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Archive for Monika Miles

Nexus: What Do You Need To Know And How Does It Relate To State Tax?

MONIKA MILES - NEXUS

In the state tax world, one of the most important concepts is “nexus.” Also known as “taxable presence, “nexus” is the term that describes the minimum connection a company needs to have with a state in order to be subject to the state’s taxing scheme. This includes sales tax, income tax, gross receipts tax and more.

There’s a lot that goes into the discussion around nexus, and with the recent state tax law changes, there are frequent updates. This post is a helpful start to understanding what nexus is and how it affects your business.

How Does Physical Presence Nexus Establish State Tax Exposure?

One primary way companies establish nexus is through having a physical presence in that state. For example, if a business has “boots on the ground” in terms of employees or third-party contractors working in the state, or has inventory, other personal property or real property in the state, the company likely has nexus and needs to collect and remit state tax.

When it comes to physical presence nexus, there are a few specific areas we look at:

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Tax Business Climate In U.S. State Of Alaska

MONIKA MILES - Alaska Tax And Business Climate

On March 30, 1867, the United States purchased Alaska from the Russian Empire for $7.2 million, or approximately two cents per acre. The area went through several administrative changes before becoming recognized as a territory on May 11, 1912. It was admitted to the union as the 49th state on January 3,1959.

It is the largest U.S. state by area and the 3rd least populous state in the U.S. It is the northernmost and westernmost state and has the most easterly longitude in the U.S. because the Aleutian Islands extend into the Eastern Hemisphere. With its myriad islands, Alaska has nearly 34,000 miles of tidal shoreline.

Business Climate

Alaska’s economy is dominated by the fishing, natural gas, and oil industries, resources which it has in abundance. United Sates armed forces bases and tourism are also a significant part of the economy.

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Economic Nexus In Wake Of The Wayfair Decision

Monika Miles On Economic Nexus

In the United States, the sales tax landscape has drastically changed following the June 2018 U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc. In this landmark decision, the high court ruled that it was constitutional for South Dakota to enact an economic nexus law. While this may seem like old news, we are still receiving queries every single day about economic nexus and how it impacts our clients.

As a result of the Supreme Court’s decision, over the last year, most of the states which impose a state-level sales tax have jumped on the economic nexus bandwagon and have enacted “Wayfair” types of laws. States are eager to collect sales tax (as well as other types of taxes) and, in theory, want to make it easier for companies to pay their taxes. In addition to physical presence, if companies create economic nexus in a state, that requires them to collect and remit sales tax and also file sales tax returns, provided the state has enacted an economic nexus statute, which again, most of them have at this point!

What Is Economic Nexus?

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Business And Tax Climate In Massachusetts

Monika Miles

Massachusetts is named after the Massachusett tribe, which once inhabited the eastern part of the state, and is one of the original 13 colonies. It is the 7th smallest state in the United States. Despite its small size, Massachusetts features numerous topographically distinctive regions. The large coastal plain of the Atlantic Ocean in the eastern section of the state contains Greater Boston, along with most of the state’s population, as well as the distinctive Cape Cod peninsula. To the west lies the hilly, rural region of Central Massachusetts, and beyond that, the Connecticut River Valley. Along the western border of Massachusetts lies the highest elevated part of the state, the Berkshires.

The entire Commonwealth of Massachusetts has played a powerful commercial and cultural role in the history of the United States. Before the American Civil War, Massachusetts was a center for the abolitionist, temperance, and transcendentalist movements. Massachusetts is home to numerous museums and historical sites. Historically themes museums and sites such as the Springfield armory National Historic Site in Springfield, Boston’s Freedom Trail and nearby Minute Man National Historical Park, both which preserve a number of sites important during the American Revolution, the Lowell National Historical Park, which focuses on some of the earliest mills and canals of the industrial revolution in the U.S., the Black Heritage Trail in Boston, which includes important African-American and abolitionist sites in Boston, and the New Bedford Whaling National Historical Park, all showcase various periods of Massachusetts’ history.

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Trick Or Treat! State Tax And Its Effect On Popular Treats

Monika Miles

Halloween is right around the corner. As you prepare to greet trick-or-treaters or dress in costumes for a party with friends, I thought it would be fun to look at how states are benefiting from the holidays, specifically through sales tax.

Obviously, certain Halloween items fall under standard taxes (e.g. Halloween costumes). But what about those treats? From candy for the kids to soda and adult beverages for the grown-ups, keep reading to learn how these sweets and drinks fall under state tax provisions.

Trick Or Treat! Candy Meets Sales Tax Laws

It’s estimated Americans will spend $2.6 billion dollars on Halloween candy this year. Although candy itself is small and fairly inexpensive, when you add up how many consumers are buying it, you can see why it becomes a state tax issue.

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Update On Economic Nexus Around The Country

Monika Miles

Economic nexus continues to be a hot topic in the sales tax world. Since the U.S. Supreme Court Case of South Dakota v. Wayfair (June 2018), almost all states have enacted economic nexus laws as they want their share of revenue from businesses selling to customers in their state. In this week’s blog, we’ll take a look at Kansas and their struggle to get an economic nexus law on their books as well as an update on other states that have economic nexus laws.

Reminder- What is Economic Nexus?

In the past, companies needed to have physical presence, or “boots on the ground,” in a state in order to have nexus (or taxable presence) in a state. This meant that a company needed to have offices, inventory, employees, or contractors in a state for a certain amount of time. Companies now don’t necessarily need to have physical presence in a state in order to create nexus; they now can have nexus in a state by virtue of economic nexus. Economic nexus means that companies need to have sales of a certain dollar amount or needs to have a certain number of transactions within a state. Some states require both criteria.

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How Does Economic Nexus Apply To More Than Just Sales Tax?

Monika Miles

Last year’s Wayfair v. South Dakota decision changed the way states define nexus for sales tax purposes. In the past, a business needed to establish physical presence, but the Supreme Court’s decision set precedent for states to establish economic nexus parameters, thereby mandating a certain percentage of sales made within the state are subject to sales tax.

However, it’s important to note that economic nexus doesn’t only affect sales tax. If your company conducts a certain amount of business within the state, it may also be responsible for collecting and remitting all applicable taxes, not just sales tax.

AccountingWeb does a terrific job explaining the following ways states and cities are applying economic nexus to their jurisdiction. Note that some are not necessarily new, but more states ARE considering economic nexus in areas beyond sales tax. Here’s a quick summary to get you started.

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State Of Utah Business Climate And Taxes

Monika Miles

Utah is a state in the western United States. It became the 45th state admitted to the union on January 4, 1896. It is the 13th largest state by area, the 30th most populous and the 11th most densely populated state.

Utah is known for its natural diversity and is home to features ranging from arid deserts with sand dunes to thriving pine forests in the mountain valleys. It is a rugged and geographically diverse state that is at the convergence of three distinct geological regions: the Rocky Mountains, the Great Basin, and the Colorado Plateau.

Utah features a dry semi-arid to desert climate, although its many mountains feature a large variety of climates, with the highest points in the Unita Mountains being above the timberline. The dry weather is a result of the state’s location in the rain shadow of the Sierra Nevada in California. The eastern half of the states lies in the rain shadow of the Wasatch Mountains. The Primary Source of precipitation for the state is the Pacific Ocean, with the state usually lying in the path of the large Pacific Storms from October to May. In Summer, the state, especially southern and eastern Utah, lies in the path of the monsoon moisture from the Gulf of California.
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The Chicago Lease Tax: Important Details For SAAS Companies

Monika Miles

Understanding sales tax compliance for SaaS companies is difficult. Some states tax it, some don’t. But what about cities?

Although Illinois doesn’t tax SaaS at the state level, Chicago’s Personal Property Lease Transaction Tax (or Chicago lease tax) is one that these types of businesses need to know about. While it’s not a sales tax, it’s applicable to any entity leasing personal property – including cloud services – to customers in the city.

What Is The Chicago Lease Tax?

Chicago’s lease tax applies to businesses or individuals that either have a lease or lease out personal property that’s used in the city.

Why not just charge a sales tax like other jurisdictions? As the Chicago Bar Association’s Samantha Breslow explains on BloombergTax.com, “Chicago is barred from taxing services, causing it to develop tax rules capturing transactions for the usage of property through a lease or license.”

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Economic Nexus And Exempt Sales?

Monika Miles And Nexus

If you’re an avid reader of our blog, you know that economic nexus is the hot topic when it comes to determining if a company has created taxable presence in a state. Since the Supreme Court’s decision in South Dakota v. Wayfair Inc. in June 2018, we’ve been helping clients to make sense of this  somewhat confusing concept.  While physical presence nexus (employees, inventory, office space) in a state is also still in play and creates a filing requirement, companies find themselves tripping into nexus much more quickly now because of the sales and transaction thresholds of economic nexus legislation, which varies from state to state.

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New State Tax Laws Effective October 1, 2019: What You Need To Know

Monika Miles

Are you curious what state tax updates are on the horizon? October 1, 2019 is a big date coming up; numerous states have new online sales tax provisions, amnesty programs and other legislative changes going into effect in just a few weeks. Keep reading for a quick summary of new laws and programs to keep an eye out for beginning next month.

Alabama’s Simplified Sellers Use Tax

As of October 1, Alabama requires remote retailers selling more than $250,000 in total sales (taxable and nontaxable) to begin collecting and remitting sales tax. Although sellers need to file their Alabama state tax returns monthly, these sales and use taxes fall into the “simplified” category because they’re a flat 8 percent on all purchases, regardless of the shopper’s locality in the state.

Arizona Eases Into Online Sales Tax

Arizona’s transaction privilege tax (TPT) is designed to ease the smaller out-of-state retailers into online sales tax compliance. As the Arizona Department of Revenue explains, the threshold for remote alleges to pay TPT is:

  • $200,000 in 2019 (beginning October 1)
  • $150,000 in 2020
  • $100,000 in 2021 and thereafter

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California State Tax Rules For The Cannabis Industry

California Cannabis Tax Rules

The cannabis industry is the new hot evolving industry in CA. California became the first state to legalize medical marijuana in 1996. On November 8, 2016, the state’s voters chose to legalize recreational use of marijuana.

The California Tax and Fee Administration (CDTFA) has put together an online guide to help business owners better understand the tax obligations specific to their cannabis business. In the following article, we will summarize these nuances that business owners need to know about this industry. Also, stay tuned for future articles on this topic.

Taxes Involved

In addition to state sales and use tax, effective January 1, 2018, a 15% excise tax is imposed upon retail purchasers of cannabis and cannabis products.  Additionally, a tax on all harvested cannabis that enters the commercial market is imposed on cultivators at a rate of:

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