The State of Washington has carved out a nexus safe-harbor for out-of-state representatives attending qualifying trade shows/conventions.
Effective July 1, 2016, for purposes of Washington’s Sales and Use Tax, and also the Business and Occupation (B&O) Tax, the Washington Department of Revenue may not make a determination of nexus based solely on the attendance or participation of one or more representatives at a single trade convention per year in Washington.
So, what does this mean for businesses? Without more, businesses that attend/exhibit (but not sell) at only one trade convention, not marketed to the general public, per year, will not be deemed to have a registration and a tax reporting requirement for purposes of Washington Sales and Use, and B&O tax.
Click here to read Washington’s Special Notice.
Or, click here to view Eide Bailly’s “Understanding Nexus” video.
As a result of a $900 million budget shortfall, Louisiana lawmakers have passed the following tax measures aimed at bridging the revenue gap. Some of the more important changes are as follows:
Income/Franchise Tax Changes (effective 1/1/2017):
- Expansion of franchise tax:
- “Domestic Corporation” now includes partnerships, joint ventures, and LLCs electing to be taxed as C Corporations for federal income tax purposes.
- Expansion of franchise tax nexus for out of state taxpayers – nexus for corporations that own interest in partnerships with Louisiana operations.
- Net Operating Loss (NOL) Reduction – NOL deduction cannot exceed 72% of Louisiana taxable income.
- NOL Carryover ordering – must use loss carryovers starting with the loss for the most recent taxable year. Older NOLs may expire since taxpayers would have to first use newer NOLs.
- Modification of corporation income tax rate to flat rate of 6.5% (contingent).
- Addback of intercompany interest, intangible expenses and management fees unless certain exceptions are met.
- Modification of federal income tax deduction (contingent).
Sale/Use Tax Changes:
- Effective 4/1/16 through 6/30/2018, the legislation increases the sales tax rate by 1% (bringing the rate to 5%). Referred to as the “Clean Penny” Legislation, the legislation includes its own set of exclusions and exemptions apart from the exclusions and exemptions that apply to the original 4% sales tax rate (referred to as “Old Penny”).
- Old Pennies (the original 4% sales tax) – law modifies the list of exclusions and exemptions, specifically as they relate to the 2% basic rate (sub component of the 4% tax). It is important to note the inconsistencies between the exclusions and exemptions offered under the Clean Penny and Old Penny laws.
- Affiliate Nexus provisions – the legislations drastically expands the definition of a “dealer.”
For additional background regarding the legislation, please visit the tax foundation website.
Did you know that there is an easy way to verify your North Dakota sales tax rate? The ND.gov website has just been revamped to include easy navigation to calculate the sales tax rate for a specific location. Eide Bailly has put together a handy step-by-step guide on how to successfully identify your sales tax obligation.
Colorado’s sales and use tax notice and reporting requirements for remote retailers…Still Alive! Previously, the District Court granted DMA’s motion for summary judgement and granted an injunction against the Department of Revenue from enforcing such requirement. However, on February 22 the U.S. Court of Appeals for the Tenth Circuit held that the requirements do not violate the Commerce Clause. In other words, (depending on any further litigation/appeals) Colorado can reinvigorate its efforts to force certain out-of-state retailers selling to in-state customers to:
1) notify Colorado customers that they are obligated to self-report and remit use tax on their purchases;
2) to provide Colorado customers with an annual report, detailing a customer’s purchases in the previous year;
3) notify the customer that the retailer was required to report the customer’s name and amount of purchases to the Department; and
4) report to the Department, the name, billing address, shipping address and total amount of purchases made by Colorado customers.
While Colorado has led the charge, many others states may jump on the reporting requirement band wagon.
Read Sutherland’s full legal alert outlining the background on Colorado’s Use Tax Reporting Requirements, District Court Ruling, Tenth Circuit Ruling, and the possibility of Future Congressional Intervention here.
Our access to internet is safe – On February 11, the Senate passed a permanent extension of the Internet Tax Freedom Act (ITFA). ITFA prohibits state and local jurisdictions from taxing access to the Internet. President Obama is expected to sign the permanent extension into law. Read more in a recent Reuters article.
Determining when and if sales tax is due and/or should be collected can be tricky. The flowchart, contained in this somewhat dated article, perfectly captures the confusion (and hilarity). Contact a member of our State and Local Team for help navigating the jumble known as sales tax.
Over the last several years, North Carolina has been incrementally revising its tax structure. On September 18, 2015, Governor Pat McCrory signed House Bill 97 (H.B. 97), which contained several additional changes to North Carolina tax law. Two noteworthy provisions relate to the apportionment formula, and they include:
- The phase in of single sales factor apportionment. The phase in occurs over three years beginning in 2016, replacing the existing double-weighted sales factor apportionment for both income and franchise tax.
- Requirement to file an informational report, showing the company’s 2014 sales factor as if it were computed using market based sourcing rules. This requirement only affects corporate multistate taxpayers with apportionable income greater than $10 million, and North Carolina apportionment percentage less than 100%.
The Corporation must include, with its 2015 filing, Form CD-400 MS, Market-Based Sourcing Information Report. The 2014 sales factor is required to be computed based on the market-based provisions outlined in H.B. 97. A potential non-filing penalty of $5,000 may be assessed for failure to file the informational report. The collected information will assist North Carolina is deciding whether to transition from cost-of–performance sourcing to market based sourcing.
More information can be found on the North Carolina Department of Revenue website.