Direct Marketers Take Aim at Colorado Reporting and Notice Regulations.

The Direct Marketing Association finds itself at odds with the new Colorado reporting and noticing requirements for non-collecting vendors.

Looks like these guys are going legal on the Centennial state (from the linked fact sheet):

“DMA and its members are filing suit against the state of Colorado in Federal Court. DMA will act as the plaintiff so that no one business has to feel the brunt of any recourse from the Colorado Department of Revenue. DMA is acting now and you need to as well. Tennessee and California are considering similar legislation and others will soon follow.”

Here is a post on the Cali Bill  (with an update, see update #2) and here is a post on Oklahoma’s new reporting regulations that only partially mirror the Colorado regs.

See here for prior post on the CO regs at issue here.

Would California’s License Plate Adverts be Subject to Sales Tax Under New Federal Trade Commission Rules?

Probably, if the smart plates are using wireless technology.

Oh, wait, not sure what exactly a License Plate Advertisement is?  Never heard of a Smart Plate?  Didn’t know the FTC was looking into applying a sales tax on advertisements delivered via broadband?

We aren’t totally clear on all those great questions either, but here is our best effort:

A License Plate Advertisement apparently is just that, a license plate that is actually a digital monitor, able to ‘broadcast’ advertisements, Amber Alerts, “wash me” messages, whatever.  And California wants to issue them to motorists and collect advertising revenue from the messages they might send.

Creepy or cool we guess, depending on your approach to ‘things my car says without me knowing it’.  And don’t forget that the plates could come in handy for auto payment of tolls, parking lot fees, and fleet inventory maintenance.

Anyhow, the Smart Plate is the technology.  And really cool, based on this glowing fact sheet from the guys who build it.

And finally, would the receipts from this advertising be subject to a proposed tax on advertisements delivered via the internet?  We can’t really predict, but the possibility sure exists. 

The take away?  While California may not be likely to impose a sales tax on the advertising revenues it raises for itself, the federal government may have already begun the process of imposing their own.

The ACLU has a Problem with North Carolina’s Request of Amazon’s Sales Records.

Now, first, remember, we have already said this about North Carolina’s attempts to get access to Amazon’s sales records from sales to customers in the Tar Heel state:

“Yeah, that’s right, forget the free speech issues, the privacy red herrings.  Forget about the proper scope of a sales tax audit curiously being performed on a retailer who, by law, has no obligation to collect sales tax.  Forget about all the writers and commenters who took the bait.  Forget it all because this battle is about revenues and it is about who is required to collect those revenues for the state of NC.”
 

Well, the American Civil Liberties Union has decided that, sales tax compliance issues aside, this request from North Carolina infringes on privacy rights of North Carolinians.  We’ll leave the penumbras and emanations to the Constitutional lawyers and law professors.   But how about the new lawsuit and sales tax compliance?

Well, what we said still stands: the North Carolina lawsuit is but a battle waged in the context of a much broader war between internet vendors and the states. And the ACLU lawsuit only tends to further deflect the public’s attention from the core issue here, which is sales and use tax collections … however … whenever sales tax compliance rubs up against heavy hitters in the Constitutional rights bar, we just have to have a peek.

Here is the COMPLAINT IN INTERVENTION FOR DECLARATORY AND INJUNCTIVE RELIEF, or in plain speech, the lawsuit.  Some interesting tidbits (remember, the ACLU hates this law because of privacy concerns, not because of any particular sales tax compliance issue):

How the ACLU frames the issue.  In a word, privacy.:

“This case involves the constitutional rights of thousands of individual Amazon
customers to read books, watch films, and buy other items without the government learning about their purchasing decisions and expressive activities”

The scope of the relief sought.  The ACLU wants an end to these requests forever:

“This is not the first time that DOR has issued a broad information request to an
out-of-state website or other business that encompasses this extremely personal and sensitive information. According to DOR, it is also not the last time that such information requests will be issued. Intervenors therefore also seek to have the Court declare DOR’s policy and practice of issuing information requests encompassing their expressive and private information to be unconstitutional and to enjoin DOR from issuing such overbroad and constitutionally impermissible information requests in the future.”

And finally, why is privacy the big issue here?  According to the ACLU, the nature of the books purchased triggers the privacy concerns:

“Many of the items available for purchase on Amazon may be viewed by some as
being controversial or offensive. For example, if one so desires, one can purchase through Amazon pro-choice or pro-life clothing, books supporting and criticizing President Obama, feminist or anti-feminist literature, Bibles or anti-Bible writings, anti-gun or pro-gun books and accessories, and Confederate flags or Rainbow Coalition flags, just to name a few.”

The take away?  The sales tax compliance issues surrounding nexus are a hotbed of talk amongst vendors and sales tax pros.  The Constitutional issues raised by the strategies of the states to encourage collection are becoming a hot topic for a broader audience.

Buffalo Tax Professionals: Sales Tax Compliance is Really Important!

Listen, we recognize that we end up in central New York a little more often than some other corners of the USA, but hey, we got two Syracuse grads in the office so be happy it isn’t salt potatoes, snow and Dinosaur Bar-B-Q 24/7, OK?

In any event, this business news article from the shores of Lake Erie has some great quotes.  And as they say ‘we couldn’t have said it better ourselves’ … :  (all excerpts from the linked article)

A Historical Perspective:
 

“For years and years, when clients failed to pay their taxes, we didn’t worry too much about it. We just put them in Chapter 13 for repayment,” said Jeffrey M. Freedman, senior partner at Jeffrey Freedman Attorneys at Law, which sponsored the event. “Today it’s a whole new ballgame. People with lots of back taxes are being charged with crimes.”
 

The Trend:

Criminal tax fraud prosecutions have increased to 327 in the fiscal year 2009-10, up from just 33 for the same period in 2006-07.

From the Trenches:

“The best advice to give clients,” (William Comiskey) said, “is to treat this money like it doesn’t belong to you — because it doesn’t.”

And finally, the Capstone Sentiment:

“My problem doesn’t focus on cheats; it focuses on the state’s failure to educate people on what they need to do to comply,” said Gabriel J. Ferber, an attorney with Nesper, Ferber & DiGiacomo.

The take away?  Due to the fiscal messes that most states find themselves in, aggressive sales tax compliance scrutiny is upon vendors in all jurisdictions.  Finding a trusted partner in the sales tax realm is becoming more and more of an imperative.

July 1 is Next Week, Are You Ready for HST in Ontario and B.C.?

The sun is finally out in the Pac Northwest, summer is here, we hope. 

Another change in climate is about to become the law of the land in the Great White North.  But this warm-up has nothing to do with fronts or storms, although it might be the source of some high pressure for vendors who sell items and services in Canada.  

Hurricane HST is about to make land in Ontario and B.C., promising sales tax compliance headaches at gusts of over a hundred miles an hour.

We have posted about the HST earlier, and today we really don’t have much new to say.  Actually, the word today comes from the Canadian Revenue Agency, who has released yet another bulletin related to the HST transition.

The take away?  For many vendors, the transition to HST will be anything but a walk on a sunny beach.

Colorado Springs Discovers Fountain of Green From Sales Taxes on Medical Marijuana.

Probably a little too much of the green on da blog as of late, but we just couldn’t let this nugget  vaporize without sparking a little light on the subject.

Sales tax revenues on Medical Marijuana in Colorado Springs, CO have mushroomed 1000% in the first third of 2010. 

In fact, it looks like the annual take from tax on tokes will top ten times the tepid tally of Two Thousand Nine.

The bottom line here?  Politically speaking, maybe an owner of a dispensary said it best (from the linked article):

“This is revenue,” she said, referring to the taxes dispensaries are paying. “This is going to our city, and it’s staying within Colorado.”
 

For vendors interested in accurate sales tax compliance, the revelation that medical marijuana can be a stable source of sales tax revenues will only serve to focus more compliance pressure on vendors in this market.

Use Tax Compliance 101, Empire State Style.

New York State has released Tax Bulletin TB-ST-910.  This Bulletin deals with Use Tax Compliance for businesses in the land of the bark eaters.

Use taxes are in the news these days in the context of the “Amazon” controversy regarding nexus.  In that conflict, the use taxes owed, but not remitted, by customers of remote vendors are the missing piece of the excise tax loop for the states.  For now, states seem much more willing to expand the definition of nexus or establish administrative burdens for non-collection than they are interested in going door-to-door collecting use tax.

OK, that all said, what about use taxes for the things vendors (all businesses, really) use up in the process of being in business?  This perspective of use tax compliance is not getting the press lately, but that does not change the use tax compliance issues that exist today.

As the bulletin points out, use tax compliance concerns can rear their head in many scenarios:

” This bulletin discusses the following common situations in which a business operating in New York State may owe use tax:

• purchases of taxable property or services made outside of New York State;
• purchases of taxable property or services made over the Internet, from catalogs, or by phone from businesses that are located outside of New York State;
• purchases of taxable property or services on an Indian reservation;
• purchases where the taxable property or services are used in a different local taxing jurisdiction in the state from where they were purchased or where they were delivered;
• withdrawal of taxable property from inventory for use by the business; and
• use of taxable property that is manufactured, processed, or assembled by the business.  “

States with a sales tax generally treat use taxes incurred by businesses in a similar manner as New York.  The bottom line is that if your company buys anything without paying sales taxes on the purchase, either
a. sales tax is collected upon the resale of that item, or
b.  use tax is due for items consumed by your company.

The take away?  Use tax compliance can be an issue for companies that don’t sell any taxable items or services!  If your business buys anything exempt from sales taxes that it doesn’t re-sell, your business might owe use taxes on the purchase value of those items.

Pueblo Colorado Looks to Raise Sales Tax Rates for Medical Marijuana.

The city of Pueblo, Colorado is looking to take the argument for ‘legalize and tax’ to another level.  

We already posted about some state’s attempts to pull medical marijuana under the sales tax tent.  The sales tax compliance issues facing dispensary vendors are compounded in Pueblo by what will amount to a + 12% sales tax on medicinal cannabis.
 

“Council President Larry Atencio, who favors licensing and regulating the businesses  said all indications are the marijuana centers have plenty of patients or customers.

“Voters have said people have a right to use medical marijuana for certain health conditions,” Atencio said. “That’s fine, but I’m also willing to tax the heck out of them. I’m all in favor of sin taxes, so a 4.3 percent tax sounds fine to me.” “

The Council President seems confused on whether medical marijuana is medicine or a “sin”.  We will leave that policy debate for another day.

The bottom line?  Now that a few of the states have become comfortable with medical marijuana, they are recognizing the potential for big revenues.

Housing and Economic Recovery Act and Sales Tax Compliance, part II.

A few months back, we posted a bit about a new federal requirement for on-line vendors.  The focus of the feds, naturally, is income tax compliance. 

But this is a sales tax blog, we know, read on …

The law, codified at Sec. 6050W of the Internal Revenue Code, is an information reporting requirement for payment card and third-party payment transactions.   The nutshell version: 

“Each payment settlement entity shall make a return for each calendar year setting forth—

(1) the name, address, and TIN of each participating payee to whom one or more payments in settlement of reportable payment transactions are made, and

(2) the gross amount of the reportable payment transactions with respect to each such participating payee”

Relax, Gramma, your occasional E-Bay sales aren’t in the sights of the IRS.  The law has a de-minimis exception for folks who sell less than $20,000 annually or have less than 200 annual transactions. 

OK, that being said, what are the tax compliance challenges presented by the new law? 

First of all, here is a great Law Review Article from the Southern California Law Review (USC to most of you).  The article does a good job of laying out the motivation and collateral effects of the new reporting rule. 

For individual vendors, there may not be excessive compliance costs related to the new law.  On its face, the compliance requirements of the new rule fall upon “third-party settlement organizations”, or in plain English, the people who process your credit card order when you buy something on e-Bay. 

Of course, some internet vendors process their own payments, so those select few will feel the brunt directly.  For the rest of them, it is likely that the costs associated with the new reportiong rules will be passed on to their consumers indirectly via fees charged by the their payment processor.

The information provided by the third party settlers will point the IRS to vendors and everyday folks who are receiving beaucoup third-party payments, but are not reporting all that income on their 1040.   ( I know, I know: underreporting of income by taxpayers, who’d have thought. … ?)

The information provided by the third party settlers will be very valuable to sales tax compliance professionals as well.  (We are not sure how easily the purchases data will be made available to state auditors, but these are essentially 1099s, and those forms are not exactly state secrets in the current environment).  Bottom line: those 1099s will prove gross sales amounts to individual customers and that info will be very useful to sales tax compliance professionals. 

For any auditor interested in use tax compliance, those reports are the golden ticket to assessments for non-reporting purchasers who purchase for personal use free of sales tax.

And of course, for any auditor interested in sales tax compliance, the reports will be a roadmap of purchases by re-sellers, by which auditors will be able to glean estimates of expected gross receipts by looking at purchases by vendors.

The take away?  From 30,000 feet, this law looks like another reporting scheme designed to improve compliance.  Fair enough.   We have witnessed the Colorado reporting requirements for sales tax and other states’ similar versions.  The stated purpose of these laws is to increase transparency and to aid regulators and auditors do their work, which the laws likely accomplish. 

But one offshoot of the new reporting laws may also serve to increase compliance costs for not collecting sales tax or not remitting use tax exceed the compliance costs for just collecting sales or remitting use tax in the first place.

Halfway Around the World, India Exerts Sales Tax Compliance Pressure on a Honda Dealer.

In honor of our friends and colleagues from India, we bring you avalara blog: International Edition…

The compliance requirements faced by sales tax vendors, and the enforcement thereof, do not begin and end at any border.

Here is an interesting blurb about sales tax compliance in India.  Seems a car dealer is accused of skirting local sales taxes by some, umm, creative geo-interpretation?

A car dealer?  Acting shady?  Well…

The take away?  As economies around the globe modernize, the demands placed on governments by their constituents expand.  In order for countries and states to provide the type of services and stability that folks in a modern economy expect, the money has to come from somewhere. 

Sales taxes and other similar excise taxes are ingrained vehicles for revenue collections, and compliance with those laws will remain a challenge for vendors all over the world for a long, long time coming.

Virginia Sales Tax Vendors Discover that Compliance Requires a Loan to Richmond

The states are struggling with short and long term budget pressures, this much we know.  Legislators in the Commonwealth of Virginia have dreamed up a novel approach to … well, we aren’t sure how much this will help relieve the fiscal reality faced in the Old Dominion, but it creates some headaches for large Virginia sales tax vendors.

The nutshell version, from the linked article, is that the state’s fiscal year end is June 30, so accelerated sales tax payments from Virginian sales tax vendors will make the 2009-2010 fiscal year finish in the black.  Of course, eventually the accelerated payments will end and the state will have to budget for 11 months of collections, but that won’t happen until 2021 when the program is set to end.

In the meantime though, at least one group of Virginia stakeholders is glad about the budgetary switcheroo:

” (Gov. Bob) McDonnell said this week that he’s optimistic the state will end this fiscal year with a surplus that’s significant enough to trigger a 3 percent bonus for state employees. The one-time cost would be $83 million.”

 

No word in the article about just how happy Virginia Sales Tax vendors are to provide the state an interest free loan, mid-recession, to fund bonuses for state employees.  (Including the state’s team of Sales Tax Compliance professionals, no doubt…)

Granted, the class of mandatory early remitters is relatively small (about 1000 as per the article) compared to the entire class of Virginia sales tax vendors.  However, the mandate presents significant sales tax compliance challenges.

We would guess one significant challenge is: how to find the cash to remit since the cash being remitted has not been collected from customers yet!

Yeah, that stings enough, but also consider the additional bookkeeping tasks involved with reconciling June filed-as sales with actual June sales.  Even vendors seeking a hardship exception to the accelerated sales tax payments must provide extensive documentation ahead of time to avoid penalty.

But the state will give a vendor a break under certain circumstances:

” A Dealer who would otherwise be required to make an accelerated sales tax payment, but is no longer in business, will not be required to make the accelerated sales tax payment ”  Guidelines, Page 3.

At least no one can ever say that the Virginia Department of taxation doesn’t have a heart, or a sense of humor.

The take away?  Large Virginia vendors must comply and pay up.  What else can we say?

Big Picture, vendors of all sizes and from all jurisdictions must recognize that budgetary shenanigans may be another source of sales tax compliance complexity.

Oklahoma Enacts Colorado-ish Use Tax Noticing Requirement.

Since we are all over Oklahoma today, why not word about a new sales tax compliance wrinkle for vendors who sell to customers in the Sooner state.

There are a lot of sales tax related items that this monster legislation touches on, but perhaps the most timely issue relates to the so-called “Amazon Tax” controversy.  We have posted and posted about the on-going efforts of states to enforce collection of sales taxes by out of state vendors (hence, the imprecise term “internet tax” has developed).  A few states have attempted to dramatically expand the definition of nexus so as to include out of state vendors, like New York or North Carolina.

Other states have taken a different tack.  Well, actually Colorado is the only one to have actually gotten the regs off the ground, but California has a similar bill pending.

So what is the alternative to attempts to expand nexus beyond its generally understood definition?  Noticing, thats what!  See the newest Oklahoma law:

“SECTION 2. NEW LAW A new section of
law to be codified in the Oklahoma Statutes
as Section 1406.1 of Title 68, unless there
is created a duplication in numbering, reads
as follows:
A. Each retailer or vendor making sales of
tangible personal property from a place of
business outside this state for use in this
state that is not required to collect use
tax, shall provide notification on its
retail Internet website or retail catalog
and invoices provided to its customers that
use tax is imposed and must be paid by the
purchaser, unless otherwise exempt, on the
storage, use, or other consumption of the
tangible personal property in this state.
The notification shall be readily visible.
It is further provided that no retailer
shall advertise on its retail Internet
website or retail catalog that there is no
tax due on purchases made from the retailer
for use in this state.”

So, the lawmakers in Oklahoma made notice requirements law, backed off the Colorado reporting requirements, but then added a twist of advertising restrictions, just to keep all you vendors on your compliance toes.  

The take away?  The new law presents a unique, if not onerous, sales tax compliance challenge for vendors who sell in Oklahoma, but do not collect tax there.   

Big picture, the new law’s notice requirements, as well as the law’s amnesty for vendors, (maybe we’ll get to that on a later post) reflects the current trend by states to ‘try anything’ to encourage sales tax collections by out of state vendors.