STATE AND LOCAL TAXATION a. . Client maintains a website, theme being lifestyles
ID: 2459919 • Letter: S
Question
STATE AND LOCAL TAXATION
a. . Client maintains a website, theme being lifestyles for individuals (an information center on recreation, quality of life, dining, theatre, etc.)
b. Client's customer base are restaurants, playhouses. etc. The service they provide to their clientele is advertising via the internet.
1. Question: Client files income tax returns in the following states: CA, DC, IL, NY. Is the gross revenue reported on income tax returns for each state subject to sales tax in the respective state? Explain in detail for any two of the states.
Explanation / Answer
Washington, D.C. Yes it is required. In addition to federal income taxes, taxpayers in the nation’s capital pay local taxes to the District of Columbia. These include a district income tax, with rates ranging from 4% to 8.95%, a 5.75% sales tax, and property taxes on real estate. Any person who lived in the District of Columbia for at least 183 days during the course of the year must file a D.C. tax return (if he or she was required to file a federal tax return). The D.C. income tax consists of four tax brackets, with rates from 4% to 8.95% D.C. income tax rates apply to taxable income. This is derived from federal adjusted gross income (AGI), which includes salaries, wages, interest, dividends, capital gains (described in further detail below), rental income and royalties. However, a number of adjustments can be made to that total to reduce taxable income, as can deductions and exemptions. Sales Tax The general sales tax rate in Washington, D.C. is 5.75%. This is collected by retailers and vendors, and charged to consumers. It applies to most goods (also called “tangible personal property”) and some services California Every retailer engaged in business in this state has sales tax nexus. A retailer engaged in business is defined as any retailer that has substantial nexus with this state for purposes of the commerce clause of the United States Constitution or any retailer upon whom federal law permits this state to impose a use tax collection duty. If you are a “qualified purchaser,” you must pay your use tax due by filing your return for the previous calendar year Retail sales of tangible personal property in California are generally subject to sales tax. Examples of tangible personal property include such items as furniture, giftware, toys, antiques, clothing, and so forth. In addition, some service and labor costs are subject to sales tax if they result in the creation of tangible personal property. The tax rate for sales and use taxes is the same. In some instances, retailers must pay use tax, rather than sales tax, to the BOE. The most common example of a purchase subject to the use tax is a purchase of an item for use in California from an out-of-state retailer. Out-of-state retailers who are engaged in business in this state are required to collect the use tax, whenever applicable, from the consumer at the time of making the sale.
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