university of washington. basic tax refresher quiz is the uw exempt from all wa sales/use tax? what...
TRANSCRIPT
Basic Tax RefresherQuiz
Is the UW exempt from all WA sales/use tax?
What is the first question to ask when determining whether something is subject to sales or use tax?
Tangible piece of property OR pure service?
Which of the above is taxable, generally?
Tangible piece of property
Basic Tax RefresherQuiz (con’t)
When is a service considered taxable?
When it is associated with a piece of tangible property
Is a warranty or maintenance agreement taxable?
Yes, both are taxable.
When is shipping considered taxable?
Pure shipping without purchase of taxable tangible property, not taxable.
Otherwise, taxable.
Basic Tax RefresherName ONE sales/use tax exemption people at
the UW can take when making purchases.
Reseller’s permit Machinery and EquipmentHigh tech deferralNot brought into Washington
Basic Tax RefresherWhat is destination based sales tax?
Tax rate charged is that of the location of delivery
What are object codes used for?
Does the object code determine the taxability of the item?
NO! Taxability is based on the underlying item being purchased.
Taxation of digital goodsLaw was put in place July 26, 2009
Washington at forefront of taxation of digital products
Includes digital goods and digital automated servicesDigital Good: sounds, images, data, facts, or information, or
any combination thereof, transferred electronicallyDigital Automated Service: any service transferred
electronically that uses one or more software applications
Digital products are generally subject to sales or use taxUser’s right of use can be permanent or less than permanentMay be a subscription
Examples of digital goodsDigital audio works
MusicAudio books
Digital audio visual worksMoviesMusic videos
Digital booksBut, not newspapers, chat rooms or weblogs
Items that you would have traditionally received in tangible form, but are now electronic
What isn’t a digital good
Telecommunications services (may still be taxable)
Computer softwareInternet and internet accessProfessional and personal services,
represented in electronic formInvolves the application of human effortHuman effort originated after the customer
requested the service
Digital automated services (DAS)Examples:Online searchable database
Information service using software to transfer news, other information
Online data gathering serviceService that searches the internet to identify,
gather, and categorize digital documentsOnline gaming service
Games played against others onlineOnline rental facilitation
Eg. Apartment rental
What isn’t a DASServices that require primarily human effort
by the sellerPrimarily (more than 50%) human effort
involved Contract with company to build website (not
taxable) But, purchase website template (taxable as DAS)
Live presentations via the internet where discussion takes place in real time, not taxable
Recorded presentations, taxable
Digital codesCodes that give the purchaser the right to obtain digital products
E.g. code to download software
Does not include a code that represents a stored monetary value, a redeemable card, gift card, or gift certificate
Can be delivered by different meansEmail, soft drink bottle cap, etc.
If code provides access to traditionally taxable (e.g. software license) & nontaxable items (e.g. live webinar to train how to use software), then if the seller itemizes the taxable & nontaxable items separately, each could be taxed accordinglyIf not itemized, entire purchase price for code would be taxable
ExclusionsOnline education programsLive presentations
Seminars Participants can ask real time questionsDoesn’t include a pre-recorded webinarDoesn’t include online training courses if not
liveStorage, web hosting and back-up
Security, firewalls, web filtering are not included
General Sales Tax ExemptionsResale
Component of a new productMade available free to general publicReceived for free by end userSales to internal departmentsMachinery & equipment used in research &
development
What should I remember?Even if it is delivered digitally, it might be
taxable
If you have it made specifically for you, it’s probably not taxable
If you and the rest of the world can buy it, it probably is taxable
Internet access and web hosting are not taxable
Computers - HardwareHardware is taxable
Includes sales, leases, rentals, licenses to use and any other transfer of possession
Sales tax also applies to all charges for the repair, maintenance, alteration, or modification of hardware, software, or equipment
Computers - SoftwarePrewritten software is taxable
Includes keys, or codes to access the softwareIncludes right to access software where possession is
maintained by the seller or third party regardless of how the payment is structured
Prewritten software maintenance agreementsAgreement may include professional service components
All taxable if part of the same agreement Professional services taxed as professional services if broken
out
Customized software is generally not taxable
Medical mattersExempt items
Prescription drugs used in diagnosis, cure, mitigation, treatment, or prevention of disease in humans
Includes prescription lensesIncludes items/substances used in treating
patients Needles, tubing, bag when used to deliver
prescription drugs Diagnostic substances and reagents, including
prepared slides, tubes that contain diagnostic substances and reagents
Stands for intravenous bags, plain glass slides, not included
Same items are NOT exempt when used in research
More medical itemsProsthetic devices are exempt
Artificial substitutes that replace missing parts of the human body
Includes dental prosthetic devices “Orthotic devices” are not exempt, but may qualify
as a prosthetic Designed to activate or supplement a weakened or
atrophied limb or functionBraces, collars, casts, splintsCan be temporary or permanent
Prosthetic/Orthotic devices do not include:Wheelchairs, crutches, walkers, canes (taxable)
Value Added Tax (VAT)A tax on the purchase of a good or service
Usually seen in the European Union, but also in Asia
Generally between 15% - 25%
Can try to get a refund at the airport
Best option is to buy it through the internet when you get back
MiscellaneousServices to publish materials
Taxable if services provided in WAIncludes copying (Kinkos)
Payment processing service (Paypal)Not taxable
Data warehousing services Server space to store dataNot taxable
More MiscellaneousI paid 7.3% sales tax in Arizona. I don’t have to pay
use tax in Washington, do I? Well, yes actually you do.
That’s not fair! What can I do?Retail sales of tangible personal property to
nonresidents temporarily within Arizona, for use outside of Arizona, are exempt from transaction privilege tax if the seller ships or delivers the tangible personal property out of Arizona.
Generally applicable in most states. Confirm you are not resident and will use the item out of state.
Confirm treatment with seller!
Misc ContinuedAmazon didn’t charge sales tax on my last
purchase. I don’t have to pay use tax, do I? Yes, you do have to pay use tax. Third party
sellers sometimes do not charge sales tax, so if the item is taxable, use tax is due.
Does the University of Washington pay Business and Occupation (B&O) tax? No, the UW is statutorily exempt from B & O tax.
What is a UBI?A Unified Business Identifier. The UW has one for
all its operations.
Is that it?Yep, it’s that easy. To sum up:
If you don’t pay sales tax, you probably owe use tax, unless there is a specific exemption.
If you pay sales tax someplace else, you probably shouldn’t have and you likely still have to pay use tax in WA.
Even if you can’t touch it, it might be taxable. (digital goods)
Object codes don’t drive taxability, the law does.What do I do if I can’t figure it out? Email or
call the Tax Office!
Resources
[email protected]://f2.washington.edu/fm/tax/homehttp://f2.washington.edu/fm/tax/taxabilityhttp://dor.wa.gov/Content/Home/Default.aspxhttp://apps.leg.wa.gov/rcw/default.aspx?cite=
82.08http://apps.leg.wa.gov/wac/default.aspx?cite=
458-20