Tag Archive for Monika Miles

The Truth About SaaS And Economic Nexus: 5 Myths Exposed

Monika Miles SaaS And Nexus Myths

There are a lot of misconceptions when it comes to SaaS and economic nexus, especially following last year’s Wayfair decision. Although these technology companies generally aren’t selling a tangible product across state lines, many state online sales tax laws are written in a way that make these businesses liable for collecting and remitting state sales tax.

Are you unknowingly exposing your SaaS company to sales tax risk by creating economic nexus? Keep reading for the truth about five common myths!

Myth #1: Because Wayfair online sales tax statutes provide for a clear date to begin filing, we don’t need to worry about retroactive exposure.

While it’s true that most states are not requiring companies to go back and file retroactively based upon the new economic nexus provisions (certain dollar or transactional thresholds of sales into a state during a year), there is still some retroactivity that companies may be forgetting.

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It’s Still All Greek – U.S. Multistate Tax For Foreign Companies Since Wayfair

Monika Miles And Nexus In The United States

Almost two years ago (my how time flies), my husband and I took an amazing vacation on a cruise of the Mediterranean.  When I returned from that trip, I wrote a blog about the nuances for foreign companies doing business in the United States as it relates to state tax issues.  Income tax and sales tax in the US are challenging concepts not only for foreign companies, but also domestic companies.  And as the state tax landscape has changed recently as a result of the recent South Dakota v. Wayfair (2018) decision, it may also be impacting foreign companies doing business here as well.

So, to recap from that prior blog article, and to elaborate a bit further, here are some of the major areas for foreign companies to consider as they begin doing business in the US.

The Concept of Nexus – “Nexus” is the minimum contact a company must have with a state in order for the state to be able to impose its tax laws on the company.  Historically (until the Wayfair case in June 2018), companies looked to whether they had substantial physical presence in a state.  As I often tell clients, consider where you have “boots on the ground”, in terms of employees, contractors, offices, and inventory (see more below) – to name the more common nexus creators.   Once nexus is established, the company may be subject to the filing of income tax returns, the collection and remittance of sales tax and filing of returns, employer payroll taxes and employee withholding, and myriad other taxes which may be imposed by the state or local entities.   A challenge that some foreign companies face is that they don’t realize how many different state and local agencies there are (in addition to the US federal government).

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In The Cloud: Sales Tax And Software-As-A-Service

Monika Miles - In The Cloud Software As A Service

A very important and often misunderstood area in the sales tax arena is the taxability of cloud-computing, cloud-based services, etc., collectively often referred to as Software-as-a-Service (or “SaaS”). The very moniker alone is enough to start the state tax conversation down an interesting path.

The Basics

When we work with clients to determine how something should be taxed, we start with a few basic premises and then work from there.

Premise #1 (Nexus has been created): The taxpayer must have taxable presence (or “nexus”) with a state before the state can require the company to collect and remit sales/use taxes. Nexus is created in a variety of ways. Traditionally, we talked about having a physical presence, including such things as having employees in the state, third party contractors acting on the company’s behalf in the state, owning property (such as inventory) in the state, and owning or leasing office space in the state. Now, with the US Supreme Court’s ruling in South Dakota v. Wayfair in June 2018, many states are enacting economic nexus statutes which require sellers to collect and remit in those states based on sales or transactional thresholds. (For instance in the South Dakota case, which many states have mimicked, sales of $100,000 OR 200 transactions in the state during the year will give rise to economic nexus, and a collection and reporting requirement for sellers.)

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New York State Boards The Wayfair Train

Monika Miles - New York State Boards The Wayfair Train

In the United States, the sales tax landscape has changed dramatically due to the recent U.S. Supreme Court Case of South Dakota v. Wayfair (June 2018). Following this landmark decision which made it easier for companies to create nexus in states, many states have enacted legislation which create guidelines/thresholds for economic nexus. In a previous blog, we talked about this epic decision. Through December, over 30 states had enacted economic nexus legislation. But we had not heard from New York.

What Is Economic Nexus?

Prior to the Wayfair decision, 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 had 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 for them to create nexus; they now can have nexus in a state by virtue of economic nexus. Economic nexus means that if companies have sales of a certain dollar amount or have a certain number of transactions with a state, the state can require the company to register, collect and remit sales tax.

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Florida’s State Economy And Favorable Tax Rates

Monika Miles- Florida And Tax

Florida is the southeasternmost U.S. State, with the Atlantic Ocean on one side and the Gulf of Mexico on the other. It has hundreds of miles of beaches. The city of Miami is known for its Latin-American cultural influences and notable arts scene, as well as its nightlife, especially in upscale South Beach. Orlando is famed for its theme parks including Walt Disney World.

Florida is the flattest state in the United States. Lake Okeechobee is the largest freshwater lake in the state.

Central Florida is known as the lightning capital of the United States, as it experiences more lightning strikes than anywhere else in the country. Florida leads the United States in tornadoes per area (when including waterspouts), but they typically do not reach the intensity of those in the Midwest and Great Plains. Hail often accompanies the most severe thunderstorms. Hurricanes pose a severe threat each year during June 1 to November 30, hurricane season, particularly from August to October.

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Online Sales Tax And SAAS: What You Need To Know

Monika Miles-Online Sales Tax And SAAS

Last year was a big one in the online sales tax debate; everything changed following the Wayfair v. South Dakota Supreme Court decision. Once the ruling was announced in June, states began creating and implementing online sales tax provisions for internet retailers selling to state residents. In addition to adding uncertainty for small business trying to sort out tax code for dozens of states across the country, the ruling complicated another already-confusing situation: the taxability of SaaS (Software as a Service).

Online Sales Tax & SaaS In States Across the Country

How does the taxability of SaaS tie in with the Wayfair ruling? The Wayfair ruling doesn’t relate specifically to SaaS – it’s about nexus – but because states are enacting laws which now make it easier to create nexus (for instance, the South Dakota standards that started this all – sales of over $100,000 in a year OR 200 transactions), companies now need to be more diligent in determining whether their products and services are subject to tax in various states. That’s where the analysis of the SaaS revenue stream fits in. Many of our clients that were, perhaps, based in one state and may have had physical presence nexus in one or two other states didn’t have that much to worry about. But now, we need to know where their revenue streams (SaaS and others) are taxable because they are often reaching the minimum thresholds for registration, collection and filing of sales tax.

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Three Fascinating Examples Of State Tax Law Intersecting Technology

Monika Miles - Three Ways State Taxes And Technology Intersect

As we welcome the New Year, I thought it would be fun to look at a few areas where state tax laws and technology are coming together. Keep reading for three different updates that share ways modern tech is affecting states’ revenue.

1. Ohio Accepts Cryptocurrency for State Tax Payments

Cryptocurrency like Bitcoin has been around for a while now, yet Ohio is setting an interesting state tax precedent by allowing businesses to pay their fees with the digital currency.

This is especially interesting as these types of currency are known for volatility. However, the state’s taken this into consideration. OhioCrypto explains:

Payments made on, through our third party cryptocurrency payment processor partner BitPay, are immediately converted to USD before being deposited into a state account. BitPay sets the exchange rate for a 15 minute allotted time window for each transaction once a business taxpayer begins to make their payment at BitPay assumes the risk of any market fluctuations during the allotted time window.

While the taxpayer will need to pay transaction, network and mining fees, the cost to the business seems to be less than if they paid their state tax fees through Ohio’s credit card service provider.

It will be interesting to see if other states decide to begin accepting cryptocurrency for state tax payments in the future.

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A Helpful Overview Of The 2019 State Sales Tax Ranking

Monika Miles- Overview of 2019 State Sales Tax

Over the past few years we’ve seen how companies have determined where to base operations based on considerations like sales taxcredits and incentives, and overall business climate. When it comes to running a business, which states are friendliest and which are most unfavorable?

The Tax Foundation’s 2019 State Business Tax Climate Index compiles various state details to offer a fascinating comparison for corporate leaders. Keep reading for an overview of how the various states stack up next to each other, especially in regards to sales tax.

2019 State Sales Tax Ranking

The Tax Foundation’s review of this year’s sales tax ranking includes a map with a helpful visual of each state’s placement on the list.

On it you can see the top 10 states are:

  1. New Hampshire
  2. Delaware
  3. Montana
  4. Oregon
  5. Arkansas
  6. Wyoming
  7. Maine
  8. Wisconsin
  9. Nebraska
  10. Virginia

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Focus On North Carolina And Taxes

North Carolina And Taxes

The Tar Heel State is a southeastern U.S. state with a landscape ranging from Atlantic Ocean beaches to the Appalachian Mountains. Charlotte, the state’s largest city, is home to the NFL’s Carolina Panthers and museums, such as the NASCAR Hall of Fame. The state motto (“First in Flight”) honors the Wright Brothers, who flew their first plane in Kitty Hawk on the Outer Banks.

North Carolina provides a large range of recreational activities, from swimming at the beach to skiing in the mountains. North Carolina also offers everything from theme parks to lighthouses.

Business Climate

North Carolina is the leading U.S. state in the production of flue-cured tobacco and sweet potatoes, and second in the farming of pigs and hogs, trout and turkeys. In the three most recent USDA surveys, North Carolina also ranked second in the production of Christmas trees.

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Important U.S. State Tax Measures: Watch Out For The Results In These State Initiatives

Monika Miles- State Tax Measures
Carbon State Tax Initiative: Washington

Washington’s Initiative 1631 would impose a tax on carbon emissions from companies that either sell or use fossil fuels; it would be the first of its kind across the country.

What would this new state tax cost companies? The Tax Policy Center explains, “The proposed rate is $15 per metric ton of carbon emissions beginning in 2020 with $2 annual increases until the state meets its emissions target.” The Tax Foundation specifies the target as, “Reducing overall emissions to 25 percent below 1990 levels by 2035, and by 50 percent below 1990 levels (or 70 percent below the state’s expected emissions for that year) by 2050.”

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Update To Texas Jumping On The Economic Nexus Bandwagon

Monika Miles - Texas Nexus

Earlier this year, the Supreme Court handed down its landmark decision in South Dakota v. Wayfair Inc., which made it easier for companies to create nexus in states. In turn, this made it easier for states to collect revenue from companies doing business in these states.

In a previous blog, we reported that Texas is making plans to join many other states by jumping on board the economic nexus bandwagon. The Texas comptroller recently unveiled plans to move this legislation forward.

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States’ Reactions To Online Sales Tax: What You Need To Know

Monika Miles - States Reactions To Onli

If you’ve been following the Wayfair case, you know the Supreme Court upheld South Dakota’s online sales tax legislation (related to economic nexus), creating precedent for other states to create and implement similar measures. But, as we explained in our last blog post, this doesn’t automatically mean all 50 states are charging taxes on internet purchases.

Which states are now collecting online sales tax, and how does this new ruling affect residents in states without sales tax? Keep reading to find out how some states are reacting to the Supreme Court’s ruling.

More States Begin Collecting Online Sales Tax

It’s not surprising that states are scrambling to create internet sales tax legislation to increase revenue as quickly as possible. As of October 1st, ten states joined the ranks of those requiring collection of sales tax if certain economic nexus thresholds are met:

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