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© 2011 Financial Operations Networks LLC Understanding and Complying with Sales & Use Tax Diane L. Yetter YETTER – tax meets technology Wednesday, April 13, 2011 Click Thru Nexus Legislation • “Amazon” legislation ― Passed in NY, NC, RI ― Litigation in NY ― Requires tax collection if affiliates refer business and receive compensation ― Proposed legislation in many states in 2011 www.TheAPNetwork.com Page 2 Click Thru Reporting Legislation • Reporting legislation ―Passed in CO and OK ―Restraining order in CO ―Requires sellers who do not collect tax to notify sellers of use tax obligation ―CO requires “1099” type notices ―Proposed legislation www.TheAPNetwork.com Page 3 Streamlined Sales Tax • “Standardization” of definitions • Simplification on administrative functions ― Registration ― Compliance ― Rates/boundaries/tax matrices ― Exemption documentation • Compliance options www.TheAPNetwork.com Page 4 Streamlined Sales Tax (Cont’d.) • Current full member states: Arkansas Indiana Iowa Kansas Kentucky Michigan Minnesota Nebraska Nevada New Jersey North Carolina North Dakota Oklahoma Rhode Island South Dakota Vermont Washington West Virginia Wisconsin Wyoming • Current contingent member states: Georgia Ohio Tennessee Utah • Laws apply to all taxpayers in the state not just if registered under SST www.TheAPNetwork.com Page 5 Streamlined Sales Tax (Cont’d.) • S.34, The Sales Tax Fairness and Simplification Act — This would grant the consent of Congress to the Streamlined Sales and Use Tax Agreement providing sufficient simplification and uniformity to warrant federal authorizations to member states • H. Res. 95, introduced Feb 2011 ― Resolution opposing any legislation that would grant state governments the authority to impose any sales tax collecting requirements on out-of-state small businesses that partake in online commerce www.TheAPNetwork.com Page 6 Amnesty • WA: 2/1/11-4/30/11; waives all interest and penalties for taxes due before 11/25/10 • OK: Retailer & Consumer Use Tax; register prior to 7/1/11; waive all prior taxes, penalty, interest if collect for 36 months • MI: 5/15/11-6/30/11; waives penalties for taxes prior to 1/1/10; 20% additional penalty if not filed under amnesty • SSTP Amnesty: GA, UT, TN, OH – all taxes waived if filed under SSTP; valid until 12 months after full member www.TheAPNetwork.com Page 7 Use Tax Responsibility • Purchases from non-registered vendors • Applies to purchases regardless of order type (mail, phone, internet) • Generally applies to tangible personal property • States starting to tax more services • Unclear rules in many states on digital goods www.TheAPNetwork.com Page 8 Contracting Concerns • Sellers with nexus can’t “assign” their tax collection responsibility • Supplier contract terms can’t dictate sales/use tax responsibility • State can usually assess against either seller or buyer except in certain states and types of transactions www.TheAPNetwork.com Page 9 Tax Considerations • Separated versus lump sum • Combining taxable and exempt items • Appropriate descriptions on purchasing contracts • Vendor location and rate impact • Temporary storage planning www.TheAPNetwork.com Page 10 State Enforcement • Almost all states in severe budget crisis • More aggressive audit activity • More responsibility placed on taxpayers • Less involvement on review prior to issuance of assessment www.TheAPNetwork.com Page 11 Next Steps • Determine where you have nexus • Evaluate any past liabilities • Evaluate options such as amnesty or voluntary disclosure • Coordinate with vendors • Train staff • Establish compliance process & procedures www.TheAPNetwork.com Page 12 © 2011 Financial Operations Networks LLC Thank You! If you have further questions: Diane L. Yetter President Yetter – tax meets technology (312) 701-1800 x2 [email protected]