year 2020, 2021 or 2022. A recovered material manufacturing facility is a facility that receives service under an electric public utility rate. Applied only to the facility owner on January 1, 2004, manufactures products made from recovered materials, completed a comprehensive energy audit within the past 48 months or within 90 days after January 21, 2020 and employs 250 or more employees in New Jersey effective January 1, 2019.
North Carolina As of February 1, 2020, an auctioneer who meets the definition of a marketplace facilitator must collect and remit sales and use tax on taxable marketplace facilitated sales when the auctioneer meets certain criteria. These criteria include directly or indirectly listing or otherwise making available for sale a marketplace seller’s items through a marketplace owned or operated by the marketplace facilitator. In addition, the auctioneer would collect the sales price or purchase price of a marketplace seller’s items or otherwise process payment or make payment processing services available to purchasers for the sale of a marketplace seller’s items.
South Carolina Based on a recent private letter ruling, the South Carolina Department of Revenue (DOR) deemed online software services associated with managing durable medical equipment taxable. The associated taxpayer provided a cloud based software platform billed as a monthly subscription fee, which tailored to durable medical equipment suppliers, where no transfer of tangible personal property occurred in the transaction. Since the taxpayer provided customers access and use to the software online, the South Carolina DOR deemed the access and use of software to be communication services, which are subject to tax in South Carolina.
South Dakota As of July 1, 2020, a seller now has 120 days post sale to obtain a sales tax exemption certificate or all relevant required information from their customers in order to exclude sales tax from the invoice. Any certificate received after the 120 day mark will not be considered valid  by the South Dakota DOR.
Tennessee As of October 1, 2020, marketplace facilitators are required to collect and remit sales tax on behalf of third party sellers. A marketplace facilitator is defined as a person who contracts  with a seller for consideration, to make available or facilitate a taxable retail sale on the seller’s behalf by directly or indirectly facilitating the retail sale in any manner. This includes advertising, marketing, promoting, taking orders or providing the physical or electronic infrastructure that brings purchasers and marketplace sellers together and collecting, charging, processing or otherwise facilitating payments for such retail sales on behalf of the marketplace seller.
Texas As of April 1, 2020, remote sellers must combine sales made through all mediums with delivery into Texas to determine whether the safe harbor provision applies. This includes sales made via a marketplace facilitator where the marketplace facilitator collected sales tax on behalf of the remote seller.
Washington Related to the COVID-19 pandemic, Washington clarified sales of alcohol used for sanitizing purposes and sold to hospitals, clinics and first responders are subject to both Washington retail sales tax as well as the business and occupations tax. Any sale of alcohol to a free hospital is exempt so long as the free hospital does not charge patients for health care provided. Donations of alcohol are also exempt.

References:
[1] House Bill No. 217, Legislature of the State of Idaho
[2] Normand vs Wal-Mart.com, Case Number: 2019-C-00263

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