Monthly Archives

March 2014

Mar 21
0

Ignorance is not Bliss (when it comes to sales tax!)

By | Contractor/Repair Services, Retail

This has been a week of delivering bad news to companies who contacted me only after being notified by a state taxing jurisdiction that they were not in compliance.  As predicted, their first words were “Why didn’t someone tell me _________”?   It’s really hard to know how much of this whining to believe. Over the years I’ve found business of all sizes to fit into one of three categories when it comes to sales tax (and probably other taxes):

1. Those that don’t want any information or advice unless they initiate the dialog.
2. Those that solicit information and promptly ignore or don’t believe the advice they get.
3. Those that welcome and follow the advice from trusted advisors and implement their suggestions as appropriate

When I get calls from companies who find themselves in trouble, it’s hard for me to figure out which category they fall into.  Almost all of them have an outside CPA so I know that they are having some interaction with a tax professional at some point in the year.  Whether their advisor knows anything about sales tax is a different story (and different blog entry).

Regardless of the type or quality of advice these businesses may have received, it is still startling that the owners have taken no initiative to find out what their obligations were as a multistate business.  How, in once case, could a contractor doing business in 10 states not wonder if they had any type of multistate sales tax or income tax problem?  Did they just think that they could wonder from state to state doing construction projects without having any type of state tax issues? (Apparently the answer was “yes”).

This type of ignorance is dangerous to the business and the business owner.  With more states enforcing their officer liability rules, the owners and officers of the companies are now personally liable for the ignorance (or lack or curiosity) of their business managers when it comes to multistate tax.  In the short term, ignorance may be bliss, but in the long term, ignorance is dangerous and could be catastrophic for the business and its owners.

Because most CPAs only have a rudimentary working knowledge of multistate sales tax, don’t expect them to be the only resource available to you for quality advice.  If you have any questions please contact me for a free 30 minute discussion. https://www.salestaxstrategies.com/index.html
Ned Lenhart, CPA
President

 

 

Mar 13
0

Leave it to Congress to Makes Sales Tax More Complicated

By | Legislative, Retail

I’m reading with amazement the various testimony offered to Congress on March 12, 2014 concerning the initiative to allow states to require remote sellers to collect sales tax on all remote sales.  I’m comforted by the recognition that the cost of compliance for any business is not insignificant and that there are serious integration issues associated with the “free” sales tax software offered by the states.   What is most concerning are some of the options that special interest groups are offering.  https://www.salestaxstrategies.com/sales-tax-issues.html

One group is suggesting that sales tax be based on the “ship from” location and not the “ship to” location.  This is certainly an option which will be great for customers buying products from Delaware, New Hampshire, Alaska, Montana, and Oregon which don’t have sales tax.  I fail to see, though, how this strategy bridges the tax revenue gap in the states where the customer is located-which has been the primary argument of the retail community.  Further, how would this provide and incentive to purchase items from the brick-and-mortar stores in your home state?

One group is also suggesting that Congress implement a law similar to the “Webb-Kenyon” act which prohibits the shipment of property from one state to another state if the sale is not legal in destination state.  Under this approach, the Federal government wants to use the taxing power of the state to dictate what retailers can send property into a state.  As I follow their arguments, any retailer who is not registered for sales tax in the destination state would be deemed to be shipping property that is not lawful to be sold in the destination state.  Wow!

The best comment from the day was that if something were to pass the House this year, it would be during the “lame duck” session after the mid-term elections.  That is not very encouraging.  “We have to pass it so we will know what’s in it”!!

Even with the passage of some type of tax act, many savvy shoppers will still continue to shop primarily from web-stores (even if they do charge tax) because of the dramatic price difference of the products and offers of free shipping.  I’d hate to see what type of solution Congress has for that problem

Ned Lenhart, CPA
President