Presentation on theme: "Sales Tax is Changing. What’s happening & why? Client Service Opportunities Andy Johnson CPA- Partner Peisner & Johnson Mike Fleming – Peisner Johnson."— Presentation transcript:
Omni channel Markets: Gaming Digital Goods – MP3 Files, Movie / TV downloads, Purchased Image, etc. Virtual Items – Exist within a specified environment. Example -Xbox Live marketplace, MapleStory: Flower bouquets, Game’s weapons 15 Sheldon’s dilemma from the Big Bang Theorydilemma Next up after Marketplace Fairness ?
Marketplace Fairness Acts –Grants authority to states to require a remote retailer to collect sales tax –Defines a remote retailer as any seller who makes interstate sales of products or services –Effectively eliminates nexus for sales tax purposes –Applies only to remote retailers with annual remote sales in excess of $1 million, but remote sales includes exempt sales –Requires very little simplification from states, and most of that is only for remote retailers 18
Court Cases Scripto Georgia company used independent sales reps in Florida, and Supreme Court held that it had significant connection (1960) National Bellas Hess 1967 Supreme Court Case. National Bellas Hess, Inc. v. Department of Revenue of Ill., 87 S.Ct. 1389 (1967)
Court Cases Tyler Pipe Texas company with no property, offices, or employees in Washington. Supreme Court agreed that activities created nexus and assessment stood (1987) Quill Corporation For sales and use tax purposes, the Supreme Court held that a taxpayer must have a physical presence in the state. Quill Corporation v. North Dakota, 112 S.Ct. 1912 (1992)
Generally: Register Collect the sales tax/pay the income tax o Collect a proper resale certificate in lieu of tax File regular tax returns I have nexus. Now what?
Auditing your customers Information sharing with other states Special task forces Leads o Former employees o Competitors How do states find you?
Nexus Questionnaires The state already suspects you. Questions identify: o Assets in the state o Activities in the state Response deadline Penalties of perjury
Alabama "I declare that the information furnished in response to this questionnaire is to the best of my knowledge and belief, true, correct and complete.” Michigan “I declare, under penalty of perjury, that the information provided in this questionnaire and any attachments is, to the best of my knowledge, true, correct and complete. If prepared by a person other than officer, partner or owner of the business, this declaration is based on all information you have knowledge.” Questionnaire Verbiage
Texas "I declare that the information in this document and any attachment is true and correct to the best of my knowledge and belief.” Michigan “Under penalties of perjury, I declare that the information furnished in this questionnaire is, to the best of my knowledge and belief, true, correct and complete. If prepared by a person other than an officer of this corporation, this declaration is based on all information of which you have knowledge.” Questionnaire Verbiage
Nexus Questionnaires Don’t respond o Issue preliminary assessment Respond o Could impact your voluntary disclosure o Contact a consultant
No statute of limitations Seven or more years of tax assessments Penalties and interest o Up to 60% If the State Finds You
Service Company Small company in a couple of states Got national contract Used subcontractors to do local work Audited and assessed Registered in all states
Software Company Specialized software Traveled to customer sites to install and train Nexus questionnaire completed and returned States requested prior seven years returns $300,000 liability +
Bank Bag Company Largest client requested tax be charged Register in every state Set up the billing systems with correct rates and taxability Registered in all states
Sale of Company Purchaser conducted due diligence Determined they had nexus in states where they were not registered Purchaser requested they either discount price of business for amount owed or place funds in trust until resolved.
The Biggest Tragedy in Sales Tax Tax you could have collected (willingly) from your customer at the time of the transaction ends up coming out of your pocket three years later… With Penalties and Interest!
THE PROBLEM NEVER GOES AWAY… IT ONLY GETS BIGGER
What states am I registered in now? Where else do I have nexus? What do I sell in those states? Define the Problem
Sales Purchases Net Income Apportionment Quantify the Problem
Sales Purchases Net Income Apportionment Potential Refund?
Fix the Problem Rank your states by potential liability Possible approaches o Do nothing o Register o Amnesty o Voluntary disclosure agreement (VDA)
Problems with Registering Now When did you first start doing business in our state? All back taxes returns due o Back to day one Penalty and interest applies
State Amnesty Take advantage of state amnesties Amnesties are rare
Voluntary Disclosure Agreement Request an agreement on a no-name basis o Limited look back period o Eliminate or reduce penalty and interest Registration is part of the process Not available in certain circumstances
Voluntary Disclosure Agreement Deadline o Critical; extensions possible Time frame o Calculate the tax o Complete the forms necessary o Send forms & money in on time
Now What? Set up your systems to bill and collect the proper sales tax rates File sales tax returns Remit tax Relax.
Sales Tax Returns Monthly, quarterly, annually, depending on sales volume Local jurisdictions o e.g. AZ, CO, LA Stay current on rate changes
Costly Mistakes Ignoring the situation Failing to collect tax at the time of sale Registering without a VDA in place Remitting tax to the wrong jurisdiction
Summary 1.Define the Problem 1.Quantify the Problem 1.Fix the Problem
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Text How Can We Help You? State tax refund reviews State tax audit defense Nexus determination and mitigation Compliance services
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Avalara – Corporate Snapshot Market Leader in Automated Sales & Use Tax 10,000 customers 60,000 registered users 3+ million calculations per day – 1 billion annually Manage 5 million exemption certificates & file 500,000 returns Filing & remitting $14 billion in sales & use tax annually Enviable Business Position: A Growing Company in a Growing Market – Not a zero sum market Acquisitions of CertCapture, Tax Matrix & additional taxability content - Additional Content is a market changing event Sales Tax in the News – NPR, Amazon proposals– related to eCommerce, Market Street Fairness Act Expanding Markets – gaming, mobile payment platforms New Datacenters – To address Growth & Market expansion