PORTFOLIO

Sales and Use Taxes: Retail Sales Issues (Portfolio 1360)

Be a trusted advisor to your clients with Bloomberg BNA Tax Portfolios. In this Portfolio, our expert authors explain the sales taxation of retailers both in terms of taxes the retailer pays, and the taxes the retailer is required to collect.

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DESCRIPTION

The Sales and Use Taxes: Retail Sales Issues Portfolio begins with a discussion of the states' ability to require collection of sales and use taxes, including the mail order sales.

 

This Portfolio further addresses how changes in technology have impacted compliance through changes in electronic transmission. Also, many specific topics relating to items potentially taxable to the retailer such as direct mail advertising, gifts and promotional items are discussed.

 

Our authors also provide a discussion of audit methodology and the requirement to keep adequate records including exemption certificates.


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AUTHORS

SUSAN S. JONES

Susan S. Jones, formerly Vice President – Client Resource Group for DuCharme, McMillen & Associates Inc., is a state tax consultant practicing in Naples, Florida. She also previously served as Director of State & Local Taxes for PepsiCo Inc. While at PepsiCo, Susan was responsible for all state and local tax matters for this Fortune 15 company. Susan has served on the Executive Committee of COST and the state tax committee of Tax Executives Institute. Currently, she serves on the Finance and Tax Committee of the Florida Chamber of Commerce, and is Chair of the State Tax Committee of the FICPA. She also is a consulting editor for Interstate Tax Insights. She has been a frequent lecturer at national tax symposiums and has published several articles on various state tax issues.

 

Credentials / Susan received her B.A. in Environmental Science from the University of Virginia and her Masters in Taxation from Virginia Commonwealth University (Dean's Scholar).  


MARILYN A. WETHEKAM, ESQ.

Marilyn Wethekam is a partner in the Chicago law firm of Horwood, Marcus & Berk, Chartered, where she concentrates her practice in state tax planning and the resolution of state and local tax disputes on a nationwide basis for multistate and multinational corporations. Prior to joining the firm, she was Tax Counsel for the Mobil Oil Corporation, specializing in state and local tax matters, and Supervisory Tax Counsel for Montgomery Ward & Co. Inc., where her responsibilities included both state and federal tax matters. Marilyn is a frequent lecturer before groups such as the New York University's Institute on State and Local Taxation, Georgetown University's Institute on State and Local Taxation, the Council On State Taxation, and the Tax Executives' Institute. She has also authored several articles on state taxation. Marilyn is a member of the CCH State Tax Advisory Board, the Advisory Board of Georgetown University Institute on State and Local Taxation and past Chair of the Council On State Taxation.

 

Credentials / Marilyn received her B.A. degree from Loyola University of Chicago, her J.D. degree from Illinois Institute of Technology, Chicago–Kent College of Law, and an LL.M. in taxation from John Marshall Law School. She is admitted to practice in Illinois and Texas.


TABLE OF CONTENTS

Detailed Analysis

1360.01. SALES AND USE TAXES - OVERVIEW

A. Introduction

B. Definition of Retailer and Retail Sale

C. Jurisdiction and Nexus Issues

1. States Ability to Require Collection of Tax

2. Mail Order Sales

3. Internet Tax Freedom Act

4. Streamlined Sales Tax Project (SSTP)

5. State Legislation

6. Court Cases

a. National Bellas Hess Inc. v. Illinois Department of Revenue

(1) Litigation in Response to Bellas Hess-L.L. Bean and Bloomingdale's By Mail

(2) Other Litigation

b. Quill Corporation v. North Dakota Department of Revenue

7. Current Developments in Nexus Cases

a. Affiliate Nexus

b. Independent Agents Creating Nexus

c. Delivery Vehicles

d. Physical Presence

e. Trade Shows and Other Sporadic Visits

D. Apportionment Issues

E. Methods of Accounting for Sales and Use Tax Returns

F. Bad Debts

G. Drop Shipments

1360.02. SALES PRICE

A. In General

B. Miscellaneous Charges and Fees

1. Lay–Away Fees

2. Set–Up Charges vs. Installation Labor

3. Repossessions, Returned Goods, and Partial Refunds

4. Warranties

5. Packaging

1360.03. SHIPPING AND HANDLING CHARGES

A. In General

B. State-by-State Analysis

1. Alabama

2. Alaska

3. Arizona

4. Arkansas

5. California

6. Colorado

7. Connecticut

8. Delaware

9. District of Columbia

10. Florida

11. Georgia

12. Hawaii

13. Idaho

14. Illinois

15. Indiana

16. Iowa

17. Kansas

18. Kentucky

19. Louisiana

20. Maine

21. Maryland

22. Massachusetts

23. Michigan

24. Minnesota

25. Mississippi

26. Missouri

27. Montana

28. Nebraska

29. Nevada

30. New Hampshire

31. New Jersey

32. New Mexico

33. New York

34. North Carolina

35. North Dakota

36. Ohio

37. Oklahoma

38. Oregon

39. Pennsylvania

40. Rhode Island

41. South Carolina

42. South Dakota

43. Tennessee

44. Texas

45. Utah

46. Vermont

47. Virginia

48. Washington

49. West Virginia

50. Wisconsin

51. Wyoming

1360.04. GIFTS AND PROMOTIONAL ITEMS

A. Gifts and Premiums

B. Gifts - Other Issues

1. Gifts of Merchandise to Charitable Organizations

2. Applying Use Taxes to Gifts in a Multistate Situation

C. Prizes

D. Coupons and Discount Cards

1. Vendor Coupons and Discounts

2. Manufacturer Coupons and Discounts

3. Coupon Books

E. Trading Stamps

F. Demonstrators

G. Samples

1360.05. EXEMPTION CERTIFICATES

A. Overview of Exemptions

B. Documenting Tax-Exempt Sales

C. Maintaining the File

D. Exemption Certificate Forms

1. In General

2. MTC Uniform Exemption Certificate

3. Blanket Exemption Certificates

E. Audit Problems Related to Exemption Certificates

F. Sales to Other Exempt Groups

1360.06. TAXATION OF DIRECT MAIL AND ADVERTISING SUPPLEMENTS

A. Direct Mail Advertising Materials

1. Early Court Cases

2. D.H. Holmes Co. v. McNamara

3. Statutory Exemptions

4. Determining the Taxable Base

5. Planning

B. Newspaper Advertising Supplements-Newspaper Inserts

1. In General

2. Planning

C. State-by-State Analysis

1. Alabama

2. Alaska

3. Arizona

4. Arkansas

5. California

6. Colorado

7. Connecticut

8. Delaware

9. District of Columbia

10. Florida

11. Georgia

12. Hawaii

13. Idaho

14. Illinois

15. Indiana

16. Iowa

17. Kansas

18. Kentucky

19. Louisiana

20. Maine

21. Maryland

22. Massachusetts

23. Michigan

24. Minnesota

25. Mississippi

26. Missouri

27. Montana

28. Nebraska

29. Nevada

30. New Hampshire

31. New Jersey

32. New Mexico

33. New York

34. North Carolina

35. North Dakota

36. Ohio

37. Oklahoma

38. Oregon

39. Pennsylvania

40. Rhode Island

41. South Carolina

42. South Dakota

43. Tennessee

44. Texas

45. Utah

46. Vermont

47. Virginia

48. Washington

49. West Virginia

50. Wisconsin

51. Wyoming

1360.07. ELECTRONIC DATA INTERCHANGE (EDI) AND ELECTRONIC FUND TRANSFERS (EFT)

Introductory Material

A. Definitions

B. Model EDI Regulations

C. Federal EDI Initiatives

D. Specific EDI Issues for Retailers

1360.08. PROCUREMENT CARDS

A. Background

B. Advantages

C. Disadvantages

D. Sales and Use Tax Considerations

E. Example States

1. Florida

2. Virginia

1360.09. AUDIT ISSUES

A. Audit Techniques

B. States' Use of Outside Auditors

C. Nontraditional Audits

D. Effective Rate Agreements

1360.10. LOCAL SALES AND USE TAXES

A. Introduction

B. Administration

C. Sourcing of Sales

D. Nexus

1360.11. OTHER TYPES OF TAXES

A. Income Taxes

1. Apportionment of Retailers

2. Tax Credits

B. Property Taxes


WORKING PAPERS

Working Papers

Item Description Sheet

Worksheet 1 Electronic Funds Transfer (EFT)

Worksheet 2 Rev. Proc. 98-25 1998-11 I.R.B. 7 (3/16/98)

Worksheet 3 Model Recordkeeping and Retention Regulation

Worksheet 4 Model Recordkeeping and Retention Regulation Explanation and Commentary

Worksheet 5 California Sales and Use Tax Regulation 1698 (Amended 6-26-97; eff. 10-4-97)

Worksheet 6 Uniform Sales and Use Tax Certificate Multijurisdiction

Bibliography

Bibliography