It looks like the SD Supreme Court will hear the Wayfair, Overstock, and Newegg case on August 29, 2017. Read more about the case and how it may impact multistate businesses in a recent Tax News & Views.
Learn more about the Multistate Tax Commission voluntary disclosure program during the “What’s Hot in Sales Tax” webinars on August 21 and 22. Register today!
If you are a contractor looking to do business in Arizona, then this webinar is for you! Join us on Wednesday, September 13 to learn more about Arizona’s legislation regarding maintenance, repair, replacement, and alteration (MRRA) activities. Learn more and register here.
The Oklahoma Tax Commission has created an Oklahoma Amnesty Program for certain taxes not paid as of August 1, 2017. This can be a great benefit for qualified taxpayers as the program waives penalties and interest on the qualified outstanding taxes. But before entering into any amnesty program, consult with a tax professional to understand the details of the program and how they will work in your particular situation.
Key Highlights from the OK Amnesty Program:
- The application period runs from September 1, 2017 – November 30, 2017.
- The taxpayer must remain tax compliant for one year after approval for the program, or interest and penalties will be restored.
- Nearly every tax type is eligible
- Eligible taxpayers must have:
- No other outstanding tax liabilities, other than those pursued for the program
- Not been contacted by the Tax Commission or third party acting on behalf of the Commission
- Not collected taxes from others (for example sales tax – but there is a remedy)
- Not entered into a voluntary disclosure agreement for the tax type being pursued within the past 3 years.
- Three year lookback period
- A payment plan can be requested
In addition, there is another amnesty program for remote online sellers (selling through Amazon, etc.) being offered through the Multistate Tax Commission that could also provide benefit for the resolution of Oklahoma and 15 other participating states past due or unfiled tax issues which is scheduled to start on August 17, 2017, click here for more information.
Please contact your Eide Bailly professional or a member of our State and Local Tax team to learn more.
Read more about other current amnesty programs here.
Dealing with change is standard operating procedure for many companies: employees leave and are hired; new products are introduced and old ones phased out; there are booms, and there are busts. On top of all that, companies need to account for sales and use tax changes. Significant changes in rates, regulations, and product taxability often take effect July 1, which is the start of a new fiscal year in all but a few states.
At the end of 2016, we shared many of the sales tax changes set to occur January 1, 2017. These included state sales tax rate changes in California and New Jersey, the expansion of sales tax to certain services in North Carolina, the prohibition of taxing more services in Missouri, and a bevy of recently enacted soda taxes and tampon tax exemptions. At mid-year, we’re seeing a few propositions that signify a dramatic shift in online sales tax revenue.
States want to collect more tax revenue from remote sales
Perhaps the most notable trend of 2017 is states’ push to obtain tax revenue from remote sales. This isn’t new. States have been working to tax out-of-state sellers for years, but their efforts have been hampered by Quill Corp. v. North Dakota, 504 U.S. 298 (1992) — the landmark Supreme Court ruling that a state can only tax businesses physically located within its borders.
In recent years, states have found creative ways to work around the physical presence precedent upheld by Quill. They’re taxing businesses with ties to in-state affiliates and those that generate a certain amount of business through links on in-state websites (commonly known as click-through nexus). Increasingly, they’re also taxing companies with a certain amount of economic activity in the state (economic nexus). Unfortunately for states in need of additional sales tax revenue, these affiliate, click-through, and economic nexus laws are difficult for states to enforce.
Therefore, many states are looking to different and more aggressive approaches. Two methods in particular have been gaining steam this year: use tax notification and reporting requirements, and taxes on online marketplace providers such as Amazon and eBay.
Use tax notification and reporting requirements
Colorado paved the way for states to impose use tax notification and reporting requirements on non-collecting out-of-state sellers. After spending years stuck in court, its policy takes effect July 1 — the same date a similar policy starts in Puerto Rico. Vermont recently passed one and made it effective retroactively, on January 1, 2017. Other states, including Pennsylvania and Texas, are considering use tax notification and reporting measures.
Sending annual reports of consumer purchase activity to consumers and state tax authorities is more work for remote retailers, and Colorado and the other states could be using their policies as a back-door approach to getting out-of-state companies to register and collect. Even if companies choose to not take that route, use tax reporting should help states increase their use tax collections.
Taxing online marketplaces
Minnesota is the first state to enact a tax on marketplace providers. HF 1 will take effect at the earlier of July 1, 2019, or when the Supreme Court modifies its decision in Quill — though the effective date could change if Congress passes legislation allowing states to tax remote sales.
North Carolina, Texas, Washington, and a number of other states are also interested in taxing marketplace providers, and their efforts are likely to continue or resume as 2017 wanes. But not all agree it’s a good idea: New York lawmakers blocked Governor Andrew Cuomo’s attempt to tax them earlier this year.
Congress could tackle online sales tax
Federal lawmakers are much preoccupied with tax reform and repealing or revamping the Affordable Care Act. Allowing states to tax remote sales transactions, or definitively preventing them from doing so, seems to be low on their list of priorities. However, we’ve learned to expect the unexpected from Washington, so a federal solution to the problem of untaxed remote sales should not be entirely ruled out.
Two bills have been introduced that would authorize states to tax certain interstate sales: the Marketplace Fairness Act of 2017 and the Remote Transactions Parity Act of 2017.
A bill that would codify the physical presence standard set by Quill and further limit states’ ability to tax interstate sales has also been introduced: the No Representation Without Representation Act of 2017.
Other sales tax changes
Many of the trends seen at the start of the year are continuing as 2017 progresses. Florida has enacted a tampon tax exemption, Seattle a soda tax. Tennessee is lowering the state sales tax rate on food and food ingredients, there are calls to add a statewide sales tax in Alaska, and although he failed to achieve it this session, Governor Jim Justice has been pushing to raise the state sales tax rate in West Virginia. The taxation of services — including online music and movie streaming services — remains a hot and hotly contested topic. And, as always, a plethora of local sales tax rate changes take effect at the start of each new quarter.
Don’t be lulled into complacency during the dog days of summer: There’s a lot happening in the world of sales tax right now. Staying on top of these and other changes will allow you to prepare for them. Download Avalara’s 2017 Sales Tax Changes Mid-Year Update to learn more.
As a reminder, the Nevada Commerce Tax Return reporting Nevada sourced receipts from July 1, 2016 – June 30, 2017 is due on August 14, 2017.
The State of Nevada, via Senate Bill 483, enacted the gross receipts tax, called the Commerce Tax in 2015. The annual tax applies to entities that are engaged in business in Nevada and have Nevada sourced gross revenue that exceeds $4 million in the fiscal year. The law requires taxpayers that are engaged in business in Nevada to file a Commerce Tax return regardless of the amount of their taxable gross receipts. However, taxpayer’s having less than $4 million of Nevada gross receipts can simply check a box on the return indicating they are below the $4 million threshold and send in the return. Taxpayers having more than $4 million of Nevada gross receipts must calculate their Commerce Tax liability.
Contact your Eide Bailly professional or a member of our State and Local Tax Team to learn more.
The income tax increases recently enacted in Illinois took effect July 1, 2017, the middle of the taxable year for most taxpayers. The Illinois Department of Revenue published guidance for such taxpayers showing how to compute their tax for the year that includes July 1.
The flat individual tax rate increases from 3.5% to 4.5% resulting in a blended rate of about 4% for the 2017 calendar year filers, though the published guidance does not explicitly say so. Additional guidance will likely be provided in January 2018 for 2017 tax years, according to the state of Illinois. If they use the actual number of days before and after the rate increase in 2017, the rate would be 4.0041%.
For fiscal years beginning in 2016 for individuals, trusts and estates, Illinois provides a table:
The 1.5% “replacement tax” on top of the regular income tax for S corporations and fiduciaries is unchanged.
The corporate rate increases to 7%, from 5.25% resulting in a 6.125% rate for the 2017 calendar year C corporations, or 6.1322% using the actual number of days before and after the rate increase takes effect.
The blended rates for fiscal years beginning in 2016 are in the following table:
The 2.5% replacement tax that applies on top of these rates is unchanged.
Illinois also issued a Summary of Illinois Income Tax and Sales Tax Changes from P.A. 100-0022. The summary covers changes to the research credit, domestic production deduction, unitary taxation and other items affected by the changes. Watch for additional information related to these changes in future posts.
Other coverage: Illinois increases income tax rates, restores research credit