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Tag Archive for Monika Miles

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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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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Focus On Washington State Tax Climate

Monika Miles On Washington State Tax Climate

Washington is a state in the Pacific Northwest. It is the 18thlargest state and the 13th most populous state. The state was admitted to the union as the 42nd state in 1889.

The Puget Sound in Washington is an inlet of the Pacific Ocean consisting of numerous islands, deep fjords, and bays carved out by glaciers. The remainder of the state consists of deep temperate rainforests in the west; mountain ranges in the west, central, northeast and far southeast; and a semi-arid basin region in the east, central and south, given over to the intensive agriculture. Washington is the second most populous state on the West Coast, after California. Mount Rainier, an active stratovolcano, is the state’s highest elevation, at almost 14,411 feet, and is the 2nd topographically prominent mountain in the continental United States, the first being Denali in Alaska.

Business Climate

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What You Need To Know About The Taxability Of SaaS In Nine Eastern States

Monika Miles

Are you curious if you need to be paying taxes on or charging your customers sales tax on your sales of these revenue streams: Software-as-a-Service (SaaS), cloud computing and electronically downloaded software? The answer is, maybe. Because these three areas are defined differently by each state, it’s important to understand how each state’s tax codes approaches them.

Being aware of the tax ramifications in any state your company has established nexus is incredibly important, especially considering last summer’s Wayfair decision. While the U.S. Supreme Court’s decision may seem like it was only directed at online sellers, the truth is that multi-state sellers (such as those generating revenue from SaaS and software) are also affected. Because of the ruling, it will be even easier to establish nexus in more states across the country; companies need to know which taxes they’re responsible for in regards to SaaS, cloud computing and electronically downloaded software.

Here’s a guide to the taxability of SaaS in these nine key eastern states:

  1. Florida
  2. Georgia
  3. Illinois
  4. Indiana
  5. Massachusetts
  6. New York
  7. Ohio
  8. Pennsylvania
  9. South Carolina Read more

Internet Sales – The Wayfair Case

Monika Miles And Internet Sales Tax
South Dakota v. Wayfair, Inc.  – THE Case

On June 21, 2018, the U.S. Supreme Court ruled 5-4 in favor of overturning its 1992 decision in Quill, which set a standard requiring substantial physical presence before a state could enforce the sales tax collection responsibilities on a seller. In the current case, South Dakota v. Wayfair, Inc., writing for the Court’s majority, Justice Anthony Kennedy indicated “…the Court concludes that the physical presence rule of Quill is unsound and incorrect. The Court’s decision in Quill Corp v. North Dakota, 504 U.S. 298 (1992), and National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 753 (1967), should be, and now are, overruled.”

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What Companies Need To Know About Voluntary Disclosure Agreements

Monika Miles Sales Tax

The phrase of the day is “V-D-A”!  In the state tax world, that refers to Voluntary Disclosure Agreements, and we are working on many of these for our clients lately.  What are they, exactly, and why should your company perhaps be considering them as well?

What is a Voluntary Disclosure Agreement?

Simply put, entering into voluntary disclosure agreements with states is about companies identifying their potential state tax exposure (sales tax, income tax, or both) and coming forward voluntarily to pay any outstanding liabilities before the state identifies the company as part of an audit or other outreach effort.  As states are becoming more aggressive in their pursuit of out-of-state taxpayers, it’s becoming a bit of a game of “Beat the Clock!”

What are the advantages?

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What You Need To Know About Resale Certificates And Online Sales Tax

Monika Miles - Resale Certificates

Resale certificates provide a sales tax exception for registered retailers. They’re a way for the wholesaler to verify the company they’re selling to is planning to resell the items and collect sales tax during that future purchase. Note that resale certificates are not a new concept. They’ve been around since long before the Wayfair ruling, but as with everything sales tax – that ruling created some new confusion about an older concept! See below.

As Fundera explains:

When you purchase goods with a resale tax certificate, you’ll also need to be sure to collect the exempted tax when you sell the products. Resale certificates usually state your name and address as the buyer, the reseller’s permit number, a description of the purchased item, and a statement that the item in question is being purchased for resale.

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Minnesota Business And Tax Climate

Monika Miles - Minnesota

Minnesota is a state in the Upper Midwest and northern regions of the United States. Minnesota is the 12th largest state in area and the 22nd most populous state, where 60% of its residents live in the Minneapolis-Saint Paul metropolitan area (known as the “Twin Cities”). This area is the center of transportation, business, industry, education, and government, while being home to an internationally known arts community. The remainder of the state consists of western prairies now given over to intensive agriculture; deciduous forests in the southeast, now partially cleared, farmed, and settled; and the less populated North Woods, used for mining, forestry and recreation.

Minnesota’s first state park, Itasca State Park, was established in 1891, and is the source of the Mississippi River. Today, Minnesota has 72 state parks and recreation areas, 58 state forests covering 4 million acres and numerous state wildlife preserves. The Mississippi National River and Recreation area is a 72-mile-long corridor along the Mississippi River through the Minneapolis-St. Paul Metropolitan Area connecting a variety of historic, cultural, and geologic interest.

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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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