Compliance Fundamentals Mastering Tax Base, Nexus, Sourcing and - PowerPoint PPT Presentation

Presenting a live 110-minute teleconference with interactive Q&A Sales and Use Tax Key Compliance Fundamentals Mastering Tax Base, Nexus, Sourcing and Other Essential Multi-State Concepts TUESDAY, OCTOBER 15, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Joseph Geiger, Senior Tax Consultant, Vertex , Berwyn, Pa. Sean Weaver, Director, Ryan , Alexandria, Va. Keith Huggett, Sales Tax Expert, The Tax Office , Roseville, Calif. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .

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Sales and Use Tax Key Compliance Fundamentals Oct. 15, 2013 Joseph Geiger, Vertex Keith Huggett, The Tax Office joseph.geiger@vertexinc.com khuggett@plan4tax.com Sean Weaver, Ryan sean.weaver@ryan.com

Today’s Program Essential Concepts of Sales Tax and Revenue Agency Slide 8 – Slide 44 Administration [Keith Huggett] Sales Tax Nexus and Sourcing of Transactions Slide 45 – Slide 82 [Joseph Geiger] Sales Tax Exemptions and Exemption Certificates Slide 83 – Slide 93 [Sean Weaver]

Notice ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY THE SPEAKERS’ FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN. You (and your employees, representatives, or agents) may disclose to any and all persons, without limitation, the tax treatment or tax structure, or both, of any transaction described in the associated materials we provide to you, including, but not limited to, any tax opinions, memoranda, or other tax analyses contained in those materials. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

Keith Huggett, The Tax Office ESSENTIAL CONCEPTS OF SALES TAX

9 Essential Concepts of Sales Tax www.plan4tax.com

10 Sales Tax vs. Use Tax www.plan4tax.com

11 Definitions • Sales Tax: Tax imposed on the retail sale of personal property in this state • Use Tax: Tax imposed on the consumption or use of property in this state, not otherwise subject to sales tax www.plan4tax.com

12 Types of Taxes • Seller Privilege • Imposed on the seller’s gross receipts for the “privilege” of doing business in the state. • Seller is liable for the tax but can pass it on to the purchaser. • Can be included in the price or separately stated on the invoice. www.plan4tax.com

13 Types of Tax Part 2 • Transaction Tax • Imposed on the sale of tangible personal property or service. • Purchaser is liable to the seller for the taxes due. • Must be separately stated on the invoice. www.plan4tax.com

14 Tax Types Part 3 • Consumer Levy • What we consider to be “sales tax” • Imposed on the sales of tangible personal property and services. • Imposed on the purchaser but collected by the seller. • Must be separately stated on the invoice. www.plan4tax.com

15 Last One…. • Gross Receipts Tax • Imposed on the tangible personal property and services but with fewer exemptions or exclusions to the taxable base • Must be separately stated on the invoice • Hawaii has special considerations: if the tax is passed on to the purchaser it becomes part of the gross receipts for tax calculations www.plan4tax.com

16 Vendor Responses to Sales Tax • Not all states have absorption laws 1) A seller may not want to charge the buyer the tax. These are usually states in which the burden of the tax is intended to be imposed on the seller, not the buyer. 2) States often provide an exemption when separately charging sale tax would be really inconvenient (bars, food vendors at sporting events, vending machines, etc.) There may be a requirement that a sign be posted saying that the price includes the sales tax. www.plan4tax.com

17 Vendor Responses cont. 3) There are a few states that say that if the invoice says “tax included,” that’s good enough. 4) Some states have no problem with the seller saying that it will refund the sales tax, even it has to charge the tax. 5) Many states allow the seller to say something like, “The state makes us charge you tax, but we’ll give you a rebate of 6%,” as long as the seller is not saying that it is refunding the tax itself. www.plan4tax.com

18 Streamlined Sales & Use Tax Agreement • The SSUTA focuses on improving sales and use tax systems for all sellers and for all types of commerce through all of the following: • State level administration of sales and use tax collections. • Uniformity in the state and local tax bases. • Uniformity of major tax base definitions. • Central, electronic registration system for all member states. • Simplification of state and local tax rates. • Uniform sourcing rules for all taxable transactions. • Simplified administration of exemptions. • Simplified tax returns & simplification of tax remittances. • Protection of consumer privacy. www.plan4tax.com

19 SSUTA Q&A • How does SSUTA simplify sales tax administration? • Through tax law simplification, efficient administrative procedures & emerging technologies. • How do uniform definitions reduce business administrative expenses? • The Agreement defines sixty-nine different administrative terms and products and services that states either tax or exempt. A business making sales into a Streamlined state only needs to know whether the product or service they sell is taxable or exempt. www.plan4tax.com

20 Revenue Agency Administration of Sales Tax www.plan4tax.com

21 Filing Frequency  State and local jurisdictions • Determining monthly, quarterly, semi-annual or annual returns • Each jurisdiction has its own guidelines.  Thresholds • Dollar amounts • Time period  Registrations • May determine frequency www.plan4tax.com

22 Filing Frequency cont.  Pitfalls • Registrations • No-change jurisdictions • Processes  Remedies • Proactive • Persistent • The old fashioned way www.plan4tax.com

23 E-Filing  Streamlining the process • Saves time and money  Automated solutions • E-file capabilities  Manually • Jurisdictional Web sites  Third party • Peace of mind www.plan4tax.com

24 E-Payments  Streamlining the process • Saves time and money  Automated solutions • E-pay capabilities  Manually • Jurisdictional Web sites  Third party • Value-added resources www.plan4tax.com

25 State of the State • Audit Program • State audits nearly 1% of permit holders • Program identidied $497.7 million in deficiencies • Taxpayers received $131.5 million in refunds • Top Areas of Taxpayer Noncompliance • Use tax on out-of-state purchases ($122M) • Unsupported sales for resale ($76M) • Additional sales based on markup of costs www.plan4tax.com

26 What Can States Do? • Increase audit activity; • Increase tax collection efforts; • Expand nexus statutes; • Increase tax rates; • Expand taxable base and eliminate exemptions; • Expand EDI filing requirements www.plan4tax.com