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Multiple states have recently passed or introduced legislation setting guidelines on who is allowed to make contracts with state agencies. States have previously made it clear that their agencies are not allowed to do business with vendors who are not registered to collect and remit sales and use tax in their state. A new trend is emerging in which states are not allowing vendors to do business with their agencies if an affiliate of the vendor is supposed to, but has not registered to collect and remit sales and use tax in their state. Legislation is pending in Georgia and legislation has been passed in California, Connecticut, Illinois, Missouri, North Carolina, and Virginia. (Georgia- HB 1240, 2004; California- SB 1009, 2003; Connecticut- HB 6802, 2003; Illinois- SB 874, 2003; Missouri- HB 600, 2003; North Carolina- HB 1433, 1999; Virginia- Ruling of Commissioner, P.D. 04-4, January 23, 2004.)


Effective July 1, 2004, the sales and use tax rate in Mariposa County, California will be 7.25%, down from 7.75%. Any collections of the MCHA sales or use tax after this date must be returned to the customer or forwarded to the state. Those with contracts specifying the 7.75% should apply the higher rate for property delivered or lease payments received before July 1, 2004 and the 7.25% rate for transactions on or after July 1, 2004. (Special Notice, California State Board of Equalization, May 2004)


As of July 1, 2004, the state sales and use tax rate increases from 6% to 6.25%. However, as part of this approved rate increase, voters also approved a decrease in the local tax rates, therefore leaving the unchanged combined rate of 7.25%. State tax returns and local tax schedules will remain unchanged; changes will only be noticeable if you have sales or purchases that qualify for a partial exemption from sales and use tax. The exemptions include the following: 1) rural investment tax, 2) teleproduction or other post production services, 3) farm equipment and machinery, 4) diesel fuel used in farming activities or food processing, 5) timber harvesting equipment and machinery, and 6) racehorse breeding stock. Therefore, beginning July 1, 2004, the partial tax exemptions will increase from 5% to 5.25%. (Tax Information Bulletin, California State Board of Equalization, June 2004.)


This policy is effective as of January 1, 2004. Any vendor that is offered a contract by California must submit a copy of their seller's permit or certificate of registration. In addition, the vendor must submit the same documentation for any affiliates that make sales into California. The one exception to this policy is that executive directors of the various state departments and agencies can determine that the contract is necessary to meet a 'compelling state interest.' (California Law Sec. 10295.1.)


It is now easier to report use tax in the state of California. A Use Tax line has been added to the California Income Tax Return, allowing taxpayers to report use tax on any purchases made during the tax year on one form rather than having to file a separate use tax return with the Board of Equalization. For more information you may contact the state Board of Equalization's Information Center at 1-800-400-7115 or view the frequently asked questions regarding use tax at (State Board of Equalization, News Release #14-M, March 11, 2004)



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