Don’t Shoot the Messenger; They Might Just Save Your Business

Last year we released a short video highlighting a situation we refer to as “the biggest tragedy in sales tax.”  Essentially a business which has a tax obligation, or “nexus”, to a state fails to collect sales tax from customers at the time of purchase and is audited.  The state assesses the business for the tax, plus heavy penalty and interest charges.  What once would have been willingly collected from paying customers now comes directly out of the company’s pocket.  And sadly, the penalty and interest charges from these audits can balloon even relatively small assessments into business crippling amounts.  Such was the case in the state of Washington just recently.

In A Stunning About-Face: Amazon Says It Will Start Collecting Sales Tax Everywhere -- For Their Affiliates. Why This is Such a Big Deal.

Many Internet-only retailers do not collect sales tax on their sales except in a few states where they have a physical presence or nexus. Amazon.com may be the largest of them all and certainly must be the most well-known, but by no means are they the only ones. There are many online sellers large and small who do not collect sales tax everywhere they ship product. Internet sellers have generally followed Amazon’s lead and taken the position that since they don’t have physical presence, they don’t have “substantial nexus” and therefore states can’t force them to be tax collectors. States have struck back with a variety of so-called “amazon laws” attempting to assert that these online sellers do in fact have at least a type of physical presence through so-called “click-through affiliates” and other agents in the state.

Online-only sellers usually collect tax in just a few states. This contrasts sharply with traditional retailers that have “brick-and-mortar” stores. These traditional retailers who also make substantial sales online (see walmart.com, bestbuy.com, etc.), almost universally collect taxes on their online sales. And with an estimated $170 billion dollars in online retail sales in 2010 according to the National Retail Federation, It’s become a huge issue. It’s a big deal for states starving for revenues and for small/local as well as large/international companies who may or may not be collecting tax on online sales.

This May Be Ohio’s Most Generous Use Tax Amnesty Plan Ever

Back in April, we wrote about Ohio Department of Taxation’s (ODT) use tax collection program.

They called their program the Use Tax Education Program. When the government uses the word “education” in a tax collection program title, you better hold on to your wallet! Their interest is not so much in education as it is in income repatriation.

But then almost as soon as the ODT announced their education program it was suspended because the legislature had the temerity to pass their own amnesty bill. The amnesty program would be effective October 1, 2011 so the ODT had to scramble to figure out the details.

The ODT has now announced the details (well some of them) via their website. Keep in mind that what the Legislature giveth, the regulator taketh (or at least attempteth to take) away, so it’s important to review the details of this program. But it does look to be relatively generous.

Keep this in mind too: This amnesty is for use tax on purchases. And it does actually waive some use tax on purchases made before January 1, 2009 that would otherwise be due. But what about sales tax on sales you make? There’s another program for that. Ohio also participates as an associate member of the SSTP and as such is obliged to offer an even MORE generous amnesty program that could waive all the tax you should have collected in OH if you qualify. More on that below after we discuss this new use tax amnesty program.

Nexus: It’s all about Physical Presence. Or is it?

By Michael J. Fleming

Nexus, it’s a fairly simple five letter word that the Miriam—Webster dictionary defines as a connection or link. At first glance the word doesn’t appear very scary, mystical or confusing, but when used in the context of taxes it is often one of the most misunderstood, misinterpreted and underestimated issues; making it a very common cause of tax problems. Why does this seemingly non-threatening word generate such heartburn in multi-state businesses?? Start with the US Constitution, add a couple federal laws and Supreme Court cases, multiply that by the laws passed in the each of the fifty states, then apply that to different categories of taxes, factor in states hungry for revenue and top it off with an ever evolving economy and you have your answer. Nexus is not static; states are constantly pushing the nexus envelope trying to increase their tax base. So even if you are a nexus expert (a Nexpert?), nexus is a topic that requires continuous monitoring and updating of knowledge.  The following discussion is intended to provide a glimpse into some of the basics of nexus and the role of physical presence.

As a Leader of a CPA Firm, What Keeps You Up at Night?

The AICPA Survey Lists CPA’s Top Five Concerns, But Did They Ask the Right Question?

And the Survey Said?

In a recent survey, the AICPA polled some 577 CPA firms with the question of “what is your chief business concern?”  A compelling question to be sure, and the answers are telling of our current economic situation.  However, in our review of the survey and the accompanying analysis by the AICPA, we began to wonder if the survey was asking the wrong question.  As evidenced by the survey itself, the issues brought up by the firms are indicative of the times we’re in.  But, based on a review of prior surveys, this year’s top concerns probably won’t be the same as next year’s concerns (just take a look at the top concerns in 2009 or 2007).  In order to find out what really troubles CPAs, instead of asking what concerns them, we might ask a more specific and telling question.  How about this: “As a leader in a CPA firm, what issues keep you up at night?”  Likely the answer to this question is far different than simply “What are your biggest concerns as a CPA?” Now, that would be an interesting survey.

I’ll tell you one thing that sometimes keeps me, as a leader of my CPA firm up at night is a worry that we made a mistake on something, or we missed some issue we should have caught. We don’t do attest work; we are state and local tax consultants—that’s all we do.

What Keeps You Up at Night?

I’d be willing to bet it’s not state and local tax—and that’s understandable. But let me tell you why it might need to be especially for your attest clients and what you can do about it.

The "Buy One, Get One Free" Sales Promo Can End Up Costing You... BIG!

by Andrew Johnson, Partner

When A Penny Charged is Worth Two Dollars In The Bush

I don’t think Yogi Berra ever said “a penny charged is worth two dollars in the bush”, but he might have. But I doubt even Yogi’s craziest statements could match the twisted logic used by the Wisconsin DOR in its recent Release.

Missouri Policy on Software Load and Leave is Ruled Out Is Software Even Taxable in Missouri Now?

Special Bonus Content: Who Else Exempts Load and Leave?

The Missouri Administrative Hearing Commission (AHC) recently held that the sale of canned computer software to a customer through a “load and leave” delivery method was not subject to Missouri use tax because the software was not tangible personal property. This decision overrides a Missouri DOR policy that software transferred by the load and leave method is taxable. (FileNet Corp. v. Director of Revenue, Administrative Hearing Commission (Missouri), No. 07-0146 RS, August 20, 2010.)