Archive for Monika Miles

Which Activities Cause State Tax Nexus Issues?

Which Activities Cause State Tax Nexus Issues?

As states are becoming more aggressive with respect to tax collection, they are also broadening the activities that cause nexus, or taxable presence, for companies. This is important because once a company has nexus, they can be subject to sales tax collection, income tax reporting and other taxes as well.

Some activities that may cause nexus (and therefore state tax reporting issues) include:

  • The hiring of an employee
  • Contracting with an independent contractor
    Maintaining inventory in third party warehouses
  • Owning property or renting office space
  • Exceeding a certain threshold of sales or transactions in a given state (see the Wayfair case discussion)
  • Using fulfillment services like Fulfillment By Amazon (FBA) or similar services which place inventory in third party warehouses in different states

Once a company begins doing business in a state, we assist with procedures for filing necessary sales tax and income tax returns. We also help with apportionment reviews and general compliance.

On the income tax side, one hot topic is properly sourcing revenue for service-based companies. Many states have embraced a concept referred to as “market-based sourcing” for service revenues. That generally means that the revenue will be recognized in the state in which the value of the service was received. What that means can vary by state.

Have a question? Contact Monika Miles Consulting.

Written by | Posted in State Tax Nexus

The Role Of Technology In Streamlining Ecommerce Sales Tax Compliance

The Role Of Technology In Streamlining Ecommerce Sales Tax Compliance

It has been over 5 years since the pivotal ruling essentially creating the concept of “economic nexus” thresholds in South Dakota v. Wayfair (US Sup Ct – 2018). And yet, we still field questions from e-commerce companies daily about how to navigate compliance. Ecommerce businesses operate in a complex landscape where sales tax compliance is of paramount importance. Compliance is not merely a legal obligation; it is a critical component of financial stewardship. Failing to comply with sales tax regulations can lead to financial penalties, audits, and a negative impact on the business’s reputation.

As ecommerce transactions cross state and international boundaries, understanding and adhering to the various tax laws and rates remains a formidable challenge.

This article explores the significance of sales tax compliance for ecommerce businesses and how both technology and the human element of a consultant play a pivotal role in simplifying this intricate process.

Here’s what we’ll be covering:

  1. Challenges Faced by Ecommerce Businesses in Sales Tax Compliance
    • Specific challenges in sales tax compliance:
      • Varied Tax Jurisdictions: Navigating different tax rules in various locations.
      • Tax Rate Determination: The complexity of calculating accurate tax rates.
      • Handling Exemptions: Managing exemptions for certain products or transactions.
      • Evolving Regulations: Adapting to changing tax laws.
      • Borderless Commerce: Coping with the complexity of cross-border transactions.
      • Accurate Calculation, Filing, and Record-Keeping: Ensuring precision in tax-related tasks.
      • Non-Compliance Consequences: Consequences of failing to comply with tax regulations.
  2. The Evolution of Sales Tax Software for Ecommerce
    • The evolution of sales tax compliance methods:
      • Traditional Sales Tax Compliance Methods: Manual and spreadsheet-based approaches.
      • Introduction of Sales Tax Software Solutions: Automation of the compliance process.
      • Advantages of Using Sales Tax Software for Ecommerce: Benefits of using software solutions.
  3. Key Features of Sales Tax Software for Ecommerce
    • Essential features of sales tax software:
      • Tax Calculation Software: Automates precise tax calculations for each transaction.
      • Tax Filing Software: Streamlines the submission of tax returns.
      • Tax Management Platforms: Centralized hubs for monitoring compliance.
  4. Beyond the Software: The Role of Consulting in Sales Tax Compliance
    • The importance of consulting in sales tax compliance:
      • Importance of Expertise in Tax-related Challenges: Expertise in complex tax laws.
      • How Consulting Can Complement Sales Tax Software: Combining expertise with automation.
  5. The Human Touch Before Technology
    • Emphasizes the role of a knowledgeable consultant before implementing automation solutions in tax compliance.

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Written by | Posted in Sales Tax Compliance

Why Is A Nexus Review Important?

Why Is A Nexus Review Important?

A nexus study and taxability review determine where a company might have state tax exposure and the extent of that exposure. We work with our clients to identify their activities in various states and analyze the types of transactions engaged in within those jurisdictions.

Determining exposure before a proposed acquisition is good business. We also assist in determining possible exposure before a state comes to audit. And finally, we bridge the gap with respect to financial statement disclosure.

As part of each project, we work with clients to answer the following types of questions:

  • What is nexus?
    • Do we have physical presence nexus?
    • Do we have economic nexus?
  • Is my product or service taxable?
  • Are there any available exemptions (e,g, food or medical exemptions, sales to qualified non-profit entities)?
  • Must I start collecting and remitting sales and use tax?
  • I’ve collected tax from a given state and have not remitted it-what now?

Once we determine possible exposure, we assist clients in receiving maximum benefit from available amnesty programs, contract for voluntary disclosure agreements, work with their customers to determine if they have self-assessed taxes (and can therefore reduce exposure for our client) or simply document their exposure.

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Written by | Posted in Nexus • Nexus Compliance • Nexus On Small And Mid Sized Business

Which Activities Cause State Tax Nexus Issues?

State Nexus Issues

As states are becoming more aggressive with respect to tax collection, they are also broadening the activities that cause nexus, or taxable presence, for companies. This is important because once a company has nexus, they can be subject to sales tax collection, income tax reporting and other taxes as well.

Some activities that may cause nexus (and therefore state tax reporting issues) include:

  • The hiring of an employee
  • Contracting with an independent contractor
    Maintaining inventory in third party warehouses
  • Owning property or renting office space
  • Exceeding a certain threshold of sales or transactions in a given state (see the Wayfair case discussion)
  • Using fulfillment services like Fulfillment By Amazon (FBA) or similar services which place inventory in third party warehouses in different states

Once a company begins doing business in a state, we assist with procedures for filing necessary sales tax and income tax returns. We also help with apportionment reviews and general compliance.

On the income tax side, one hot topic is properly sourcing revenue for service-based companies. Many states have embraced a concept referred to as “market-based sourcing” for service revenues. That generally means that the revenue will be recognized in the state in which the value of the service was received. What that means can vary by state.

Have a question? Contact Monika Miles and Team.

Written by | Posted in State Tax Increases • States And Nexus Update

Navigating The Risks And Benefits Of Voluntary Disclosure Agreements

Navigating The Risks And Benefits Of Voluntary Disclosure Agreements

Addressing tax compliance isn’t just a legal responsibility; it’s a strategic imperative in business. A Voluntary Disclosure Agreement (VDA) stands as a powerful tool for businesses seeking to correct past mistakes and pave the way for a future marked by fiscal integrity. In our experience, our clients tend to engage in VDAs for both of these reasons. They want to do “the right thing” while minimizing their tax burdens for retroactive liabilities.

If that all seems little weighty for just an article intro, don’t fret – here at Miles Consulting, we endeavor to make it all a little less scary. This article delves into the risks, benefits, and nuances of these VDAs, illuminating the path toward informed decision-making.

Here’s what you’ll find:

1. What Is a Voluntary Disclosure Agreement (VDA)?:

A VDA is a contract between a company and a state that outlines the benefits for both parties when a taxpayer rectifies retroactive tax exposure.

2. The Advantages of Voluntary Disclosure:

Voluntary disclosure programs provide reduced penalties, limited lookback periods, reduced audit exposure, and confidential handling of the disclosure process.

3. Eligibility and Participation Requirements:

Businesses must meet specific criteria, including full disclosure and compliance with payment terms, to participate in voluntary disclosure programs.

4. Unlocking the Benefits of Voluntary Disclosure:

Voluntary disclosure programs minimize financial impact, reduce audit exposure, and uphold business integrity through confidentiality.

5. Navigating the Risks of Disclosure:

Businesses must be aware of potential risks such as unintended audits, unanticipated tax liabilities, and data sharing between states when entering voluntary disclosure programs.

6. Evaluating the Path Forward:

A careful evaluation involves identifying issues, assessing benefits, evaluating risks, and conducting a comparative analysis to determine the most suitable compliance path.

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Written by | Posted in TaxConnections

How Practical Is Artificial Intelligence For Sales Tax? The Future of Sales Tax In The United States

How Practical Is Artificial Intelligence For Sales Tax? The Future of Sales Tax In The United States

The world of taxation is evolving rapidly, and artificial intelligence (AI) is playing a significant role in this transformation. AI is poised to make a substantial impact in the sales tax field. In the United States, sales tax has long been a complex, data-intensive, and ever-changing landscape for businesses and consumers alike. AI is affecting the way sales tax is collected, managed, and enforced, which will have practical implications for the future of businesses operating in the U.S. Here’s how… 

1. Enhanced Accuracy And Efficiency 

One of the most immediate benefits of AI in sales tax is the improved accuracy and efficiency it brings to the record-keeping tasks. Traditional manual methods of pulling recordings and searching for small details are time consuming and prone to errors, which can result in costly audits and penalties for businesses. AI-powered software can automate the process of pulling information from documents such as invoices and exemption certificates to streamline and speed up time-consuming record keeping tasks and pulling records for audits. This can also reduce the likelihood of errors and ensure that businesses are in compliance with sales tax regulations. But as always, we recommend that you double-check your work! 

 2. Assisting In Research  

So much of our time working in sales tax ends up being spent on research. Whether that is determining sales tax rates, economic nexus thresholds, taxability of different types of items, or one of the many other details relevant to staying compliant. AI can be helpful in this process! AI is best used to get leads in researching the taxability rules of different items. If you begin selling a new product in a new state, AI can set you in the right direction. Then you can continue your research built on that foundation. Think of AI as a guide that can set you in the right direction but does not complete the full journey for you.  

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Written by | Posted in Sales Tax

Thinking About An Acquisition? Do Your Due Diligence!

Thinking About An Acquisition? Do Your Due Diligence!

When entertaining discussions about mergers and acquisitions ( M&A ), due diligence practices as they pertain to the state tax side of a deal are a key item. We frequently consult with clients that are in the process of either acquiring another company or looking to be acquired. In either case, the client wants to be aware of any potential state tax exposure areas so they can move forward appropriately and correctly negotiate the deal.

Often however, the due diligence process is the first time the company has addressed the multi-state landscape. Sometimes M&A deals fall apart because a target company does not have its sales tax house in order. If a suitor company does its due diligence and finds significant exposure related to years of non-compliance with sales tax collection or income tax filing, it can either derail an entire deal or significantly impact the purchase price.

What Are Some Due Diligence Questions To Ask If A Company Is Being Acquired?

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Written by | Posted in Acquisition Due Diligence

Utah And Nevada and Sales Tax – SaaS, Software And Fun Facts

Utah And Nevada and Sales Tax - SaaS, Software And Fun Facts

This month, we continue our blog series with a contrast of a couple of western states – Utah and Nevada – specifically their treatment of technology items for sales tax purposes.

Wait! Already know you need help with Utah or Nevada issues? Please reach out to us at info@milesconsultinggroup.com

Software as a Service (SaaS) in Utah vs. SaaS in Nevada

Software as a Service (SaaS) is subject to sales tax in several jurisdictions across the country. Approximately half of states do tax the SaaS revenue stream. As you’ll see below, these two states differ regarding their treatment of sales tax for SaaS.

Cloud Computing Services are subject to sales and use tax in Utah.

Utah imposes sales and use tax on license fees for remotely accessed prewritten software, including hosted software, application service provider software, software-as-a-service (SaaS), and cloud computing applications, purchased for use of the software in Utah.

SaaS is exempt from sales and use tax in Nevada.
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Written by | Posted in Utah Sales Tax

New York & New Jersey And Sales Tax – SaaS, Software & Other

New York & New Jersey And Sales Tax – SaaS, Software & Other

This month, we continue our blog series with a contrast of a couple of Northeast states – New York and New Jersey – specifically their treatment of technology items for sales tax purposes.

Wait! Already know you need help with New York or New Jersey issues? Please reach out to us at info@milesconsultinggroup.com

Software as a Service (SaaS) in New York vs. SaaS in New Jersey

Software as a Service (SaaS) is subject to sales tax in several jurisdictions across the country. Approximately half of states do tax the SaaS revenue stream. As you’ll see below, both states differ regarding their treatment of sales tax.

Cloud Computing Services are subject to sales and use tax in New York and New York City.

The sale to a New York purchaser of a license to remotely access prewritten software is subject to tax and the sale is sourced to the jurisdiction in which the purchaser uses or directs the use of the software.

SaaS is exempt from sales and use tax in New Jersey unless it meets the definition of an information service. SaaS is not considered a transfer of tangible personal property and is not an enumerated taxable service.
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Written by | Posted in New Jersey Sales Tax • New York Sales Tax

The Sales And Use Tax Audit Series-The Pre-Audit (3rd Blog)

The Sales And Use Tax Audit Series- 3rd Blog- The Pre-Audit

In this article we cover what to do when the Company receives a letter that it has been selected for a sales and use tax audit. We discuss everything that you should and should not do before the audit starts. We call this the Pre-Audit because the auditor’s letter is the first signal to “circle your wagons” and call a professional in asales and use tax, like Miles Consulting Group (“MCG”). In this blog we will discuss what the auditor wants you to do and what your representative will likely recommend you do. If you just received an audit letter then we recommend the following: stop, breathe, don’t talk to the auditor without representation, and call an expert in sales and use tax.

This is the third blog of the five we will cover in our “Sales Tax Audit Series” – this is the Pre-Audit blog. In each article, we will be making recommendations on what to do when informed by the State that you will be audited – our focus will be California’s CDTFA, but these recommendations will apply to every other state, too.

The Auditor

We want to remind our readers here that we respect the job that auditors do, and we always aim to engage with them respectfully and fairly. Unfortunately, the nature of an audit is that it’s easy to see it as adversarial. So, what should you expect from the auditor? The auditors’ general premise is that they have the law on their side so the taxpayer must comply with their requests. Those requests are going to be demanding and, in some cases, unreasonable. As a taxpayer, it’s OK to push back on some of these requests.

In California, and other states, initial contact is generally made via a letter informing the company about the audit and requesting books and records. In some cases, the company may receive a phone call from the auditor. We will talk about the books and records letter in a moment, but the trickier situation is when an auditor calls before the books and records letter is received. Consider these questions:
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Written by | Posted in Sales Tax Audits

Unravelling The Impact: How The Wayfair Case Sales Tax Legislation Has Shaped The Ecommerce Landscape

Unravelling The Impact: How The Wayfair Case Sales Tax Legislation Has Shaped The Ecommerce Landscape

In e-commerce, where digital marketplaces transcend geographical boundaries, ongoing sales tax legislation in states across the country has emerged as a crucial factor for the success and sustainability of online businesses. With governments around the globe recognizing the immense economic potential of e-commerce, the introduction of sales tax regulations here in the US has become a pressing reality. In the wake of the Wayfair case, compliance with these legislative measures has now become paramount for e-commerce businesses, as failure to adhere to the evolving tax landscape can result in significant financial consequences and reputational damage.

In this article, we explore the intricate implications of sales tax legislation on e-commerce businesses, shedding light on the challenges they face and the strategies they adopt to ensure compliance in this complex regulatory environment.

Overview of Recent Sales Tax Legislation

The Wayfair decision and its impact on sales tax laws
The Wayfair decision, a 2018 landmark ruling by the US Supreme Court, transformed the landscape of sales tax legislation for ecommerce businesses. This decision enabled states to craft legislation that would enable them to enforce sales tax collection from out-of-state sellers based on economic nexus thresholds. The Wayfair decision overturned the previous physical presence requirement and paved the way for economic nexus laws that determine sales tax obligations based on sales volume or transaction thresholds.
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Written by | Posted in Wayfair Case • Wayfair Decision

The Importance Of State Tax Due Diligence

The Importance of State Tax Due Diligence

In today’s complex business landscape, mergers, acquisitions, and other transactions require careful consideration of various financial and legal factors. Among these considerations, state tax obligations play a critical role.

In this article, we’ll discuss the importance of state tax due diligence in business transactions, particularly mergers and acquisitions. We’ll outline how businesses can thoroughly assess their state tax obligations to mitigate risks, make informed decisions, and ensure compliance. We’ll also touch on the identification of potential tax liabilities, transaction-specific triggers, and the scope of tax liability. And finally, we’ll define an effective state sales tax due diligence plan, and how to develop your own.

And for more articles on multi-state tax solutions, click here.

Definition and purpose of state tax due diligence

State tax due diligence refers to the process of conducting a comprehensive review and analysis of a company’s state tax obligations in the context of mergers, acquisitions, and other business transactions. It involves identifying potential tax liabilities, assessing risks, and ensuring compliance with state sales tax laws and regulations. The goal of state tax due diligence is to minimize financial, legal, and reputational risks associated with non-compliance and to provide organizations with a clear understanding of their tax obligations.

Importance of conducting due diligence in mergers, acquisitions, and business transactions

Mergers, acquisitions, and other transactions involve numerous financial and legal considerations. Among these, state tax obligations play a critical role. Failing to address state sales tax implications adequately can have severe consequences, including financial penalties, legal disputes, damage to reputation, and negative impacts on future transactions and partnerships. Conducting thorough state tax due diligence is vital for businesses to mitigate risks, make informed decisions, and ensure compliance with applicable tax laws.

Understanding state sales tax obligations in transactions
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Written by | Posted in State Tax Due Diligence
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