Los Angeles California Tax Attorney Blog

Los Angeles Tax Attorney: Last week's firestorm regarding Sarah Palin's wardrobe expenses generated several calls regarding tax implications or tax problems for Governor Palin stemming from her $150,000.00 clothing shopping spree.

Politics aside (Democrats position: $150,000 for clothes...she’s no Josephine Six Pack, Republicans Position: Remember John Edwards $400 hair cut), from an IRS tax perspective, it may be a non issue. (United States Tax Court US TAX COURT holds the jurisdiction to resolve any tax problems that may arise out of Palin's tax situation.)

Uniforms provided by employers for business use are not taxable to the employee. I’m not sure if Sarah Palin is “employed” by the Republican Party because she is still the governor of Alaska. It may be possible that she is employed by both entities. Regardless, Palin’s clothing from Neiman Marcus and Saks 5th Avenue probably would not constitute “uniform” as defined by the IRS TAX CODE Although if RNC argued that all female members of the party must wear certain type of Valentino or Armani in red or black while on stage to campaign, it may have a plausible counter argument if such clothing items were not usable for ordinary wear.

Some of my colleagues believe that she would need to declare fair rental value of the clothes she used on her income tax return but certainly not the full $150,000 RNC spent on her clothes. However, what would be the rental value for these clothes? Difference between cost less resale value?

I think the fair rental value or fair use valuation would be the correct tax position in most ordinary circumstances. However, RNC or Palin’s tax attorney could probably argue that she would not need to declare any rental value for these clothes.

The reason?

Most used clothing items have very little resale value. However, assuming that Governor Palin never owned these clothes, RNC could auction off Palin’s clothes which would probably generate revenues in excess of 10 to 20 times the cost basis for these clothing. (Campaign Fund Raising Issues?) In essence, the argument would be that Palin didn’t rent these clothes, she provided service and added value by having worn these items. This issue would be determined by the United States Tax Court US TAX COURT.

Further, what is the difference between expensive clothing provided to news anchors or stand-up comedians like Jay Leno by their respective stations and the situation here? They are all celebrities looking good for their jobs...right? Leno or Katie Couric don’t pay taxes for the different wardrobes which they wear every night. Regardless, Wardrobegate’s political damage may be significant but the IRS tax impact to Palin should be nominal.

Californa Sales Tax BOE - Board of Equalization Tax Attorney

California Board of Equalization California Sales Tax

Sales Tax for Construction Restaurant and Bars

APPLICATION OF TAX TO RESTAURANT EQUIPMENT CONTRACTORS

The Board of Equalization, in conjunction with the Restaurant Equipment Contractors Association, has made a study of components involved in lump-sum contracts for the furnishing and installing of restaurant equipment. Review Construction Sales Tax Basics Here

Application of California sales tax may differ based on type of contract you have with your contractor as well as classification of items used to construct the restaurant or bar. Sales tax amount for materials, equipments and fixtures will vary significantly and it may result in huge tax savings for either the restaurant owner or contractor depending upon classification method.

The following are some items which are usually considered to be materials when furnished and installed by a construction contractor in performing a contract for the food industry:

Carpeting, including padding and trim when affixed to the real property by glue, nails, etc.
Doors
Ducts installed in walls, ceilings, and floors
Grab bars (for handicapped lavatories)
Millwork
Pass window frames and shelves
Wall corner pieces and wall caps
Wall covering materials (wallpaper; paneling; etc.)
Wall flashing
Wall mirrors

The following items furnished and installed by contractors to the food service industry are generally classified as fixtures:

Bolt-down counter stool bases, with stools attached thereto
Bolt-down table bases with table tops affixed
Custom fabricated cash stands
Custom fabricated cocktail back bar superstructures
Custom fabricated cocktail back bar
Custom fabricated cocktail bars
Custom fabricated counters
Custom fabricated dishtable assemblies
Custom fabricated make-up tables
Custom fabricated pot racks
Custom fabricated scullery sink assemblies
Custom fabricated seating assemblies/booth units
Custom fabricated serving counters
Custom fabricated service stands
Custom fabricated soffits
Custom fabricated walk-in coolers and freezers that are affixed to the real estate
Dispensers for soap, towels, toilet tissue
Faucets
Freezers
Hoods
Lighting fixtures
Motors
Plumbing fixtures
Refrigeration compressors
Refrigerators
Safes, imbedded in concrete in the buildings
Water heaters (built into fixtures or into water systems)
Water softeners (built into fixtures or into water systems)

Fixtures also include the following items which are built into fixtures or otherwise built into the realty and which may not be removed without damage to the items or the realty:

Char-broilers
Dish dispensers
Dishwashers that are built into a dishtable
Disposals
Drink dispensers
Freezers
Griddles
Ice cream cabinets
Ovens
Refrigerators
Roll warmer
Scrap chutes
Soda fountain systems
Soup warmers
Syrup rails

The following is a list of items which may be generally considered to be machinery and equipment when freestanding or when they are not firmly affixed to the building or built into it or another fixture and which may be readily removed without damage to the building, the unit, or other fixture:

Adding machines
Artifacts items
Bar stools
Beverage and juice dispensers
Bulletin boards
Can openers
Chairs
Char-broilers
Chinaware, silverware, pots and pans, paper goods, culinary items
Coffee makers
File cabinets
Flight-type dishwashers
Floor racks
Griddles
Hot water hoses
Ice bins
Ice cream cabinets
Ice making machinery
Iced tea dispensers
Iced tea machine
Lockers
Microwave ovens (freestanding)
Milk dispensers
Mixers
Ovens
Portable bins and tables
Ranges
Reach-in freezers (self-contained)
Reach-in refrigerators (self-contained)
Roll covers
Safes
Salamanders
Scales
Shelving units
Silverware boxes
Slicers
Table lamps
Tables
Time car racks
Time clocks
Toasters

Californa Sales Tax - Board of Equalization Tax Attorney

California Board of Equalization California Sales Tax

Sales Tax for Construction Contractors to US Government Projects

A. MATERIALS AND FIXTURES — U.S. construction contractors are the consumers of materials and fixtures which they furnish and install in the performance of construction contracts with the United States Government. Either the sales tax or the use tax applies with respect to sales of such property to U.S. construction contractors. There is no distinction between the application of tax to materials and fixtures. Only the cost is subject to tax (even though the fixtures are self-manufactured).The sales tax, but not the use tax, applies even though the contractor purchases the property as the agent of the United States.

B. MACHINERY AND EQUIPMENT — U.S. construction contractors are retailers of machinery and equipment furnished in connection with the performance of a construction contract with the United States Government. Tax does not apply to sales of machinery and equipment to U.S. contractors or subcontractors, provided title to the property passes to the United States before the contractor makes any use of it. The contractor may issue a resale certificate. However, if the contractor uses the machinery or equipment before passage of title to the United States, then the contractor is the consumer of the machinery or equipment and either sales tax or use tax applies to the sale to or the use by the contractor of the machinery and equipment.