Featured Guest Blogger- Harry-Todd Astrov
At Miles Consulting Group, we often assist clients in audits, or other disputes with state agencies, such as departments of revenue, usually related to sales or income tax. In this month’s guest blog, Harry-Todd Astrov looks at disputes from the federal standpoint and things to consider before engaging in fancy tax planning.
On March 23, 2017, the IRS Large Business and International (LB&I) division announced the initial identification and selection of 13 “campaigns” to combat perceived tax compliance issues, with more campaigns to be identified and launched in coming months.
Several of these campaigns either explicitly or implicitly will target mid-market businesses. These include a campaign to examine transactions with non-U.S. related parties, a separate campaign to specifically examine the transfer pricing used by inbound distributors, whether S corporation are claiming losses in excess of basis, the repatriation structure being used for tax-free repatriation of funds into the U.S., and whether foreign companies doing business in the U.S. are filing a Form 1120-F with the IRS.
We all buy digital products and music online, but how does Pennsylvania tax them?
Businesses obviously grow by selling their products outside of their local boundaries and across state lines. Pennsylvania (PA) has experienced, like most states, a relatively large amount of sales from companies outside PA, and, with that, the loss in sales tax revenue from those sales, as out of state companies do not often collect sales tax. Pennsylvania has a growing economy, and like most states, it is continually modifying its tax laws to be current with changing conditions and technologies.
Last summer, we wrote an article about a new Pennsylvania law going into effect related to taxing software that is digitally downloaded. This law went into effect on August 1, 2016.
Golden Gate Bridge in San Francisco, California
This month, we travel back to the mainland (and the home state of Miles Consulting Group) to the 3rd largest state in the country and the 6th largest economy in the world- the Golden State of California! With its sunny and dry coastal climate year round (except for January 2017!) and easy access to the ocean and mountains, California has always been seen as an ideal resort destination. In the 1960s, popular music groups such as The Beach Boys promoted the image of Californians as laid-back, tanned beach-goers – which, of course we all are!
California is home to the second most populous city in the United States- Los Angeles, which is home to the Hollywood entertainment industry. San Francisco, 400 miles to the north, is where you will find the Golden Gate Bridge, Alcatraz Island and cable cars.
Happy New Year from Miles Consulting Group!
Happy New Year!
I always like the fresh feeling of a New Year – a clean desk, a new calendar, and a relaxed and grateful frame of mind from coming off of the holidays. I’m particularly excited about 2017 because it’s a year of special milestones and anniversaries for me – both personally and professionally, and I’m a big believer in celebrating those special occasions. I’m not sure exactly what the year will bring, but I have big expectations for it.
Cash register used to compute sales tax
For several years, the online sales tax debate has been tossed around Capitol Hill, but has gained little traction in Congress. However, two new bills introduced recently add some new fodder for discussion. One bill makes it harder to impose sales tax, while the other makes it much easier. Will either pass?
No Regulation Without Representation
Representative Jim Sensenbrenner, a republican from Wisconsin, introduced a new bill to Congress in July that would prevent states from taxing any seller lacking a physical presence. This bill is called the No Regulation Without Representation Act of 2016 (H.R. 5893).
Under this bill, unless the person is physically present in a given state during the relevant tax period, a state may not obligate a person to:
- Collect a sales, use or similar tax
- Report the sale
- Assess a tax on a person
- Treat the person as doing business in a state for purposes of such tax
Las Vegas, NV
In 2015, Nevada’s legislature was busy enacting controversial legislation aimed at raising revenue in the state. These laws are yet another challenge for businesses.
Last year, Senate Bill (SB) 483 was signed into law by Governor Sandoval and became known as the “Commerce Tax.” This new law went into effect on July 1, 2015 and applies to businesses whose Nevada gross revenue in a taxable year exceeds $4,000,000. Under the law, a “business entity” is defined as a corporation (both S and C), partnership, LLC and sole-proprietorship (i.e., those who file schedule C), just to name a few. For a complete list of the business entities subject to the Commerce Tax, click here. Note that out of state companies are also subject to the Commerce Tax to the extent that they have nexus in Nevada.
This law was enacted a year ago, but the effects of it are now being seen by companies whose first Commerce Tax return is due for the year ended June 30, 2016. This tax must be remitted to the state within 45 days after the end of the taxable year (August 15, 2016). Companies may file an extension for 30 days, to allow them more time to comply with the new law. All Nevada business entities are required to file the return, even if total revenue is less than the $4,000,000 minimum.
What if you could walk into a store, buy something and not have to pay sales tax because the whole state does not impose a sales tax? Believe it or not, in some states that does happen. Several states, mainly in the South and East, have these so-called “tax holidays.” These holidays are targeted at specific goods. As we discuss below, during tax holidays specific items are exempted from the tax, only in certain states, and these holidays occur only on limited days. Very little is uniform in the multistate tax world.
This is a hotly contested topic; the question up for debate is whether sales actually increase enough to offset the lost sales tax revenue. Researchers found that on sales tax holidays, households increase the quantities of clothing and shoes bought by over 49% and 45%, respectively to what they buy on average. However, evidence shows that these holidays simply shift the timing of these purchases and some retailers will actually raise prices during the holiday, reducing consumer savings.
How did Sales Tax Holidays begin?
Ohio and Michigan enacted the first state tax holidays in 1980, offering a tax holiday on automobile purchases. However, it was New York that, with the first tax holiday on clothing, sparked the interest in other states wanting to have state tax holidays. New York sought to combat ‘border shopping’ by administering tax holidays because New Jersey does not charge tax on clothing during the ‘back to school’ shopping season in late August. Border shopping is the concept of traveling to nearby states to take advantage of lower tax rates. Another example of multistate ‘border shopping’ is that Manhattan drivers cross the George Washington Bridge into New Jersey to buy gas at the small gas station at the end of the bridge because gas is dramatically cheaper in New Jersey.
I was speaking with a marketing consulting colleague of mine not long ago and in trying to help me hone my approach for continually connecting better with my target audience, he asked me the seemingly simple question “How does someone know when they need your services?” Of course, that should be simple! I’ve been consulting for clients in this market space for many years. And yet, the circumstances when someone may need our services can vary. So, I thought I’d dedicate some time here to give examples of when CFOs, controllers or other accounting professionals might need my multistate tax consulting services.
Your Company is Expanding
Once your company begins doing business across state lines – whether that means setting up additional offices, hiring employees in other states or even just sending a salesforce out to call on clients in other states, or utilizing the services of independent contractors to perform installation, repairs or maintenance services – you are going to begin to trip into tax situations in other states. Continue reading
Happy Anniversary Miles Consulting Group! In fourteen years, I’ve watched this practice change with this times – gone are the California Manufacturers Investment Credit and the Enterprise Zone benefits – both of which were significant tax credit and incentives benefits to our clients over the years. Added are some new California incentives – the CA Partial Manufacturer’s Sales Tax Exemption, and the California Competes Tax Credit. Yet tried and true multi-state tax consulting – nexus reviews, taxability studies, voluntary disclosures, and audit defense continue to be the cornerstone of our current consulting. We’ve also recently added “Jumpstart Your Rainmaking” that’s been providing some “splash”! The webinar series, aimed at helping CPAs (and others selling professional services) to enhance their marketing, networking and targeting skills begins again in May. (For more information and to register, click here.)
A lot has changed over the years that has affected not only our business, but our country. Take a trip back in time to see what was happening back in 2002 when we were founded:
In 2002… Continue reading
In today’s society, one of the biggest concerns that every business or individual wants to avoid are lawsuits. Under the False Claims Act (FCA), there is a liability to businesses or individuals who commit fraudulent behavior that impact governmental programs. Most cases resulting from the FCA are in regards to health care, housing and mortgage frauds.
Unfortunately for businesses, there is a higher risk of involvement in a lawsuit due to the Qui Tam provisions of the FCA. The Qui Tam provisions allows informants or “whistle blowers” to bring forth a lawsuit against the business or individual on behalf of the government. Qualified informants must be directly involved and knowledgeable of the fraudulent behavior conducted and must not be from a secondary source. The incentive for informants to come forward is that they will receive a portion of the funds recovered from a successful settlement or judgment (generally 15 to 30 percent of the recovery).
There has been an increasing popularity in Qui Tam cases since 2009. Prior to 2009, Qui Tam cases averaged 300-400 cases per year. For years after 2009, the average rose to more than 600 new Qui Tam cases per year, with 2013 and 2014 exceeding 700. Continue reading