Extending Online Tax to the Cloud Software Companies & Multi-State Tax Issues
A couple of weeks ago we started a series about the nuances of state taxes as they apply to various technology industry niches. Today we continue by focusing on software companies and multi-state tax issues they face including nexus, sales and use tax, state tax legislation and more.
An Overview of Software Companies
Software companies make up a significant part of the technology sector. Software refers to, “The programs used to direct the operation of a computer, as well as documentation giving instructions on how to use them.” The software industry has certainly changed over the years – from the days of companies selling software on disks or other media, to today’s digital downloads of software, and even software as a service (SaaS), which is becoming very prevalent.Read more
Focus on Montana
This month we continue our focus on another majestic state, Montana. The state is rich in natural resources and beautiful landscapes. The majority of this state has not been industrialized and remains close to nature. Montana is the 4th largest state (land size), yet it is one of the least populated states in the country. The state has a lot more to offer than just its beautiful scenery. When you finish reading this blog, you might think about living in Montana.
Business Climate
According to the 2014 census, its population of 1.024 million people is the 5th smallest in the nation and is less than Rhode Island’s (1.055 million). On the other hand, Montana is abundant in land and natural resources, befitting of its nickname, the “Treasure State.” The majority of its land is dedicated to farmland and agriculture. It is the 3rd largest producer of wheat in the US generating approximately 11% of the total wheat production in the country. In addition to crops and livestock, Montana also offers mining as one of its key industries.Read more
Extending Online Tax to the Cloud Medical Device Companies & Multi-State Tax Issues
As you know, at Miles Consulting Group we’re all about helping companies approach multi-state tax issues such as defining nexus, determining the taxability of various products and services, and complying with state income tax and sales tax regulations and more. State tax legislation affects companies in a wide variety of ways, which is part of what makes the topic so complex.
In this brand new series, we’re going to explore the nuances of state taxes as they apply to various technology industry niches. After all, we are based in Silicon Valley, and have had the privilege to work with some of the nation’s most innovative companies. Today’s focus is medical device companies!
An Overview of Medical Device Companies
This subset of the technology industry actually covers a fairly large spectrum. The FDA defines a medical device as, “An instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent or other similar or related article, including a component part, or accessory, which is:
- Recognized in the official National Formulary, or the United States Pharmacopoeia, or any supplement to them,
- Intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, or
- Intended to affect the structure or any function of the body of man or other animals, and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes.”
Permanent R&D Credit
It’s nice to start 2016 with some good tax news. Right before 2015 ended, the US Congress passed a significant bill that seeks to help American taxpayers keep their money and grow our economy. Last December, Congress passed a bill, referred to as “Protecting Americans from Tax Hikes Act of 2015” (PATH). For many years, there have been essential tax credits and benefits that expired every year with no certainty of extension. With PATH, that uncertainty goes away as it permanently extends more than 20 tax relief provisions.
The bill includes provisions for individuals, families, and businesses. A major provision that we want to focus on is the extension and modification of the R&D credit which is stated in section 121 of the bill. To see the entire bill, click here.
The provision permanently extends the research and development (R&D) tax credit. For years, the R&D credit had to be renewed by Congress annually (and some years wasn’t at all). Read more
Conducting Business in the Golden State [California State Tax Woes]
Do you conduct business is California? The state is known for a less-than-friendly atmosphere for clients, yet the economy is responsible for $2 trillion in business annually. With 1.37 million businesses and 17 million workers, many companies are choosing to maintain a presence despite California’s state tax system scaring many others away. In fact, another article recently concluded that California is one of the best places for new business. So what’s the real story? It’s probably something in between! The truth is, as the nation’s largest state, California is a hub for commerce, and many businesses can’t afford NOT to be here.
Why do businesses stay?
In a recent article, Joe Vranich, a corporate relocation specialist and harsh critic of the Golden State’s business climate, still says, “This is the single most beautiful state I’ve ever lived in…I have the best quality of life I’ve ever had here. And the weather, I tell people I think this is the weather we’ll find when we get to heaven.”
As a resident myself, I have to agree the state does have an appealing draw. It’s not all weather and beauty, either. There are particular fields California has a stronghold on, such as technology and entertainment. And, the state has started doing what it can to try to entice companies to stay too, by providing some credits and incentives to offset the hefty California state tax costs (see our recent blog about the state’s California Competes Tax Credit). Of course, other states offer credits and incentives as well, so some of that is just California trying to keep up.Read more
Happy New Year!
It’s the time of year to reflect on the past year, and then to make resolutions for the upcoming year. I’m working on those resolutions (aka "the plan for 2016") right now and hopefully it’ll be final in a few days. In January 2016 and beyond, stay tuned for continued blogs around multi-state tax issues affecting our clients (as we’ve always done), as well as Rainmaking topics for those of you interested in building your consulting revenues (a new venture for us in 2015).
But in the meantime, I’d like to thank all of the readers of this blog, and my clients and colleagues for your support during 2015. I couldn’t do it without you! And I’d especially like to thank my support team that helps to make Miles Consulting Group successful in so many ways. As so many of you know, when you own a small business, it’s difficult to have all the right resources in-house and so it’s important to build a great team of consultants to support you! I’m very grateful to all of you and want to thank you from the bottom of my heart. Let’s make 2016 one of the best years ever.
Thank you to my….
- Publicity team, Erika Taylor Montgomery and Emily Sidley at Three Girls Media
- Web designer Robin Fisher at Take Flight Graphics
- Logo designer, since forever, Rob Henslin at Robert Henslin Designs
- Administrative support, Marit Fox at Abundant Administrative
- IT Tech support, Ryan, Ryan, Harish, Jon and Adrienne at Team Logic IT
- Video creative director, Buddy Saupe at YourBizVid
- Coach and confidante, Barbara Mencer
- Fellow women business owners and support group at NAWBO-Silicon Valley
- Colleagues at Vistage, ProVisors and AFWA for years of leadership skills and networking opportunities
And for those of you that might be reading this – check out these folks (and organizations) in 2016! I highly recommend them all! And as business owners, let’s stick together and support one another!
Here’s wishing you all a wonderful 2016! To your prosperity!!
Fondly,
Monika
New Laws for 2016
Every year state legislatures enact a number of interesting laws. We thought we’d recap a few just to ring out 2015 and ring in 2016. Here are some changes to expect in 2016 in California, and a “feel good” favorite in Illinois – just because we love our animals in every state!
CALIFORNIA
Vaccination (S.B. 277): The amendment to the vaccination law removes the immunization exemption for personal belief for children attending public or private elementary or secondary school, day care, nursery, or development center. In response to recent disease outbreaks in the country, the legislation imposes stricter guidelines and immunization requirements for people in in a classroom setting where there is a lot of human interaction.Read more
How California's Like Scrooge: Extending Sales Tax to Services
It’s no secret California is constantly looking for new ways to increase its revenue. This past year alone, residents have seen a call for higher soda, insurance, energy, income and property taxes. It doesn’t end there, though. State Senator Bob Hertzberg also proposed extending sales tax to include services as well.
You may think, “Well, California really needs the revenue, so maybe it’s worth it.” However, if you look at the numbers, California will end the current fiscal year with a $7.9 billion surplus, even after enacting the largest spending plan in state history, which included an increase on education, paying down debt, creating new programs for the poor and adding billions to a “rainy day” fund. The Legislative Analyst’s Office also anticipates the surplus will continue over the next several years.
About the New Bill
Like Scrooge, Sen. Hertzberg’s proposal increases taxes to literally nickel and dime residents in every means possible. Falling under Senate Bill 8 (or SB 8), the proposal would tax services like childcare, transportation, haircuts and more. The actual bill itself doesn’t include a lot of detail as to which services exactly would be included, but it does claim to raise at least $10 billion in new revenue each year. Chances are, this means a wide variety of services would fall under its umbrella.Read more
Focus on Alaska
As the holiday season, Christmas and a new year come our way, there has been the inevitable emergence of cold weather imagery in stores, restaurants, etc. The mascot of the season, of course, is none other than Santa Clause! Do you ever stop and think of where Santa Clause came from and lives? People say it’s the North Pole. But could that famous workshop maybe be in Alaska?
For our State of the Month, we decided to take a journey up north and show you our largest state. This might just be the place where Santa spends most of his days.
Business Climate
Alaska’s land area of 663,300 square miles is more than twice the size of Texas, yet despite its incredible land size, its population of 735, 601 (as of 2014), is one of lowest in the nation. A much smaller Rhode Island has a bigger population (1.055 million) than Alaska. Nonetheless, its lack of citizens does not speak poorly of its business environment.Read more
Extending Online Tax to the Cloud
We’ve written about online sales tax multiple times before, but it’s a complicated topic without a simple solution. And that’s why we keep coming back to it! In the past we’ve discussed how states are attempting to extend the definition of nexus to broaden their online tax reach, or potential legislation coming through Congress. But one area we haven’t really taken a look at is the question of cloud-based services. How do they fit into the online sales tax debate?
About Cloud-Based Services
More and more, consumers are opting for digital versions of software, music, DVDs and games over physical copies. They purchase the rights to use these goods online and stream them directly from the “cloud” to their computer, tablet or smartphone without ever holding a tangible item that can be taxed in the traditional manner.
Consumers aren’t the only ones relying on the cloud. Businesses are continuing to move their company’s storage to the ominous “cloud,” hiring third-party cloud-based organizations rather than needing to rely on their own data-management. Many companies are therefore entering the software-as-a-service (“SaaS”) models.Read more
