It’s back! The Tax Trends Webinar Series is designed to offer free education and provide information on innovative strategies to save you time and money. Our webinars this year include topics such as state income tax compliance, sales tax considerations, economic nexus, and more. Click here to view all of our Tax Trends sessions and to register.
On November 25, 2017 Colorado published a permanent rule in regard to its Notice and Reporting requirement for out-of-state retailers. The permanent rule includes a few minor changes and clarifications from the previously announced requirements.
Summary of Rule
Effective July 1, 2017, Colorado required an out-of-state retailer whose total gross sales into Colorado are $100,000 or more, and who does not collect Colorado sales tax, to give a transactional notice to their Colorado purchasers that sales tax has not been collected and that use tax may be owed. Additionally, if any of their Colorado purchasers purchased more than $500 worth of products in a calendar year, then a Purchase Summary must be mailed to that purchaser and a corresponding Informational Report given to the Colorado Department of Revenue.
Noteworthy Changes with Permanent Rule
- Colorado has recognized that some out-of-state retailers making online sales utilize third party payment processing vendors. Previously, to give a transactional notice, an online retailer would be required to display a transactional notice on the “check out” page. However, for retailers that use a third party payment processor, they may not have control of the content that is on the “check out” page. Therefore, those retailers can now give the transactional notice on the “product page” of their website.
- For retailers that utilize subscription type sales such as a “Jelly of the Month Club,” Colorado has clarified the notice requirements. For subscription type sales, a transactional notice is only required when the purchaser enrolls in the subscription or renews it.
- The maximum penalty limitation given to out-of-state retailers for the first year that they are required to comply, has been removed. Now, if an out-of-state retailer fails to comply with Colorado’s Notice and Reporting rules they will have to show that they “reasonably had no knowledge” of the requirement, to be subject to a maximum penalty.
- Unlike Washington, Colorado does not directly impose a duty to either collect sales tax or comply with their Notice and Reporting requirement on marketplace providers, such as Ebay. But, sellers (with gross sales of $100,000 or more), that utilize online marketplaces, are still required to comply with Colorado’s Notice and Reporting requirement regardless of their use of a marketplace provider platform. However, the permanent rule allows marketplace providers to satisfy the Notice and Reporting requirements on behalf of the sellers.
Colorado has indicated that online retailers must include certain elements in the transactional notice. Sample language would include the following:
[Name of retailer] does not collect Colorado sales or use tax. This purchase is not exempt from Colorado sales or use tax merely because it is made over the internet or by other remote means. The State of Colorado requires purchasers to (A) report all purchases that are taxable in Colorado and for which no tax was collected by the retailer and (B) pay tax on those purchases.
The permanent rule will be effective on January 1, 2018.
If your company makes sales into Colorado without collecting sales tax, contact Eide Bailly’s State and Local Tax Team for assistance with how to comply with Colorado’s Notice and Reporting requirements.
Do you do business in the state of California, or are you considering expanding into the state? Join our State and Local Tax team for a webinar on December 7 and learn the ins and outs of California tax filing. This session will discuss registration and forms, various taxes, starting and closing a business, and more! Learn more and register here.
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.
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.
An out-of-state wholesaler will have economic nexus if it has (i) more than $267,000 in gross income in Washington; (ii) more than $53,000 of payroll in Washington; (iii) more than $53,000 of property in Washington; or (iv) at least 25% of total property, payroll, or income in Washington.
Washington ~ Business and Occupation, Sales and Use Taxes: Changes to Nexus Standards Explained
The Washington Department of Revenue has provided excise tax guidance on the new nexus standards applicable to out-of-state taxpayers making wholesale sales and retail sales in Washington. Effective September 1, 2015, out-of-state businesses making wholesale sales into Washington will be liable for wholesaling business and occupation (B&O) tax on sales delivered into the state for the current year if they meet any of the economic nexus thresholds during the prior calendar year. An out-of-state wholesaler will have economic nexus if it has (i) more than $267,000 in gross income in Washington; (ii) more than $53,000 of payroll in Washington; (iii) more than $53,000 of property in Washington; or (iv) at least 25% of total property, payroll, or income in Washington. In order to determine whether a wholesaler exceeds the $267,000 threshold, both apportionable income attributable to the state and wholesale sales delivered to Washington are included.
Effective September 1, 2015, a click-through nexus standard has been adopted for retailing B&O tax and sales tax purposes. An out-of-state retailer will be presumed to have nexus with Washington if it (i) enters into agreements with Washington residents and pays a commission or other consideration for referrals via a website link or otherwise; and (ii) has more than $10,000 in sales into Washington during the prior calendar year due to these agreements. The presumption may be rebutted by showing that each in-state resident with whom the retailer had an agreement was prohibited from engaging in solicitation activities on behalf of the retailer and did not engage in such solicitation.
Tax Topics: New Nexus Standards for Wholesale and Retail Sales — Effective September 1, 2015, Washington Department of Revenue, August 18, 2015, ¶203-928