As a CPA firm focusing on state and local taxes, we speak with many taxpayers going through audits. A recurring theme that we often hear is that the auditor, audit supervisor or even the entire state audit division are being totally unreasonable or unfair. They can’t wait to appeal their audit, because once they get in front of an “impartial third party”, they feel that they will be treated more justly and receive a different outcome. While these taxpayers are often correct that they are being treated unreasonably, they are far from correct in their belief they will receive a different outcome in appealing their audit; especially in the state of Texas.
Should You Appeal Your Assessment in Texas?
Probably, especially if you disagree with it, but before you do, understand the odds are stacked against you. In addition you should know the audit process and try to resolve any issues at the appropriate levels during the process. Do not give up in trying to work with the auditor. If need be bring in someone to work on your behalf. Here are some reasons why.
Friday, October 28, 2011
Friday, August 26, 2011
Big Changes with Texas Certificates
Are You A Rancher/Farmer in Texas or Do You Have A Rancher/Farmer Customer? If so, the Texas Sales Tax Law Has Changed for You.
Do you sell to farmers or ranchers in Texas? Then a new law in Texas applies to you. Starting in January, 2012, you’ll have to collect a new certificate from them with their new Comptroller-issued exemption number.
The Comptroller is currently working on the application for a registration number. A farmer/rancher in Texas enjoys a very broad-ranging exemption and until now, there was no need to register. You just buy an exempt item at Home Depot or Lowes or Tractor Supply and sign a statement that you're a rancher and no tax is charged. Now, any store who sells to a rancher will need to collect and manage a new certificate.
Many of our clients are experiencing increased sales tax audit liabilities because of missing resale and other exemption certificates. This is an area that states are targeting with laser-like focus. Exemption certificates have always been a problem in most sales tax audits, but as long as you had something on file that you “accepted in good faith”, or if you came up with the missing certificate, the auditors would usually give you a pass. If the item was clearly exempt, they were pretty lenient about the certificates. But states are getting very aggressive; focusing on the technicalities to the extreme. The item may clearly be for resale or exempt like these agricultural items, but it you don’t have the right form completely filled out and signed with a valid id number and the right date, they will tax you all day long til the cows come home. It’s easy, low-hanging fruit.
Do you sell to farmers or ranchers in Texas? Then a new law in Texas applies to you. Starting in January, 2012, you’ll have to collect a new certificate from them with their new Comptroller-issued exemption number.
The Comptroller is currently working on the application for a registration number. A farmer/rancher in Texas enjoys a very broad-ranging exemption and until now, there was no need to register. You just buy an exempt item at Home Depot or Lowes or Tractor Supply and sign a statement that you're a rancher and no tax is charged. Now, any store who sells to a rancher will need to collect and manage a new certificate.
Certificate Management Just Got Harder
Tuesday, May 24, 2011
Is an iTune Taxable in California?
How About in Other States?
Back in 2008, we wrote that the CA legislature was contemplating a change to its sales tax statutes to tax downloaded software. As it turned out, they didn’t change the law after all and electronically downloaded music and other digital goods in CA remained exempt from sales/use taxation. Meanwhile, a song purchased on a CD has always been taxable in CA. That may seem a bit unfair. If you buy a song on iTunes and download it to your iPod, you owe no tax in CA, but that same song on a CD is taxable in CA.
This may seem arbitrary and capricious, but there is a reasonable explanation for the different tax treatment.
Back in 2008, we wrote that the CA legislature was contemplating a change to its sales tax statutes to tax downloaded software. As it turned out, they didn’t change the law after all and electronically downloaded music and other digital goods in CA remained exempt from sales/use taxation. Meanwhile, a song purchased on a CD has always been taxable in CA. That may seem a bit unfair. If you buy a song on iTunes and download it to your iPod, you owe no tax in CA, but that same song on a CD is taxable in CA.
This may seem arbitrary and capricious, but there is a reasonable explanation for the different tax treatment.
Tuesday, April 26, 2011
OH SALT Update
Commercial Activities Tax (CAT), Sales & Use Tax, VDAs & Amnesty
The State of Ohio and its state and local tax (SALT) policies are currently generating a variety of questions from our clients as well as with others we are speaking with. Since OH is generating so much attention we thought it might be beneficial to share with our readers the subjects that are most frequently arising and provide you with some information as well as our thoughts.
These subjects include OH’s requirement that companies register, file and remit use tax, and the State’s push to go after the 380,000 business who don’t have use tax accounts. We will also take a look at the OH sales tax amnesty that forgives not only all principle and interest but all back sales taxes as well. Finally, we will take a look at the CAT and how you can have nexus without a physical presence.
By Michael J. Fleming
The State of Ohio and its state and local tax (SALT) policies are currently generating a variety of questions from our clients as well as with others we are speaking with. Since OH is generating so much attention we thought it might be beneficial to share with our readers the subjects that are most frequently arising and provide you with some information as well as our thoughts.
These subjects include OH’s requirement that companies register, file and remit use tax, and the State’s push to go after the 380,000 business who don’t have use tax accounts. We will also take a look at the OH sales tax amnesty that forgives not only all principle and interest but all back sales taxes as well. Finally, we will take a look at the CAT and how you can have nexus without a physical presence.
Wednesday, April 6, 2011
Don't Miss this New Twist to the Washington Tax Amnesty
You might be able to get part of the tax WAIVED along with the penalty and interest
We’ve been beating the drum on the amnesty in Washington for some time. We don’t like to beat the drum too long and loud, but in this case, we feel compelled to call your attention to the opportunity, lest you miss out.
The State is NOT Meeting Their Projections
In December of 2010, during Senate hearings of the Washington State Tax Amnesty (SB 6892), the WA Department of Revenue Interim Director, Tremaine Smith, testified that the proposed Amnesty program was projected to generate $28.3 million. The Amnesty which subsequently passed, began on February 1, 2011 and continues through April 18, 2011, may not meet it’s projections. According to a Tri-City Herald article published 3/24/2011, “5,000 businesses in Washington have taken advantage of a new tax amnesty program and paid more than $12.6 million into the state”. Using those numbers our calculations show that more 70% of the time had elapsed yet less than 45% of the revenue had been generated.
We’ve been beating the drum on the amnesty in Washington for some time. We don’t like to beat the drum too long and loud, but in this case, we feel compelled to call your attention to the opportunity, lest you miss out.
The State is NOT Meeting Their Projections
In December of 2010, during Senate hearings of the Washington State Tax Amnesty (SB 6892), the WA Department of Revenue Interim Director, Tremaine Smith, testified that the proposed Amnesty program was projected to generate $28.3 million. The Amnesty which subsequently passed, began on February 1, 2011 and continues through April 18, 2011, may not meet it’s projections. According to a Tri-City Herald article published 3/24/2011, “5,000 businesses in Washington have taken advantage of a new tax amnesty program and paid more than $12.6 million into the state”. Using those numbers our calculations show that more 70% of the time had elapsed yet less than 45% of the revenue had been generated.
Tuesday, March 22, 2011
BIT, CIT, MBT, MGRT & SBT
News and Views on the Alphabet Soup of MI Taxes
On February 17, 2011, as part of his 2012-2013 budget, Michigan Governor, Rick Snyder announced his proposal for the elimination of the Michigan Business Tax (MBT) and for the replacement of it with a flat Corporate Income Tax (CIT) of 6%. While not surprising (it was part of his campaign platform) it is unsettling. You see, the MBT was passed in 2007 but it didn’t replace the Single Business Tax (SBT) until January 1, 2008. Tax professionals are already tasked with knowing both the SBT and MBT. They must retain a working knowledge of the SBT as the audit periods are still open and they obviously must contend with the complexities of the current MBT. Now they must grapple with the reality that they may have another tax to plan for. In theory, you could have a tax professional defending an SBT audit, filing MBT returns and at the same time be involved with tax planning for the CIT. Talk about a heavy workload and it’s not farfetched at all. While we cannot say for sure that the Governor’s CIT will pass, it does seem probable. And there seems to be growing support for the elimination of the MBT. If the MBT is eliminated it will have to be replaced by something. In the meantime, working with the SBT, MBT and it’s component parts the BIT and MGRT will be taxing enough.
By Michael J. Fleming
On February 17, 2011, as part of his 2012-2013 budget, Michigan Governor, Rick Snyder announced his proposal for the elimination of the Michigan Business Tax (MBT) and for the replacement of it with a flat Corporate Income Tax (CIT) of 6%. While not surprising (it was part of his campaign platform) it is unsettling. You see, the MBT was passed in 2007 but it didn’t replace the Single Business Tax (SBT) until January 1, 2008. Tax professionals are already tasked with knowing both the SBT and MBT. They must retain a working knowledge of the SBT as the audit periods are still open and they obviously must contend with the complexities of the current MBT. Now they must grapple with the reality that they may have another tax to plan for. In theory, you could have a tax professional defending an SBT audit, filing MBT returns and at the same time be involved with tax planning for the CIT. Talk about a heavy workload and it’s not farfetched at all. While we cannot say for sure that the Governor’s CIT will pass, it does seem probable. And there seems to be growing support for the elimination of the MBT. If the MBT is eliminated it will have to be replaced by something. In the meantime, working with the SBT, MBT and it’s component parts the BIT and MGRT will be taxing enough.
Thursday, March 17, 2011
An Amnesty Worth Its SALT
A look at the B & O, Economic Nexus, Elimination of Physical Presence and Amnesty
In the current economic environment, states have a tightrope to walk between balancing the need to increase revenues with the need to save and create jobs. The state of Washington probably thinks it has found a creative way to do both.
Prior to June 1, 2010 many of WA’s in-state companies that provided services were at a competitive disadvantage to out of state companies. In instituting an economic nexus standard in addition to changing the apportionment method for certain companies to “single factor receipts apportionment” WA has leveled the playing field. In fact, many WA companies with out of state sales will see their taxes go down, some substantially.
On the other hand, out-of-state companies who have never worried about the B & O before will now be subject to the WA tax, even if they don’t have a physical presence. Common sense tells us that WA will look at ways to not only make up for the tax relief they have provided their domestic companies, but also to bring in the additional revenues all states are looking for. Increased enforcement of both the B & O and the sales and use tax are two of the most logical ways to do this. Out-of-state companies who are not paying the B & O seem to be likely (and lucrative) targets. The current amnesty program is a useful tool that many taxpayers may or may not take advantage of for a multitude of reasons.
By Michael J. Fleming
In the current economic environment, states have a tightrope to walk between balancing the need to increase revenues with the need to save and create jobs. The state of Washington probably thinks it has found a creative way to do both.
Prior to June 1, 2010 many of WA’s in-state companies that provided services were at a competitive disadvantage to out of state companies. In instituting an economic nexus standard in addition to changing the apportionment method for certain companies to “single factor receipts apportionment” WA has leveled the playing field. In fact, many WA companies with out of state sales will see their taxes go down, some substantially.
On the other hand, out-of-state companies who have never worried about the B & O before will now be subject to the WA tax, even if they don’t have a physical presence. Common sense tells us that WA will look at ways to not only make up for the tax relief they have provided their domestic companies, but also to bring in the additional revenues all states are looking for. Increased enforcement of both the B & O and the sales and use tax are two of the most logical ways to do this. Out-of-state companies who are not paying the B & O seem to be likely (and lucrative) targets. The current amnesty program is a useful tool that many taxpayers may or may not take advantage of for a multitude of reasons.
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