More Amnesty in the Wake of the Wayfair Decision!
There always seems to be an amnesty program going on somewhere. We recently reported on an amnesty program in Texas and other states are jumping on the bandwagon as well. The recent Wayfair Supreme Court decision has shed light on the requirements to collect sales tax and as a by-product more companies are focusing on getting into compliance. States are encouraging this behavior by administering amnesty programs.
When businesses become delinquent on their taxes, they often accrue penalties and interest with the states. During these amnesty programs, states may waive penalties and/or interest. States administer amnesty programs because they want companies doing business in their state to be compliant and in the process collect the revenue!
U.S. SUPREME COURT SALES TAX DECISION (WAYFAIR)- Q&A
The hot news in the sales tax world within the last week is, of course, the U.S. Supreme Court’s 6/21/18 ruling in South Dakota v. Wayfair, Inc. This ruling overturned the high court’s 1992 decision in Quill (Quill Corp v. North Dakota, 504 U.S. 298 (1992)), which set a standard requiring substantial physical presence before a state could enforce the sales tax collection responsibilities on a seller. It’s a standard that we’ve lived with for over 25 years. But in the decision for the majority in Wayfair Justice Anthony Kennedy, who served on the Court in 1992 and at the time voted in favor of the Quill decision, now indicated that “the internet’s prevalence and power have changed the dynamics of the national economy” since 1992’s ruling, and that for many reasons, it was time to revisit and overturn the ruling.
So, what does it mean for our clients? In this blog, we address a few of questions that have come up for us in the past few days.
An Update On Recent California Taxes: What You Need To Know
Have you been keeping up with California’s recent news regarding taxes? From cannabis to tap water and gas, California’s various tax legislation would impact all residents. Here’s a recap of each one.
California’s Taxes on Gas
Senate Bill 1 increased gas taxes by 12 cents per gallon, diesel fuel 20 cents per gallon and raised vehicle fees. The legislation was approved by both the Legislature and the governor back in April and is projected to raise $5.4 billion a year for road and transit projects. While the tax revenue is earmarked for important work within the state, 51 percent of registered voters report they'd repeal the tax if it were placed on the statewide ballot in November.Read more
FOCUS ON RHODE ISLAND
This month we travel north east to The Ocean State of Rhode Island. It is nicknamed the Ocean State due to its large number of ocean front beaches, large bays and inlets that amount to about 14% of its total area. The state is mostly flat with no real mountains.
Rhode Island has two distinct natural regions. Eastern Rhode Island contains the lowlands of the Narragansett Bay, while Western Rhode Island forms part of the New England Upland. The state’s forests are part of the Northeastern coastal forests ecoregion.
Georgia's New Online Sales Tax Bill: What You Need To Know
While we wait for the U.S. Supreme Court’s decision regarding online sales tax, states are continuing to take matters into their own hands. Georgia recently passed House Bill 61, legislation requiring online retailers that make at least $250,000 or 200 sales a year in the state to collect sales tax or send "tax due" notices to customers spending a minimum of $500 on their websites.
Georgia’s Online Sales Tax Bill & The Supreme Court
Georgia’s new online sales tax law will go into effect January 1, 2019, however depending on how the Supreme Court rules on the Wayfair v. South Dakota case, Georgia's new legislation may be blocked. That doesn't necessarily mean the end of the law, though.
As Bloomberg explains, "Either way, the requirements might put Georgia in line for a lawsuit of its own... if the Supreme Court upholds the physical presence standard, Georgia’s collection requirement would remain constitutionally unenforceable, but dealers meeting either of the thresholds would be subject to the notice and reporting requirements."Read more
CALIFORNIA AND MARKET BASED SOURCING-ATTEMPTED CLARIFICATION?
Market-Based Sourcing of revenue for services as related to income tax apportionment purposes is becoming a trend among states. As our economy becomes more service intensive, determining how to properly source service and intangible revenue is vital to the states. According to Bloomberg BNA, California’s latest draft rules for market-based sourcing of sales of intangibles are confusing and could affect defense contractors, asset managers, and R&D service companies.
On May 18, 2018, the California Franchise Tax Board (FTB) held its third Interested Parties Meeting (IPM) regarding proposed amendments to California Code Regulations, Title 18 (CCR), Section 25136-2. This section of the CA Regulations describe the provisions of market-based sourcing rules for California taxpayers.
What You Need To Know About California's SB 993 & Why We're Against It
Sales tax is a major revenue source for many states, including California, which is why its legislature has been looking for additional ways to collect fees under the ‘sales tax’ umbrella.
For years, State Senator Bob Hertzberg has been trying to extend the state’s reach by imposing sales tax on services. Although 2015’s Senate Bill 8 didn’t pass, there’s another bill recently heard in the Senate Governance and Finance Committee: Senate Bill 993 (SB 993).
How Senate Bill 993 Affects Sales Tax
While SB 993 might help increase California’s revenue, it comes at quite a cost. This legislation would create a new sales tax on services like legal and accounting, further complicating an already intricate state tax code.
CalCPA makes several key points against this new sales tax legislation:
1. Ultimately, the sales tax burden will fall to consumers.
In order to compensate for the additional expense, businesses will increase their rates. This will happen in companies across the board – not just those providing legal or accounting services. Here are a couple of examples from CalCPA:
Consumers might not be taxed on the food they buy, but the cost of produce at the grocery store will likely increase since the grocery store overhead has gone up to include more costly accounting and tax services…or a small business that elects to have a retirement plan for its employees is required by law to meet certain audit requirements, which requires the use of an external CPA. Or they may need an audit or review as part of their application for a bank loan. Either the business absorbs the added tax on the service they are required to get, passes the cost to their consumers or elects to no longer offer a retirement plan to employees or opt to not pursue a planned expansion.Read more
FOCUS ON WISCONSIN
This month we travel north to the Badger State of Wisconsin, a Midwestern U.S. state with coastlines on two Great Lakes (Michigan and Superior) and an interior of forests and farms. Several beer companies are based in Milwaukee, and many offer brewery tours. The state is known as “America’s Dairyland” because it is one of the nation’s leading dairy producers, particularly famous for its cheese. Manufacturing, especially paper products, information technology (IT), cranberries, and tourism are also major contributions to the state’s economy.
Wisconsin’s geography is diverse having been greatly impacted by glaciers during the Ice Age with the exception of the Driftless Area. The Northern Highland and Western Upland along with a part of the Central Plain occupies the western part of the state, with lowlands stretching to the shore of Lake Michigan. Wisconsin is second to Michigan in the length of its Great Lakes Coastline.
Top Predictions You Need to Know: Wayfair v. South Dakota Online Sales Tax Case
As we wait for a decision in the Wayfair v. South Dakota Supreme Court Case regarding online sales tax, we thought it would be fun to take a look at possible outcomes depending on how the Court rules.
Our Opinion on the Online Sales Tax Case
Back in March we shared our predictions on how the online sales tax case's outcome would affect businesses.
What if the Supreme Court rules against South Dakota? We're back where we started with Quill remaining the physical presence standard and states passing various legislation that's either unconstitutional (and likely not upheld) or that requires onerous reporting.
What if the Supreme Court rules in favor of South Dakota? This would effectively reverse Quill, potentially leading to economic nexus becoming a viable threshold for creating nexus, companies selling more than a certain dollar amount needing to collect sales tax in many more states, retroactive sales taxes and more.
Read more details about our predictions in this blog post.
Other Opinions on the Online Sales Tax Case
Here are a few additional predictions we agree would likely come into play.Read more
SUPPORT FOR WOMEN ON PUBLIC BOARDS- CA SENATE BILL 826
Last week, I attended NAWBO-California’s annual Propel Your Business conference in Sacramento. I try to attend this conference every year because the dynamic and energy of the women business owners in the room is contagious! It reminds me of just a few reasons why I’m so proud to own my business.
One of the key items we discussed this year was California Senate Bill 826 – Corporate Board Gender Diversity, authored by Senators Jackson, Atkins and Leyva (all female senators). In short, SB 826 is a proactive approach to require more women directors on the boards of publicly held companies in California. The state is the 5th largest economy in the world, and as such, should set an example for responsible business globally.
