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Archive for Sales And Use Tax

The Challenges Of SaaS Taxability And Why You Should Care

The Challenges Of SaaS Taxability And Why You Should Care

Even without considering the ramifications of the 2018 Wayfair decision, the taxability of software-as-a-service (SaaS) products is complicated. With Wayfair thrown in, it just gets worse.

But why is it so complicated? More importantly, how are SaaS companies supposed to be able to comply with tax laws when they can barely keep on top of them?

A large portion of it comes down to irregularities in SaaS definitions between states, in addition to little uniformity when it comes to SaaS tax legislation. The very nature of the product (is it “software” or “service”) adds to complexity. Over 20 states now assess sales tax on the SaaS revenue stream, but for different reasons.

Why Are SaaS Taxes So Complicated?
In addition to occasionally differing definitions, the laws built on top of those definitions are also different state to state. For example, in New York, all canned or prewritten computer software is considered tangible personal property, and is thus taxable. In others, like Nevada, SaaS is taxable, but only when used for business purposes. Texas classifies SaaS as information services and assesses tax on 80% of the cost (rather than 100%).
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12 Common Sales And Use Tax Audit Triggers

Sales And Use Tax Audits- Aaron Giles

When you receive a sales and use tax audit notice in the mail, it sparks worry, concern and anxiety.  Frequently, the first question that comes to mind is “What triggered this sales and use tax audit?” Understanding the sales and use tax audit triggers or cause of the audit can help companies both prepare for the audit by predicting what the auditor will be looking for, as well as take steps to avoid sales and use tax audits in the future.

Similar to the IRS with income tax audits, states have systems, policies and procedures in place that help them to identify businesses to select for a sales and use tax audit.  While each state’s methodology is different, there are some common reasons taxpayers are flagged for a sales and use tax audit.

12 COMMON SALES AND USE TAX AUDIT TRIGGERS

Our analysis of common sales and use tax audit triggers is based upon 15 years’ worth of sales and use tax audit defense and representation services that we have provided to hundreds of taxpayers across the U.S.  We have arranged these reasons in order of the likelihood of triggering a sales and use tax audit.

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Wisconsin And Wyoming State Sales And Use Tax

Aaron Giles

Wisconsin State Sales And Use Tax

The state of Wisconsin levies a 5% state sales tax on the retail sale, lease or rental of most goods and some services. Local jurisdictions can impose additional sales taxes of 0.6%. The range of total sales tax rates within the state of Wisconsin is between 5% and 5.6%.

Use tax is also collected on the consumption, use or storage of goods in Wisconsin if sales tax was not paid on the purchase of the goods. The use tax rate is the same as the sales tax rate. Returns are to be filed on or before the 20th day of the month following the month in which the purchases were made. For example, purchases made in the month of January should be reported to the state of Wisconsin on or before the 20th day of February. For more information on Wisconsin sales tax exemptions please visit the sites shown below.
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Washington D.C. And Washington State Taxes

Aaron Giles

Washington DC Sales And Use Tax

The District of Columbia, Washington D.C., levies a 5.75% state sales tax on the retail sale, lease or rental of most goods and some services. There are no additional local sales taxes in Washington D.C.

Use tax is also collected on the consumption, use or storage of goods in Washington D.C. if sales tax was not paid on the purchase of the goods. The use tax rate is the same as the sales tax rate. Returns are to be filed on or before the 20th day of the month following the month in which the purchases were made. For example, purchases made in the month of January should be reported to the District of Columbia on or before February 20th.

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Ohio, Oklahoma Sales And Use Tax – Oregon Has No Sales And Use Tax

Aaron Giles - Ohio, Oklahoma And Oregon

Ohio State Sales And Use Tax

As of September 1, 2013, the state of Ohio levies a 5.75% state sales tax on the retail sale, lease or rental of most goods and some services. Local jurisdictions impose additional sales taxes ranging between 0.75% and 2.25%. The range of total sales tax rates within the state of Ohio is between 6.5% and 8%.

Use tax is also collected on the consumption, use or storage of goods in Ohio if sales tax was not paid on the purchase of the goods. The use tax rate is the same as the sales tax rate. Returns are to be filed on or before the 23rd day of the month following the month in which the purchases were made. For example, purchases made in the month of January should be reported to the state of Ohio on or before the 23rd day of February.

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New York State, North Carolina And North Dakota Sales And Use Tax

Aaron Giles

New York State Sales And Use Tax

The state of New York levies a 4% state sales tax on the retail sale, lease or rental of most goods and some services. Local jurisdictions impose additional sales taxes up to 4.875%. The range of total sales tax rates within the state of New York is between 4% and 8.875%.

Use tax is also collected on the consumption, use or storage of goods in New York if sales tax was not paid on the purchase of the goods. The use tax rate is the same as the sales tax rate. Returns are to be filed on or before the 20th day of the month following the month in which the purchases were made. For example, purchases made in the month of January should be reported to the state of New York on or before the 20th day of February. 

New York State Department Of Taxation And Finance
New York State Sales And Use Tax Rules
New York State Sales Tax Forms

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New Hampshire, New Jersey, New Mexico Sales And Use Tax Exemptions

Aaron Giles

New Hampshire State Sales And Use Tax

The state of New Hampshire is one of five states in the U.S. that does not charge a state sales tax.

New Jersey State Sales And Use Tax

The state of New Jersey’s sales tax rate was reduced effective January 1, 2017. The sales tax rate was reduced from 7% to 6.85% and will be reduced again as of January 1, 2018 to a 6.625% rate. New Jersey applies sales tax on the retail sale, lease or rental of most goods and some services. There are no additional local sales taxes in the state of New Jersey. More information is provided below about reduced sales tax rates and major New Jersey sales tax exemptions.

In Salem County, the sales tax rate is 3.5% and the 7% state sales tax rate does not apply. This 3.5% Salem County rate only applies to retail sales of tangible personal property made in person at a place of business located within Salem County.

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Minnesota, Michigan And Mississippi Sales And Use Tax

Sales And Use Tax - Mississippi, Minnesota, Michigan

Michigan State Sales And Use Tax

The state of Michigan levies a 6% state sales tax on the retail sale, lease or rental of most goods and some services. There are no local sales taxes in the state of Michigan.

Use tax is also collected on the consumption, use or storage of goods in Michigan if sales tax was not paid on the purchase of the goods. The use tax rate is the same as the sales tax rate. Returns are to be filed on or before the 20th day of the month following the month in which the purchases were made. For example, purchases made in the month of January should be reported to the state of Michigan on or before February 20th.

Michigan Department of Treasury
Michigan Sales Tax Legislation
Michigan Sales tax Legislation

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Sales Tax Issues Your Corporate Controller Needs To Know About

Sales And Use Tax

If your company is set up like most, the sales tax burden probably becomes yet another area piled onto the already busy plate of the corporate controller. This is especially true at small and middle market businesses. These organizations often don’t have a tax department that includes sales tax, so all accounting-related matters fall to the controller.

He or she is usually a financial accounting person and probably doesn’t enjoy dealing with tax anyway, but now they are stuck with trying to figure out the complications of sales tax. Unfortunately, due to the complicated nature of sales tax issues – especially now that the recent Wayfair case has complicated state-to-state commerce even more, the results could be costly for your business.

Can’t My CPA Firm Handle Sales Tax Too?

Although many businesses hire an outside CPA firm to assist with tax returns, these firms often don’t have the skill set to deal with sales tax matters beyond filing in-state returns. We find that many smaller CPA firms don’t specialize in sales tax consulting, which includes nexus (both physical presence and economic nexus), taxability of a company’s products (which may include digital goods), potential exposure analysis and more.

That said, the controller may think that the accounting firm has it taken care of (and vice versa). This is a dangerous position for the company, particularly as the states are also becoming more aggressive.

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Determination Of Property’s Taxability For Michigan Sales And Use Tax

In Michigan sales and use tax law determining whether an item of tangible personal property remains tangible personal property or becomes a fixture affixed to real estate can significantly affect the taxability of the item in question. This determination may impact whether the taxpayer is considered a retailer or a contractor.

There are also several exemptions in Michigan sales and use tax law for purchases of tangible personal property that do not apply if the item is instead a fixture. The Michigan sales and use tax exemptions for both the agricultural industry and the industrial processing or manufacturing industry include such language.

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More States Impose Sales Tax On E-Commerce Sales

Over the last few decades, states have had the opportunity to broaden their income and franchise tax base by ensnaring a larger proportion of out-of-state taxpayers in their taxing regime through adoption of broad economic or factor-based economic nexus standards.

However, states have traditionally struggled to do the same with respect to their sales and use tax base because of the long-standing United States Supreme Court nexus decision in Quill Corp. v. North Dakota (1992).” 1 For nearly three decades, the dicta contained in Quill have prevented states from adopting economic-based nexus
standards with respect to sales and use taxes, requiring instead a more stringent physical presence standard (or “substantial nexus”).
The Supreme Court has repeatedly declined to hear challenges or cases related to Quill, until recently. Read more

High Court Reconsiders Physical Presence Requirement For Sales Tax

South Dakota is taking the physical presence rule back to our nation’s highest court in its dispute with Wayfair, Inc., to determine whether it may continue to require out-of-state sellers such as online retailers to register with the state and collect and pay over sales tax.[1]

In the seminal case from 1992, Quill Corp. v. North Dakota, the U.S. Supreme Court ruled that retailers did not have to collect sales tax in any state where they have no physical presence. However, the exponential growth of eCommerce and internet sales has significantly changed the retail landscape since that time. Read more