Tuesday, August 30, 2011

Enterprise Zones

Something horrible happened here

Most states have economically depressed areas, usually urban but sometimes rural.  Politicians want to encourage businesses to locate in those areas (more jobs, more votes).  So they offer sales and use tax exemptions as incentives.  They also often offer non-sales tax incentives, like income tax and property taxes.  But I think I'll just talk about the sales and use tax piece, if you don't mind.  Enterprise zone is the generic name for this exemption, and most states call it by some variation of that term.

Interestingly, this is about the only exemption that is based on where an item is purchased, sold, or used.


The incentives usually include some mix of the following exemptions, depending on the state:

No sales and use taxes on purchases of building materials used inside an enterprise zone.

No sales and use taxes on any purchases to be shipped to and used in the enterprise zone.

No sales taxes on items sold in the enterprise zone by a business in the zone.

There are usually some mix of the following restrictions, depending on the state:

Companies receiving the exemptions have to meet employment and/or investment targets.

Companies can't simply move from one part of the state to the enterprise zone, causing growth in the enterprise zone and loss in the former location of the business.

The seller AND the buyer have to be located in enterprise zones, but not necessarily the same one.

Companies have to register with and get prior certification from the economic development agency du jour.

The exemption is available for local taxes only.

The sales may not be exempt.  But the company can apply for a refund or credit.

Zones have expiration dates.

The certifications of businesses in the zones have expiration dates.

Some states have a variety of different types of zones with different rules.  For example, Pennsylvania has: Keystone Opportunity Zones, Keystone Opportunity Expansion Zones, Keystone Improvement Zones and First Class City Improvement Zones.  Sheesh.

Why I hate Enterprise Zones (warning, you're entering the "editorial zone")

Let's see:

1.  Politicians want private companies to do something, like set up businesses in blighted areas.

2.  So they write tax exemptions encouraging that.

3.  But they want to make sure those sneaky businesses don't make TOO much money in tax savings, nor abuse the exemption.

4.  So they add nuttier and more complicated restrictions into the rules.  Notice that I wound up listing a whole lot more restrictions above then actual exemptions.

5.  Politicians also appear to be too lazy to just update the rules for a zone.  They have to write new ones piling on the old ones (see Pennsylvania above).  

6.  Businesses that might move into the area look at the rules, sigh, and say, "never mind."  Therefore these enterprise zones don't accomplish what the politicians wanted and promised.

What  you should do

Check to see if your company, or any of your vendors or customers, are already located in an enterprise zone.  In other words, are there exemptions available to you that you weren't aware of?

Factor any tax exemptions into your expansion plans.

Make sure you understand the rules clearly before taking action.

Get a professional to assist with this if the rules are as complicated in your state as I've implied.

Get a professional anyway.  If you're making business decisions based on some system a politician has set up, you want to make sure you do it right.



The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details we haven't discussed, and every state is different.  Here's more information

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Monday, August 29, 2011

Got an iPad?

Firewhip II've just tested it on our last webinar and it truly works...kind of.  You can download the gotomeeting app and join our webinars.  The screen looks nice and it seems to be pretty fast.  There is ONE problem though.  And it's a biggy.  There's no chat function that's available on the regular clients.  Which means you can't text in your questions.

This isn't the end of the world since I do invite voice questions at the end of the webinar so that folks who haven't been able to chat can ask questions (eg. people who phone in and follow along on the paper copy of the handouts).

So if the iPad, with its limitations, works for you, huzzah!  

Yes, I've been spending too much time at our local renaissance fair recently.

Oh, one more thing.  I haven't heard of an Android version yet.




The Sales Tax Guy
http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
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Wednesday, August 17, 2011

Felony Watch: Links to Stories About People Doing Bad Things

Felony, anyone?Some relatively recent news items about sales tax evil-doers

Gadsden AL businessman charged with sales tax evasion  myfoxal.com

Bronx County Restaurateur Faces Felony Tax Charges Failed to Remit over $500,000 in Sales Tax to State and City readme.readmedia.com


3 North Georgia Business Owners Indicted for Tax Theft newschannel9.com

Former Loris SC councilman, wife face sales tax charges thesunnews.com

Liquor store owner charged with $380k sales tax evasion NY midhudsonnews.com

Rye Man Accused Of Stealing $380K In Sales Tax NY northcountrygazette.org

Brooklyn Park business loses sales tax permit MN hometownsource.com

Ex-Anderson Mayor Rex Lynch arraigned on felony charges TN knoxnews.com

Miller’s Essenplatz’s owner convicted of not paying sales tax NewarkAdvocate.com

Former North Naples restaurant owner accused of stealing $67,000 in sales taxes naplesnews.com

Aurora IL gas station owner charged with sales tax fraud couriernews.suntimes.com

Bronx Businessman (Truck Rental) Failed To Pay $400K In Sales Tax northcountrygazette.org

Lake Elmo man faces 9 counts of tax evasion MN startribune.com

Pasco café owner accused of failing to pay sales tax (WA) tbo.com

Coraopolis car dealer faces charges (PA) timesonline.com

Guilty plea entered in theft of sales taxes (used car dealer) buffalonews.com

Norwalk CT Businessman Accused Of Stealing More Than $15,000 In State Sales Tax (liquor/convenience store) Courant.com

Ocala car dealer arrested on tax charges ocala.com

Tax Lien Forces Kushi (restaurant) To Shutter With Hopes To Reopen Wednesday DC
dc.eater.com

Local Auctioneer Serving 90-Day Jail Sentence (SD) yankton.net

Tri-Cities WA Home Builder Charged With Tax Fraud keprtv.com

Omaha guy mulls moving company but may owe a LOT of taxes to Nebraska due to playing games with vehicles - allegedly omaha.com



The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only. Research these issues thoroughly before making decisions. Remember: there are details we haven't discussed, and every state is different. Here's more information

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Don't forget our upcoming seminars and webinars.
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Wednesday, August 10, 2011

Sales Tax Poetry

Clippers Gone WildCollect sales tax, you kept?
Beware the tax man, he'll catch you.
Orange suits will look nice.

Now, you're all supposed to snap your fingers and say, "Cool, man. Cool."

This was published for fun in the latest issue of e-AP News Trust me, there are no anthologies coming.


The Sales Tax Guy
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Tuesday, August 02, 2011

Editorial: What's the point of a sales tax holiday?

Beaver House
Warning - I have absolutely no real facts to back me up, merely surmises, my own experiences and assumptions.  But I'll bet I'm right.  This is just pretty much a rave-out.

Seems to me that most retailers really don't get much benefit from sales tax holidays.  They have to stock up for that one particular weekend in August.  They have to reprogram their POS systems. They probably have to staff up as well.  They may even pay their staff overtime if they happen to be paying attention to wage and hour laws (which is a big "if").  They'll get in arguments with customers about whether or not this particular school supply qualifies for the exemption.  Is it a purse?  Or is it a school bag?  And then they see a slide in their sales for the non-holiday weeks surrounding that one particular weekend in August.

In other words, do retailers see any long term, increase in profits?  I'll betcha they don't. 

But there are two situations where holidays can benefit retailers.

1.  If they're on the border with another state that doesn't have a sales tax holiday, then they can steal business from that other state.  I wonder though, if the retailers would be so enthusiastic if they had to enclose a flyer with each purchase advising the customer that when they return back to their state, they will owe use  tax on their purchase to their state.  In other words, legally, it's pointless to go to another state to take advantage of a sales tax holiday and then use those clothes in your state.  You know, use tax?

I always find it funny that politicians know that they're stealing business from the other state, even use that as a justification for the holiday, but still whine about losing tax revenue from Amazon's failure to collect taxes.  Isn't this kind of the same thing?  They're creating a system where the buyers are failing to pay the required use taxes in their home states.

2.  I can see, from a marketing perspective, that having a sales tax holiday is a great way to build enthusiasm, a festive atmosphere and maybe a buying frenzy.  But can't the retailers just buy some balloons and have a "storewide sale?"  Essentially, by making it a sales tax holiday, ALL of the taxpayers in the state are paying the marketing costs of the retailers.  Doesn't seem fair.

There is one group that definitely and always benefits from a sales tax holiday - politicians.  An example:

I live in Illinois, who, up until last year, never had a sales tax holiday (at least in my memory).  Then, in the midst of a massive and spectacular budget crisis (I've heard we are now the most broke state in the Union), we have a sales tax holiday.  Which is just going to mean a bigger budget crisis.  Why did we have one?  Well, let's just say that our beloved governor was running for reelection and it was a tight race.  Need I say more?

I guess I will.  Politicians love to pat themselves on the back about sales tax holidays.  But the holidays cost the state tax revenue, probably don't help the retailers, and steal business from other states without really benefiting the customers, who then owe use taxes in their states.  

Cynical?  Yep.  Correct?  I'll betcha.  What do I think of politicians?  Not much.

Enjoy your sales tax holiday, if you live in or near one of these states




The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details we haven't discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.