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The SALT Shaker – September 2016

September 1, 2016

By Keith Habel, CPA
Partner, SALT Practice Leader

Illinois

Sales Tax Rate on Cancer Treatment Medical Devices and Components Reduced: Effective August 19, 2016, the sales tax rate on products classified as Class III medical devices by the US FDA for cancer treatment pursuant to a prescription, as well as any accessories and components related to those devices, has decreased from 6.25% to 1%. S.B. 3047

Exemption for Feminine Hygiene Products Enacted: Effective January 1, 2017, feminine hygiene products will be exempt from Illinois sales and use tax. S.B. 2746

Sales of Licensed Computer Software Exempt: A recent private letter ruling released by the Illinois Department of Revenue discusses exempt sales of licensed computer software. The letter ruling states that the license of software is not considered a taxable sale if (1) It is evidenced by a written agreement; (2) it restricts the customer’s replication and use of the software; (3) it prohibits the customer from licensing, sublicensing or transferring the software to a third party; (4) the licensor has a policy of providing another copy at minimal or no charge if the customer loses or damages the software, or permitting the licensee to make and keep an archival copy; and (5) the customer is required to destroy or return all copies of the software to the licensor at the end of the license term. ST 16-0003-PLR

Missouri

Delivery Charges Subject to Sales Tax: Due to a recent Missouri Supreme Court ruling concerning the taxability of delivery charges, the Missouri Department of Revenue states that if the party intends delivery to be part of the sale of the property, the delivery charge is subject to tax even if the delivery charge is separately stated. Missouri Department of Revenue

Wisconsin

Management Services Deemed Integral Part of Taxable Services: The Wisconsin Tax Appeals Commission upheld that laundry and related management services provided by a company to nursing homes, retirement homes and rehabilitation facilities were taxable. The plaintiff provided employees to perform laundry services and an on-site manager for each facility. The plaintiff argued that the services provided by the account manager were nontaxable management services. However, the Commission found that services provided by the account manager were taxable laundry services because the primary purpose of the service contracts were for the client to obtain laundry services, which are taxable in Wisconsin. The account manager’s activities were not isolated but were an integral part of the company’s laundry services. Healthcare Services Group v. Wisconsin Department of Revenue

Federal

Proposed Federal Legislation Would Codify a Physical Presence Nexus Standard: Currently, many states have or are in the process of enacting economic or threshold-based nexus standards, meaning physical presence is not required to establish sales and use tax responsibilities. However, federal legislation has been introduced to the House that would permit states to subject a person or entity to sales and use tax responsibilities only if physical presence has been established. The proposed legislation defines physical presence as well as providing an exclusion for “de minimis” physical presence, which is also defined. If enacted, this legislation would apply to calendar quarters beginning on or after January 1, 2017. Proposed H.R. 5893 – No Regulation Without Representation Act of 2016

For more information or assistance on state and local tax (SALT), call 888-556-0123, email info@honkamp.com or submit our online form.

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