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Effective Sales Tax Saving Strategies and Exemptions

Learn about efficient strategies for reducing sales tax, including resale exemptions, manufacturing exemptions, residential exemptions, and more. Discover ways to save on taxes for various goods and services. Attend this insightful presentation by CPA Stephen Hanebutt at the UTA Alumni CPE Event on August 11, 2016. Take advantage of tax-saving opportunities for businesses and individuals.

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Effective Sales Tax Saving Strategies and Exemptions

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  1. Efficient Strategies for Sales Tax Savings SALES TAX EXEMPTIONS YOU (POSSIBLY) AREN’T AWARE OF Presented by: Stephen Hanebutt, CPA Annual CPE Event For UTA Alumni And Friends August 11, 2016 1 www.salestaxtexas.com

  2. Efficient Strategies for Sales Tax Savings THE RESALE EXEMPTION SellerBuyer/SellerBuyer 2 www.salestaxtexas.com

  3. Efficient Strategies for Sales Tax Savings THE RESALE EXEMPTION Also applies to rentals This includes replacement parts on rented items Many opportunities for restaurants 3 www.salestaxtexas.com

  4. Efficient Strategies for Sales Tax Savings TPP TRANSFERRED IN CONNECTION WITH A TAXABLE SERVICE When a provider of taxable services transfers tangible personal property in connection with the providing of the service, the tangible personal property transferred may be purchased tax-free by the service provider. 4 www.salestaxtexas.com

  5. Efficient Strategies for Sales Tax Savings TPP TRANSFERRED IN CONNECTION WITH A TAXABLE SERVICE • Janitorial Services • Lawn Maintenance Services • Pool Cleaning Services • Golf Courses 5 www.salestaxtexas.com

  6. Efficient Strategies for Sales Tax Savings THE MANUFACTURING EXEMPTION In general, a purchase of otherwise taxable TPP or a taxable service will be nontaxable when purchased by a manufacturer in the process of making a chemical or physical change to property being manufactured for ultimate sale so long as the item purchased is necessary and essential to the manufacturing process. 6 www.salestaxtexas.com

  7. Efficient Strategies for Sales Tax Savings THE MANUFACTURING EXEMPTION The manufacturing process is defined to be “Each operation beginning with the first stage in the production of tangible personal property and ending with the completion of tangible personal property.” 7 www.salestaxtexas.com

  8. Efficient Strategies for Sales Tax Savings THE MANUFACTURING EXEMPTION Raw Materials www.salestaxtexas.com

  9. Efficient Strategies for Sales Tax Savings THE MANUFACTURING EXEMPTION Manufacturing Equipment 9 www.salestaxtexas.com

  10. Efficient Strategies for Sales Tax Savings THE MANUFACTURING EXEMPTION Energy 10 www.salestaxtexas.com

  11. Efficient Strategies for Sales Tax Savings THE MANUFACTURING EXEMPTION Packaging Supplies • Boxes • Tape • Strappers • Labels • Pallets 11 www.salestaxtexas.com

  12. Efficient Strategies for Sales Tax Savings THE MANUFACTURING EXEMPTION Industrial Solid Waste Disposal • Scrap • Must be a result of the manufacturing process • Take a percentage 12 www.salestaxtexas.com

  13. Efficient Strategies for Sales Tax Savings THE MANUFACTURING EXEMPTION • Pollution Control Equipment • Quality Control Equipment 13 www.salestaxtexas.com

  14. Efficient Strategies for Sales Tax Savings THE MANUFACTURING EXEMPTION • Cleanrooms 14 www.salestaxtexas.com

  15. Efficient Strategies for Sales Tax Savings THE RESIDENTIAL EXEMPTION Improvements - the labor to improve real residential property is nontaxable (exclusion). If labor charges are separated from materials charges, the labor charges are exempt and the materials charges are taxable. If there is a lump-sum charge for both materials and labor, the entire amount is nontaxable. 15 www.salestaxtexas.com

  16. Efficient Strategies for Sales Tax Savings THE RESIDENTIAL EXEMPTION Applies to: • Single family homes • Apartment complexes • Nursing homes Does not apply to: • Hospitals • Most hotels 16 www.salestaxtexas.com

  17. Efficient Strategies for Sales Tax Savings THE RESIDENTIAL EXEMPTION ABC Carpet Cleaning Co. • Heavy clean • Deodorize • Spot treatment • Pet stains • Mildew treatment 17 www.salestaxtexas.com

  18. Efficient Strategies for Sales Tax Savings THE RESIDENTIAL EXEMPTION ABC Carpet Cleaning Co. • Water extraction • Furniture moving • Replace pad • Dehumidifier rental • Blower charge • After-hours service call 18 www.salestaxtexas.com

  19. Efficient Strategies for Sales Tax Savings THE RESIDENTIAL EXEMPTION Energy 19 www.salestaxtexas.com

  20. Efficient Strategies for Sales Tax Savings THE HOME BUILDER’S EXEMPTION Builders of residential properties are eligible. • Single family homes • Apartment complexes • Nursing homes 20 www.salestaxtexas.com

  21. Efficient Strategies for Sales Tax Savings THE HOME BUILDER’S EXEMPTION Applies to real property services. • Landscaping • Lawn and yard maintenance • Janitorial/custodial services • Waste disposal services • Pest control • Surveying 21 www.salestaxtexas.com

  22. Efficient Strategies for Sales Tax Savings EXEMPT ENTITIES • It is important to keep in mind that the sales tax exemption for exempt entities applies to their purchases, not their sales. • There is an exemption available to for-profit entities owned in a partnership by tax-exempt entities. 22 www.salestaxtexas.com

  23. Efficient Strategies for Sales Tax Savings NEW CONSTRUCTION EXEMPTION The labor to build newly constructed property is nontaxable (exclusion). If labor charges are separated from materials charges, the labor charges are exempt and the materials charges are taxable. If there is a lump-sum charge for both materials and labor, the entire amount is nontaxable. 23 www.salestaxtexas.com

  24. Efficient Strategies for Sales Tax Savings NEW CONSTRUCTION EXEMPTION New construction defined • Building new structures • Adding new usable square footage to an existing building (expansion) • Initial finish out work • Rebuilding from the ground up a structure that has been demolished down to the foundation 24 www.salestaxtexas.com

  25. Efficient Strategies for Sales Tax Savings OIL AND GAS EXEMPTION • Fracturing • Perforating • Workover • Acidizing • Logging • Plug and abandon • Pull back charges • Swabbing • Jetting 25 www.salestaxtexas.com

  26. Efficient Strategies for Sales Tax Savings MAINTENANCE OF REAL PROPERTY • Distinguished from repair, remodeling or restoration • Must be scheduled and periodic 26 www.salestaxtexas.com

  27. Efficient Strategies for Sales Tax Savings GOOD PROSPECTS FOR SAVING FROMHAVING A SALES TAX REFUND REVIEW • Manufacturers • Apartment Complexes and Nursing Homes (Property Management Companies) • Home Builders • Construction Companies • Oil and Gas Companies 27 www.salestaxtexas.com

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