We are behind a couple of weeks, just think of it as 'spring break'. Still the same here is a little something to tease your appetite for sales tax tips.... The Q&A is courtesy of our friends at Avalara, (the commentary is all me. Murph)
Sales Tax Trivia
Question: As long as you’re not tied down, what lofty mode of “transportation” is tax free in Kansas?
Answer: Hot air balloon. If the balloon is tethered, it’s considered an amusement and admission is taxable. Pilot it up, up and away and fly under the auditor’s radar (no tax strings attached) via air commerce rules.
(As I recall from Oz, the Wizard originally gave 'tethered' balloon rides for a traveling carnival until one day when the tether broke, I guess he was really trying to escape the tax man for all the past due taxes he owed.)
Question: Getting a to-go cup for your coffee is a no-brainer in Colorado. But you’ll have to pay sales tax if you want to top it off with what item?
Answer: Lid. Colorado’s food packaging laws differentiate between “essential” items like cups and containers, which are tax-exempt, and taxable “non-essential” items such as lids, napkins and straws.
(Keeping a 'lid' on tax exemptions is one way that state and local governments insure a revenue stream for their day-to-day operations. Sales tax exemptions with 'caps' on amounts are extremely hard to track on a manual basis.)
Question: Under the Streamlined Sales Tax law, what essential quencher is now classified as a soft drink?
Answer: Bottled water. Under the SST agreement, retailers are required to collect sales tax on bottled drinks that contain “less than 50% of fruit or vegetable juice’ and carbonation is no longer a factor.
(Soft drink manufacturers like Coca Cola generate almost as much in revenues from bottled water sales as they do soda, so why would states and local governments want to give up tax revenues as waters continue to rise in lieu of soda sales.)
Question: Brace yourself for this one: What items that previously took a big bite out of dental insurance premiums are now tax-exempt in Arizona?
Answer: Orthodontic devices. Folks are smiling easier now that lawmakers finally got it straight!
(All those politicians don't want to pay sales taxes to keep their smiles straight, it's hard to keep things in proper alignment when you are busy saying one thing out of one side of their mouth, and something different out of the other side.)
Question: Washington and Colorado certainly weren’t hazy on their intent to levy a hefty 25% tax on what recreational item?
Answer: Marijuana. That’s some “wacky tobaccy” tax law! But we’re guessing you weren’t in the weeds on this one.
(Is that what they mean by 'your tax dollars going up in smoke?)
About Sales Tax
Sales tax provides critical revenue for states. Other than property and income tax, sales tax is the largest source of tax revenue in the majority of the 46 states that collect it. From a government perspective, making sure every sales tax dollar is collected, through audits, fines, penalties rates and rules, is an exercise for income. It’s easy to be lured into a false sense of compliance when it comes to sales tax, this series is intended to insure that you are aware of the key sales tax facts for YOUR state.
Note: For sales tax definitions and essentials check out the opening article to this series.
Manual sales and use tax management is prone to error and consumes staff time in pass-through rather than revenue-generating activities. Avalara provides solutions for sales tax automation, including tax calculation, exemption certificate management, returns processing and 1099 filing and reporting. Automation via Avalara allows businesses to be fully sales tax compliant without sacrificing productivity.