OpenBazaar - A New Wrinkle for Internet Sales Tax Collection?
As we have regularly reported, it’s clear the issue of collecting sales tax from Internet sales is long from resolved. As new versions of the Marketplace Fairness Act surface in Congress to address the issue of sales/use taxes that go largely uncollected, other marketplaces are starting to come to light, such as OpenBazaar, “A completely decentralized online marketplace that links individual buyers and sellers without an organized middleman (think Amazon, but without the intermediary of, well, Amazon).” Not only is Congress not yet ready to deal with our current Internet transactions, but if this kind of marketplace model takes off, they’ll really be scratching their heads!
By using Bitcoins as opposed to a country’s specific currency, OpenBazaar users are able to buy and sell internationally without the government being involved at all. In fact, the program isn’t run by an organization at all; it’s completely open-source, although it’s still in beta.Read more
"Girl Power"
What does 
“Girl Power” have to do with state tax consulting? Well, nothing actually. But every now and then (since this is my blog) I feel that I have the liberty to wax poetic about something that isn’t directly related to my industry. My “girl power” DOES have something to do with being a business owner for 13 years, so I’m comfortable that still have the business angle covered!
I’ve been thinking about gender issues a fair amount lately – maybe more so than usual. I’ve grown up in life and in business where women have been easily half of the workforce. In public accounting, at the staff levels, it seems that women even outnumber the men. But we’ve all read the statistics that still less than 20% of partners in large public accounting firms, CFOs in private industry and CEOs of Fortune 500 companies are women. And while it’s reality – it’s a reality that is still frustrating!
So, why has this bubbled up for me recently? It seems that in the last month or so I’ve tripped over things in the world that still make me shake my head. Here are some examples:
- In Silicon Valley during the months of March & April, we were riveted to the news almost daily watching the Ellen Pao trial related to the lawsuit against her former employer Kleiner Perkins. Kleiner Perkins is the grand-daddy of venture capital firms in the Valley. And Ms. Pao sued the firm for discrimination when she didn’t make partner with the firm. Whether she had a good case or not, or whether it was “win-able” are all items for continued speculation. She didn’t win. But the case aired the dirty laundry of the firm and got the Valley talking about gender equity issues. During the trial, there was testimony about bad behavior and lewd comments by some of her male counterparts. It got me thinking – is there a woman out there who HASN’T been in a situation where there’s been some inappropriate commentary among co-workers? It got me thinking about some of the stories I could tell, and do….occasionally.
- I attended a California conference of NAWBO – the National Association of Women Business Owners last month in Sacramento. We helped to represent the over 1 million women owned businesses in our state alone. It was so empowering to see the women in that room banding together and sharing the issues that are unique to not only entrepreneurship, but also to women owned business. During the conference, we celebrated the association’s 40 year anniversary, and were reminded that our first national President, Susan Hager, founded NAWBO because she couldn’t join the chamber of commerce as a woman business owner. Susan said, “Get a seat at the table or build your own table, and make sure to include other women at that table.” Wow! Thank you to her for getting us our own table. We were also reminded that NAWBO was instrumental in the passage of HR 5050 – the Women’s Business Ownership Act of 1988, which was key in women gaining access to capital. Before the passage of this law, lenders could legally deny a woman access to capital without a male co-signer on a loan. IN 1988!!
- It’s 2015, and women are STILL earning just 78 cents (or less) to the dollar that their male counterparts are earning for the same jobs. Once again….it’s 2015. Why is this still happening? It’s important that we still talk about it and make strides toward closing the gap.
- I presented a webinar on April 30th (Sales Tax Hot Topics for CPAs) http://www.cpaacademy.org/archived_show/a0DC000000dfNBiMAM . It’s a presentation that is always well received and I get a lot of great feedback. This time, one of the attendees sent me a message about the energy in my presentation and my “girl power”. People always tell me I have good energy, but it’s been a while since someone has told me that I have girl power. It gave me a boost. Nevermind that I know my subject matter – I came through with power! And I like that!
In summary, these recent events remind me to be grateful to those pioneering women who laid the groundwork for women entrepreneurs today. And with all respect to my many amazing male colleagues, ladies – let’s not be afraid to flex a bit of girl power now and then!
Washington State’s Solution to Internet Sales Tax
If you’ve been following the Internet sales tax debate, you know that taxing online transactions is one way that lawmakers foresee increasing state revenue. Still, they can’t start collecting online sales tax until Congress passes federal legislation to mandate and enforce a change in procedure for on-line retailers. Or can they?
Legislators in Washington State’s House created a plan that would allow the state to collect tax from online sales. Because Internet shoppers are supposed to be paying use taxes based on sales taxes they don't pay from an online purchase, this legislation could be considered simply enforcing existing law.
Washington’s Five-Point Internet Sales Tax Solution
The plan basically expands the definition of “nexus” to prompt online sales tax collection in five areas.Read more
Focus on New York (and NYC)
This month, we welcome you to the state with the city that never sleeps. New York conjures up images of buildings larger than life, flashing billboards, prestigious universities, American history, and so much more. The state is rich with culture, business, and prosperity.
Business Climate
There’s a lot more to New York State than just New York City. In fact, the state is almost 55,000 square miles and of that area only 470 belongs to New York City. But that relatively small area includes Wall Street, and the nation’s hub of the financial industry.
New York is the home to several financial services corporations, including Morgan Stanley, Citigroup, and Goldman Sachs. In 2012, the securities industry accounted for almost 22% of the city’s total private sector wages. The total wages for the industry were $59.3 billion. Despite the high total wages, only 5% of total private sector jobs came from the securities industry. The average private sector wage in 2012 was $69,200. The average salary (including bonuses) for the securities industry was $360,700, which is over 5 times larger than the private sector average. Of course they are being taxed heavily as well, with 16% of the state’s tax revenue coming from these activities.
Other industries important to New York’s economy include the industrial-commercial, tourism, service, and agricultural industries.
Taxes
New York has an unfavorable tax climate ranking 49th out of 50 states, according to the Tax Foundation’s 2015 State Business Tax Climate Index.Read more
New 2016 R&D Tax Credits? Assembly Bill 437 Introduced
Have you taken advantage of California’s Research Tax Credits before? As it stands right now, this credit reduces income tax for those that paid or incurred qualified research expenses. And you might be surprised to know how many industries and businesses take advantage of the R&D tax credit every year, at both the Federal and State level. Did you know software development, construction, manufacturing, architecture and engineering businesses can qualify? Improvements that expanded the definitions to reward all types of innovation and design work were made over 10 years ago. Now, this law might be improved even further.
California Assembly Speaker Toni Atkins recently introduced a bill that would help businesses - especially small ones - by providing additional benefits to companies with smaller revenues.Read more
Internet Sales Tax News: The Marketplace Fairness Act of 2015
Did you hear the latest in Internet sales tax news? The Marketplace Fairness Act of 2015 was unveiled earlier this month, and it seems to have support from both sides of the aisle. (Ah, yes, but haven’t we heard that before?) The new Act is substantially similar to the 2013 version, but the 2015 version, prohibits states from imposing collection requirements on remote sellers prior to one year after Marketplace Fairness is enacted (versus 180 days), or during the busy holiday retail season between October and December of the first calendar year that Marketplace Fairness Act is enacted.
The legislation would give states the option to require out-of-state businesses to collect and use taxes the same way local businesses do. This would especially impact online sellers and consumers in the form of paying online sales tax.Read more
Focus on Washington
Is Washington the next Silicon Valley? Possibly, possibly not. Regardless, the state has a wealthy portfolio of household name companies including Amazon, Microsoft, and Starbucks. Other popular companies headquartered in Washington include T-Mobile USA, Eddie Bauer, Nordstrom, Costco Wholesale, REI, and Tully’s Coffee. Roughly 1 out of 3 people in Washington have a college degree and over 90% of Washingtonians have graduated high school. To top that all off, Seattle is considered one of the most educated cities in the nation. Over 53% of the population over the age of 25 hold a bachelor’s degree. We assume that all the coffee is the reason for a productive economy and talented workforce. This month, we decided to travel back to the west coast and put our focus on the Evergreen State!Read more
Happy Anniversary to Miles Consulting
I’m proud to dedicate this blog to the 13th anniversary of Miles Consulting Group. Yes, the company becomes a teenager this month! It sounds cliché to say that I can’t believe where the years have gone, but it’s true. It’s exciting to mark the occasion and celebrate for a moment the many successes that we’ve had along the way. As a company growing up in Silicon Valley, where the entrepreneurial spirit is alive and well (and has been throughout the company’s tenure), we’ve watched many things change over the years - both within the company and around us.
Inspiration
In my association with Vistage (my CEO advisory group) and various networking groups (NAWBO-SV, ProVisors, and AFWA), I sometimes have the opportunity to speak and counsel other business owners, or those thinking about starting a business. I am often asked the question, “What inspired you to start your business?” Bill Labhart (my partner) and I decided to start the business in 2002 when we had one too many lunches together while at a Big 4 firm and convinced ourselves we could do it better on our own. We wanted to provide quality services to companies that valued and respected our services, and do it with people we liked. While we never officially put it in writing, we had a "No @$$hole" policy with respect to employees, vendors and even clients. It served us well. Sure, we all want to land that next big engagement, but not if it means working with people that you don’t like. That unwritten policy has stayed intact and I think it’s a key to our success thus far!
Changes & Reflection
In 13 years, we’ve certainly seen our share of change. We’ve endured changes to tax laws that have impacted our clients and our own business. We’ve been a part of economic highs and lows, and watched our clients acquire and/or become acquired. We’ve hired several great employees over the years (most while they were still working on their accounting degrees) and many of them have moved on to large firms, which makes me very proud. (They’ll be back!) We’ve served clients in many industries including technology, banking, construction, utilities, retail (brick and mortar and on-line commerce), and others. We’ve served Fortune 100 companies and also very small businesses, from California to New York, and many states in between! And we’ve won a whole lot more engagements than we’ve lost. My partner retired in 2013, and in 2014, I changed our name, logo, branding and website to reflect who we are today. What hasn’t changed since 2002 is providing good quality state tax services with, and for, people that we like!
Thank you!
For all of you that have been employees, clients and vendors over the years, thank you! Thank you for helping us launch 13 years ago, to grow and to support us in so many ways. Thank you also to friends, colleagues and family, without whom much of this wouldn’t have been possible (or fun).
I look forward to the opportunity to continue to provide service to amazing people at amazing companies. Happy Anniversary Miles Consulting! Here’s to many more!
Photo credit: imagarcade.com
Business Formation 101: Choosing a State for Your Company
When you started or expanding your business, what criteria did you use for selecting a location? Did you opt for a “business friendly” state? Because each state offers different taxes, fees, credits and incentives, it can be hard to know how to choose the best fit for your company.
One important idea to keep in mind is that selecting a state of incorporation for your company doesn’t only come down to taxes, fees, credits and incentives. It’s also important to think about where your business will operate and have nexus. Although “business friendly” states certainly sound appealing, they aren’t always the best choice for entrepreneurs – especially small business owners.
A good principle to keep in mind is that if your business has five or fewer shareholders it may be best to form a corporation or LLC in your home state – where you live and will be conducting business.
With that in mind, here are 6 key business formation criteria to keep in mind:
1. Initial fees. Some states require one-time formation fees for new corporations or LLCs. In some states, like Arkansas, Colorado, Oklahoma and Mississippi, this fee is as low as $50. For others, like Texas and Connecticut, it’s as high as $310-$455. Fortunately, this initial fee shouldn’t have a long-term impact on your company.Read more
Making Sense of The Cloud, SaaS and State Tax
One of the hottest areas in the sales tax arena right now is the taxability of cloud-computing, cloud-based services, etc., collectively often referred to as Software-as-a-Service (or “SaaS”). The very moniker alone is enough to start the state tax conversation down an interesting path.
The Basics
When we work with clients to determine how something should be taxed, we start with a few basic premises and then work from there.
Premise #1: The taxpayer must have taxable presence (or “nexus”) with a state before the state can require the company to collect and remit sales/use taxes. Nexus is created in a variety of ways, but it still refers to a physical presence, including such things as having employees in the state, third party contractors acting on the company’s behalf in the state, owning property (such as inventory) in the state, and owning or leasing office space in the state.
Premise #2: Once nexus is established, in general, the sale of tangible personal property by a retailer to a customer in a given state is generally taxable. We start there, and then review the transaction to see if there are any exemptions that would cause the sale of the property to not be taxable. Exemptions may fall under categories such as the nature of the product being sold (food, certain medical products, etc.), the purchaser of the property (the U.S. Government), and the use of the product (in manufacturing or for resale), to name a few.Read more
