State and local tax rules are in constant flux, and it can be difficult to stay on top of all of the current developments. Luckily, we’re here to help. Check out our recent article to learn more about some current hot topics, including sales tax reporting requirements, economic standards, and more!
On July 14, 2014, the Michigan Supreme Court ruled in International Business Machines v. Michigan Department of Treasury that the taxpayer was allowed to use the three-factor formula apportionment election provided under the Multistate Tax Compact (MTC) in determining its 2008 Michigan Business Tax (MBT). Read more at http://link.plantemoran.com/m/1/90311804/b19914-56621273-fdb4-4585-add6-b50cae69355a/1/854/77ac9ea4-0720-4ecf-b640-e4a947c8923f.
The Tax Foundation released a report outlining the state and local tax burdens of the residents of each state. Some of the key findings of the report are below:
•During the 2011 fiscal year, state-local tax burdens as a share of state incomes decreased on average. This trend was largely driven by the growth of income in all states.
•In 2011, the residents of New York, New Jersey, and Connecticut had the highest state-local tax burdens as a share of income in the nation. In these states, residents have forgone over 11.9 percent of income due to state and local taxes.
•Residents of Wyoming paid the lowest percentage of income in 2011 at just 6.9 percent. They replaced Alaska, which had previously been the least-taxed for multiple decades, as the lowest-burdened state in the nation. After Wyoming and Alaska, the next lowest-taxed states were South Dakota, Texas, and Louisiana.
•State-local tax burdens are very close to one another and slight changes in taxes or income can translate to seemingly dramatic shifts in rank. For example, the twenty mid-ranked states, ranging from Oregon (16th) to Georgia (35th), only differ in burden by just over one percentage point.
•On average, taxpayers pay more to their own state and local governments (73 percent of total burden). Taxes paid within states of residence decreased on average in 2011, while taxes paid to other states increased, leading to a slight decrease in total burden. Some states deviated from these national trends, however.
For the full report, visit:
The number of sales tax jurisdictions in the United States has risen to 9,998 –up 300 from 2011. The table below breaks out the number of sales tax jurisdictions by state:
Total Sales Tax Jurisdictions, 2014
District of Columbia 1
New Jersey 2
New Mexico 142
New York 84
North Carolina 105
North Dakota 137
Puerto Rico 79
Rhode Island 1
South Carolina 41
South Dakota 251
West Virginia 11
Source: Vertex, Inc.
Despite simplification efforts on both the state and federal level, it would appear that the complexity of navigating sales tax in the United States has risen.
The Marketplace Fairness Act (MFA), a piece of legislation that would give states the authority to require remote sellers to collect and remit sales tax, overwhelmingly passed the Senate last year. Although it has been held up in the House of Representatives, pressure from numerous supporters is indicative that it, or future legislation, will eventually pass both houses. The MFA includes a provision that stipulates that certain simplifications must be made to a state’s tax code in order for states to qualify to collect online sales tax.
According to the Tax Foundation, an independent non-partisan tax research think-tank, in an attempt to convince Congress to allow jurisdictions to collect sales tax on interstate internet transactions, states have made the claim that they have simplified their sales tax systems. The Tax Foundation asserts that, while the number of jurisdictions within a state isn’t everything, “no matter how it’s measured, states haven’t yet fulfilled their promises to simplify their sales taxes.” Still, the likelihood that businesses will soon have collection liability on internet sales is becoming a more plausible reality as the MFA continues to gain traction.
The backers of the Marketplace Fairness Act (MFA) are apparently planning on re-doubling their efforts to pass the legislation. According to an article from Internetretailer.com, a letter In support of the MFA, written to U.S. Rep. Robert Goodlatte (R, VA), lists “more than 300 signatories, including 174 trade associations and dozens of retailers among 137 individual companies.” The MFA would allow states to require remote sellers to collect sales tax on items that were sold within the state.
This article from Forbes, explores the amount of tax evasion that is occurring due to Cyber Monday. Cyber Monday follows Black Friday, and is typically the busiest day of the year for online shopping. States often look forward to Black Friday, because it generates a significant amount of sales tax revenue. Cyber Monday, however, is a day where states lose copious potential revenue. Out-of-state retailers are not required to collect and remit sales tax without a physical presence or substantial nexus within the state. Even if the tax is not collected by the seller, the buyer typically still owes the use tax on the product; however they rarely report this. The result is high profits for retailers, and little to no revenue for states.
The Arkansas supreme court upheld a circuit courts order certifying that online travel companies are providers of hotel accommodation and therefore are required to collect and remit sales tax. Read the desicion: