Tag Archive for state tax

Marketplace Fairness Act And State Revenue Cuts?


If Congress enacts the Marketplace Fairness Act (such as S. 743) to allow states to require some remote (non-present) vendors to collect sales tax from customers in their state, states should see a revenue increase. The revenue is not a new tax because their residents should have been paying use tax on these purchases from remote vendors, but because individuals and businesses are not 100% use tax compliant, the sales tax from remote vendors would likely be greater than use tax collections. At least one state has given consideration to what to do with the revenue.

By The Way – the House Judiciary Committee held a hearing today (March 12) on alternatives to the MFA – I’ll have more on that later. Read more

Are You Inadvertently Doing Business In California?

LLC Members And Partners – The Franchise Tax Board Says You Are Doing Business In California…  Are You?

Effective January 1, 2011, California defines “doing business” in the state under Cal. Rev. & Tax Cd. §23101 as any active business having any of the following attributes:

•  Organized or located in California;
•  California sales exceeding the lesser of $500,000 or 25% of total sales;
•  Property  located in California exceeding the lesser of $50,000 or 25% of total property; or
•  California wages exceeding the lesser of $50,000 or 25% of total wages paid.

Sales are attributable to California if property is delivered within the state or is shipped from the state and the purchaser is the United States government or if no other state taxes the sale.

For service sold on or after January 1, 2013, California lays claim if:

•  The purchaser of the service receives benefit of the services within California such as the repair of a computer for a user in that state;
•  Sales of securities, insurance, or other intangible assets to California residents;
•  Sales, leases, rental, or licensing of California real estate or other property.

 See Cal. Rev. & Tax Cd. §25136. Read more

“Words Have Meaning — Especially Statutory Words”

By Michael J. Fleming

One of my mentors constantly reminds me that, “We are accountants; words have meaning.” My immediate response is to usually think that, “if we were not accountants would words not have meaning?” However, once I get past my sarcastic thoughts, I realize that he is challenging us to be more precise and succinct in our writing and to not just read surface meanings but to really analyze the words for alternative meanings. Looking for alternative meanings is especially important when it comes to state tax audit defense. Since you can’t change the facts, you sometimes have to change the argument.

This concept was illustrated quite pointedly in the recent decision of Van Horn v. Alabama Department of Revenue, Alabama Department of Revenue, Administrative Law Division, No. S. 12-863, January 3, 2013. In this case, the taxpayer or his employees traveled throughout AL to take photographs which were later developed at the home office and sent to customers by common carrier. The taxpayer also made in-person phone calls. The DOR examiner assessed the taxpayer for the local taxes based on the sales and photographing visits. The administrative law judge agreed that it could be argued that the taxpayer had purposely availed himself of the economic market and met the conditions of Quill. However, Quill did not apply because the DOR had not updated its regulations concerning local nexus. Basically the only activity that mattered was solicitation and the taxpayer actually traveled into four jurisdictions to solicit sales. However the Administrative Law Judge (ALJ) found that this was still not enough to create nexus. His reasoning was that the statute read “salesmen” while in the taxpayer’s case there was only one “salesman”. He clarified that since the state only used the plural form, the regulation anticipated multiple sales people and therefore the taxpayer did not have nexus.

Words have meaning! In this case the state failed to update its language to be more encompassing and capture the implications of Quill as well as using only the plural form of a word. What great illustrations! We don’t suggest taking this approach when doing tax planning but when you find yourself in an audit situation having someone who can think outside the box is invaluable. My mentor constantly forces us to do so.