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On December 16, 2014, President Barack Obama signed the Consolidated and Further Continuing Appropriations Act, 2015, for sales and use tax purposes. The Act includes a provision that extends the Internet Tax Freedom Act (ITFA) until October 1, 2015 with all provisions unchanged.


On January 9, 2015, the House of Representative introduced a bill (un-numbered) that would permanently extend the ITFA, banning states and local jurisdictions from imposing any new tax on internet access. The proposed bill removes the current effective dates of November 1, 2003 through October 1, 2015 and changes the effective date to be effective for new taxes imposed after the date of the enactment.  It is not clear if states that have been grandfathered under the existing provision could retain their current tax on internet access but it appears that may be the case.  No formal legislation has been introduced that would incorporate the Marketplace Fairness Act into this bill. The bill is sponsored by House Judiciary Committee Chairman Bob Goodlatte, among others.


For our previous news item on this topic, see Internet Tax Freedom Act is Extended Through December 11, 2014.


For an update on this news item, see Internet Tax Freedom Act Extended Until December 11, 2015.


(Consolidated and Further Continuing Appropriations Act, 2015; H.R. 235)


President Barack Obama has signed federal legislation extending the Internet Tax Freedom Act (ITFA) through December 11, 2014 as part of the joint resolution which made continuing appropriations for fiscal year 2015. The ITFA was previously set to expire on November 1, 2014. The ITFA bars state and local governments from imposing multiple or discriminatory taxes on electronic commerce and taxes on Internet access.


For an update to this news item, see Internet Tax Freedom Act Extended Until October 1, 2015, Permanent Extension Introduced.


(P.L. 113-164 (H.J. Res. 124), 113th Congress, 2nd Session, Laws 2014)


The Streamlined Sales and Use Tax (SST) Governing Board has  issued a best practices matrix which provides answers to whether the state follows the best practices set forth in the SST Agreement regarding deal-of-the-day vouchers. All SST Member states are to complete and publish their position on the best practices.  The matrix outlines if the “best practiceas approved by the Streamlined Sales Tax Governing Board (SSTGB) for each of the products, procedures, services, or transactions identified in the chartis followed by the specific state. The following best practice descriptions are listed in the matrix along with whether the state follows the best practice:


1.       The member state administers the difference between the value of a voucher allowed by the seller and the amount the purchaser paid for the voucher as a discount that is not included in the sales price (i.e., same treatment as a seller’s in-store coupon), provided the seller is not reimbursed by a third party, in money or otherwise, for some or all of that difference.

2.       The member state provides that when the discount on a voucher will be fully reimbursed by a third party the seller is to use the face value of the voucher (i.e., same as the treatment of a manufacturer's coupon) and not the price paid by the purchaser as the measure (sales price) that is subject to tax.

3.       The member state provides that costs and expenses of the seller are not deductible from the sales price and are included in the measure (sales price) that is subject to tax. Further, reductions in the amount of consideration received by the seller from the third party that issued, marketed, or distributed the vouchers, such as advertising or marketing expenses, are costs or expenses of the seller.


Unless otherwise listed below, the SST member states have published the Best Practices Matrix and follow the three best practices listed above.


The following SST member states have issued the matrix but don’t follow some or all of the best practices listed above as of April 2014: Georgia, Kansas, Nebraska, New Jersey, and Ohio.


The following SST member states have not yet issued the matrix as of April 2014: Tennessee, Utah, Vermont, and Wyoming.  Copies of the matrix can be found on each specific state information page on the SST Web page at


Representative Lamar Smith (Republican, Texas) has introduced a bill to bar multiple taxes on digital goods and services.  Smith had proposed an earlier bill which failed to pass.  This bill is a revised version of the earlier bill. The proposed bill – called the Digital Goods and Services Tax Fairness Act of 2013 – would only allow a state to tax sales of digital goods and services to customers with a tax address within that state. Additionally, states would be barred from imposing multiple taxes on digital goods. The bill defines digital goods as sounds, images, data and facts maintained in digital form. Internet access service is not included as a digital good in the bill. (H.R. 3724)


A Kentucky court ruling was upheld that denied a manufacturer refunds of sales and use tax and utilities gross receipts license tax that the manufacturer sought based on energy-related partial exemptions.  The exemptions were the partial exemption from sales and use tax for the consumption of energy used in in the course of manufacturing, processing, mining or refining, and any related transportation services to the extent that the energy cost exceeds 3% of the production cost; and the partial exemption from utilities gross receipts license tax, involving the exclusion from gross receipts of amounts received for furnishing energy used in the course of manufacturing, processing, mining or refining, to the extent that the energy cost exceeds 3% of the production cost.  The Board of Appeals analyzed similar exemptions for sales and use tax.  The manufacturer of aluminum billets restructured and created a wholly-owned subsidiary, the purpose of which was to speculate, hedge, purchase, and own raw aluminum to make billets.  The manufacturer transferred all raw aluminum to the subsidiary and entered into a tolling agreement with the subsidiary in which the manufacturer processed the aluminum into billets for a fee.  The manufacturer claimed that it was a toller and was therefore entitled to exclude the cost of aluminum from production costs for the purposes of the exemptions.  For the purposes of the exemptions, cost of production is computed on the basis of plant facilities, defined as all permanent structures affixed to real property at one location.  The board of appeals found that because the manufacturer and subsidiary operations constituted one plant facility, the manufacturer could not allocate the cost of aluminum to the subsidiary for speculating/hedging as well as allocate the cost of aluminum to the subsidiary for purposes of calculating the cost of production for the exemptions.  The manufacturer failed to demonstrate that the two operations were truly separate and distinct or that the manufacturer was not dependent on the subsidiary for the production of the billets.  The board of appeals found that there was only one operation at the plant facility.  The raw aluminum had to be included in the cost of production calculation, despite the subsidiary owning it, because the aluminum was associated with and necessary for the plant operation for which the manufacturer sought the exemption. Therefore, the energy costs did not exceed 3% of the production costs.  (Ohio Valley Aluminum Company, LLC v. Finance and Administration Cabinet, Kentucky Board of Tax Appeals, File Nos. K-10-R-35 and K-10-R-36 (Order No. K-22086), May 22, 2012)



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