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Expanding Your Digital Value Via State And Local Tax Advisory Services

Ray Bigley – VP Business Development; Avalara Andrew Johnson – Partner; Peisner Johnson & Company December 6, 2013 © Avalara

Today’s Discussion

• Market Forces & Evolving Markets • Market Place Fairness Act (67 to 29) • Peisner Johnson & Company – Client Service Opportunities • Summary Making sales tax less taxing.

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$55,000,000,000 $107,000,000,000 $130,000,000,000

Making sales tax less taxing.

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Market Forces: State Budget Gap

Making sales tax less taxing.

State Budget Gaps Making sales tax less taxing.

Market Forces: State Budget Gap

$23,800,000,000 $12,500,000,000

Making sales tax less taxing.

Market Forces

46 States, WA DC & Guam Making sales tax less taxing.

Sales & Use Taxes In “LOTS” of Jurisdictions

Alaska has no State Sales Tax, But does have Local Sales Taxes

There are over 11,000 North American Taxing Jurisdictions

• • 46 States (Including The District of Columbia) have some form of Sales And Use Tax

NOMAD States

– No Sales Tax in NH, OR, MT, AK, DE Making sales tax less taxing.

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Evolving Markets

Mobile payments ( Affirm, Square, GoPayment, Fortumo, Zong ) Gaming ( mobile devices, Xbox, PlayStation, Wii )

Omni channel Markets: Mobile

Making sales tax less taxing.

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Emerging Markets – Gaming, Mobile Payment

Making sales tax less taxing.

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Omni channel Markets: Gaming

Making sales tax less taxing.

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Next up after Marketplace Fairness?

Digital Goods – MP3 Files, Movie / TV downloads, Purchased Image, etc.

Virtual Items – Exist within a specified environment. Example -Xbox Live marketplace, MapleStory: Flower bouquets, Games-weapons

Sheldon’s dilemma from the Big Bang Theory

Making sales tax less taxing.

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Marketplace Fairness Act (67 to 29)

“Very Brief Overview”

Grants authority to states to require a remote retailer to collect sales tax Defines a remote retailer as any seller who makes interstate sales of products or services Applies only to remote retailers with annual remote sales in excess of $1 million, but remote sales includes exempt sales Requires very little simplification from states, and most of that is only for remote retailers Making sales tax less taxing.

Andrew (Andy) Johnson Peisner Johnson & Company, LLP

Making sales tax less taxing.

The 5-Point Assessment

1. Nexus 2. Tax Rates and Taxability 3. Use Tax 4. Exemption Certificates 5. Tax Returns

Nexus

What is nexus?

Nexus: A connection; a link or tie Minimum level of physical presence that allows a jurisdiction to require you to register, collect, and remit sales and use tax

Obvious

Less Obvious

How do states find you?

• • • • Auditing your customers Sharing with IRS and other states Special task forces Leads o Former employees o Competitors

THE PROBLEM NEVER GOES AWAY… IT ONLY GETS

BIGGER

Assessment #1

Analyze the Nexus Footprint

Tax Rates and Taxability

Under-Collecting

● Something taxable in one jurisdiction may not be taxable in another...

● Except when it is. ● Rules are constantly changing - more than 5,000 changes in the last year alone

Tangible Personal Property (TPP) Fundamentals

Only CERTAIN services are taxable

● ALL sales of TPP are taxable unless there is a specific exemption for that item.

● What about digital products?

Fundamentals

Assessment #2

Make Sure Clients Charging Tax on Taxable Stuff at the Right Rate

Use Taxes

Online Purchases

Accruing Use Tax

Putting Your System in Place

● Decide who should manage use tax accrual ○ Accounts payable department ○ Purchasing department ● Service opportunity for CPAs

Assessment #3

Make sure clients have a system for accruing use tax on taxable purchases — don’t overpay though

Exemption Certificates

Exemption Certificates Are Low-Hanging Fruit

Sampling

Assessment #4

Review certificates actually collected by client.

Tax Returns

Screenshot/CBS

Assessment #5

Review returns filed

Protect Your Clients

The 5 Point Assessment:

1.Nexus

2.Tax Rates and Taxability 3.Use Tax 4.Exemption Certificates 5.Tax Returns

PeisnerJohnson.com

Training SALTsource newsletter Blog Charts and white papers

Who is Avalara

Market Leader in Automated Sales & Use Tax • Located on Bainbridge Island, WA & Seattle • Offices across North America, in EU & Asia • 11,000 customers 60,000 registered users • 4 million calculations per day – approaching 1.5 billion annually • Manage 5 million exemption certificates & file 500,000 sales tax returns • Filing & remitting $14 billion in sales & use tax annually • Original member Streamline sales tax & Certified provider Making sales tax less taxing.

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Questions [email protected]

[email protected]

Making sales tax less taxing.

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