Amazon Shares Valuable 3rd Party Sales Tax Data with MA
As we wait for the courts to settle the online sales tax debate, states like Massachusetts are continuing to go after third-party resellers, specifically those that sell on Amazon, in an attempt to track down the sales tax revenue they've been missing.
In September, Massachusetts sued Amazon for data about its third-party sellers with inventory in the state. A judge ruled in Massachusetts' favor and, finally, in late January Amazon notified its sellers they would turn over the information, including:
- Each marketplace seller’s contact information, including name, address, federal tax ID number, and phone number
- Estimated value of each marketplace seller’s inventory in Amazon’s Massachusetts fulfillment centers, based on the seller’s selling prices in late 2016 and 2017
FOCUS ON NEW HAMPSHIRE
This month, we travel to the New England region of United States to New Hampshire. Known as the Granite State, it is defined by its quaint towns and large expanses of wilderness.
New Hampshire is a state with some mighty history. In January 1776, it became the first of the British North American Colonies to establish a government independent of the Kingdom of Great Britain’s authority, and it was the first to establish its own constitution. Six months later, it became one of the original 13 states that founded the United States of America, and in June 1788 it was the ninth state to ratify the Constitution, bringing that document into effect.
3 Ways High-Tax States Are Fighting Federal Tax Reform
As this year's federal tax reform begins to come into play, high-tax states like California, New York, New Jersey and Maryland are coming up with ways to work around it, "reworking their tax codes to ease residents' pain from new limits to federal deductions for state, local and property taxes," as CNBC explains.
How are legislators in these states fighting against the tax reform? Three states - New Jersey, Connecticut and New York - are taking the matter to court, suing the federal government over it. That’s not all high-tax states are doing, though. Here are a few additional ways some state legislatures are proposing to counteract some of the new measures.
In California: Donate to the California Excellence Fund
In response to the $10,000 cap on property, state and local income tax (SALT) deductions, California Senate leader de Leon introduced a bill allowing the residents to pay some state taxes to the California Excellence Fund, a state nonprofit. This would let them deduct their charitable contribution on their federal tax return. The idea is that the taxpayer would pay the first $10,000 of their SALT taxes as normal, and then contribute the remaining amount to the fund as a donation, thereby making their entire SALT taxes deductible. For more information, check out this recent blog post.Read more
BREAKING NEWS CONCERNING ONLINE SALES TAX
The United States Supreme Court announced on January 12, that it has granted certiorari and will hear a case related to state taxes - something that does not happen often! The High Court could finally settle an ongoing battle between e-retailers and states about how online purchases are taxed, and in the process may overturn a 1992 ruling which currently prevents states from collecting sales taxes on online purchases unless the seller has a physical presence in the state. An overhaul of this nature would change the state tax landscape significantly and require more online sellers to collect sales tax.
What’s happening?
Based on a long standing Supreme Court ruling from 1992 (Quill Corp. v. North Dakota), online retailers are not required to collect sales tax unless they have a physical presence (such as an office, inventory, or people) in a state. Over the past several years as online purchases have become prolific and states are losing sales tax revenue, the states have fought back by passing creative legislation to allow for collection of sales tax on online purchases. Several state legislatures have recently enacted laws referred to as “economic nexus” provisions, where a company creates nexus in a state by virtue of a minimum amount of sales revenue or instances of sales into a state, instead of looking to the physical presence threshold. Some states, like Colorado, have passed onerous reporting mechanisms to, in effect, report on their customers who may not be self-assessing use tax.
The Good & Bad of the New Tax Reform: How California's Affected
The beginning of the year marks the start of many new things: a new year, new business goals and new federal tax reform. What do the changes in tax law mean for California companies – especially in Silicon Valley?
In The Daily Journal, Carl Guardino (CEO of the Silicon Valley Leadership Group) likened the latest tax reform to the 1960s western, "The Good, the Bad and the Ugly" - and for good reason. While there are some changes that will benefit corporations, others will likely make it difficult for businesses in the area.
Are these changes considered ‘good, bad and ugly’ throughout the entire state, all the way down to Southern California? Keep reading to find out how this year’s federal tax reform will affect corporations in Silicon Valley as well as Southern California.
‘The Good’ of Federal Tax Reform
One big change to the latest tax reform is corporations seeing tax rates slashed; instead of paying 35 percent, they'll only need to pay 21 percent. Also, companies making profits overseas will only be subject to taxes based on where the sales are made, eliminating an additional tax they've been paying in years prior. As you can imagine, these changes will make a big difference for many companies in the area. It also makes U.S. businesses more competitive with the global innovation economy, an important field for many Silicon Valley enterprises.Read more
State Tax Deduction Limit? California Fights Back.
By now many of us in California have contemplated our fate regarding how the tax reform act passed by Congress last month will likely hurt Californians as a result of the federal limit on the state and local tax deduction for individual taxpayers.
In an effort to mitigate the limit of this deduction for Californians, state lawmakers have quickly looked to alternatives.
New Tax Plan – limited deduction
For residents of California and other high tax states, a major item of concern in the tax act is the cutback of deductions for state and local taxes (SALT). Taxpayers will now be able to deduct only up to $10,000 in SALT, including property taxes. According to this recent LA Times article, limiting the SALT deduction could affect as many as 6 million Californians. California taxpayers accounts for almost 20% of all SALT deductions, which is the highest state in the nation. Other states with large amounts of SALT deductions include New York, New Jersey and Connecticut, perhaps not coincidentally - all “blue” states.
How to mitigate the problem?
One option proposed last week by Senate President pro Tempore Kevin de Leon (D – Los Angeles), would be to recast state and local taxes as charitable contributions, which remain fully deductible under the GOP tax act. SB227 (known as the “Protect California Taxpayers Act”) would allow California taxpayers to make a charitable donation to a government entity, the California Excellence Fund, in the amount of their state taxes. They would then receive a dollar for dollar tax credit on their CA tax return in the amount of the donation. (For example, a taxpayer owing $15,000 in property taxes, might pay this amount to the Excellence Fund. The taxpayer then gets a tax credit for the entire $15,000 on their CA return. On the federal tax return, the taxpayer correctly classifies this amount as a charitable contribution, which is not limited to the $10,000 SALT rule. So, by essentially reclassifying the property tax as a contribution, the taxpayer still gets the full deduction for the entire $15,000, rather than just $10,000 on their federal return.)
Playing Devil’s Advocate?
So, that all sounds good. But will the IRS allow it? Will Congress?
What constitutes a charity? The Internal Revenue Service (IRS) and federal courts have ruled that government entities can qualify as charities for the purpose of the charitable deduction, even when the donor receives a full state or local tax credit in return. California and other states already have similar programs in place. For example, CA has a College Access Fund, which grants a 50% tax credit for contributions to the Cal Grants Program, which aids low-income college students. 17 additional states use a similar model to fund private education.
While the proposal is certainly creative, and has some defendable history behind it, we recommend to be cautiously optimistic about its ultimate passage in the state and then whether Congress will find a way to shut it down by passing further clarifying legislation.
For more information regarding this act published by the San Joe Mercury News, click here.
Stay tuned for further updates!
If you have any questions, please don’t hesitate to contact us at info@milesconsultinggroup.com. We are happy to help with all of your tax needs.
Happy New Year! An Online Sales Tax Preview for 2018
Happy New Year from everyone at Miles Consulting Group! We hope you had a wonderful holiday season and are looking forward to 2018. We certainly are!
What’s on the horizon for the coming year? We’re looking forward to seeing how the following state tax news unfolds during this year:
- States’ conformity to the new federal tax act just passed. Many states may de-couple from some of the changes in the federal law. Planning for this could prove challenging!
- Supreme Court cases: It will be interesting to see if some of the state legislation we’re watching makes it to the U.S. Supreme Court, such as South Dakota's Senate Bill 106, Ohio's "cookie directive" or Indiana’s economic nexus. Could this finally be the year that the Supreme Court (or Congress) weighs in on the online sales tax debate?
- Increased compliance for those that decide not to collect sales taxes (because they don’t have nexus in a state), but require sharing customer data in states such as Washington and Colorado. We expect more states to jump on this bandwagon in 2018.
Thank you for an Awesome 2017
In our last blog post of 2017, I’d like to stop and reflect for a moment with you, my readers.
As we quickly approach 2018, we know that the multi-state tax landscape will continue to be interesting. We’ll have plenty of opportunities in the upcoming months to discuss the state tax impact of the recently passed tax act, potential Supreme Court cases, sales tax on online taxes, and myriad other “developments” in many states.
But today, I’d like to simply say thank you! Thank you to clients who continue to engage with us for your multistate tax needs – from special projects, to nexus and taxability studies, to controversy work and much more! Thank you to colleagues, CPAs, attorneys, temporary/fractional CFOs and compliance firms with whom we partner to deliver amazing service to our clients. Thank you to trusted advisors and colleagues in my many networking groups (ProVisors, AFWA, NAWBO and WITNG, among others). Thank you to my business coach of many years, Barbara, who helps to keeps me accountable and on track – both with the state tax consulting and my Jumpstart Your Rainmaking program. And of course to my family – who continue to support me in these endeavors and frequently stop me and ask “How are you really doing?!” or “How can I help?” And thank you also to the team behind Miles Consulting Group who help with IT, marketing, administration, and so many other things that continue to keep us humming! Thank you Jeff for all that you do!
We are excited about a prosperous 2018. We look forward to continuing to work with our current clients and meeting and working with new ones. We’re already looking at some travel to conferences in the new year (both to take in some new information AND to be on the teaching side to share information with others), and continuing our on-line education via webinars (both on the tax technical and Rainmaking sides of the house.
So, join us in turning that calendar page to January 2018 in just a few days. We are excited about working with all of you and seeing what that year will bring.
Happy holidays and Happy New Year to you and yours!!
Fondly,
Monika & The Miles Consulting Team
The Top 8 Significant Sales Tax Issues of 2017
As 2017 comes to a close, we thought this would be a good time to reflect on the past year. There have been quite a few notable developments in the online sales tax realm and in multistate issues in general over the last 12 months. Here are 8 developments that we thought were of particular significance, which we’ve discussed on our blog in the past year.
1. Fascinating Ramifications of Colorado's New Online Sales Tax
Colorado has been at the forefront of the internet sales tax debate since 2010, when it passed a law that required companies with more than $100,000 in sales that did not have nexus in the state to 1) alert Colorado customers that state sales or use tax is due and 2) file annual reports to the state, listing all the names, purchases and shipping addresses of Colorado customers.
After making its way to the courts and several rounds of negotiations between the state and taxpayers, the law went into effect on July 1, 2017. Find out why the U.S. Supreme Court chose not to hear the case and more in the full blog post.
2. Another Move Toward Economic Nexus
When businesses sell their products across state lines, they need to think about whether they have taxable presence, or nexus, in the state and if their products are taxable. In 2017, several states began pushing the boundaries of defining the physical presence in order to generate more revenue. Welcome to the concept of "economic nexus."
Read more about this concept and how states such as Indiana are pushing limits through economic nexus in this blog post.Read more
FOCUS ON NEBRASKA
This month, we take a journey out west to Nebraska, where early settlers roamed the state. It used to be nicknamed the “Tree Planter’s State,” but was changed in 1945 to the “Cornhusker State.” Husking corn was done by hand by early settlers of course (before the invention of husking machinery). The University of Nebraska athletic team is called the Cornhuskers.
Nebraska is a Midwestern U.S. State encompassing the prairies of the Great Plains, the towering dunes of the Sandhills and the panhandle’s dramatic rock formations. Lincoln, the capital and a vibrant university town, is distinguished by its soaring state capitol. The city of Omaha is home to the Durham Museum, which honors the state’s pioneering past in a converted railroad depot.
