Oklahoma Sales Tax on Laundry Services - DOC

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                                       The Tax Gouge
                                                                                  Only a few states currently
                September 2001
                Volume 1, Issue 1
                                           Update- 2001 State                     exempt military pension
                                           Laws Benefiting                        income regardless of disability:
                                                                                  Alabama, Hawaii, Illinois,
                                           Military Taxpayers                     Kansas, Louisiana,
                                                                                  Massachusetts, Michigan,
                                           NEW JERSEY & WISCONSIN                 Mississippi, New Jersey, New
                                           EXEMPT MILITARY PENSIONS               York, and Pennsylvania.
Inside this Issue                          AND SURVIVOR BENEFITS                  Kentucky and Oregon have
                                           FROM STATE INCOME TAX --               special rules. In Wisconsin
        Update - 2001 State Laws
1       for Military Taxpayers - NJ,
        WI, AL, MN
                                           Are you from Jersey? New Jersey
                                           has exempted military pension and
                                                                                  for tax year 2001, there are
                                                                                  special rules. Several states
                                                                                  limit their exemptions to
        2001 State Law Update -
2       IL, CO, OK, CA, MD, IN,
        HI, LA
                                           surviving spouse payments from
                                           state income tax for all retirees
                                           regardless of age (62) or disability
                                                                                  disabled vets. The Retired
                                                                                  Officers Association (TROA)
                                                                                  has an all-states guide at
        Reservists Called to Active
3       Duty - Tax Info
                                           status required under the old law.
                                           The new law is effective 5/7/01
                                           and retroactively to taxable years
                                                                                  http:/www.troa.org/ publication/
                                                                                  taxguide2001/page2.asp. See
                                                                                  Code 16's states tax guide at
        List of Free IRS Pubs
3       available at www.irs.gov
                                           beginning on or after 1/1/01.
                                           Cheeseheads, keep reading. SB 55,
                                                                                  http://www.jag.navy.mil/ documents/
        When Dads Watch the                signed into law as 2001 Wisconsin
4       Kids                               Act 16, includes an elimination of
                                           income tax on military pensions,
                                                                                   MINNESOTA EXEMPTS
                                                                                   ACTIVE DUTY PAY IF
                                                                                   STATIONED OUTSIDE OF
        2001 Tax Act Links -               including payments received by
4       highlights, guides, and
                                           surviving spouses. The exemption
                                           is effective for taxable years
                                                                                   THE STATE --

        Meet the New Tax Wienie            beginning on 1/1/02. Under the          Minnesota citizens, before you
4                                          old law, it was not taxable only if
                                           the retiree was a member of the
                                                                                   reach for the Florida change of
                                                                                   domicile form, read on about
        Tax Credit Bill is Full of         military system as of 31 Dec. 63.       your ex-SEAL governor, Jesse
5       Swine and Bovine Waste
                                           ALABAMA DOR UPHOLDS
                                                                                   Ventura. The "Brain"
                                                                                   (formerly known as "The
                                           FORMER SPOUSE EXEMPTION -               Body" to his wrestling fans),
                                                                                   signed into law an amendment
                                           The Alabama Dept. of Revenue
                                           ruled that the state income tax         that exempts military pay of
                                           exemption for military pensions         Active Duty personnel
                                           applies to former spouses who           stationed outside of Minnesota
                                           receive military retirement pay         by deeming them to be
                                           pursuant to a divorce decree.           nonresidents. It is effective
OJAG Code 16.1, Legal Assistance                                                   for tax years beginning after
Washington Navy Yard                       GOOD WEB GOUGE ON STATE                 31 Dec. 2000, so be sure to
(202) 685-4639                             MIL PENSION EXEMPTIONS --               file a tax return for this year to

                         . . . . . . . . . . . . . . . . . . . . . . .
September 2001

claim a refund and ensure PSD     $1,500 per year for military       Maryland residence.
stops withholding Minnesota       pay (not pension).
income tax. Minnesota joins a                                        INDIANA ISSUES STATE
handful of other states that      HAP PAYMENTS ARE                   TAX GOUGE --
                                  SUBJECT TO STATE TAX
exempt active-duty military                                          See Indiana Department of
                                  IN CALIFORNIA --
pay of its legal residents from                                      Revenue's Info Bulletin No. 27
state income tax: Illinois,       The California State Board of      available at http://www.state.in.us/
Michigan, Montana, Oregon         Equalization has held that         dor/publications/bulletin/income/pdf/
(if earned outside the state;     Homeowners' Assistance             ib27.pdf.
plus up to $3,000 of active       Program payments are
duty pay earned in the state),    includable in state taxable        HAWAII PROFITEERS
Pennsylvania, and Vermont (if     income. No surprise here - the     BEWARE --
earned outside the state).        feds also tax it. The
                                                                     Not a benefit but good to
                                  Homeowners' Assistance
                                                                     know: Hawaii Act 270 makes
WE LOVE VETERANS                  Program was authorized by the
                                                                     it illegal to purchase state tax-
                                  Demonstration Cities and
                                                                     exempt cigarettes from a
                                  Metropolitan Development
When a state tax commentator                                         military outlet and resell them,
                                  Act of 1966, codified at 42
questioned the tax policy                                            effective June 22, 2001.
                                  USC § 3374. The act provides
wisdom of singling out            monetary support for eligible
military personnel for                                               LOUISIANA DOR
                                  federal personnel, military and    PROPOSES RULE TO
favorable treatment and asked     civilian, who are faced with       EXEMPT MILITARY PAY
a state legislator what his tax   losses resulting from the sale     OF NATIVE AMERICANS --
policy was, he responded, "We     of their home due to a drop in
love veterans."                   real estate values because of      The Louisiana Department of
                                  the actual or pending closing      Revenue has proposed a rule
ILLINOIS EXTENDS                  of a military installation. The    that exempts from income tax
INCOME TAX EXCLUSION              Army Corps of Engineers            military compensation paid to
FOR MILITARY PAY TO               administers the program. The       an enrolled member of a
GUARD AND RESERVES --             government reimburses              federally recognized Indian
                                  individuals for part of the loss   tribe if he or she was residing
Giving some love to its           from selling their homes or        on that tribe's reservation upon
guardsmen and military            buys their homes by paying         entering the military and has
reservists, Illinois broadened    off the mortgages.                 maintained it as his domicile.
the state's income tax                                               See LAPA 00-13 for general
exclusion for military pay to     MARYLAND GRANTS                    info on state taxation of
include their pay.                HOMESTEAD EXEMPTION                military compensation of
                                  TO CERTAIN SURVIVING               Native Americans domiciled
COLORADO BILL TO                  SPOUSES --                         in Indian County. BZ to LT
NIXED -- A Colorado state                                            Christopher Mora, JAGC, a
                                  For tax years beginning after
                                                                     citizen of the Chitimacha
Senate Committee killed a bill    June 30, 2001, an unremarried
                                                                     Indian nation in Louisiana,
to exempt military pay from       surviving spouse of a member
its state income tax.                                                whose persistent advocacy for
                                  who dies on active duty is
                                                                     himself and others encouraged
                                  entitled to claim a homestead
OKLAHOMA GRANTS                                                      DOR to issue its proposed
                                  exemption on his or her
SMALL PARTIAL                                                        rule.
Okie, not much help - you
only get an exemption of

  2                . . . . . . . . . . . . . . . . . . . . . . . .
                                                                                           The Tax Gouge

                                    This relief also applies to state    Pub 527 - Residential Rental
Reservists Called                   income taxes. Members must           Property
to Active Duty -                    apply to the IRS (or state) and
                                    satisfy the material effects test.   Pub 529 - Misc. Deductions
Tax Info                            For good gouge on this issue         Pub 544 - Sales and Other
                                    and other SSCRA tax issues,          Dispositions of Assets
-- Reservists called for active     download Army Pub JA 260
duty away from their tax            (SSCRA Guide) available at           Pub 550 - Investment Income
homes may be able to deduct         www.jagcnet.army.mil.                and Expenses
unreimbursed travel expenses                                             Pub 554 - Older Americans'
(including lodging, meals           Free IRS Pubs                        Tax Guide
[special rules], cleaning and
laundry expenses, and related       The IRS has an excellent web         Pub 559 - Survivors,
tips, etc.) provided they keep      site loaded with user-friendly,      Executors, and Administrators
their regular job while on          plain English pubs on every
active duty, return to it after                                          Pub 564 - Mutual Fund
                                    tax topic imaginable. It has a       Distributions
they are released, and pay for      search engine for locating
those expenses at their official    topics of interest. Here is a        Pub 590 - IRA's
military post of duty. To the
                                    partial list of what you can         Pub 596 - Earned Income
extent they exceed BAH and
                                    download at www.irs.gov.             Credit (EIC)
BAS allowances, the expenses
are deductible only as a            Pub 3 is particularly useful for
                                    military-specific tax issues.        Pub 908 - Bankruptcy Tax
miscellaneous itemized                                                   Guide
deduction subject to the 2%         Check it out.
AGI floor. See IRS Form             Pub 1 - Your Rights                  Pub 925 - Passive Activity and
2106; page 11 of IRS Pub 3;                                              At-Risk Rules
and IRS Pub 463.                    Pub 3 - Armed Forces' Tax
                                    Guide                                Pub 926 - Nanny Tax Guide
-- Similar to the rules for                                              Pub 929 - Tax Rules for
regular active duty personnel,      Pub 54 - Tax Guide for U.S.
                                    Citizens and Resident Aliens         Children and Dependents
the cost and upkeep of
reservists' uniforms is             Abroad                               Pub 946 - How to Depreciate
deductible only if they are         Pub 463 - Travel,                    Property
prohibited from wearing the         Entertainment, Gift, and Car
uniforms when off duty. A                                                Pub 968 - Tax Benefits for
                                    Expenses                             Adoptions
deduction allowed under this
test must be reduced by any         Pub 508 - Tax Benefits for           Pub 970 - Tax Benefits for
uniform allowance received,         Work-related Education               Higher Education
and the unreimbursed cost is        Pub 516 - U.S. Government
subject to the 2% adjusted
                                    Civilian Employees Stationed
gross income (AGI) floor for
miscellaneous itemized              Abroad
deductions.                         Pub 519 - U.S. Tax Guide for
-- If reservists owe a tax
deficiency to the IRS before        Pub 521 - Moving Expenses
being called to active duty,        Pub 523 - Selling Your Home
under § 513 of the SSCRA
the IRS must defer payment          Pub 526 - Charitable
without interest if their ability   Contributions
to pay has been materially
impaired by the call-up.

    . . . . . . . . . . . . . . . . . . . . . . . .                                              3
September 2001

When Dads Watch the                                                               MEET THE NEW
                                                                                  TAX WIENIE
                                                                                  In this inaugural TIM of mine,
                                                                                  I hope you have found some
                                                                                  useful information for yourself
                                                                                  and your clients hungry for tax
                                                                                  gouge. For those of you who
                                                                                  don't know me (i.e. most of
                                                                                  you), I am LCDR Keith Brau.
                                                                                  In May 2001, I graduated from
                                                                                  Georgetown's LLM tax
                                                                                  program and assumed the tax
                                                                                  conn from CDR (sel.) Steve
                                                                                  Haycock. I apologize for not
                                                                                  being as funny as the Code
                                                                                  Warrior is. Steve has the
                                                                                  amazing knack for making tax
                                                                                  law hilarious and yet gets his
                                                                                  points across. I got the idea
                                                                                  for using the newsletter format
                                                                                  at B. Dalton's while thumbing
                                                                                  through a copy of "The
                                                                                  Complete Idiot's Guide to
                                                                                  Microsoft Office 97" and saw
                                                                                  stuff on newsletters in the
                                                                                  chapter entitled "Whipping up
                                                                                  Word Documents". As the tax
                                                                                  rep, I have to have a
                                                                                  nickname. LT Sara Park, the
                                                                                  Chief ELF, suggested "Tax
                                        If [a Supreme Court Justice is] in the    Wienie". But I think I'm going
Links re 2001 Tax                       doghouse with the Chief [Justice], he     to go with "Taxmeister" to fit
                                        gets the crud. He gets the tax cases --   my Teutonic sudsy surname.
Act -- highlights,                      Justice Harry Blackmun.                   Please email me with any tax
guides, charts                          Big business never pays a nickel in
                                                                                  questions, suggestions, or
                                                                                  good gouge.
                                        taxes, according to Ralph Nader,
                                        who represents a big consumer             V/r,The Taxmeister,
                                        organization that never pays a nickel
http://www.dtonline.com/TaxGuide2000/   in taxes. -- Dave Barry                   LCDR Keith L. Brau
                                        The IRS has 480 different tax forms,
http://www.ricedelman.com/plannin       plus 280 more to explain how to
g/taxes/new2001taxlaw_4.asp             fill out the first 480. The original
                                        Tax Code had 11,400 words; today it
                                        has 7 million. -- Rep. Sam Johnson,

  4                  . . . . . . . . . . . . . . . . . . . . . . . .
                                                                                                                             The Tax Gouge
Grassley Bill to Add Swine, Bovine Waste to Power Producer Credit **
Finance Committee ranking member Charles E. Grassley, R-Iowa, introduced S. 1219, which would add
manure and other nutrient waste from pigs and cows to the kinds of renewable energy resources eligible for
the electricity production credit.

As reported in "Tax Analyst Today", 2001 TNT 154-3:

                               =============== SUMMARY ===============

Finance Committee ranking member Charles E. Grassley, R-Iowa, introduced S. 1219, which would add manure and
other nutrient waste from pigs and cows to the kinds of renewable energy resources eligible for the electricity
production credit. Also, the bill would amend an Agriculture Department program and guarantee that payments of
up to $100,000 over two years would be made available to farmers "for 'cost sharing' opportunities" related to
implementing this electricity production system, he said.

Even if this tax incentive had been available in the past to beef and pork producers, "they probably wouldn't have
had access to the capital necessary for infrastructure development" of anaerobic digesters or similar systems that
convert manure into power, Grassley said. About 20 dairy and hog farms in 11 states have installed these systems
and have demonstrated that a livestock producer can reduce or eliminate monthly energy purchases from electric and
gas suppliers, he maintained.

                               =============== FULL TEXT ===============


S. 1219. A bill to amend the Internal Revenue Code of 1986 to include swine and bovine waste nutrients as a
renewable energy resource for the renewable electricity production credit, and for other purposes; to the Committee
on Finance.

Mr. GRASSLEY. Mr. President, for years I have worked to decrease our reliance on foreign sources of energy and
accelerate and diversify domestic energy production. I believe public policy ought to promote renewable domestic
production that burns clean energy. For this reason, I will be introducing the Providing Opportunities With Effluent
Renewables, or POWER Act today which cultivates another homegrown resource: swine and bovine waste

Section 45 of the Internal Revenue Code provides a production tax credit for electricity produced from renewable
sources. Currently, the production tax credit is available for wind, closed- loop biomass, and poultry waste. The
POWER Act will modify Section 45 to include swine and bovine waste nutrient as a renewable energy source.
The benefits of swine and bovine waste nutrient as a renewable resource are enormous. Right now, there are at least
20 dairy and hog farms in the United States that use an anaerobic digester or similar systems to convert manure into
electricity. These facilities include swine and/or dairy operations in California, Wisconsin, New York, Connecticut,
Vermont, North Carolina, Pennsylvania, Virginia, Colorado, Minnesota, and my home State of Iowa.

By using animal waste as an energy source, a livestock producer can reduce or eliminate monthly energy purchases
from electric and gas suppliers. In fact, a dairy operation in Minnesota that uses this technology generates enough
electricity to run the entire dairy operation, saving close to $700 a week in electricity costs. This dairy farm also
sells the excess power to their electrical provider, furnishing enough electricity to power 78 homes each month, year

The benefits of using an anaerobic digester do not end at electricity production. Using this technology can reduce
and sometimes nearly eliminate offensive odors from the animal waste. In addition, the process of anaerobic
digestion results in a higher quality fertilizer. The dairy farm I referenced earlier estimates that the fertilizing value

    . . . . . . . . . . . . . . . . . . . . . . . .                                                                                5
September 2001

of the animal waste is increased by 50 percent. Additional environmental benefits include mitigating animal waste's
contribution to air, surface, and groundwater pollution.

With all the problems that this type of opportunity remedies, I'm sure there will be a number of folks wondering why
we haven't tried this before. The reason is, even if we had provided swine and bovine producers with tax incentives
to produce renewable energy, they probably wouldn't have had access to the capital necessary for infrastructure

In fact, there was a segment on National Public Radio last week addressing the topic of anaerobic digester energy
production. A professor from Cal State University who is an expert on anaerobic digesters was interviewed. The
professor explained that the main reason farmers have not pursued this type of opportunity is cost.
For that reason, in addition to the tax credit opportunity I'm providing under section 45, I'm also going to guarantee
within the POWER Act that funds be made available under the Environmental Quality Incentives Program for the
development of anaerobic digesters.

Currently, the Environmental Quality Incentives Program provides funding for technical, educational, and financial
assistance to farmers and ranchers for soil, water, and related natural resource concerns on their land. A component
of the program allows for improvements to farm manure management systems. The POWER Act will guarantee that
payments, up to two years worth of funding which currently amount to $100,000, would be made available to
producers for "cost sharing" opportunities related to anaerobic digester implementation.

Using swine and bovine waste nutrient as an energy source can cultivate profitability while improving
environmental quality. Maximizing farm resources in such a manner may prove essential to remain competitive and
environmentally sustainable in today's livestock market.

In addition, more widespread use of this technology will create jobs related to the design, operation, and
manufacture of energy recovery systems. The development of renewable energy opportunities will help us diminish
our foreign energy dependence while promoting "green energy" production. This tax/farm bill proposal is real "win-
win" situation for America and for our livestock producers.

Using swine and bovine waste nutrient is a perfect example of how the agriculture and energy industries can come
together to develop an environmentally friendly renewable resource. My legislation will foster increased investment
and development in waste to energy technology thereby improving farmer profitability, environmental quality, and
energy productivity and reliability.

Why should we promote swine and bovine waste nutrient as an energy source? Consider the recent electricity
shortage in California, the sky-high prices at the pump throughout last year and the soaring cost of home heating
fuel and natural gas this winter. We have an obligation to consumers across the country to accelerate the nation's
production of homegrown, clean-burning, renewable sources of energy.

The POWER Act is good for agriculture, good for the environment, good for energy consumers, and promotes a
good, make that great, renewable resource that will reduce our energy dependence on foreign fuels. It is my hope
that all of my colleagues join with me to advance this important piece of legislation.

** Special thanks to The Tax Lady (a former Code 16 tax rep) for apprising the Taxmeister of this legislation.

  6                   . . . . . . . . . . . . . . . . . . . . . . . .

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