Focus on Connecticut
This month, we travel to the Southern part of New England, Connecticut. The “Constitution State” is the third smallest state according to land size, but its population is actually bigger than 20 other states. The has a mix of coastal cities and rural areas dotted with small towns. Mystic is famed for its Seaport Museum filled with centuries-old ships, and the beluga whale exhibits at Mystic Aquarium. On Long Island Sound, the city of New Haven is known as the home of Yale University and its acclaimed Peabody Museum of Natural History.
Business Climate
The state’s key industries include finance, insurance and real estate. Major financial industry employers include The Hartford, Travelers, Cigna, Aetna, Mass Mutual, People’s United Financial, Bank of America, Realogy, Bridgewater Associates, GE Capital, William Raveis Real Estate and Berkshire Hathaway.
Manufacturing is a huge sector contributing to the state’s GDP. Raytheon Technologies and its subsidiaries, Pratt & Whitney and Collins Aerospace, is the state’s leading manufacturer. Lockheed Martin subsidiary, Sikorsky Aircraft operates Connecticut’s single largest manufacturing plant in Stratford, where it makes helicopters. Other major manufacturers include the Electric Boat division of General Dynamics, which makes submarines, Boehringer Ingelheim, a pharmaceuticals manufacturer and ASML, which makes precision lithography machines used to create circuitry on semiconductors and flat-screen displays.
Over half of the state’s agricultural production is the result of nursery stock production. Connecticut’s agricultural products include milk, eggs, vegetables, fruit, tobacco and shellfish.
Tax Climate
The top individual income tax rate is 6.99% and the top corporate income tax rate is 7.5%.
Apportionment: Connecticut taxpayers apportion income tax using a sales formula.
Connecticut sources services using destination-based sourcing.
Sales Tax Structure
The state sales tax rate is 6.35% and the highest combined rate is also 6.35%.
Generally, sales of digital products in Connecticut are taxable. Sales of prewritten computer programs delivered electronically are subject to sales and use tax, but with exceptions. Effective Oct. 1, 2019, sales of prewritten computer software delivered electronically are considered sales of tangible personal property and are subject to the state’s standard rate. However, if prewritten computer software delivered electronically is purchased by a business for use by such business it is taxable at the 1% rate for computer and data processing services, which is reduced from the regular state rate for sales tax. Sales of custom computer programs delivered electronically are not subject to sales and use tax. Connecticut imposes sales and use tax on sales of software as a service. How products are produced, sold and delivered is critical to determining the tax status.
Connecticut has an economic nexus law where if an out of state seller sells $100,000 and comprises 200 transactions into the state, sellers need to collect and remit sales tax on those transactions. This threshold applies to all transactions within the 12-month period ending on September 30 immediately preceding the monthly or quarterly period when liability is established. Transactions that are included in the threshold include gross receipts from tangible personal property (including digital products and SaaS) sold into the state, exempt sales and exempt services. Transactions that are excluded from the threshold include services, sales for resale and sales through a marketplace. This legislation went into effect on July 1, 2019.
Marketplace facilitators that facilitated retail sales of at least $250,000 during the prior 12-month period are required to collect and remit sales tax on behalf of their marketplace sellers. A marketplace facilitator is defined as anyone that provides a forum that lists or advertises taxable tangible personal property for sales by marketplace sellers; directly or indirectly collects receipts from the customer and remits payments to the marketplace seller; and is compensated for such services. This legislation was enacted on December 1, 2018.
Many states have annual sales tax holidays, during which certain items the state wants to promote the purchase of (like school supplies emergency preparedness supplies, or energy efficient appliances) can be purchased sales tax free. Connecticut had a sales tax holiday from the from Sunday, April 10 to Saturday, April 16, 2022. During this week, certain gas taxes and sales and use taxes on certain clothing and allocating funds for free public bus services were subject to the tax exemption. For more information on the sales tax free week, click here.
Our team at Miles Consulting Group is always available to discuss the specifics of your situation, whether in Connecticut or other U.S. States, and help you navigate the complex tax structures arising from multistate operations. Call us to help you achieve the best tax efficiencies.
Random Facts
- Connecticut and Rhode Island never ratified the 18th Amendment (Prohibition).
- Connecticut is home to the oldest U.S. newspaper still being published: The Hartford Courant, established in 1764.
- The first speed limit ever set was passed into law in Connecticut in 1901, a neck breaking limit of 12 miles per hour.
- Connecticut was the first state to have permanent license plates, starting in 1937.
- Cattle branding in the United States began in Connecticut when farmers were required by law to mark all of their pigs.
- The first lollipop-making machine opened for business in New Haven in 1908. George Smith named the treat after a popular racehorse.
- The inventor of the process of vulcanization, Charles Goodyear, was born in New Haven. Goodyear was a self taught chemist and engineer.
- Noah Webster, of Webster’s dictionary, was born on October 16, 1758, in the West Division of Hartford, CT (now West Hartford). He attended college at Yale in New Haven. His first edition of his dictionary was published in 1806.
- Eli Whitney was famed for inventing the cotton gin, was from New Haven, CT.
An Important Update On SaaS And Sales Tax: Answering Client Questions
The Software-as-a-Service (SaaS) industry has continuously grown since the first SaaS company was founded in 1999, and remains a complex and ever-changing field. It can be especially complicated when it comes to sales tax, and we constantly receive questions about it. The very nature of the product (is it a service or a software?) is a large part of the confusion, and as a result, states may define SaaS differently, which makes it hard for businesses, especially smaller ones, to keep up. SaaS is now taxed in over 20 states, but for different reasons. Other areas unique to SaaS companies in the realm of sales tax include the sourcing of revenue to the correct state, timing of the recognition of the sale and the application of the tax (versus recognition of revenue for financial/book purposes).
If you are new to the application of sales tax to SaaS, we recommend you check out our previous articles on the topic, including this one here, where we discuss in-depth what makes SaaS sales taxation so complex. In the current article, we discuss answers to specific SaaS sales tax questions and clarify how we can help companies move forward.
Q: How Has The SaaS Industry Grown This Year?
Before we dive into our SaaS and sales tax client questions, we want to share some SaaS industry updates to set the precedent for how large this industry has become. Since 2015, the SaaS industry has grown from $31.5 billion to an estimated $171.9 billion. That equates to 500% growth in only seven years. Overall, the annual growth rate is projected to surpass 17% in 2022. As you can see, this is a fast-growing field of technology, and it is important to stay ahead of your sales tax obligations.
Q: Do All States Tax The SaaS Revenue Stream?
Currently, not all states tax the SaaS revenue stream, though many do. It gets a little complicated because SaaS is considered a service in some states and not in others. To make matters more difficult, some states tax these types of services, while some do not. For example, in Arizona, SaaS is considered a taxable service. In Washington, however, SaaS is considered to be a tangible software and is subject to sales tax because of that. In Texas, SaaS is regarded as a taxable data processing service and subject to 80% taxability (vs. 100%). Similar to all other aspects of sales tax, each state, and sometimes each city, has different tax legislation for different products and services. For instance, while the states of Colorado and Illinois do not tax the SaaS revenue stream at the state level, the cities of Denver and Chicago do! (Trust us, there's some nuance there, so if you have nexus in those cities, give us a call!) Discover more about SaaS taxability by state in our previous articles here and here.
Q: What About A SaaS Company Engaged In An M&A Transaction (Or Thinking About It)?
We often see SaaS companies in the middle-market (MM) space become targets for acquisition. These companies are often not as well-represented by tax advisors (specifically in sales tax) as the purchasing company. Oftentimes, the company hasn't considered all the ramifications of sales tax on SaaS until the purchaser brings it up in the due diligence process. Unfortunately, that can often be too late, as the seller is then left with significant exposure that can affect the purchase price, holdback, etc. and make a real financial impact on the seller shareholders. Ideally, a company planning an exit strategy via acquisition should engage in internal due diligence around this matter before getting deep into the deal. Here at Miles Consulting, we can help MM companies to either shore up their state tax exposure before a deal or during the due diligence process as an advocate for the seller. Coming in earlier is ideal, as it takes some of the urgency away and allows companies a bit of time to prepare analysis, take steps toward remediation (which may also include reaching out to customers regarding self-assessment) and overall employ an offense instead of defense. We often assist with determining how much companies potentially owe in retroactive sales tax (exposure analysis), how to come forward and fix it (remediation) and a plan to move forward.
Q: What Do We Do as SaaS Company That Needs To Register In Various States And What Are The Ramifications Of Prior Year Exposure?
We are frequently introduced to clients wishing to become sales tax compliant. Ideally, they'd like to register and simply move forward with collection, remittance and compliance. Unfortunately, they often haven't considered prior liabilities created by having nexus in a state (either physical presence or economic nexus). During the registration process, states will ask when nexus was created. If that date was in the past (and it frequently is), the state will expect the delinquent returns to be filed and overdue tax be paid.
We assist with that process by determining clients' nexus creation dates, estimated amount of exposure, an overall game plan for remediation and then actually doing the "heavy lifting" of assisting with voluntary disclosure agreements (VDAs) or backfiling. There are some nuances of when you would want to do a VDA versus backfiling; this is something that we can help with as well! Once we help a client become sales tax compliant, we can also assist them with a plan to move forward with a strong sales tax compliance strategy.
Q: How Can I Implement Software To Assist With Sales Tax Compliance?
Once a SaaS client becomes sales tax compliant for retroactive liabilities, they'll need to consider how they would like to move forward in the actual collection of tax from customers, remittance of tax to the states and filing returns. They have many different options. One option is to do this internally, which can be cumbersome in a smaller organization as it takes a lot of time and effort. Clients can also choose to acquire a software solution, such as Avalara or TaxJar (Miles Consulting Group partners with these companies), to assist with collecting the correct amount. To determine how to remit tax, file returns and stay in sales tax compliance, businesses also have many options, depending on cost, convenience, technical experience, complexity, etc. They can choose a complete software solution, a complete human solution or a combination of the two. This last option is where we often come in to help - we work with software but also apply a human approach by including a level of review that cannot be achieved with software alone.
Do You Need Help With SaaS And Your State Sales Tax Compliance?
State sales tax issues are complex and constantly adapting, especially when it comes to SaaS companies. It is important to consistently ensure you meet all of your sales tax compliance requirements. Working with an experienced team of state tax consultants like Miles Consulting Group is a great way to do this. If you have questions about your tax liability related to SaaS, or have any other state sales tax compliance questions, please contact us today. We're happy to clarify any multi-state tax issues you're trying to navigate.
Focus on Missouri
This month we travel to the “Show Me” state of Missouri. The people of Missouri have earned their motto as the “Show Me” state for their very practical skepticism of the fads that sweep other parts of the country. This attitude manifests itself in the state government’s approach to business encouragement and regulation.
The state is the 21st most extensive by area and is geographically diverse. North of the Missouri River, the state is primarily composed of rolling hills of the Great Plains and south of the Missouri River, the state is dominated by forests. The Mississippi River forms the Eastern Border of the State, eventually flowing into the swampy Missouri Bootheel.
As NFTs Gain Popularity, What Are The Sales Tax Ramifications?
Non-Fungible Tokens, or NFTs, have been around since 2014, but only obtained mainstream use in 2021. According to the Economic Times, NFTs have only gained momentum since. This is due to a variety of reasons including the connection with the metaverse and celebrities jumping on the NFT bandwagon. As a result, NFT sales have soared, with some bringing in millions of dollars. With the popularity of NFTs rising, what are the sales tax ramifications? In this blog article, we explore this new and multifaceted area of taxes.
What Is An NFT?
Before we explore NFT sales tax implications, let's clarify what an NFT is. An NFT is a digital asset that represents real-world objects like music, art and videos. Just about anything can be an NFT, and this link shares a list of some of the most popular types such as collectables, trading cards, art, memes and more. NFTs are bought and sold online, usually with cryptocurrency, a decentralized digital money based on blockchain technology like Bitcoin. As we mentioned above, NFTs have gained traction in recent years, especially as a way to buy and sell digital artwork. According to Forbes, about $174 million has been spent on NFTs since November 2017. NFTs stand out among most digital creations, because they are generally either very limited, or one of a kind, and have unique identifying codes.
NFTs And Sales Tax
According to Bloomberg Tax, at least 31 states apply sales taxes to digital products and services, some of which are broad enough to likely include NFTs if they can be viewed (like artwork or trading cards) or heard (like music). No state in the United States currently implements specific NFT sales tax legislation. However, both Washington state and Puerto Rico are drafting regulations that would include NFTs in the definition of digital products when it comes to sales tax obligations. Once NFTs are added to this definition, it certainly raises questions about the sales tax ramifications. What kinds of transactions will trigger a tax collection duty? Given the anonymity embedded in many NFT transactions, how will the IRS (and in this case, states) source transactions and trace the identities of buyers and sellers? Stay caught up with our blog, as we will continue to follow this new and emerging aspect of sales tax and NFTs.
What Should You Be Aware Of As A Buyer Or Seller To Comply With All NFT Sales Tax Liabilities?
- What if I sell an NFT online directly to a purchaser?
Due to the landmark decision in South Dakota v. Wayfair (2018), every state with sales tax has introduced some level of economic nexus, meaning that a seller does not need to have physical presence in a state in order for the state to require the seller to collect its sales tax (if it meets a certain threshold of sales). This would include NFT sales if that state's digital product sales tax requirements are broad enough to include them.
- What if the buyer's state taxes digital products, but mine does not?
If the seller meets the threshold for total sales or separate sales transactions in the purchaser's state, then the seller would generally be required to collect and remit sales tax for that state. The seller should then look at the potential taxability of the NFT and determine the filing requirements. Some states may not require the registration for sales tax if all sales are non-taxable.
- How do I remit sales tax to the states that I am responsible for?
As with all multistate sellers, an NFT seller must register with the state tax agency to obtain a sales tax license or permit. This can be overwhelming, especially if you are a small seller and need to register in multiple states. Some states also allow their municipalities to administer their own local sales tax, which would require filing at the local level in those states. We recommend reaching out to qualified multi-state tax professionals, like our team at Miles Consulting, to help guide you through this process.
Do You Need Help With NFTs and Your State Sales Tax Compliance?
These state tax issues are complex and continuously evolving, especially when it comes to new technology like NFTs. It is important to consistently ensure you are meeting all of your sales tax compliance requirements. Working with an experienced team of state tax consultants like Miles Consulting Group is a great way to do this. If you have questions about your tax liability related to NFTs, or have any other state sales tax compliance questions, please contact us today. We're happy to clarify any multi-state tax issues you're trying to navigate.
Beer Brewing and Sales Tax in California
The team at Miles Consulting Group loves beer (and wine) and we especially love to help beer brewers with the challenges of reporting sales and use taxes.
Craft brewing is a highly competitive industry – California leads the U.S. with almost a thousand craft beer breweries; New York, Pennsylvania, Colorado, Washington and Michigan have about 400 craft brewers per state – that’s a lot of competition. So, with all that competition, craft brewers need to look for edges to stay in business by increasing profits and reducing operating costs. Miles Consulting Group can help craft brewers minimize their operating costs by reducing their sales and use tax burden, or “beer-den.” In this blog we are going to focus on the state with the most craft beer brewers – like the color of a crisp lager we will direct this blog to the Golden State – California.
Returns And Sales Tax: What Are Important Things To Know As A Business?
Returns are inevitable when you sell a product, whether you are a brick-and-mortar business, an online retailer or both. According to a recent survey published by the National Retail Federation and Appriss Retail, retailers saw about 16.6% of total merchandise sold eventually returned in 2021, which is up from the 10.6% of total returns in 202o. Since you are bound to see returns as an e-commerce business, it is important to be aware of the sales tax refund obligation process.
It seems simple enough, right? You need to refund your customer the sales tax that you collected from them, so just claim a credit on your next sales tax return. Unfortunately, as with just about every area of sales tax, the answer is a little more complicated. Keep reading this article to learn more about your state's requirements for refunds and sales tax.
How Many Returns Are We Talking About?
First, let's discuss the number of returns that happen in the United States. As we mentioned above, about 16.6% of total merchandise sold in 2021 was returned, but if we look at online retail exclusively, about 21% of total items were returned, according to the same survey. In terms of dollar amounts, online sales totaled about $1.050 trillion of total sales last year, with approximately $218 million returned. This can add up to a lot of sales tax. Since the average state sales tax rate is 1.45%, or $3,161,000 in this example, it can add up quickly! The amount of returns can also vary depending on the season. For example, in the 2021 holiday season, November and December, total retail sales reached $887 billion, with an expected return rate of about 18%, higher than the yearly rate. Return rates don't just vary depending on the time of year, but also on the industry. According to a 2021 study, clothing, shoes and electronics are the top three categories of most commonly returned items, with 88% of those surveyed reporting they have returned a clothing item before. But how do these return rates affect the sellers in terms of sales tax refunds?
Sales Tax And Refund Requirements
For most states, if you refund sales tax to a customer for a previous taxable period, you are technically obligated to file an amended return for that period. On that amended return is where you would claim the refunded sales tax. Then, the state can add this back as a credit toward a future sales tax payment. The main reason for this is that sales tax rates are constantly changing, sometimes by a lot. For example, if the sales tax rate increases by 1% between the time your customer bought the item and the time that they return it, you would be wrongly credited an extra 1%. This can add up, especially for large businesses. State's requirements for an amended tax return help avoid this issue.
That said, sometimes companies might still make the decision to take the credit in the period of the return. We recommend our clients look at the materiality. Since there will likely be returns almost every filing period, the former approach would lead to filing amended returns almost every period, which can result in an audit flag.
How To File After A Sales Tax Return
Now that you know what your sales tax obligations are after a customer makes a return, how do you file the return? Most states allow you to log in to your state's taxing authority and just amend the previous return online. However, some states do require a physical paper return. If you are unsure what your state's requirements are, or would like help from a state tax expert, our experienced team at Miles Consulting is happy to assist you.
Documentation Is Key
Whether you're talking about merchandise returns being recorded in the right period or other adjustments to be made on a sales tax return, it is always important to maintain proper documentation in case of an audit. This is true for all aspects of tax compliance, so we just can't stress it enough.
Do You Need Help With Your State Sales Tax Compliance?
Sales tax can be complex and varies state to state. Working with an experienced team of state tax consultants like Miles Consulting Group is a great way to ensure you meet all of your sales tax obligations. If you have questions about your tax liability or have any other state sales tax compliance questions, please contact us today. We're happy to clarify any multi-state tax issues you're trying to navigate.
Focus on Delaware
This month we travel east to the state of Delaware, the first State. It is nicknamed the first state because it was the first state to ratify the U.S. Constitution.
Delaware occupies the northeastern portion of the Delmarva Peninsula and some islands and territory within the Delaware River. It is the second-smallest and sixth least populous state, but also the sixth-most densely populated. The state is divided into three counties, having the lowest number of any state (unless one counts Louisiana and Alaska, which do not have counties, but parishes and boroughs respectively). This state can be seen as a hidden gem; being surrounded and overshadowed by its neighboring states, Pennsylvania, Maryland, and New Jersey.
Service Sales Tax By State: Important Things To Know
According to Focus Economics' recent economic forecast, the services sector is the main engine of our economy in the United States. Since service-oriented companies are such a large part of our economy, we thought it would be beneficial to look at how services are taxed in different states across the country.
Are Services Subject to Sales Tax?
When we think of sales tax, most people assume that only the sales of tangible goods are subject to it. Most state laws are written to assume that sales of tangible personal property are subject to sales tax unless there is a specific exemption (there can be many!) and laws for sales of services are written to assume that services are exempt unless specifically enumerated. So historically, while it certainly varies by state, few services were subject to sales tax.
Right now, states tend to tax only specific services. This may seem surprising, because this tax could be a huge way to increase economic revenue. There is a lot of discussion at state legislative levels to increase the tax base to include more services. While this may be true, Scott Peterson, vice president of government relations at Avalara, shares that the complex part of tax policy change isn't the amount of money that new legislation will produce, it is balancing who will take on the tax burdens. This may be why legislation to tax services has been introduced but has not always passed. While no two states currently tax services in the same way, Avalara divides the general types of services being taxed into six categories.
- Services related to the sale of tangible personal property (TPP). This typically means services that improve or repair property such as car repair or carpentry services.
- Services to real property including landscaping and janitorial work.
- Services performed for companies and businesses fall into this category, including credit reporting agencies and telephone answering services.
- Personal services, which includes services that offer personal grooming or other types of "self-improvement". Tanning salons and animal grooming services would fit under this category.
- Professional services including physicians, accountants and other licensed professionals.
- Amusement/recreation services is the last category. This includes admission to amusement parks and other types of entertainment.
Even if two states have tax legislation in the same category, the legislation can look drastically different between the two and the devil is always in the details. Keep reading to learn more about some specific states' service sales tax legislation.
Potential New Service Tax In Nebraska
If bill LBB 422 is passed in Nebraska, more services would be subject to sales tax and the sales tax rate would be lowered as well. Services that would be taxed if the bill is passed include dry cleaning, interior design and investment advice. If passed, the legislation would take effect in November of this year.
Indiana Service Tax Updates
Another state that could potentially introduce service sales tax legislation is Indiana. If Senate Bill 372 is passed, sales tax would apply to most services in the state starting January 2023. This would include "any activity engaged in for another person, if the person purchases the service as the end user of the service for consideration."
The services exempt from sales tax would include B2B transactions, government services and services rendered by an employee.
Current Service Tax Legislation In California
California does not generally collect sales tax on services, except for when the service is "inseparable from the sale of a physical product." This can include the setup of a purchased machine or other assembly purchases. We see this frequently in the complex rules of "fabrication" labor. There are some nuances in these rules that delineate the differences between non-taxable repair and taxable fabrication.
What To Expect For Service Tax Legislation In Other States
Currently, Hawaii, New Mexico and South Dakota are the only states that tax all but specified services, as their models are more gross receipts based, so there is a lot of room for service sales tax legislation in other states. We will keep you up to date with our blog!
Do You Need Help With Your State Sales Tax Compliance?
State tax legislation is complex and varies state to state. Working with an experienced team of state tax consultants like Miles Consulting Group is a great way to ensure you meet all of your sales tax obligations. If you have questions about your tax liability or have any other state sales tax compliance questions, please contact us today. We're happy to clarify any multi-state tax issues you're trying to navigate.
Important Updates California Taxpayers Need To Know About Unclaimed Property
Unclaimed property is not an area that we normally focus on at Miles Consulting, but we have received questions due to its relationship with state tax. In this article, we discuss what unclaimed property is and new California updates that taxpayers should be aware of.
What Is Unclaimed Property?
Before we discuss the new unclaimed property updates in California, it is important to have a clear understanding of what unclaimed property is. All 50 states currently have unclaimed property (sometimes also referred to as escheat) legislation. Simply put, unclaimed property is when a company has an outstanding debt that has not been claimed by the rightful recipient. When this happens, the state will help recover it. This subsequently creates a huge hassle for the companies.
Unclaimed property is typically seen in banking, where an account will go delinquent if there is no activity. The bank will then try to find the account holder, but if they are not able to they still have to do something with the funds. They turn them over to the state for safekeeping on behalf of the account holder. The state will publish lists of unclaimed property that people can check. Eventually, if the person is not found, the state gets to keep the money. We also see this in non-banking situations with companies and payroll checks. Imagine you get a check from your company for $35. Maybe it is your last check from the business and you never cash it in because you lose it. Technically, your employer can't just void it and keep the money. They need to make multiple attempts to try and get it to you. The onus is on the business to make multiple attempts to contact the rightful owner. If that isn't successful, they need to send it to the state as unclaimed property. As you can imagine, from a business's standpoint, trying to keep track of such items can be quite cumbersome. "Debts" like this can often pile up for years - which can create a problem for a company if the state ever comes out to audit.
According to NBC, California currently holds $9.3 billion in unclaimed property and is urging residents to check if they have a claim.
Here is a link in California where you can see if you are owed any money, as well as some more information regarding unclaimed property. There is no time limit or fee for filing a claim, and some of the simpler claims can be filed in as little as two weeks.
California Unclaimed Property Updates
The California Franchise Tax Board (FTB) is requiring certain business taxpayers to report their unclaimed property compliance when filing their 2021 business tax returns. The legislation authorizes the FTB to share the information with the State Controller's Office (SCO) to aid in its enforcement of unclaimed property laws.
California A.B.466 was enacted on July 16, 2021 and amends the state's income tax disclosure provisions to allow the FTB to provide the SCO with certain taxpayer information. Following this authorization, the FTB announced that it would add the following questions to its corporate, partnership and LLC tax returns:
- Has this business entity previously filed an Unclaimed Property Holder Remit Report with the State Controller's Office?
- If you answered with a yes, when was the report filed?
- What was the amount last remitted?
According to the bill analysis, there has been low reporting under the current unclaimed property laws, and as such, "..the SCO estimates that businesses could be holding more than $17.6 billion in unclaimed property." The SCO believes that compliance with the state's unclaimed property reporting laws is potentially as low as 2% of all businesses.
What Should You Do Next?
If you are a California business that has not filed an unclaimed property report, you may want to take an internal review to see your potential liability. Just like with all tax compliances, we recommend being proactive to see what your liabilities may be. If you do need assistance in this area, we can make a referral to one of our partners who may be able to assist.
Do You Need Help With Your State Sales Tax Compliance?
State tax legislation is complex, and working with an experienced team of state tax consultants like Miles Consulting Group is a great way to ensure you meet all of your sales tax obligations. If you have questions about your tax liability or have any other state sales tax compliance questions, please contact us today. We're happy to clarify any multi-state tax issues you're trying to navigate.
What's a "Reverse Sales Tax Audit?" And Why do you Care?- Part 2
Last month our blog on reverse audits highlighted the primary steps of a reverse audit, and why your company might benefit from one. This month we will touch on some of the procedural best practices and pitfalls as well as some specific points to consider when embarking on a reverse audit
Filing Claims for Refund
Many hours of good work put into a reverse audit can be wasted if the proper refund claims are not in place. Claims need to be filed timely. In California for example, the statute of limitations is three years from the due date of the return for the reporting period for which the asserted overpayment was made. However, if we again look at California as an example, we will need to determine the nature of the tax overpayment. If we are we talking about sales tax paid to a vendor in error, the period open for review is based on the vendor’s statute of limitations. If the vendor has an ongoing audit with waivers in place, you could have an extended claim period. If the tax in question is California use tax, whether use tax self-assessed or use tax paid to vendor, the claim period is based on the purchaser’s statute of limitations. There are numerous factors that come into play when asking the question was the claim filed timely.
