An Interesting Look at Sales Tax and Legal Marijuana
Although the presidential campaign seemed to dominate headlines earlier this month, there was another proposition that passed in California (as well as a handful of other states): recreational marijuana became legal. What does this mean for the Golden State’s sales tax revenue? And how will it affect other industries? I thought it would be worth taking a look at what other states have done and how California may proceed in the coming months.
How Colorado & Washington Approach Marijuana Sales Tax
Colorado and Washington legalized recreational marijuana in 2012. Here’s how they currently charge sales tax:
Colorado
In 2015, the state of Colorado received $135 million in sales tax revenue from nearly $1 billion in marijuana sales. It’s worth noting Colorado’s population is only about a tenth of California’s.
Recreational marijuana is subject to:
- 2.9% state sales tax (which is the rate for all tangible personal property)
- Any local sales taxes
- An additional 10% state marijuana sales tax
- Recreational marijuana is also subject to a 15% excise tax
In Colorado, the retail cultivator is liable for the excise tax, which is included in the price the consumer pays at the store (which is similar to liquor or tobacco). The sales tax is imposed on the sale from the retailers to the consumer.Read more
FOCUS ON GEORGIA
The last of the original thirteen colonies is Georgia, the Peach State. Georgia is also known as the Empire State of the South. The state has varied terrain with mountains and natural rock in the northwest, urban areas, forest in the southern part and farmland.
There are also many points of interest that attract visitors to Georgia. In Atlanta, there are the World of Coca-Cola and the Georgia Aquarium. Stone Mountain, just north of Atlanta, is Georgia’s most popular attraction, receiving over 4 million visitors per year. Callaway Gardens, in western Georgia, is a family resort. The area is also popular with golfers.
The 10 Worst States for Women: Equality Issues Nationwide
Happy Election Day! Regardless of your politics, this is a notable election for many reasons, one of which is the possibility of our nation’s first female president. While we wait for the results to come in, I thought it would be interesting to take a look how women fare in states across the country. This article ranks the 10 worst states for women, based on economy, leadership and health (pulled from census data). Keep reading for the results.
Issues Surrounding Women’s Equality in the Workplace
No matter the outcome of today's election, the presence of a female presidential candidate sheds light on many women's equality issues, most notably the gender wage gap, inflexibility in the workplace for pregnant women and those with young children, and a clear lack of women in positions of political influence.Read more
SALES TAX EXPOSURE REVISITED
In our practice, we see many new clients who have sales tax exposure issues. And we, of course, are happy to help them identify and then mitigate that exposure. As we discussed in our blog last month, SALES TAX NON-COMPLIANCE: WHAT’S YOUR EXPOSURE, sales tax exposure can add up quickly. Sales tax is a gross tax and if not properly collected from the buyers at the time of the sale, it can come back to haunt the seller later.
In this month’s blog, we add a little more detail to the example we started last month, just to show how these liabilities can really add up- and how we can assist in remedying them.
When a client comes to us with multi-state tax issues, we start by asking the questions:
- Does the company have nexus in the state in which it sells its products? If yes, since when?
- Is the product taxable?
- Are there any exemptions?
- What is the potential retroactive exposure?
New: Important California State Tax Credits and Incentives Updates
Are you trying to pursue California’s state tax credits and incentives? If so, there are three recent updates you may want to know about:
California Competes State Tax Credit and Online Reporting Requirements
As of January 1, 2017, the Governor's Office of Business and Economic Development (Go-Biz) will be required to report more detail about businesses taking advantage of the the California Competes State Tax Credit.
Current law requires Go-Biz to report the following online:
- The name of each taxpayer that receives a state tax credit
- The estimated number of jobs that are created or retained by the credit
- The amount of credit the taxpayer is allocated
- The amount of state tax credit recaptured from the taxpayer
The new law requires Go-Biz to additionally post the following information online:
- The primary location where the taxpayer will increase the net number of jobs or investments
- Information identifying credits considered priority due to being located in a high unemployment or poverty area
- Information that identifies if the state tax credit awarded is counted toward the amount allocated for small businesses
FOCUS ON WEST VIRGINIA
Known for its mountainous landscape and rolling hills, this month we travel east to West Virginia. The state has a rich history and is embedded in the Appalachian Mountains.
West Virginia is known for a wide range of outdoor recreational activities, such as skiing, whitewater rafting, fishing, hiking, backpacking, mountain biking and hunting. For something on the calmer side, the state offers many golf courses.
It is also one of the most densely Karstic areas in the world, making it a choice area for recreational caving and scientific research. Karstic topography is a landscape formed from the dissolution of soluble rocks such as limestone, dolomite, and gypsum. It is characterized by underground drainage systems with sinkholes and caves. These underground hydrology systems contribute to much of the state’s cool trout waters.
Important Change: When are Corporate/Partnership Tax Returns Due?
Do you take notice when it comes to new California tax laws and updates? Here is one that taxpayers and tax preparers alike will want to pay attention to.
Assembly Bill No. 1775: Updated Due Dates for Corporate and Partnership Tax Returns
Signed by Governor Brown in September 2016, a recent change to California tax law revolves around due dates for corporate and partnership returns. As the bill text explains, for tax years beginning on or after January 1, 2016:
- Partnerships need to file an informational tax return on the 15th of the 3rd month (changed from the 15th day of the 4th month).
- LLCs classified as partnerships need to file a return of taxes due and payable on the 15th day of the 3rd month (also changed from the 15th day of the 4th month)
- S Corporations need to file a tax return on the 15th day of the 3rd month (resulting in no change)
- Taxpayers subject to the Corporation Tax Law that aren’t S Corporations need to file a return by the 15th day of the 4th month following the close of its taxable year (changed from the 15th day of the 3rd month)
Sales Tax Non-Compliance: What's Your Exposure?
An entrepreneur’s dream is to start her own business and witness it grow. First, she wants to see it grow locally. And then, she may see it grow statewide. Whether the company is a small retail operation or a cutting edge technology company, the next step up may be overwhelming as the business begins to operate across state lines. At that point, there are many strategic and tactical issues including hiring employees or contractors operating in other states, or the maintenance of inventory. These can lead to nexus, or taxable presence. And now the company has potential filing issues, for state unemployment, state income tax and sales tax. Many of these items are initially overlooked and can cause significant exposure- even for small start-up companies.
Example:
Let’s follow the life of ABC Company. It is based in Florida, and it is sending sales people to Texas and California. As a result they are generating sales in these other states and the company is growing. Everyone is happy; they are beginning to see a profit. However, the company is likely overlooking one key issue, which can be a very big deal- sales tax. They may not realize that they have not been collecting and remitting state sales tax in California or Texas. To make matters worse, those sales people may have territories that include other neighboring states as well. The company may not worry about it initially, but the Departments of Revenue (DOR) in these states will think otherwise.
Next, a few things can happen: the company can take action and be proactive or they can wait until the states find them. Let’s examine the alternatives.
Online Sales Tax Review: What Do You Need to Know?
Have you been keeping up with the online sales tax debate? Are you curious which pieces of internet sales tax legislation are still circulating in Congress? Here’s a quick summary of the current bills we’ve been watching, and the pros and cons for each one.
The Marketplace Fairness Act of 2015
Unveiled in March 2015, this version of the Marketplace Fairness Act is similar to its 2013 predecessor with a few notable changes, requiring out-of-state companies to collect sales and use tax just like local businesses already do.
Pros
- It has a small seller exception (it does not apply to small businesses selling less than $1 million online).
- It creates an environment where the states would ultimately have to become more uniform in order to participate, thus creating some simplification.
Cons
- The implementation dates are confusing.
- It relies too heavily on Streamlined Sales Tax states.
- Conforming of non-Streamlined Sales Tax states would take a long time, and it’s unlikely there would ever be true conformity.
- It requires internet sellers to do a lot of research into sales and use taxes for online customers.
- It doesn't address more complicated matters such as re-sales, audits, etc.
This new legislation massively expands the authority of states’ tax collection.
FOCUS ON WYOMING
Vast plains and the Rocky Mountains paint the landscape of Wyoming, the Cowboy State. Its famed Yellowstone National Park, a nearly 3,500 square mile wilderness area, is home to hundreds of animal species (i.e., bears, wolves, bison, elk and antelope), dramatic canyons, alpine rivers, lush forests, hot springs and gushing geysers, its most famous geyser being Old Faithful. Yellowstone was the nation’s first national park and the first national monument was Devil’s Tower. Known for its backcountry skiing areas, forested trails and Snake River is Grand Teton National Park.
Just a few of the ways to explore Wyoming’s natural lands is to enjoy a sightseeing tour, soak in a hot spring or watch the wildlife. Yellowstone Lake offers plentiful fishing and boating during the warmer months.
Due to its sparse population, Wyoming lacks any major professional sports teams. However, college (e.g., the University of Wyoming) and high school sports are popular in the state. Rodeos and Rugby are also popular sporting events in Wyoming.
