 |
|
|
Tax Tip |
|
1. The 2004 New York State budget included new sales and use tax exemptions for aircraft maintenance purchases. The exemptions became effective on December 1, 2004 and expire on December 1, 2009. With the December 1, 2009 date in mind, you may consider planned aircraft maintenance purchases so that the “still current” rules will apply to the transaction. As a result, you may still be able to purchase aircraft maintenance services and related property without paying a sales/use tax. If the maintenance is performed after November 30th the aircraft maintenance exemption will not likely be available to you. |
|
|
|
|
|
 |
|
Not So “EZ”
On April 15, 2009, New York State made a number of changes to the existing Empire Zone (EZ) Program; one of the most important changes involves “Retention Certificates.”
In order to receive any New York State EZ credits for tax years beginning on or after January 1, 2008 (you read that correctly - 2008!), every eligible business must first obtain a “Retention Certificate” from the Department of Economic Development (Empire State Development or “ESD”). ESD is currently reviewing certifications for existing Empire Zone businesses. New criteria will be applied (e.g. a modified cost benefit test), and those businesses meeting the criteria will be issued Retention Certificates that must be attached to their tax returns. Note that pass-through entities, such as partnerships, S-Corporations, and LLCs should distribute copies of the EZ Retention Certificate to their partners, shareholders, and members, who will also be required to attach the Certificate to their personal return in order to claim EZ credits.
Based on our discussions with Randy Coburn, Director of the Empire Zones Program we understand that:
• If a taxpayer files their return before receiving a Retention Certificate while claiming EZ credits, they will need to amend the return when they receive the Retention Certificate. The Retention Certificate must be attached to the amended return. Otherwise, the credits will be denied, potentially subjecting the taxpayer to a tax assessment as well as underpayment penalty and interest.
• If a taxpayer receives a decertification notice, any claimed EZ credits will be denied (and carryover credits lost), again potentially subjecting the taxpayer to a tax assessment as well as underpayment penalty and interest..
• If a taxpayer has filed for an extension it is highly likely that they will be notified by ESD prior to September 15th whether they are in or out of the Empire Zone Program.
As of press date, Mr. Coburn confirmed that the ESD review process has not been completed, and that Retention Certificates have yet to be distributed. Some preliminary estimates indicate that as many as 1,000 businesses may not be recertified – one in nine businesses in the program. In the meantime, due to the unique circumstances of each taxpayer, the decision to prepare a return with or without credits should be considered carefully. This will minimize the risk that significant work will be required to modify the return once a Certificate or decertification notice is received.
Controversy in Missouri regarding the taxability of “food”
The Director of the Missouri Department of Revenue recently denied sales tax refund requests by Krispy Kreme and American Multi-Cinema for sales of food items that may qualify for the reduced food tax rate. On the heels of the Director’s denials, both companies filed separate appeals with the Administrative Hearing Commission.
The Missouri Office of General Counsel has adopted the point of view that the only “food” that qualifies for the reduced tax rate is food that is actually consumed at home. The relevant statutory authorities include the following:
§ 144.014 RSMo reduces the state sales tax rate from 4.225 percent to 1.225 percent on all retail sales of food. Section 144.014.2, RSMo provides in relevant part: [T]he term “food” shall include only those products and types of food for which food stamps may be redeemed pursuant to the provisions of the Federal Food Stamp Program as contained in 7 U.S.C. Section 2012, as that section now reads or as it may be amended hereafter . . . .
7 USC 2012 - Sec. 2012. Definitions . . . (g) "Food" means (1) any food or food product for home consumption except alcoholic beverages, tobacco, and hot foods or hot food products ready for immediate consumption other than those authorized pursuant to clauses (3), (4), (5), (7), (8), and (9) of this subsection, (2) seeds and plants for use in gardens to produce food for the personal consumption of the eligible household,
It is interesting to note that § 144.014 RSMo was amended to include an additional test for determining when “food” is food. “For the purpose of this section, . . . the term "food" shall not include food or drink sold by any establishment where the gross receipts derived from the sale of food prepared by such establishment for immediate consumption on or off the premises of the establishment constitutes more than eighty percent of the total gross receipts of that establishment, regardless of whether such prepared food is consumed on the premises of that establishment, including, but not limited to, sales of food by any restaurant, fast food restaurant, delicatessen, eating house, or cafe.”
Based on our discussions with the Department, this additional rule was added for the convenience of fast food restaurants so that they could simply charge the higher tax rate on all food sales – acknowledging that at least some of fast food sales qualified for the lower rate. Looking at this another way, if food items sold by a fast food restaurant wouldn’t have qualified for the lower rate simply because they weren’t actually consumed at home, then why would the statutory definition have had to be amended to provided for an 80% rule in the first place?
It may take some time for the Krispy Kreme and American Multi-Cinema cases to be resolved and it is possible that the Director’s decision will be overturned. In the meantime, affected taxpayers may consider filing a protective refund claim of their own.
For more information on this and other state and local tax issues, please contact one of the Tronconi Segarra & Associates’ State & Local Tax Services Team Leaders.
David E. Werth, J.D., CPA, Partner
Andrew J. Toth, CPA, Principal
Thomas E. Mazurek, Jr., CPA, Senior Manager
|
|
|
 |
