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Wednesday, November 25, 2020 | History

2 edition of Sales tax exemptions -- the erosion of the tax base found in the catalog.

Sales tax exemptions -- the erosion of the tax base

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Published by College of Commerce and Business Administration, Bureau of Economic and Business Research, University of Illinois at Urbana-Champaign in [Urbana, Ill.] .
Written in English


About the Edition

The basic philosophy of a sales tax is that it should be a general levy on consumption expenditures. The early state sales taxes provided general coverage of commodity purchases, but they included many nonconsumption transactions, and they excluded services. There has been a limited trend over the years to add some services. But the major trend has been toward erosion of the base. Part of the trend, and particularly the exemption of industrial and farm machinery and equipment, can be defended on the grounds that these changes bring the taxes more in line with the basic philosophy of the sales tax. But the major form of erosion has been the steady increases in the exemption of consumption purchases, particularly food (once rare, now found in a majority of states), medicines, household fuel, other items, and sales to various nonprofit organizations. Most of these exemptions have been pushed by groups seeking to lessen regressivity of the tax -- but most do so in a fashion objectionable in many respects, compared to alternatives. Virtually all exemptions complicate the operation of the taxes. Legislatures have not been at all careful in establishing the exact form of exemptions in such a fashion as to minimize operational difficulties. There are two major lessons from experience: one exemption breeds another, and exemptions, once provided, are very difficult to remove. Despite the erosion, most of the taxes do remain relatively broad in scope.

Edition Notes

StatementJohn F. Due
SeriesBEBR faculty working paper -- no. 868, BEBR faculty working paper -- no. 868.
ContributionsUniversity of Illinois at Urbana-Champaign. College of Commerce and Business Administration, University of Illinois at Urbana-Champaign. Bureau of Economic and Business Research
The Physical Object
Pagination[1 leaf], 11 p. ;
Number of Pages11
ID Numbers
Open LibraryOL24623171M
OCLC/WorldCa700752779


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Sales tax exemptions -- the erosion of the tax base by John Fitzgerald Due Download PDF EPUB FB2

But the major trend has been toward erosion of the base. Part of the trend, and particularly the exemption of industrial and farm machinery and equipment, can be defended on the grounds that these changes bring the taxes more in line with the basic philosophy of the sales : As with other deductions and exemptions, however, the tax benefit from personal exemptions depends upon a taxpayer’s marginal tax rate.

For instance, a single taxpayer in the 12 percent tax bracket would save $ of taxes with a personal exemption of $4, whereas a single taxpayer in the 32 percent tax bracket would save $1, 1^2-processes,andfromastate'sstandpoint,mayadverselyaffecteconomic development. Theearlysalestaxeswerevery"broadincoverageoftangiblepersonal property;Illinois.

To limit future profit shifting, the Tax Cuts and Jobs Act (TCJA) added a new tax, the BEAT (base erosion and anti-abuse tax). The BEAT targets large US corporations that make deductible payments, such as interest, royalties, and certain service payments, to related foreign parties.

Guidelines to Texas Tax Exemptions Refer to publicationNonprofit and Exempt Organizations – Purchases and Sales, for more information. Various types of organizations may be exempt from sales tax on purchases necessary to the organization's exempt function, or from hotel occupancy tax or franchise tax.

Tax base is defined as the income or asset balance used to calculate a tax liability, and the tax liability formula is tax base multiplied by tax rate. Author: Julia Kagan. One major issue with sales taxes across the country is the eroding sales tax base.

The base erosion is partially due to conscious policy changes, such as exemptions for groceries as we discuss below. But another source of sales tax base erosion is the changing structure of the economy, moving from a goods-based economy to one dominated by services.

A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of a tax on goods or services is paid to a governing body directly by a consumer, it is usually called a use laws provide for the exemption of certain goods or services from sales and use tax.

Sales Tax Exclusions. Related Articles. February 5, New NBER Paper Analyzes Sales Tax on Services: A Wonkish Review. J Map: State Sales Taxes and Clothing Exemptions. Novem The Sales Tax Base Makes Headlines.

August 9, North Carolina Considers Impressive Tax Reform Options. June 7, Tax exemption is the reduction or removal of a liability to make a compulsory payment that would otherwise be imposed by a ruling power upon persons, property, income, or transactions.

Tax-exempt status may provide complete relief from taxes, reduced rates, or tax on only a portion of items. Examples include exemption of charitable organizations from property taxes and. Declining Tax Bases Corporate Income Tax Base Erosion The corporate income tax base has been eroding for many years.

The effective corporate income tax rate has fallen by about one-third since the late s, even as the simple average nominal tax rate rose about percent.3 Thus, the effective tax rate de.

Wisconsin generated $ billion in FY16 from the 5% sales and use tax, which represented % of state GPR taxes. In addition, counties and the professional baseball stadium district may collect additional sales tax from the same tax base. Sales tax exemptions result in lower revenues for both the state and local governments.

tax base the total pool that the tax authorities can tap in levying a example, the tax base for INCOME TAX is total taxable income and the tax base for CORPORATION TAX is total taxable profits.

tax base. The assessed value of all the property within a taxing governments are always extremely sensitive to the size of the tax base and the need to.

Carroll H. Sierk,State Tax Exemptions of Non-Profit Organizations, 19 Clev. Rev. tax exemptions under the various state income tax laws must also be Property Tax Philanthropy," refers to "the erosion of the property tax base that has occurred over the past half century or.

Currently, Louisiana sales and use tax law sets out approximately sales and use tax exclusions and exemptions.

These exclusions and exemptions are, to some extent, organized by type. Exclusions, which are not taxable by definition, are largely contained in the definitional section of the sales and use tax laws under Louisiana Revised.

Home Excise Tax Sales and Use Tax. Sales and Use Tax. Administers the interpretation, collection and enforcement of the Arkansas Sales and Use tax laws.

This includes Sales, Use, Aviation Sales and Use, Mixed Drink, Liquor Excise, Tourism, Short Term Rental Vehicle, Short Term Rental, Residential Moving, Beer Excise and City and County Local Option Sales and. Concerned about the erosion of its sales tax base and corresponding loss of critical funding for state and local services, the South Dakota Legislature enacted a law requiring out-of-state sellers.

Sales Tax Audit Triggers: Minimizing Tax Pitfalls and the Catch of Nexus Sales Tax Registration, Nexus Checklist, Negotiating Settlements, Developments in Tax Cont J • CPE, EA • Live Webinar. This webinar will provide counsel and tax professionals effective strategies and best practices for identifying and avoiding state sales tax audit triggers and.

the sales and use tax base will become smaller and smaller if changes to the taxing system are not made. Many states struggled to retard the erosion of the sales and use tax base by defining intangible property as tangible property.

When the Streamline Sales and Use Tax (SSUTA) Agreement prohibited member states from defining a digital product.

PLR Vehicle Sharing Transactions Vehicle sharing platform operator must collect sales taxes and daily rental fees from drivers on vehicle sharing transactions. PLR Transferable Tax Credit Program This letter addresses the transferable income tax credits in sectionand specifically how the transfer of eligible Enterprise Zone credits are treated by the.

Businesses not holding active sales and use tax permits may use the Claim for Local Cap Rebate Form Number ETA and provide the necessary supporting documentation for their claim. The form may be obtained by contacting the Sales and Use Tax Section by telephone at () or may be downloaded from the Sales Tax website at and.

Click here to download an Adobe Acrobat version of these regulations, Filter Regulations Filter RegulationsREG Nature Of The Sales TaxREG Use TaxREG Non-nexus SellersREG PermitsREG Retailers And SellersREG Retail Sale Or Sale At RetailREG Gross Receipts DefinedREG RecordsREG Accounting.

Again, sales tax exemptions are the most significant tax incentive program and tax evasion also considerably reduces tax burdens (regression 2).

Firms with Every sales tax permittee must file returns with the Department of Revenue on a timely basis, according to your filing frequency, even if sales tax was not collected for that month, quarter, or year.

Failing to file returns on time can result in penalties, interest and eventually could result in liens against your property. Tax Exemptions, Deductions, and Credits Tax exemptions, deductions, and credits all can reduce the amount of taxes that a person owes.

Some of these tax benefits are intended to reflect a person’s ability to pay tax; the Child Tax Credit, for example, recognizes the File Size: KB. The sales tax base fell from % of personal income in to % in (see Figure ).Increasing tax rates were until recent years sufficient to compensate for base erosion from evasion and avoidance, shifts in economic structure towards largely non-taxed services, and legislated exemptions from the by: 6.

Base Erosion Tax. The Senate Mark’s base erosion tax would apply to U.S. and non-U.S. corporations (other than regulated investment companies, real estate investment trusts and S corporations) with average annual gross receipts of at least $ million for the prior three-year period that have a “base erosion percentage” of 4% or higher.

The idea of identifying and measuring tax exemptions (also referred to as tax expenditures) is often attributed to Stanley Surrey, an Assistant Secretary of the U.S.

Treasury in the s. Surrey defined tax exemptions as tax subsidies, preferences, and incentives thatFile Size: KB. Sales Tax Exemption for a Specific Project. Effective Jan. 1,an exemption from sales tax is granted on all tangible personal property or services purchased for the purpose of and in conjunction with the construction, reconstruction, expansion or remodeling of a business which meets the requirements of a qualified firm defined in K.S.A.

(HPIP). Downloadable (with restrictions). The sales tax has long been hailed a workhouse of state and local public finance, but its future looks grim due in no small part to the continued proliferation of exemptions. While scholars have noted the role politics plays in eroding the sales tax base, no study has empirically investigated the matter.

Using a panel of 44 states from toAuthor: Propheter Geoffrey. The recently enacted tax reform act imposes a new “base erosion and anti-abuse tax” (BEAT) on large corporations. The BEAT operates as a limited-scope alternative minimum tax, applied by adding back to taxable income certain deductible payments made to related foreign persons.

States Should Embrace 21st Century Economy by Extending Sales Taxes to Digital Goods and Services these tax exemptions exist not for any policy reason but rather because sales tax • Is necessary to prevent long-term erosion of the sales tax base.

Local Sales Tax Application Destination Based Sourcing, herein. Sales Tax Jurisdictions To assist you in collecting and reporting the correct rate of sales tax, the Department of Revenue has developed Pub.

KS, Sales Tax Jurisdictions, which contains an alphabetical listing of all Kansas county and city sales tax. While New Jersey's sales tax generally applies to most transactions, certain items have special treatment in many states when it comes to sales taxes. This page describes the taxability of trade-ins in New Jersey.

To learn more, see a full list of taxable and tax-exempt items in New Jersey. Several sales tax exemptions fall under the “necessity of life” category – or at least that is typically how a state might describe them.

For example, see page 1 of California Board of Equalization Pub 61 which lists food, health and housing under this category. Non-parametric regression of tax rate on age. 4O 5O Table 6 Variation in erosion by ownership type (tax ratio and frequency of respondents by category) Variable Domestic and private Private and foreign Public Tax/sales ratio Zone 0 I Convention.

Investment code TU 0, 0 Cited by: Sales and use tax is imposed in all states except Alaska, Delaware, Montana, New Hampshire, and Oregon, and in a few limited cases, transaction-based taxes are imposed in those states as well (e.g., local sales tax in Alaska and hotel room tax in Delaware).

In the construction and real estate industries, sales-and-use-tax issues arise every day, whether it is new construction, the. Contents Preface ix 1 Th e Property Tax as a Good Tax 1 The Nature of the Property Tax 2 Progressivity, Regressivity, and Fairness 19 3 Values and Valuation 35 Special Uses of Tax Proceeds 4 Property Taxes and School Finance 57 5 Tax Increment Financing 71 Special Treatment of Specifi c Properties 6 Classifi cation and Diff erential Taxation 91 7 Open Space.

Sales and Use Tax Audit Manual Last Updated: 6/12/ 1 SALES AND USE TAX AUDIT MANUAL Major Headings Table of Contents Chapter 8 – Delinquent Tax Assignments Introduction Chapter 9 - Criminal Tax Program Chapter 1 – Tax Overview Chapter 10 – Computer Assisted Audits Chapter 2 – Audit Function Appendix 1 – Tax Returns.

You are not authenticated to view the full text of this chapter or article. Elgaronline requires a subscription or purchase to access the full text of books or journals.

Please lo. Non-Profit Business Activity and the Unrelated Business Income Tax 59 that are otherwise tax-exempt. This paper evaluates one such tax: the Unrelated Business Income Tax (UBIT).

The United States introduced in a new tax on the "unrelated business income" of certain non-profit organizations. Congress enacted.Estate taxes don't affect everyone.

In fact, according to the Tax Policy Center, of the 4, tax returns of people who died, only 1, were taxable, which was less than percent of the estimated million people who died in That is because the federal government offers an exemption that allows estates under a certain value to pass.The BEAT is imposed to the extent that 10% (5% for the calendar year) of the taxpayer’s ‘modified taxable income’ (generally, US taxable income determined without regard to any base-eroding tax benefit or the base-erosion percentage of the NOL deduction) exceeds the taxpayer’s regular tax liability net of most tax credits.