by taxnick on September 2, 2010
What’s the difference between preparing and manufacturing something? For Missouri restaurants, the difference amounts to tens of thousands of dollars.
The Missouri Supreme Court ruled Tuesday that restaurants cannot claim a tax exemption for the purchase of tables, chairs, plates and kitchen equipment.
The decision hinged on a determination that restaurants prepare – not manufacture – food for their customers. Consequently, the court said, they cannot get the same tax breaks available to manufacturing plants or to processing companies that turn live hogs and into ham ready for human consumption.
“In lay terminology, one does not speak of a restaurant as manufacturing or producing food or drink; instead, restaurants prepare, cook and serve food and drink to their customers,” the court said in a 6-1 decision written by Judge Laura Denvir Stith.
Missouri has about 10,500 restaurants that employ more than 200,000 people, according to Department of Economic Development statistics.
Although it could affect all restaurants, Tuesday’s ruling dealt specifically with 23 restaurants owned by Dallas-based Brinker Missouri Inc. The company operates businesses under the chain names of Chili’s Grill & Bar, Romano’s Macaroni Grill, On the Border, and Maggiano’s Little Italy.
The company originally sought a tax refund of about $54,000 for restaurant equipment bought between Oct. 1, 2003, and Dec. 31, 2004. The state denied nearly $49,000 of that claim, and the restaurant company appealed about $44,000 of that denial.
An attorney for Brinker Missouri did not immediately return a telephone message Tuesday.
Department of Revenue spokesman Ted Farnen said the agency had been confident its interpretation of tax law was correct. He said there are 28 other pending tax refund claims also involving restaurant equipment.
Attorneys for Brinker Missouri had argued their purchase of tables, chairs, dishes, cups and eating utensils should be tax-exempt because customers later buy the right to use them when they purchase their food.
“This argument proves too much,” Stith wrote in the court’s decision. “The plates, tables and chairs are not in any real sense transferred to customers any more than a piece of the restaurant floor is transferred to a customer when he or she walks on it, or a bottle of ketchup is transferred when a customer picks it up to use or inspect it, or a menu is transferred to a customer who reads it.”
Chief Justice William Ray Price Jr. was the lone dissenter. He said the court in previous cases had applied a broad interpretation of manufacturing plants to allow tax exemptions on equipment bought by telephone companies and newspaper publishers. He also said there was no distinction between facilities that prepare food for wholesale consumption, which receive tax exemptions, and restaurants that similarly use raw ingredients to make a more valuable food product.
“By applying an unduly narrow construction to this exemption, the majority frustrates the legislative intent of creating jobs and nurturing small business in Missouri,” Price wrote.
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by taxnick on August 29, 2010
WASHINGTON — The Internal Revenue Service is encouraging business taxpayers, associations and other interested parties to submit to the Industry Issue Resolution (IIR) program tax issues for resolution involving a controversy, a dispute or an unnecessary burden on business taxpayers.
The objective of the IIR program is to resolve business tax issues common to significant numbers of taxpayers through new and improved guidance. In past years, issues have been submitted by associations and others representing both small and large business taxpayers, resulting in tax guidance that helps thousands of taxpayers.
Recent submissions accepted into the IIR program include:
- Network assets in the telecommunications industry (unit of property)
- Asset class determination under Revenue Procedure 87-56 for wireless telecommunication assets
- Vendor mark down allowances in calculation of inventory under the retail inventory method
- Network assets in the utilities industry (unit of property)
Guidance issued as a result of the IIR program includes:
- Technical terminations of publicly traded partnerships – procedures for requesting relief, delegation of authority for granting relief, and a sample closing agreement documenting the conditions under which relief is granted. (Industry Director Communication LMSB-04-0210-006)
- Auto Last In First Out – for automobile wholesalers, manufacturers and dealers regarding the proper treatment of the dollar-value, LIFO inventory method for pooling purposes of crossover vehicles, which have characteristics of trucks and cars. (Revenue Procedure 2008-33)
For each issue selected, an IIR team of IRS and Treasury personnel gather relevant facts from taxpayers or other interested parties affected by the issue. The goal is to recommend guidance to resolve the issue. This benefits both taxpayers and the IRS by saving time and expense that would otherwise be expended on resolving the issue through audits.
IIR project selections are based on the criteria set forth in Revenue Procedure 2003-36. For each issue selected, a multi-functional team of IRS, Chief Counsel, and Treasury personnel will be assembled. The teams will gather and analyze the relevant facts from industry groups and taxpayers for each issue and recommend guidance.
Requests for guidance on tax issues under the IIR program can be submitted at any time to IIR@irs.gov. Submissions received are reviewed semi-annually with selections next being made from issues submitted by September 30, 2010.
by taxnick on August 26, 2010
NEW DELHI: The Union Cabinet on Thursday approved a new set of direct tax rules that proposes to raise income tax exemption limit from 1.6 lakh to 2 lakh, leaving more money in the hands of individuals, and a lower tax rate for companies.
The much-awaited Direct Taxes Code, or DTC, Bill, which seeks to replace the nearly 50-year-old income tax law, is likely to be introduced in Parliament on Monday and may then be referred to a select committee of members of both houses of Parliament.
The basic exemption limit is proposed to be raised to 2 lakh from the current 1.6 lakh and corporate tax rate for both domestic and foreign companies proposed is at 30%, finance minister Pranab Mukherjee said after the meeting of the Union Cabinet.
Senior citizens and women will enjoy a higher exemption of up to 2.5 lakh. There will be no surcharge or cess on companies, thereby bringing the corporate tax rate to 30% from present 34%.
The new code proposes three income tax slabs—income of up to 2-5 lakh will face 10%, 5-10 lakh will attract 20% and income over 10 lakh will face tax at the rate of 30%. The housing loan exemption of 1.5 lakh would also be available to individual taxpayers on the interest component.
“The whole objective is that a plethora of exemptions will be limited. Income tax slabs will be three. Rate of taxes will be taken in the schedule so that they need not be changed every year,” Mr Mukherjee said.
“Once the tax rates are part of the code itself, it would provide guidance and stability as to short to mid-term tax rates vis-a-vis current situation wherein tax rates could undergo a change on a year-on-year basis,” said Vikas Vasal, executive director, KPMG.
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