Sales tax exemptions for businesses providing relief after a natural disaster

It’s common for states to offer temporary tax relief to affected taxpayers during natural disasters such as fires, floods, and tornadoes, and approximately a dozen states offer income tax breaks during such times. Wisconsin is now one of few states to codify a sales tax exemption for businesses working in disaster recovery.

2017 stands out for the depth and breadth of its natural disasters. In August alone, parts of Texas received more than four feet of rain as wildfires raged across drought-stricken western states, and evidence suggests this is a trend rather than a fluke.

More disasters mean more recovery and fewer resources. Since sales tax compliance is a hassle for non-resident businesses working in a state temporarily, some states provide tax benefits to the out-of-state businesses that come to help. This can mean less red tape for businesses.

South Carolina

Under South Carolina law, a non-resident business working in the state by request and “for purposes of performing disaster or emergency-related work is exempt from state and local business registration and tax payment during the ‘disaster period.’”

A disaster period begins within 10 days of the first day a state disaster or emergency is declared, and concludes 60 days after the declared period ends.

North Dakota

An out-of-state business that enters North Dakota to perform natural disaster or emergency remediation work on critical electrical, natural gas, and telecommunication transmission infrastructure is eligible for a limited exemption from sales and use taxes and fees, licensing, and certain other requirements.

In addition, businesses don’t need to pay sales or use tax on equipment brought into North Dakota temporarily for a disaster/emergency response. However, the equipment must be removed from the state “within a reasonable period of time after the disaster response period.”

The definition of a “disaster period” in North Dakota is the same as the definition for a “disaster period” in South Carolina.

Wisconsin

Effective retroactively, as of January 1, 2017, Wisconsin provides a sales and use tax exemption for services performed during a disaster period by electric cooperatives or telecommunications utilities. It applies only during a “disaster period,” defined as South Carolina and North Dakota define it.

The sale and use of a service provided by an electric cooperative to another electric cooperative, or by a telecommunications utility, for disaster relief work performed during a disaster period is exempt from Wisconsin sales and use tax. For the exemption to apply, at least 20 percent of the electric cooperative or telecommunications company in need of assistance must be non-operational.

“Disaster relief work” includes building, installing, renovating, repairing, or performing other activities or services that relate to infrastructure in Wisconsin damaged in connection with a state of emergency. Additional details are available in the text of AB 583.

Sales tax holidays

A handful of states also provide sales tax relief for residents in advance of a natural disaster: Texas will host a sales tax holiday for emergency preparedness supplies this weekend, April 28–30; Florida will provide a similar event June 1–7; Virginia exempts a number of hurricane and emergency preparedness supplies during its annual sales tax holiday, which will run August 3–5 this year. Learn more about 2018 sales tax holidays here.

The last thing anyone needs to worry about during a natural disaster — or when cleaning up after one — is sales tax. Tax automation software simplifies compliance for businesses inside and outside of disaster zones. Learn more.