1. Service tax authorities, of late, have been issuing notices to various borrowers of External Commercial Borrowings (ECB’s) from foreign branches of Indian banks and holding them liable to pay Service tax from September 10, 2004 under section 65(12)(a)(ix) of the Finance Act, 1994 which covers ECBs.

According to the borrower, the responsibility of paying service tax is of the service provider which is the foreign branch of the Indian bank and, hence, the Indian bank having a permanent establishment in India, is supposed to pay and not the borrower.

The contention of the service tax authorities is partially correct after coming into effect of section 66A of the Finance Act, 1994 from April 18, 2006.

Until the coming into effect of section 66A, the liability and obligation to pay service tax was that of Indian bank and not that of the borrower. Contrary to the contention of the service tax authorities, even under rule 2(1)(d)(iv) of the said Rules, effective from August 16, 2002 and June 16, 2005 respectively, the borrower cannot be made liable for the payment of service tax.      Read the rest of this entry »

The article written last month titled Proper Delivery Outside of California Begins the Use Tax Exemption Process explained the importance of, and how to, properly take delivery of an aircraft outside the state, which is the first step in the California sales and use tax exemption process.  If you didn’t get a chance to read that article you can contact Aero-tax Compliance Experts, LLC (ACE) for a copy or visit www.aero-tax.com.

Many aircraft owners and potential owners have contacted us for an explanation on California’s first functional use requirement. We have learned that there is a lot of mis-information and confusion on this issue.  Our attempt is to clarify some of the confusion that exists and eliminate the mis-information with the first functional use requirement for the California use tax exemption process.

First functional use is a critical component of the California use tax exemption process.  California Sales and Use Tax Regulation 1620 defines first functional use as use for which the property was designed.  An aircraft is defined in Law section 6274 as any contrivance designed for powered navigation in the air except a rocket or missile.  Logically, one would conclude that first functional use of an aircraft is flight because aircraft are designed to fly; right?  Not necessarily.  In my experience with the sales and use tax law, one can not rely upon logic.

The California State Board of Equalization (BOE) has effectively confused the term for which the property was designed withhow big it is, or how is it configured. I’ll explain; in May of 2002 a staff member of the BOE’s tax counsel (writer) drafted a memorandum to another staff member explaining to them the writer’s interpretation of first functional use.  Somehow, the writer deduced a formula, or justification, to distinguish between aircraft designed for personal purposes and aircraft designed for commercial purposes.  Simply put, the writer concluded in the memorandum that an aircraft with 6 or fewer seats was an aircraft designed for personal purposes, and an aircraft with 7 or more seats was designed for commercial purposes.        Read the rest of this entry »

If you are feeling the stress of the upcoming April 15 income tax deadline, you have another option – you can file a tax extension and delay your income tax deadline to October 15.

The IRS is willing to grant you the six month income tax extension without you having to come up with an excuse to extend. In fact, the IRS doesn’t even ask why you need to extend. As long as you properly submit your extension request by providing accurate information, the IRS will grant you the six month extension automatically.

The fastest way to file an extension is to file it online through a website run by an approved IRS e-file provider like FileLater.com. FileLater.com makes the process easy. You’ll be asked for your contact information and then taken through a few simple questions to determine if you want to make a tax payment along with your extension. The whole process takes less than 10 minutes. A day later you’ll have an email back with the status of your extension. It’s that simple.      Read the rest of this entry »

IRS tax debt

If you happened to be one of the unfortunate individuals to owe tax debt from your past years, or you have paid your taxes for the current year, and still expect to owe further taxes to the IRS in the form of IRS debt, it’s possible for you to find a solution to redeem your taxes. The actual solution lies in not ignoring to pay your debt. Even though the IRS can collect the taxes up to ten years, it possesses many other powerful options to recover, and chances are it will. If you have outstanding IRS tax debt, the best possible solution is to utilize your savings, or alternatively borrow some funds to clear the debt. By paying your entire outstanding dues, it’s possible to save upon the penalties and fines, which are likely to be levied in case you decide to avail more time and clear your taxes over a period of time. If one borrows against some asset value such as your home, it’s quite possible the interest incurred might be tax deductible. It’s also possible to avail tax relief if you can represent your case properly to the IRS.       Read the rest of this entry »