of bills are being introduced to raise taxes,
there’s also a lot of resistance to raising taxes.
So there is more focus on budget-cutting and
a review of existing exemptions.”
“There is especially an increased focus on
compliance, with the focus on collecting as
much revenue as they can within existing
laws,” he said. “And part of this is getting more
remote vendors to collect sales tax.”
Moreover, states are searching for ways
to broaden the tax base, Collins explained.
“Because of the pressure not to increase
rates, they want to expand the items subject
to tax,” he said. “For example, Nevada has
introduced legislation that would expand
the sales tax to services. North Carolina has
looked at that also.”
Some states, such as South Dakota, tax
most services. “Repair labor, maintenance
agreements, security monitoring and haircuts
are not taxable in most states. That’s an area
that will see a lot of attention in the future,”
Collins added.
Wayne Berkowitz, head of the state and local tax group at Berdon, agreed that the states
are becoming more aggressive at defining
what items are taxable. “This is especially
true with computer software and information services,” he noted.
“For example, if you buy Microsoft Word,
it’s subject to sales tax. But if you buy software
through the cloud, is it taxable? New York now
says that if the billing address for the service
is in New York, it is subject to tax. They say
that if you have control over that software, it
is just like you purchased the software, so it’s
subject to sales tax.”
Amazon
FROM PAGE
3
THE AMAZON BANDWAGON
Click-through nexus, legislated by Amazon-style laws, is part of the process as states seek
more revenue. The Amazon laws are attempts
to collect sales tax from Internet vendors
such as Amazon and Overstock.com that sell
through in-state affiliates’ links to their Web
sites. The Internet vendor pays a commission
to the affiliate when the customer they refer
makes a purchase from the online seller.
“New York enacted the first Amazon law in
2008,” said Steven Roll, BNA’s assistant man-
Future
FROM PAGE
12
linked to what people want — and at what
cost people are willing to pay.
Efficiency in a professional firm, in and of
itself, is not a competitive advantage. It is the
equivalent of having restrooms. If your firm is
aging editor for state tax. “This was followed
by North Carolina and Rhode Island in 2009.
In 2010, no additional states enacted Ama-
zon laws, but in 2011, we’ve seen Arkansas,
Connecticut, Illinois, Vermont and California
enact similar provisions. Last year, it looked
like most states would follow the Colorado
route [which passed legislation requiring out-
of-state vendors to notify the state when a sale
was made to a state resident, and to send a
letter to resident-purchasers notifying them
of their obligation to pay use tax]. But retail-
ers’ associations have been pushing the Main
Street Fairness Act as a federal solution to the
states’ problem.”
The Main Street Fairness Act grants con-
gressional consent to the SSUTA, the multi-
state agreement on sales and use tax collec-
tion and administration that was adopted
in 2002. It authorizes each member state to
require remote sellers to collect and remit
sales and use taxes on remote sales. One of
the impasses to joining the SSUTA for many
states is the adoption of uniform sourcing
rules, according to Roll.
CONCLUSION
The new business model offered herein is not
about predicting the future; it is about helping
to shape and create the future. No one can
for by state lawmakers has not happened.
“The result is mainly that the affiliate pro-
grams are being cancelled, not that out-of-
state retailers are starting to collect. Under
the streamlined initiative, they would get the
federal authority they’re seeking to force the
out-of-state retailers to collect.”
However, the larger states aren’t interested
in pursuing SST because they don’t want to
meet the streamlined specifications, despite
the fact that pursuing Amazon legislation
won’t get them the revenue they want.
MORE AUDITS
Both the frequency and the intensity of state
sales tax audits are increasing, according to
Susan Nunez, a principal with St. Louis-based
CPA and business advisory firm Brown Smith
Wallace. “For example, state auditors are of-
ten going outside the statute of limitations
period,” she said. “If they ask you to sign a
waiver for, say, a five-year look-back period,
make sure you understand what you’re sign-
ing first. Most taxpayers just go along with
it, because they’re faced with the threat of a
jeopardy assessment if they don’t sign. The
auditor can threaten it for any period outside
of the statute of limitations period.”
Nunez advised caution in dealing with the
time allowed to respond to the auditor. “Try
not to be bullied into having to respond in a
day. An audit should be conducted in a rea-
sonable manner,” she said. “Understand how
the audit should be performed, and be aware
of your rights.”
Frequently, taxpayers will take the position
on sales and use tax of the best practices in
the industry, Nunez observed. “You should
trust the position you are taking and even
thought the auditor may sound knowledge-
able, push back and make sure the auditor
has support for his or her position. Don’t just
accept it as fact.” AT
predict the future, and only a fool tries. But
we can influence the future based upon the
decisions and choices we make.
