The CDTFA (California Department Of Tax And Fee Administration) has updated an important regulation; one that affects all out of state retailers selling to customers in California. California Regulation 1684, “Collection of Use Tax by Retailers,” is not a new regulation, but it is one that needed many updates due to the Wayfair case. The CDTFA recently received approval from the Office of Administrative Law to publish the revised regulation.

In this two-part blog we will address the most important changes to the regulation. In this first blog we will discuss an out-of-state retailer’s registration and collection requirements in California. In the second blog we will discuss when an out-of-state retailer is no longer required to hold a California use tax permit (Certificate of Registration – Use Tax).

Let’s start with what hasn’t changed in Regulation 1684 (“R1684”). Any out of state retailer that has a physical nexus in California (an office, employees or representatives in the state, inventory, etc.) is required to obtain a use tax permit and collect use tax for their sales of tangible personal property into the state from their out of state location. When you have a physical nexus you are required to register for a Certificate of Registration – Use Tax and to collect and report the use tax to the state.
Read More

For years, Washington State has been one of the states passing online sales tax legislation. From statutes expanding nexus (making more businesses responsible for the state’s taxes and fees) to its five-point internet sales tax solution, the Evergreen State is quick to come up with more solutions to make the marketplace “fair.”

The latest attempt to level the playing field makes some fairly aggressive changes in the state’s sales tax collection policy for marketplace facilitators.

While the state says it will make the marketplace more fair to brick and mortar retailers, we’d actually argue it’s a compliance burden and onerous on the seller. Why? The “solution” designates three additional definitions businesses will need to examine in order to determine how they apply if the definitions do apply, the business needs to pay close attention to another piece of legislation that may change again in the future.

Read More

Monika Miles

If you followed our recent series about multi-state tax facts for various types of technology companies, you likely noticed a common theme: it’s important to determine which states a business has created in so that they know which sales and use tax laws to follow. Although it can be tricky, the good news is there are some generalities that can help get a company started with the process.

Read More

John Dundon

It is that time of year again where we work ourselves into a tizzy finishing off the year “strong” and simultaneously enduring another holiday season whilst purportedly planning for a new year. YIKES!

With internet sales exploding, it is a good idea to review each transaction you make to know if sales tax is being charged. If it is not, chances are good that you owe Colorado USE Tax on the item purchased.

Read More

Alan Smith

No! Overturning Quill Corporation v North Dakota, 504 U.S. 298 (1992) would mean retailers throughout the United States would have to collect, report and remit sales tax for all other states with a sales tax even if the retailer has no physical presence in the other states.

Read More

California State Board of Equalization Manufacturing Exemption from Sales and Use Tax is Scheduled to Begin in July, 2014

A law created by Governor Brown’s 2013 Economic Development Initiative allows certain businesses in manufacturing or in the fields of biotechnology or physical, engineering, and life sciences to purchase or lease manufacturing or research and development equipment at a reduced sales and use tax rate for purchases occurring on or after July 1, 2014. (See Assembly Bill 93 (Stats. 2013, Ch. 69) and Senate Bill 90 (Stats. 2013, Ch. 70); and Revenue & Taxation Code section 6377.1.) The California State Board of Equalization (BOE) will be the agency overseeing and implementing this manufacturing exemption. Read More

TaxConnections Blogger Diane Yetter posts about Value Added Taxes Both Sales Tax and Value Added Tax (VAT) can present a number of challenges to tax practitioners who are well versed in one, but not the other. To begin, the basic structures of how sales tax and VAT are imposed are largely different. But once you delve a little further into each one, you may notice that the terminology used looks foreign and unfamiliar. Sales tax and VAT have different terms for essentially similar concepts, but sometimes the concepts themselves are handled altogether differently. We’ll take a look at some of the language and terms used in sales tax and VAT, how they’re similar and what makes them different.

Nexus vs. Permanent Establishment

In the U.S., nexus is the basic concept of whether a company has sufficient presence in a state which then requires them to collect sales or use tax.  Nexus refers to links, connections, or contacts between a political jurisdiction and a taxpayer. If a taxpayer has sufficient nexus with a state, it is deemed to be “doing business” in that state and will be liable for the state taxes.  In VAT countries, a permanent establishment for VAT purposes is a factual inquiry.  It could include: having a facility located in the country, bookkeeping facilities located in the country, and the ability to Read More

TaxConnections Picture - Connecting To Cloud ConceptIt is likely that most businesses today are using a cloud platform in one way or another.  Most commonly, they are doing this via remote access to software and/or hardware. There are a number of benefits to using cloud platforms.  However, cloud computing provides vendors and purchasers alike with a variety of taxability issues.  As cloud computing is a relatively new phenomenon, it has eclipsed outdated sales and use tax laws, resulting in uncertainty on how to tax such products. In this blog post, we’ll cover a few of the general issues that arise when determining the tax treatment of cloud computing.

The biggest hurdle in taxing the cloud is that there is not much legal clarity on the subject.  In looking at the precedent set by states, tax authorities have generally not provided enough guidance to aid tax professionals in determining the proper tax treatment.

One area that creates challenges is the sourcing of cloud transactions.  When determining how to source and characterize a cloud transaction for sales and use tax purposes, states will generally take one of two different approaches.  They will either source the transaction to the location of the cloud provider’s server or to the location of the end-user which they consider where the benefit is received.  From a sales tax perspective, the concepts of destination and benefit are not easily applied to digital items.  A seller of cloud products and services may have no idea where the receipt takes place, or where the item is used. From a purchaser perspective, location of use may not always be known – or may be from multiple locations.  For an example, consider electronically delivered software.  Is “use” of the product at the server location or at the user’s location(s)? Read More

iStock_tax on backXSmallToday, many states continue to face budget constraints and are increasing their audits of taxpayers to find tax liabilities to generate revenue.  One area that is often overlooked is the accrual of use tax on taxable purchases on which the vendor did not charge tax.  With many online retailers still not charging sales tax on taxable sales, this issue is particularly relevant.  The dire economic situation for many states is resulting in more use tax audits and more aggressive use tax audits.  Penalties are being assessed more aggressively for non-compliance with reporting and remitting use tax.  Additionally, subsequent audits of taxpayers where corrective actions weren’t taken are being assessed higher penalties or automatic penalties.

There are a number of ways that states are targeting companies for audits – some of which tend to focus on the sales tax side but will result in finding unregistered companies for all tax types.  Here are some of the most common audit lead methods used by the states:

–  Nexus inquiries – States identify unregistered taxpayers through an audit of one of your customers.  This is most often the case if you are providing a service in the state.  Since services are not taxable in many states, the service provider owes use tax on materials used in providing the service. In this case, you may receive a nexus inquiry letter from a state. Read More