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.
RAINMAKING- A MARKETER IN AN ACCOUNTANT'S BODY
Have you ever taken one of those personality tests like the Myers Briggs, or DISC that help to nicely or neatly (maybe?) put you in a perfect little box? They can tell you whether you’re an introvert or an extrovert, or feeling vs. thinking, or any number of other things about how you’ll get along with certain other personality types. I have a love/hate relationship with those tests. Why? Because I’m convinced that I’m pretty close to the middle on most of the categories, and so I see them as a challenge. “Ha, you little test with 100 questions – you think you know me! Have at it!”
For instance, most of the time, I really enjoy being with other people and I get energy from being in networking situations - an extrovert! My husband will tell you that I love to accept a microphone and speak in front of a crowd – an extrovert! These are good qualities to have if you want to talk about your business, and build a pipeline of referral sources and clients. They need to you know you’re out there. Yet, in the next breath, I could tell you that one of my favorite things is to hang out with a glass of wine and a book on a Friday night – an introvert? And yes, after a speaking engagement, I’d love to just run a nice hot bath and soak alone and not do it again for a few days. A long walk in the park with my dog is my idea of a good time too. Introvert?
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.
Rainmaking - Practice What You Preach!
A colleagu
e asked me the other day how my Rainmaking program was going. And the answer was, unfortunately, “It’s going well, but not taking off as quickly as I’d like it to.” After thinking about it, I got mad at myself and decided to shift the conversation to “It’s going amazingly well – thanks for asking!” The conversation needed to be reframed in order to honor the dream and the encouragement I’ve received from my friends and colleagues. So, thank you!
If you’re a frequent reader of this blog, you’ll know that most of the time it centers on practical tips and articles about multistate tax issues – my primary business. But, if you search “Rainmaking” within the blog, you’ll also know that I’m following a long-time dream to share the experiences and knowledge of building a successful consulting practice with fellow CPAs and other service providers who want to fill their pipelines. So, for several months at the beginning of the year, we featured weekly or bi-weekly posts on the Rainmaking topic as well. And then…it became much more sporadic. Ultimately, it’s been quite a while since we've dedicated a post to Rainmaking. So, this blog is a refresh!
Why Should Businesses Be Cautious of the New Sales Tax Bill?
As we shared last week, Congress recently introduced two new online sales tax bills: Sensenbrenner's H.R. 5893, which would make it harder for states to impose sales tax, and Goodlatte’s Online Sales Tax Simplification Act of 2016, which would make it much easier.
Goodlatte’s State Tax Clearinghouse
One concept in Goodlatte’s sales tax bill that’s worth exploring more is the clearinghouse concept.
According to the proposal, “A state may impose a sales, use or similar tax on a seller, or impose on a seller an obligation to collect such a tax imposed on a purchaser, with respect to remote sale of a product or service only if —
- The State is the origin State for the remote sales (where the company had the most employees during the previous calendar year);
- The tax is applied using the origin State’s tax base applicable to non-remote sales; and
- The State participates in the State tax clearinghouse.”
Online Sales Tax Debate- Still Going On?
For several years, the online sales tax debate has been tossed around Capitol Hill, but has gained little traction in Congress. However, two new bills introduced recently add some new fodder for discussion. One bill makes it harder to impose sales tax, while the other makes it much easier. Will either pass?
No Regulation Without Representation
Representative Jim Sensenbrenner, a republican from Wisconsin, introduced a new bill to Congress in July that would prevent states from taxing any seller lacking a physical presence. This bill is called the No Regulation Without Representation Act of 2016 (H.R. 5893).
Under this bill, unless the person is physically present in a given state during the relevant tax period, a state may not obligate a person to:
- Collect a sales, use or similar tax
- Report the sale
- Assess a tax on a person
- Treat the person as doing business in a state for purposes of such tax
Nexus News: The Latest from Ohio and South Carolina
As lawmakers continue to debate how to make online sales tax feasible for the whole country, the issue of nexus continues to reign supreme for states attempting to increase their revenue from internet retailers. The latest in nexus news comes out of Ohio and South Carolina, two states that recently released details about how nexus is defined in their states.
Ohio's Statutory Changes to Nexus
Earlier this month the Ohio Department of Taxation released statutory changes that broaden how the state defines "substantial nexus," which means out-of-state retailers could be held responsible for the state’s sales and use tax.
Similarly to Washington State, which expanded the definition of nexus last fall, Ohio’s update includes click-through and affiliate nexus provisions. Read more
Pennsylvania Tax Law Changes
Pennsylvania, like many other states, is adjusting its tax statutes to include more goods and services within the taxable definitions. Following recent changes to its somewhat confusing new legislation, the state issued a ‘clarifying’ bulletin for use in interpreting the new requirements. In this blog, we will discuss a few areas of this clarification as well as an amnesty program available to some businesses.
Electronically or Digitally Delivered Items (i.e., Digital Downloads)
This new Sales, Use & Hotel Occupancy Tax Bulletin 16-001, was drafted on July 21, 2016 and became effective on August 1, 2016. This bulletin clarifies recently enacted legislation related to digital products. The legislation applies a tax regime to many of the newly created revenue streams developed by the digital industry. Unlike the traditional taxes on things we can touch and feel (i.e. tangible property) lawmakers want to expand the tax revenue base to ‘new age’ things. As you might expect, the attempt to do so has resulted initially in some confusion. The bulletin is an attempt to clarify the new legislation. It explains that a state sales and use tax is imposed on electronically or digitally delivered, streamed or accessed video, photographs, books, any other taxable printed matter, applications (i.e., “apps”), games, music, any other audio, including satellite radio service, canned software, or any other otherwise taxable tangible personal property. Additionally, updates or support on these items are also taxable.
Revisiting the California Competes Tax Credit Program
Do you operate a business in California? Have you taken advantage of the state’s tax credits offered through the California Competes program? The truth is, this program is showing itself to be very difficult for companies to actually receive benefits from.
As Susan Shelley, columnist for the Los Angeles Daily News, explains:
How does a business qualify for the California Competes tax credit and how much money can it save on taxes? There doesn’t seem to be a clear answer. “Tax credit agreements will be negotiated,” the [Governor’s Office of Business and Economic Development] website states.
The negotiating is done by the governor’s appointees at GO-Biz, then approved by the California Competes Tax Credit Committee. The CCTC committee is made up of the state treasurer, the director of the Department of Finance, the director of GO-Biz, one person appointed by the Assembly Speaker, and one person appointed by the Senate Rules Committee.
They meet several times a year to consider applications…one after another, company representatives are brought before the committee to be grilled about their application for a tax credit.
Shelley goes on to explain that the questions asked are harsh – so harsh that California Compete’s legal counsel was brought in to tell the committee they are limited regarding types of data they collect, especially when it comes to company demographics. However, the Assembly’s political appointee hired their own legal counsel to insist that the tax credit program could be used for the state legislature to, “pursue other ‘underlying goals.’”
I don’t know about you, but I’d like to see the program be more objective, less subjective, and more transparent. Companies applying for the credit currently receive little guidance on how to draft a success application, and while 25% of the funds are supposed to go directly to small businesses, they are precisely the types of companies that often don’t have the wherewithal to apply.Read more
Focus on Vermont
The gold standard for fall foliage takes us to Vermont. With 75% of the state covered in forest and having the most land coverage of maple trees per capita, Vermont’s foliage season is the most vibrant. With its thousands of acres of alpine terrain, it is a popular destination for snowboarders and skiers. Trout fishing, lake fishing, ice fishing and hunting are also popular pastimes for residents and tourists alike. In the fall, hikers can catch some unforgettable views.
Vermont is attractive for more than just its environment. Vermont is also known for the manufacture and sale of artisan foods, fancy foods and novelty items such as Cabot Cheese, the Vermont Teddy Bear Company (where visitors can build their own Teddy Bear), Burton Snowboards and Ben and Jerry’s Ice Cream (where tours end by tasting your favorite flavor). Read more
