All for one, one for all. Iowa has a sales tax exclusion for “Computers used in processing or storage of data or information by an insurance company, financial institution, or commercial enterprise.” But what is a computer anymore, now that everything has a computer in it?
Last week Iowa released a ruling (Document 15300028) holding that Principal Financial Group’s all-in-one devices count as computers and are exempt from sales tax. From the ruling:
The protest was filed due to the Department’s partial denial of a refund claim which involved, among other issues, several multi-function devices which provide copy, print, scan, and fax services. Your position is that because the multi-function devices are connected to your company’s computers and used in the manner described that these devices qualify as exempt computer peripheral equipment under Iowa’s statutes and administrative code…
Rule IAC 701—18.58(1), which was written, in part, to implement that code section, defines computers as the following:
…stored program processing equipment and all devices fastened to it by means of signal cables or any communication medium that serves the function of a signal cable. Nonexclusive examples of devices fastened by a signal cable or other communication medium are terminals, printers, display units, card readers, tape readers, document sorters, optical readers, and card or tape punchers.
The Department of Revenue had argued that copiers and fax machines don’t qualify, and these functions disqualified the multi-function devices. Principal brought its considerable in-house tax expertise to bear:
However, since the filing date of the protest, you have provided the auditor with the “click count” information for each individual multi-function device included in the refund claim. This documentation verifies that each unit individually qualifies for exemption because the majority of the usage for each of the devices is for exempt printing and scanning.
Attached to the protest as Exhibit B was a summary schedule in which you determined that 96.67% of the usage of the devices was for exempt purposes. This percentage was utilized by Principal to determine the amount of tax under protest ($145,134.80). However, because each device qualified for exemption, the purchase prices of these units are fully exempt from Iowa sales tax. Therefore, the Department will refund 100% of the sales tax paid on the purchases of these devices.
So after a struggle, the Department settles on the right legal answer. The policy answer is only half-right, though. All business inputs should be exempt from sales tax, regardless of whether they are hooked up to a computer.
I rarely fax or copy anything anymore, and I think that this is true nowadays for most businesses. It could say something about how they do things at the Iowa Department of Revenue that they assumed otherwise. In any case, this ruling tells us that fax and copy capability doesn’t make an otherwise exempt scanner/printer subject to sales tax for an Iowa business.
Megan McArdle discusses presidential candidate Scott Walker’s Obamacare replacement (my emphasis):
In this debate, you can see the shape of where our politics may go over the next 20 years. Many Republicans would like a much smaller entitlement state; some Democrats would like a much bigger one, with Sweden-style universal coverage of virtually everything, crib to grave. Neither one is going to get what they want, because Americans are not prepared to give up their Social Security checks, or 60 percent of their paychecks either — and no, there is not enough money to fund these ambitions, or even our existing entitlements, by simply taxing “the rich.”
The discussion is becoming more urgent, as Obamacare as it stands is not working well; the big premium increases and the struggles of the “cooperatives” us that. It could be harder to fix the health insurance market than it was to wreck it in the first place.
Robert D. Flach brings the Tuesday Buzz on Wednesday, covering the tax blog ground from property taxes to the Get Transcript data breach.
Section 72 clearly mandates that annuity income is ordinary income, rather than capital gains. Thus, it is immaterial whether, as the taxpayer asserted, the annuity generated most of its income in the form of capital gains. Because once the annuity distributed the cash generated from those capital gains on to the taxpayer, the tax law required it to be treated as ordinary income.
Paul Neiffer, Highway Use Tax Return Due August 31, 2015
Jim Maule, More Tax Fraud in the People’s Court. “It was an attempt to change a non-deductible cost of a boat into a business deduction.”
Republican Sen. Tom Kean, Jr. this week renewed a push for his bill that would provide a tax break for so-called A-list performers in the Garden State.
Not every problem is a tax problem. Especially this one.
TaxProf, The IRS Scandal, Day 832.
David Brunori, Retroactive Tax Laws Are Just Wrong (Tax Analysts Blog):
There are two fundamental problems with changing the rules retroactively. First, it is patently unfair. People who follow the rules should not be penalized later. We would never stand for it in the criminal context. Why should we accept it for taxes? Second, retroactively changing the rules undermines confidence in the tax system. Most people try to do the right thing. Often they spend a lot of money paying lawyers and accountants to guide them to the right result. The good taxpayers might not be diligent in following the rules if those rules might change.
It’s harder to justify spending money on tax compliance when it doesn’t do any good.
Howard Gleckman, New Rules Will Require States to Be More Transparent About Tax Subsidies (TaxVox): “While local governments have complained that the new rules will be complicated and burdensome, it is frankly a scandal that governments have been able to keep these subsidies under wraps for so long.”
News from the Profession. Only 20% of Companies Using Creative Accounting to Its Full Potential (Caleb Newquist, Going Concern). “…it’s not technically fraud”