Monthly Archives

August 2011

Aug 10
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Sales Tax on Internet Sales? Maybe, if Congress gets its way!!

By | Legislative

On August 1, 2011, Sen. Dick Durbin of Illinois introduced Senate Bill 1452 “Main Street Fairness Act”.  This Bill is identical to a Bill introduced in the previous Congress that essentially adopts the Streamlined Sales Tax Program (“SSTP”) and allows states that are Members of this association to require out-of-state remote sellers to collect sales tax on sales made to customers in their state even if they do not have nexus.   The SSTP has been floating around for over a decade with about 20 states signing up.  For the most part, this movement has been primarily involved with establishing uniform definitions and processes and has not done much about determining the actual uniform taxation of goods and services.  SB 1452 does have an exemption for “small sellers” but the criteria for this have not been set. 

This Bill is simply the latest in a long line of legislation that has been introduced for over 20 years in an attempt to allow states to force companies that do not have nexus to collect sales tax.  There is no dispute that uncollected use tax is a serious issue for the states to deal with.  Use tax continues to be one of the most widely assessed tax on audits.   In the past these Bills have died in committee.  The Direct Marketing Association (DMA) is a powerful lobby and has been successful in arguing defending or modifying this legislation.   In the past, however, the state revenue situation has not been as bleak as it is now and a Bill like this might just pass this time. 

In addition, I would not be surprised to see some type of attempt to impose a small federal sales tax on remote commerce as way to increase federal tax revenue.   Who knows how creative these folks may get?

Ned Lenhart, CPA
President
Interstate Tax Strategies

Taxation of Internet Sales

Aug 01
0

Georgia Increases Audit Staff- (7-31-11 AJC Article)

By | Retail, Tax Audit

On Sunday, July 31, 2011, the Atlanta-Journal Constitution (AJC) reported on page 1 of the Business Section that the Georgia Department of Revenue had recently hired 90 new auditors and 40 additional collection staff.  I’ve noted this increase in previous entries.  The article stresses that these auditors are not targeting specific industries, but we all know this not a fully honest statement.  There is a concerted effort to audit contractors, restaurants, bars, hotels, and other service oriented businesses where the state knows they will likely have a collection.  For the most part, manufacturers are not being audited since there is so little tax to be collected from them now that Georgia law exempt most of the manufacturing related items they purchase.

One of the items noted in this article is that restaurants are being assessed tax on mandatory gratuities.  Yes, these are taxable in Georgia and most other states.  The fact that they are separately stated does not matter since these servcies are integral with the sale and delivery of the meal.  Also, these fees are paid to the restaurant and are not given direclty to the server.  Optional or voluntayr gratuities are not subject to sales tax. 
If you are a restaurant or have restaurant clients, make sure you have this area covered. 

As simple as this sounds, many restaurants are not taxing these items. This is creating a liability for tax, interest, and penalty.  It’s amazing how many companies are missing some of these basic issues which create liabilities for the company.    Given the increased number of auditors the odds of your company being audited or one of your clients being audited has increased dramatically.  Don’t wait to check to see if you are doing things correctly.  By the time the auditor contacts you, it’s too late.

Ned Lenhart
President
Interstate Tax Strategies, P.C.