monika miles | TaxConnections

17 Nov 2023

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.

Written by Monika Miles | Posted in TaxConnections

14 Nov 2023

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.

Written by Monika Miles | Posted in Sales Tax

09 Nov 2023

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?

Written by TaxConnections Admin | Posted in Acquisition Due Diligence

29 Sep 2023

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 Monika Miles | Posted in Utah Sales Tax

23 Aug 2023

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 Monika Miles | Posted in New Jersey Sales Tax • New York Sales Tax

18 Aug 2023

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 Monika Miles | Posted in Sales Tax Audits

11 Aug 2023

Calculating And Collecting Sales Tax For Direct Sales: Best Practices

In the realm of direct sales, maintaining adherence to sales tax rules is paramount for the prosperity and expansion of your business. As a diligent business owner or manager, your primary objectives revolve around boosting sales, optimizing profits, and delivering exceptional products or services to your valued customers. And so, grappling with the intricacies of sales tax can prove to be a formidable task.

In this article, we’re going to explore some handy strategies for calculating and collecting sales tax accurately in direct sales. We’ll dive into the common challenges and pain points that many business owners or accounting professionals like you often come across.

So, let’s get started and make this sales tax thing a little less daunting!

Understanding Sales Tax for Direct Sales
Sales tax plays a crucial role in direct sales and should not be overlooked. It is a type of consumption tax that is imposed on the sale of goods or services, typically collected by the seller and then remitted to the relevant tax authorities. To ensure compliance and accuracy, it is important to have a clear understanding of the different sales tax rates and how they apply to direct sales.

Sales tax rates can vary depending on the jurisdiction and can be influenced by factors such as the location of the sale, and the type of product or service being sold. Each jurisdiction may have its own tax rates, which could include state, county, and city taxes. It is crucial to be aware of the specific tax rates that apply to your business operations.

Calculating Sales Tax for Direct Sales
Accurate calculation of sales tax is crucial to ensure compliance with tax regulations. Here is a step-by-step guide to help you calculate sales tax correctly:
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Written by TaxConnections Admin | Posted in Sales Tax

08 Aug 2023

Sales Tax And Due Diligence In An M&A Deal

The fast-paced world of private equity investment, mergers and acquisitions (M&A) and the art of aligning business interests in the perfect deal certainly sounds glamorous. It’s often where Wall Street meets Hollywood and depicts people reaping lots of money in the process! There are so many components in the making of a successful merger, including synergies between the companies’ cultures and employees, financial aspects, logistics, and other important areas. Tax matters (and in our world, state tax matters) are often the last pieces of the puzzle to be brought to the deal process. And while taxes are rarely the things making the headlines in a transaction, they really are an important piece of the overall transaction – both on the state income tax side (which we’ll discuss briefly below) and the sales tax side. And all the things that we discuss regularly here in our blog – nexus, taxability, look-back, exposure and remediation – they all come up in an M&A transaction. And if the exposure is big enough, it can derail a deal. Unfortunately, we’ve seen it happen!

Some Basics

In an acquisition of a company the deal is structured as either the purchase of the stock of a company (an equity deal) or its assets (an asset deal). From an income tax perspective (federal or state), the structure of the deal makes a difference as well.

Regarding sales tax, on the actual purchase itself, there is generally no sales tax due on the consideration paid for a company in equity-based deals. However, there may be sales tax ramifications on the purchase of assets in an asset-based deal. Most states have exemptions for assets transferred as part of an acquisition (for instance an “occasional sale” exemption), but it is always important to understand the transaction itself, including the actual assets transferred, timing of such transfers, etc.
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Written by TaxConnections Admin | Posted in M&A Deals • Sales And Use Taxes

27 Jul 2023

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 Monika Miles | Posted in Wayfair Case • Wayfair Decision

05 Jul 2023

North Carolina And South Carolina And Sales Tax- SaaS, Software And Other

We continue our blog series with a contrast of a couple of southeastern states – North Carolina and South Carolina – specifically their treatment of technology items for sales tax purposes.

Software as a Service (SaaS) in North Carolina vs. SaaS in South Carolina

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 not subject to sales and use tax in North Carolina. The North Carolina Department of Revenue has also noted in a sales and use tax bulletin that charges to access computers by way of a remote terminal device are not taxable.

South Carolina taxes charges to access a database or online information service. This includes legal research services, credit reporting, research services, and charges to access an individual website. Charges for computer software delivered by an application service provider are also subject to sales and use tax. The South Carolina Department of Revenue considers an application service provider to be sufficiently similar to database access transmissions, which were ruled taxable in a sales and use tax revenue ruling by the state. SaaS is taxable in South Carolina.

Software in North Carolina vs. Software in South Carolina
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Written by Monika Miles | Posted in North Carolina Sales Tax • South Carolina Sales Tax

14 Jun 2023

The Impact Of Economic Nexus On Small And Mid-Sized Businesses

As we get ready to acknowledge the 5th anniversary of the US Supreme Court’s groundbreaking ruling in South Dakota v. Wayfair (June 2018), we wanted to revisit and summarize the ramifications of that decision as we sit here 5 years later. Small and mid-sized businesses are finding themselves in a tax landscape that continues to evolve due to the introduction of economic nexus laws over the last 5 years. It’s essential for these businesses to grasp and navigate these laws to stay compliant and steer clear of potential penalties. In this article, we’ll delve into the concept of economic nexus, discuss its impact on small and mid-sized businesses, and offer practical advice for successfully managing this intricate tax environment.

Understanding Economic Nexus
Definition and evolution of economic nexus laws
Economic nexus refers to the sufficient economic activity threshold that triggers a tax obligation for businesses in a particular state. These laws have evolved in response to the Wayfair case in 2018 and the growth of e-commerce and aim to capture tax revenues from remote sellers.

Factors determining economic nexus thresholds
States consider various factors when determining economic nexus thresholds, such as sales revenue, transaction volume, or a combination of both. These thresholds can vary from state to state, creating a complex compliance landscape for businesses operating across multiple jurisdictions.

Comparison of economic nexus vs. physical presence nexus
Traditionally, businesses were only required to collect and remit sales tax if they had a physical presence, such as employees, contractors, or a store or office, in a state. Economic nexus laws expand tax obligations to businesses that surpass the economic activity thresholds, regardless of physical presence. Fundamentally, this shift has significant implications for businesses operating in the digital marketplace.
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Written by Monika Miles | Posted in Nexus On Small And Mid Sized Business

31 May 2023

The Sales Tax Audit Series- For California And Beyond

Over the next several weeks we will post five blogs that should interest any taxpayer who is in fear of a sales and use tax audit – especially an audit that results in a “huge, unexpected liability.” These five blogs will help prepare you for all aspects of a sales tax audit by a government agency (before, during and after) and, more importantly, will help to put you on a path to owe little or nothing (you might even get a refund) – particularly if you follow the second of the five blogs, where we’ll talk about shoring up your systems before an auditor even shows up.

The advice that we will provide in these five blogs will apply to a sales and use tax audit for any state, but we will focus many specifics on our home state: the Golden State of California. California’s sales and use tax department is called the CDTFA – California Tax and Fee Administration. (The CDTFA was established in January 2018 as the successor to the State Board of Equalization or SBE.) The CDTFA is an enormous governmental agency – the size and sophistication of the CDTFA almost single-handedly dwarfs many of the U.S. states’ entire governments. The CDTFA administers 37 tax and fee programs; employs thousands of auditors and generates more than $90 billion for California and its counties, cities, and special tax districts. The CDTFA’s audits result in over $600 million of unreported tax each year. So, what can we do to help you to not be one of those taxpayers that contribute to the $600 million in audit deficiencies? It’s simple – read this blog and the next four.
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Written by TaxConnections Admin | Posted in Sales Tax Audit