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Sales Tax Exemption Form

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Sales Tax Exemption Form Powered By Docstoc
					      Arizona
Sales Tax & Use Tax

       Chunyan Pan
       Tax Manager
  Financial Services Office
                              1
    Sales Tax Defined

   Transaction Privilege Tax: tax imposed on
    vendors for the privilege of doing business in
    AZ
   Vendors register as a merchant in AZ and
    have a AZ business license
   AZ vendors usually pass the tax on to the
    customers, but the vendors are ultimately
    liable for the tax (file sales tax return and
    remit the tax to the State)
                                                     2
 Sales Tax Rate

AZ State Tax:
 6.6% for most of the categories

  including
  retail, restaurant, utilities, communic
  ations, job printing publication, and
  lease of personal property.

                                            3
Sales Tax Rate
Pima County excise tax:
 0.5% for most of the classifications
  such as
  retail, restaurant, utilities, communic
  ations, job printing, publication.



                                        4
Sales Tax Rate
Tucson city sales tax
   The University of Arizona DOES NOT charge
    city sales tax to its customers but pays to
    Tucson vendors if charged
   Tax rate is 2% for most of the
    classifications, such as retail, restaurant, job
    printing, publication, lease of personal
    property, and amusement
   4% for utilities and telecommunication

                                                       5
Sales Tax Rate: Summary
For most of the categories:
 State : 6.6%

 Pima County: 0.5%

 State & County Combined: 7.1%

 Tucson City*: 2%

  Applies when the University is a purchaser
  and purchase from a Tucson Vendor
                                           6
Sales Tax Rate:
Transient Lodging
Transient Lodging Classification (Hotel
  Tax*)
 State: 6.5%

 Pima County 0.55%

 Tucson City: 6%

 Total in Tucson: 13.05%

*varies if the hotel is located in different
  state, county and city
                                               7
    Use Tax Defined

   Tax on the use, storage or consumption
    of tangible personal property in AZ
   AZ Purchasers are liable for the use tax
    on goods purchased from an out-of-state
    vendor which did not collect the use tax
    (out-of-state vendor may collect use tax)
   If the sales tax has been paid on the
    purchase, then exempt from use tax

                                                8
    Use Tax Rate

   AZ State use tax rate is generally 6.6%
   Counties generally do not impose use
    tax
   The university is not subject to city use
    tax



                                                9
    Tax at University of Arizona As a
    Purchaser
   The University is NOT an exempt entity for AZ sales and use
    tax purpose

   The University of Arizona generally pays sales tax to the
    vendor or self-assesses use tax on its purchases if the vendor
    does not charge sales tax/use tax

   Specific exemptions may apply if in the AZ State Statutes – on
    a purchase-by-purchase basis

   If there is a sales tax exemption, then a corresponding use tax
    exemption generally also exists



                                                                      10
Nontaxable/Tax-exempt Services

   Professional and personal services
   Repair, maintenance and installation services (if
    charges are separately stated on invoices and
    records)
   Warranty or service contract (if not required to
    purchase with the tangible personal
    property, and is charged separately on an
    invoice)
   Delivery charges (freight or shipping) if
    separately stated on the invoice
   Internet access and cable services
   Conference registration fees
   Professional membership dues                        11
    General Exemptions on Tangible
    Personal Property
   Machinery and equipment used in research and
    development
   Chemicals used in research and development
   Printed and other media materials (available to the
    public) by UA Libraries
   Food for home (human) consumption
   Medically prescribed drugs, equipment or devices
   Purchase for retail
   Others as set forth in statutes such as ARS 42-5061
    or ARS 42-5159
                                                          12
Tax Exemption on Research Equipment
    Research does not include
      (1) social science

      (2) psychology

      (3) computer software development

      (4) non-technological activities or technical services



    Equipment does not include
       (1) expendable materials

       (2) office equipment, furniture and supplies

       (3) hand tools

       (4) janitorial equipment

       (5) licensed motor vehicles

       (6)shops, buildings, depots



      http://www.fso.arizona.edu/fso/deptman/10/1014spec.html
                                                                13
    Tax Exemption on
    Research Equipment (Cont’d )

   Equipment should be used exclusively for
    research
   Dollar amount does not necessarily affect
    the decision
   A repair or replacement part of a tax-
    exempt research equipment is exempt
   Leases and rentals of tax-exempt research
    equipment are exempt
                                                14
   Exemption on Chemicals
   Used in Research

Research does not include
   (1) social science
   (2) psychology
   (3) computer software development
   (4) non-technological activities or technical services
Chemicals cannot be used or consumed in activities such as
packaging, storage or transportation
It is up to the researcher who orders the item to determine
whether it is “chemical”


                                                               15
    Supplies and Materials Used in Research
    – Generally NOT exempt

   If an item does not fit into “equipment
    used in research” or “chemical used in
    research,” it generally DOES NOT qualify
    for tax exemption.




                                               16
     Computer Hardware, Software
     & Services
   Hardware: generally taxable
   Custom software is not taxable
   Pre-written software is taxable, regardless if it is
    CD-Rom or through digital means
   Computer services such as
    analysis, design, repair, support engineering are not
    taxable
   Maintenance and warranty agreement for hardware
    and software: is generally not taxable if it is sold as
    a separate item and the price is stated separately
   Software maintenance agreement for canned
    updates, modification or revisions is taxable           17
       Internet Purchase

   Internet purchases are generally subject to Sales
    Tax or Use Tax

   Some companies charge sales tax on their online
    sales

   Other companies do not charge sales tax leaving
    the liability of use tax on the purchaser

                                                        18
         Apply for Tax Exemption
         with the Vendor
   Vendors usually charge sales tax on tangible personal
    property in absence of a Sales Tax Exemption
    Certificate
   The Tax Exemption Certificate should provide the
    University‟s Federal Tax ID (74-2652689), AZ Sales
    Tax License Number (20221243), and the reason for
    exemption
   The Tax Exemption Certificate for a P-card purchase
    must be signed by the individual at the Department
    who authorizes the purchase
   Tax exemption certificate is located on eForms:
    http://uabis.arizona.edu/eforms/Launcher.asp?FormID=172
                                                              19
   Tax
Exemption
Certificate




              20
   Tax
Exemption
Certificate




              21
    Apply Exemption on Use Tax
   When an out-of-state vendor is registered to collect use
    tax, provide the Sales Tax Exemption Certificate to
    claim exemption on use tax with the vendor.
   If the vendor does not charge any sales or use
    tax, document the reason for the use tax exemption and
    keep in file (can use Sales Tax Exemption Certificate or
    memo)
   Reconcilers must check the „service/tax exempt‟ box in
    PaymentNet to avoid paying Use Tax


                                                               22
Tax at University of Arizona As
a Seller
   Department „s responsibility (1) identify
    the taxable sales, collecting the sales and
    tax revenues and depositing the revenues
    to the University accounts; (2) maintain
    detailed records of sales activities.
   FSO „s responsibility: prepare Sales Tax
    return and remit the tax receipts to the
    State of Arizona
Common Tax Exemptions on
Sales
    Professional or Personal Services
    Sales to vendors for resale
    Freight or shipping if separately stated on the invoice
    Sales to a non-resident for use outside Arizona when the retail
    item is shipped or delivered the outside Arizona.
    Textbooks required for course work sold by bookstore
    Sales or renting to nonprofit or state-operated hospitals and
     healthcare facilities (must have an Exemption Letter issued by AZ
     department of revenue)
    A certain food sales, including vending machine food, student meal
     tickets and patient food
    Others as set forth in ARS 42-5061 or ARS 42-5159
Special Case: Retail Sales to Out-of-State
Customers

        If an order is called in by an out-of-state
         purchase and delivered directly to the out-of-
         state address, the sales are tax-exempt: must
         maintain the proper shipping documentation

        If the out-of-state customer picks up the
         merchandise in AZ, sales are taxable unless the
         purchaser has proof of out-of-state residence and
         the merchandise is shipped out of State for use
         out of State. The department must maintain
         appropriate exemption certificate provided by
         the purchaser.
Publications
   If the item (e.g. newspapers, magazines,
    journals) is published in AZ, the publisher is
    liable for sales tax even the customer subscribe
    from out-of-state

   Books are under retail category so sales tax is
    exempt on out-of-state sales



                                                       26
Special Case:
Sales to Federal Government

   Retail sales are taxable at one-half of the
    regular tax rate (3.55%).
   Exempt on products sold directly to the
    US government as a manufacturer,
    modifier, assembler or repairer of such
    products
Resources:
   http://www.fso.arizona.edu/Tax/
     AZ Sales and Use Tax




                                      28
Contact Information
   For assistance to determine the taxability
    of a purchase/sales:
    Chunyan Pan, Tax Compliance 621-1957

   For assistance to record the
    purchase, sales and related tax; correction
    of use tax:
    Fred Pearson, Financial Management 621-
    6748
                                              29
Questions?




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