D.C. modifies qualified high tech company indirect tax exemption process
Effective Nov. 1, 2017, the District of Columbia Office of Tax and Revenue has revised the Qualified High Tech Company (QHTC) sales and use tax compliance process as part of the District’s overall tax modernization efforts.
The District provides a number of favorable tax benefits for businesses qualifying as a QHTC, including:
- Tax credits for training and wages paid to qualified disadvantaged and other employees in addition to payments for employee relocation costs
- Sales and use tax exemptions for computer software or hardware, and visualization and human interface technology equipment, including operating and applications software, computers, terminals, display devices, printers, cable, fiber, storage media, networking hardware, peripherals, and modems when purchased for use in connection with the operation of the QHTC
- A reduction of the corporate franchise tax rate
- A partial exemption from the personal property tax
- An exemption for five years from corporate franchise tax when located in designated high technology development zones;
- Increased deduction for Internal Revenue Code (IRC) section 179 property
- Deductions for leasehold improvements made by a tenant QHTC
- Exclusion of capital gains from taxation for qualified assets held more than five years
- Rollover (deferral) of certain capital gains
In order to qualify for the sales and use tax exemptions under the expiring procedures, the QHTC was required to provide a vendor with Form FP-337, (QHTC Exempt Purchase Certificate), when making exempt purchases. The QHTC was also required to attach another form to the QHTC’s sales and use tax returns in order to receive QHTC certification. This was essentially a self-certification process.
Today, a business intending to take advantage of QHTC benefits is required to apply online through the mytax.dc.gov portal to obtain the QHTC sales and use tax exemption certificate. The QHTC will need to provide certain information supporting its QHTC qualifications to complete the application process. Once the application has been processed, the taxpayer will receive a new QHTC Exempt Purchase Certificate to provide to vendors when making qualifying exempt purchases. The certificate is valid for one year. Importantly, businesses qualified as a QHTC under the expiring procedures will no longer be able to use the former QHTC Exempt Purchase Certificate beyond Jan. 31, 2018.
Businesses with questions about the new QHTC sales and use tax exemption procedures, or with questions on any of the expansive benefits of qualifying as a QHTC, should speak to their tax advisors as soon as possible.