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.
South Carolina to Amazon: Collect Sales Tax Now
States are continuing to come up with ways to collect sales tax from online sellers (specifically Amazon's third-party sellers). South Carolina recently filed a motion in court to force Amazon to collect these taxes and fees on behalf of its third-party sellers.
As it is now, Amazon collects sales tax on items purchased directly from them, but the retail giant does not collect it on sales made on the site by a third party. South Carolina is claiming it could lose more than $500 million in sales tax if Amazon doesn't begin collecting them now, and is asking the court to require the retailer to charge sales tax and put it into a trust or escrow-type account until the case is settled.
South Carolina’s Argument for Amazon Collecting Sales Tax
The state is most concerned with receiving the sales tax they’re owed. Someone owes it to them, and they’ve chosen to pursue Amazon for it (rather than numerous third-party sellers or the ultimate consumers).Read more
More Amnesty on the Way!
Across the U.S., amnesty seems to be a popular topic these days. The Multistate Tax Commission’s (MTC) special amnesty program for marketplace retailers recently ended. And a few other states have recently announced their own amnesty programs so that they can benefit from potential increased compliance as well. Connecticut (CT), Ohio (OH) and Rhode Island (RI) are the latest states to roll out amnesty programs of their own. And we expect others to follow. The states administer amnesty programs because they want to induce companies to become compliant by waiving, or limiting penalties and interest for prior unpaid taxes.
Recent MTC amnesty program
Many states just took part in a special amnesty program. The MTC had negotiated this special program for online sellers using marketplace fulfillment services (such as Fulfillment by Amazon) that created nexus and thereby had sales tax and income tax obligations. Twenty five states participated, including CT and RI. To find out more about this amnesty program, click here.
This special amnesty program waived taxes in addition to interest and penalties. We’ve cautioned our clients not to expect amnesties to be that generous in the future. Most state amnesties allow taxpayers to waive penalties and some interest, but rarely the tax itself.
FOCUS ON MICHIGAN
This month takes us to the Wolverine State of Michigan. The origins of this name are obscure, but may be derived from a busy trade in Wolverine furs during the 18th Century.
Its largest city, Detroit, is famed as the seat of the U.S. auto industry, which inspired Diego Riviera’s murals at the Detroit institute of Arts. Also in Detroit is Hitsville U.S.A., the original headquarters of the Motown Record Company. Michigan is home to many great musicians including The Supremes, The Temptations, Stevie Wonder, Smokey Robinson, Bob Seger, Kid Rock and Alice Cooper.
12 Important Details: Sales Tax & WA's New Marketplace Facilitators
We recently shared an overview of Washington’s New Marketplace Fairness solution. While we’re skeptical it will help rather than hinder, it’s important you know additional details about marketplace facilitators and sellers.
Marketplace Facilitator Overview
- Starting in January 2018, marketplace facilitators will need to collect sales tax on behalf of marketplace sellers that have not established a physical presence, or nexus, within the state.
- Facilitators are responsible for collection of sales tax if they themselves have nexus in Washington State or $10,000 or more in retail sales within the state. This can include their own products as well as sales they make on behalf of a remote seller.
- What exactly do these facilitators need to do? As the Department of Revenue explains:
- Collect and pay sales tax on sales to Washington consumers
- Follow the use tax notice and reporting requirements [as explained].
What is WA's Marketplace Fairness? New Online Sales Tax Solution
For years, Washington State has been one of the states passing online sales tax legislation. From statutes expanding nexus (making more businesses responsible for the state's taxes and fees) to its five-point internet sales tax solution, the Evergreen State is quick to come up with more solutions to make the marketplace "fair."
The latest attempt to level the playing field makes some fairly aggressive changes in the state’s sales tax collection policy for marketplace facilitators.
While the state says it will make the marketplace more fair to brick and mortar retailers, we’d actually argue it’s a compliance burden and onerous on the seller. Why? The "solution" designates three additional definitions businesses will need to examine in order to determine how they apply if the definitions do apply, the business needs to pay close attention to another piece of legislation that may change again in the future.
An Overview: Marketplace Fairness
Here’s an overview of the new marketplace fairness solution.
Beginning in the New Year, "Certain marketplace facilitators, remote sellers, and referrers have new obligations related to the collection of sales or use taxes or the providing of notifications."Read more
Update on the CA Competes Tax Credit
As the mainstream media wonders where Amazon will locate its HQ2, many states are in the news touting their credits and incentives benefits to draw in company expansions. We thought it would be a good time to revisit the California Competes Tax Credit. As we’ve reported before, the credit has been available since January 2014 and isn’t scheduled to sunset until 2025. Every year, the state earmarks funds for the program of approximately $200 million, and companies compete for the funds during three application periods per year.
The CA Competes Tax Credit is an income tax credit available to companies who want to expand their business in CA. (They can be in state businesses expanding or businesses new to the state.) Companies that apply for this credit must submit applications to the state detailing increased investment in CA. Tax credit agreements are negotiated by GO-Biz and approved by a statutorily created “California Competes Tax Credit Committee.” The GO-Biz is a board consisting of representatives from the Governor’s office of Business and Economic Development. Not all companies requesting money receive it. There is a subjective process for allocating the funds annually.
New in the Online Sales Tax Realm: States & 3rd Party Sellers
If you've purchased from Amazon lately, you may have noticed they've started charging sales tax. However, many third-party merchants that sell through the website haven't been collecting it.
In fact, research shows that despite half of online sales happening through marketplaces (a number which is expected to grow to two-thirds within five years), these sellers don't collect sales tax - even if the retailer they work through does (such as Amazon).
States’ Efforts: Collecting Sales Tax From Third Party Sellers
Come December 1, it's expected the states involved in the amnesty program we've recently discussed will begin collecting sales tax from online merchants - including those that sell through a website like Amazon.
As the Seattle Times points out, this presents an important question: "Who will be responsible for collecting and remitting the taxes when someone buys something from a third-party seller on Amazon.com? Is that Amazon’s job or the merchant’s job, or some combination?"Read more
