Avalara

Article Dean Dorton

Repost from Avalara , Image from Santa Clarita Consultants

2018 was an exciting year for sales tax. 2019 promises to be the same.

Sales tax wonks will remember 2018 as the year the Supreme Court of the United States overruled the physical presence rule that for decades kept states from taxing remote sales. The court’s decision in South Dakota v. Wayfair, Inc. (June 21, 2018) allows states to require a remote seller with “economic and virtual contacts” in the state (economic nexus) to collect and remit sales tax, even if it has no physical presence in the state.

This is huge, and it will take months if not years for the full ramifications of the decision to play out.

Fallout from Wayfair

As of the end of 2018, more than 30 states and Washington, D.C. have adopted economic nexus policies, including two giants, California and Texas. Fallout from the Wayfair decision is sure to continue in 2019. Several states have already filed economic nexus legislation for consideration in 2019, including Arkansas, Missouri, and Virginia. Meanwhile, sales tax simplification measures are under consideration in Texas because the Lone Star State has more than 1,500 local taxing jurisdictions.

Although the Wayfair case was triggered by an economic nexus law, the decision doesn’t prevent states from pursuing remote sales tax revenue via different routes; all it does is put an end to the physical presence rule. Thus, states could pursue a variety of remote seller sales tax laws in 2019, including affiliate nexus, click-through nexus, or cookie or software nexus. Furthermore, more states will likely require marketplace facilitators to collect and remit sales tax on behalf of their third-party sellers. What will this mean for businesses that sell through multiple channels? There’s a good chance we’ll find out in 2019.

An act of Congress?

Will the rapid growth of economic nexus and other remote seller sales tax laws inspire Congress to take up the issue? Perhaps. It could never agree to expand state tax authority to remote sales, but it might come together to limit it. A handful of bills seeking to do just that has already been introduced.

There’s more to sales tax than remote sales

States’ newfound freedom to tax remote sales isn’t the only sales tax news making headlines. Expect to see the following in 2019:

  • More states apply economic nexus to other taxes. Texas is already looking at how economic nexus affects franchise tax. Expect other states to move in that direction.
  • More taxes on streaming services. As more people stream their entertainment, more states will look to tax those services.
  • More taxes on sins. Some states will change the way they tax products like alcohol and tobacco; others could start to tax newly legal products such as marijuana.
  • More product taxability changes. In 2019, more states may exempt certain products like tampons because they’re essential. Others may subject products like soda to a higher rate because they pose a health risk. And some states may exempt newish products and services simply because they’ve never been taxed before.
  • Rate changes: There are sure to be many.

There are many uncertainties in life, and with sales tax. But one thing is certain: 2019 will bring many sales tax changes.

Local to the Raleigh-Durham area? Join Dean Dorton and Avalara for a high-level overview on how cloud financial management technology eases compliance processes for both sales and use tax, along with revenue recognition and contract management.

When: March 26, 2019 from 8:30 AM – 11:00 AM

Where: Avalara Durham offices, 512 South Mangum Street #100, Durham NC 27701

Who: All finance professionals who play an important role in industries that are affected by compliance regulations- including sales and use tax, economic nexus, ASC 606, HIIPA, GAAP, revenue recognition, etc. CFOs, Controllers, Accountants, VPs, and Directors of Finance, Tax Specialists, etc.

Article Dean Dorton

Repost from Avalara

Economic nexus is here. Is your business prepared?

Before the Supreme Court of the United States issued its ruling in South Dakota v. Wayfair, Inc. (June 21. 2018), states could only tax sales by businesses with a physical presence in the state. Wayfair changed that long-standing rule. The court found the respondents’ “economic and virtual contacts” with South Dakota to be a sufficient basis for a tax collection obligation (nexus).

For economic nexus, a business establishes an obligation to collect and remit sales and use tax by its economic activity in a state. Generally, states look at the volume of sales or the number of transactions during a particular time frame, usually (but not always) the current or preceding calendar year. In South Dakota, the threshold is gross sales of $100,000, or 200 or more transactions in the state.

Already enforced in fourteen states, economic nexus will soon be in effect in 27 states, and counting. Businesses making sales into multiple states need to be on their toes, ready to register and commence collection activities as soon as nexus is triggered.

Unfortunately, determining when economic nexus has been established in a state is complicated by the fact that there’s little uniformity between jurisdictions. And once established, the process for getting things rolling (i.e., registering to do business) varies from state to state.

Economic nexus laws vary by state

While the thresholds in the majority of economic nexus states are $100,000 or 200 transactions, that’s not the case in all states: In Georgia, it’s $250,000 or 200 transactions, in Minnesota, it’s 10 or more sales totaling more than $100,000 or 100 retail sales, and so on.

Furthermore, the threshold in some states is based on tangible personal property only, while in others it includes services and in some, it includes electronically transferred property. The threshold is comprised of taxable and exempt sales in some states but only taxable sales in others. To top it off, some states simply haven’t said.

Once nexus has been established, businesses may need to act fast.

Economic nexus can be established overnight

Consider Illinois, where economic nexus went into effect on October 1, 2018. Remote sellers must ascertain at the end of each quarter whether they’ve met one of the state’s economic nexus thresholds during the preceding 12-month period. If they have, they’re required to register and commence tax collection and remittance at the start of the subsequent quarter — which could be the next day.

The Illinois Department of Revenue provides the following example: At the end of March 2019, a remote seller determines it made $200,000 in sales to Illinois purchasers for the preceding 12-month period. As a result, it’s required to register to collect and remit tax on sales to Illinois purchasers from April 1, 2019, through March 31, 2020. On March 31, 2020, the cycle starts again.

A seller with unexpectedly strong sales in Illinois at the end of a quarter could find itself with an unexpected obligation to collect and remit tax in a matter of days.

Learn More

Attend our Economic Nexus webinar to learn more, and download our complimentary whitepaper to learn more: What the South Dakota v. Wayfair Inc. Decision May Mean for Your Business: Understanding Economic Nexus.

WEBINAR: Thursday, January 31st @ 2 pm EST

Article Dean Dorton

On June 21, 2018, the U.S. Supreme Court ruled in favor of South Dakota in South Dakota vs. Wayfair, Inc., granting the state authority to impose sales tax obligations on out-of-state transactions.

Wayfair changed that long-standing rule. The court found the respondents’ “economic and virtual contacts” with South Dakota to be a sufficient basis for a tax collection obligation (nexus). For economic nexus, a business establishes an obligation to collect and remit sales and use tax by its economic activity in a state. Generally, states look at the volume of sales or the number of transactions during a particular time frame, usually (but not always) the current or preceding calendar year. In South Dakota, the threshold is gross sales of $100,000, or 200 or more transactions in the state.

Since the ruling, economic nexus laws have been adopted by several states which could create more challenges for remote sellers. We brought in our partners at Avalara to share:

  • What the ruling is and how it has affected future laws across other states
  • What you can do now to understand the impact on your business
  • How to automate the sales tax compliance process to help save you time and confusion

Date: January 31, 2019 at 2:00 PM EST

Duration: 45 minutes

Article Dean Dorton

Repost from Avalara  

2017 was a big year for sales and use tax, and 2018 promises to be even bigger. States will likely continue to creatively redefine physical presence nexus, impose use tax reporting requirements, and tax third-party (marketplace) sales. They’ll almost certainly have to adjust their sales tax laws if Congress succeeds in enacting federal tax reform. And 2018 could be the year the Supreme Court of the United States reconsiders Quill Corp. v. North Dakota, 504 U.S. 298 (1992), the seminal ruling that prohibits states from taxing remote businesses without an in-state presence.

While we can’t tell the future, we can anticipate some of the trends sales and use tax will see in 2018. Read on to learn more.

State efforts to tax marketplace sales

Collect tax or comply with use tax reporting requirements

Although Amazon now collects tax in all states with a sales tax, it only does so on its own sales; sales by its marketplace sellers go untaxed unless the seller specifically asks (and pays) Amazon to collect it. That changed in 2018 — at least in one state.

Starting Jan. 1, Amazon started to collect tax on all of its Washington state sales, marketplace transactions included. The e-commerce giant is complying with Washington state’s new marketplace fairness law, which requires it to either collect the tax or comply with new use tax reporting requirements for non-collecting retailers. Why Amazon has chosen to comply with this law is unclear, though Washington is its home state.

Minnesota, Pennsylvania, and Rhode Island have enacted similar laws. Although Minnesota won’t require collection on these sales until the middle of 2019, Pennsylvania expects marketplace facilitators to register and collect by March 1, 2018, and the Rhode Island law took effect last August. It’s unclear how many businesses are complying with it, or how the state plans to enforce it in the coming months.

These states aren’t going after marketplace facilitators only. All hold the marketplace seller liable if the facilitator doesn’t collect and remit tax on its behalf. They also impose collection or use tax reporting requirements on certain referrers.

Since Amazon is complying with Washington’s law, there’s a good chance we’ll see more of these laws in 2018. Keep an eye on New York, North Carolina, and Texas, three states that considered taxing marketplace facilitators 2017.

Identify your third-party sellers

Massachusetts and Connecticut are taking a different tactic. They’ve asked Amazon to identify all marketplace sellers with inventory in their states.

Last spring, Connecticut Revenue Services Commissioner Kevin B. Sullivan told Bloomberg BNA that he expects Amazon to comply with the state’s request. If it has, Connecticut is keeping quiet about it. As far as we know, the online behemoth hasn’t complied with Massachusetts’ request: It may be in private discussions with the state, or it may plan to fight the Massachusetts Superior Court’s order to comply.

A legal battle could drag on for much of 2018 in Massachusetts. On the other hand, the company could work out a deal with one or both states. Stay tuned for more news.

Here’s looking at you, seller

Virginia hasn’t asked Amazon to identify its third-party sellers. However, it does hold marketplace sellers liable for sales tax if they keep inventory in Virginia. States will be watching to see if Virginia actually brings in the more than $20 million it expects to get from this in the 2018 fiscal year. Could it be that easy to get remote sales tax revenue?

And as of Dec. 1, 2017, Mississippi is holding certain remote vendors who “purposefully or systematically” exploit the Mississippi market liable for tax on their sales. If it succeeds in getting remote vendors to comply, other states may enact similar legislation in 2018.

Just give us the money

South Carolina has taken still another stance. In 2017, it handed Amazon a bill for millions in uncollected tax on its marketplace sales, and that’s just for the first quarter of 2016. The state wants Amazon to collect tax and place it in trust until this issue can be resolved, which could happen when the case goes to trial in November 2018.

If South Carolina wins, expect other states to follow its lead.

Hungry for sales tax

If not, Connecticut, Massachusetts, Ohio, and Rhode Island have a plan. They all maintain that out-of-state internet companies establish a physical presence in the state when they place software or web cookies on in-state devices, like computers, phones, and tablets. While this might not impact catalog sellers that don’t advertise online, it will surely affect online sellers.

It will be interesting to see how these laws play out in the coming year. Rhode Island’s policy took effect last August, Massachusetts’ policy on Oct. 1, 2017. Ohio’s new law took effect Jan. 1, 2018, and Connecticut will release guidelines in early 2018.

The sneaky solution

Tired of waiting for Godot, some states have come up with a creative, if sneaky, solution. They’re imposing use tax reporting and notification requirements on non-collecting vendors, which require these vendors to inform all potential customers that they don’t collect sales tax and the customer may have to remit use tax directly to the state. Non-collecting vendors also have to send all customers an annual report detailing the total amount of their purchases that year, at a minimum, and send states annual reports of the total amount of customer purchases.

This is a way to pressure non-collecting vendors to collect without enacting litigious remote sales tax laws — the lengthy legal battle over use tax reporting has already come and gone. If the first states to enact these (Colorado, Vermont) see an uptick in sales tax collections, other states are likely to consider similar requirements in 2018.

The ongoing battle to kill Quill

Let the Supreme Court decide

The slow-burning battle to kill Quill is likely to heat up this year. South Dakota has petitioned the Supreme Court of the United States to hear a case involving its remote seller compliance law, which was created specifically to challenge the physical presence precedent upheld by Quill. If the court takes the case, all states will be watching. If it abrogates Quill, states will have a clearer path to tax sales by remote vendors. If the court doesn’t take the case, states will aggressively enact the preceding concepts.

Let Congress decide

Many states are hoping the court will intervene because Congress hasn’t, despite repeated calls for it to do so. Yet Congressman Bob Goodlatte, Chairman of the House Judiciary Committee, recently asked the court to not “give up on Congress.” He says his committee “has been working diligently and assiduously” to solve the problem of untaxed remote sales and urges the court to let Congress finish what it’s started.

Does this mean we can expect to see more congressional action on this in 2018? Time will tell.

Federal tax reform fallout

Until we know exactly what the final plan is, there’s no knowing exactly how state sales and use tax will be impacted by federal tax reform. However, there is guaranteed to be fallout. If Congress succeeds in pushing it through as quickly as it hopes, states will be scrambling to understand and react to it in 2018.

Everything else

The above are some of the biggest issues facing sales tax in 2018, but they’re far from the only changes.

Taxing sin, exempting essentials

State and local governments are still grappling with how to tax specific products: those that aren’t all that good for us (i.e., candy and soda), and those some of us absolutely need (i.e., diapers, tampons).

Arkansas raised the sales tax rate on both candy and soda Jan. 1, the same day new taxes on sweetened beverages took effect in San Francisco and Seattle. And a group in Oregon is looking to put a sugar-sweetened tax to voters sometime in 2018. On the other hand, the Cook County soda tax was recently repealed, and a Michigan lawmaker is looking to prohibit local governments from imposing any sort of tax or fee on the manufacture, distribution, or retail sale of food.

Like Wisconsin, the Florida legislature will consider a sales tax exemption for diapers and incontinent products in 2018. They’ll likely be joined by several other states, including California and Texas.

Already on the calendar is an exemption for feminine hygiene products in Florida (effective Jan. 1), and an exemption for both diapers and feminine hygiene products in Connecticut (as of July 1, 2018).

Taxing … wheels?

On Jan. 1, sales-tax-free Oregon began to tax sales of bikes and vehicles. Be warned, if it has wheels, it could be taxed.

Oregon isn’t the only state getting creative with vehicle taxes. Fuel-efficient cars are better for the environment, but they take a bite out of the gas tax revenue cities states rely on to fund roads. California, Utah, and Seattle are all starting or considering pilot projects to tax miles driven rather than fuel. Expect to see more of this in 2018.

Rate changes

There will be a plethora of sales and use tax rate changes in 2018, some of which have already been announced. And watch out for department of revenue rulings, which remind us just how complicated sales tax can be.

There is sure to be more sales and use tax news in 2018, but one of the most entertaining aspects of tax (if it can be said to be entertaining), is that we never know what we’re going to get

Article Dean Dorton

Last week, on December 12th, Massey Consulting held its annual end-of-year conference for our Sage Intacct users and clients. The conference, newly renamed “Enlighten 2017”, was a great success!

The event took place at RTP Headquarters right in our own Raleigh, North Carolina. With Sage Intacct customers traveling from both out of town and out of state, there was a mix of all types of people – in other words, a great turnout. Some users had been using Sage Intacct for over 5 years, while some are currently still working on their implementation to go live in the next month.

Because of the different stages of each customer’s journey, the conference was a great opportunity for individuals to engage with each other and share their feedback and experiences with Sage Intacct.

The networking time also allowed attendees to visit Massey’s wonderful marketplace partners- AvidxChange, Nexonia, WorkForceGo, and Avalara.

                      avidxchange enlighten

Additionally, there were sessions given throughout the day from the Massey team, our marketplace partners, one of our local customers, and even a Q & A panel at the end.

“I thought the presentations were very concise and informative.  I especially enjoyed the sales and use tax software presentation {from Avalara} and the Q & A at the end about Sage Intacct.” –Eric Modrak from the American Society of Echocardiography

Presentations included information on:

  • How to keep your security safe in Sage Intacct
  • How to use AP benchmarks and dimension relationships
  • Dashboard customizations
  • Top resources you can utilize within Sage Intacct.

Attendees were able to earn 4.5 CPE credits through these sessions.

We can’t forget the delicious taco bar from Rocky Top Catering that everyone enjoyed, along with the White Elephant game that added some fun, holiday cheer to an educational day. Everyone was able to walk out with a prize, ranging from tablets, drones, to Amazon Echos and $100 gift cards!

“Massey’s Enlighten events are always very valuable as we continue to learn more about Sage Intacct. We aren’t always able to make the larger Sage Intacct events, so it’s very helpful that Massey brings some tips and updates back to us on a local level. Hearing the presentations from a few of the Sage Intacct partners also helps me think of new ways we can customize the system to work for us even better. The addition of CPE hours this year is a wonderful bonus (and the White Elephant game is pretty awesome too)!” –Laura Arndt from Riccobene

You do not want to miss out on Enlighten the next time it comes around! Stay posted with our events on Massey Consulting’s Calendar page!

Article Dean Dorton

Repost from Avalara  

When researching my favorite beverage for National and International Coffee Days (Sept. 29 and Oct. 1), I discovered that coffee hyped up goats in ninth-century Ethiopia and was dubbed a “bitter invention of Satan” by 17th century Christian Italians. This was unexpected. Still, the history of coffee surprises me less than the taxability of coffee drinks in several states.

It sometimes seems there are as many ways to tax coffee as there are varieties of coffee drinks — and anyone who’s been to a Starbucks knows that’s a lot. Taxability can be affected by the temperature of the coffee, and whether it’s consumed on premises or sold to go. It can depend on the percentage of taxable food sales made by the seller, and if the coffee’s sold separately or as part of a combination. In fact, even the sweetness of coffee can affect taxability.

Curious? Grab a cup of the tasty brew and read on.

Sit as you sip. Louisiana state sales tax often applies to hot coffee, but sales of “coffee and its substitutes” are exempt when (1) not prepared by the seller and (2) not sold by candy and nut counters, drive-ins, private clubs, snack bars, or establishments that furnish facilities for the on-premises consumption of the food.

However, this exemption isn’t available to sellers that provide facilities for on-premises consumption, and it doesn’t apply to most local sales taxes.

Drink it cold. Sales of brewed and hot coffee are taxable in Pennsylvania when sold from a vending machine or at a delicatessen, grocery store, convenience store, bakery, doughnut shop, or pastry shop. In fact, sales of all hot beverages are taxable in these venues, as are sales of nonalcoholic beverages. However, cold coffee that’s bottled and flavored is exempt.

Hang on to your lids for these next two.

When hot is cold. California sales tax generally applies to all sales of hot prepared food, while sales of cold prepared food are generally exempt. Hot coffee is considered a hot prepared food, yet it’s exempt when sold separately unless taxable under the 80-80 rule (see below) or under California Board of Equalization (BOE) Regulation 1574. When hot coffee is sold combined with a cold prepared food for one price, the wholesale becomes taxable — even though both are exempt when sold individually.

When for here is to go. That’s not all. The taxability of coffee in California is sometimes affected by the 80-80 rule, for which there are two criteria:

  • More than 80 percent of the seller’s gross receipts are from the sale of food products
  • More than 80 percent of the seller’s retail sales of food products are taxable as provided in BOE Regulation 1603

According to the BOE, “When a seller meets both criteria of the 80-80 rule …, tax applies to sales of cold food products (including sales of … hot beverages such as coffee) in a form suitable for consumption on the seller’s premises even [when] such food products are sold … ‘take-out’ or ‘to go.’” This is true no matter the quantity of the sale (e.g., 40 half-pints of milk, or 40 cups of coffee). However, tax generally doesn’t apply to “sales of food products which are furnished in a form not suitable for consumption on the seller’s premises.” And a seller meeting both criteria of the 80-80 rule may elect to separately account for sales of to go orders that could be consumed on premises. In that case, these sales may be exempt.

Sellers that don’t meet the criteria of the 80-80 rule should not charge tax on “sales of cold food products (including sales of … hot beverages such as coffee) when sold … ‘take-out’ or ‘to go.’”

If you’re confused, you’re not alone. In fact, California’s policy is so confusing, it’s triggered lawsuits.

Try it black. In addition to sales tax, presweetened coffee and tea drinks are sometimes subject to a special tax. For example, presweetened coffee drinks distributed in the City of Brotherly Love are subject to the Philadelphia Beverage Tax (PBT) — unless they contain more than 50 percent milk (or milk substitute) by volume. Certain presweetened coffee drinks are also subject to special “soda taxes” in Boulder, Colorado, the state of Vermont, and several cities in California. Seattle, birthplace of the Frappuccino, will tax many presweetened beverages effective Jan. 1, 2018 (Seattle Municipal Code, Chapter 5.53). Portland, Oregon, may follow suit.

Coffeehouses have been places to exchange ideas as much as consume coffee since their first known appearance in the Ottoman Empire approximately 400 years ago. In celebration of National and International Coffee Days, engage in a time-tested coffeehouse tradition: Swap wacky sales tax laws. Stay ahead of wacky tax laws with automation from Avalara; check out this video to see how Avalara works.

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