27th Annual Tuesday & Wednesday, January 23‐24, 2018 Hya� Regency Columbus, Columbus, Ohio Workshop O Ohio Tax International Companies with U.S. Activities … Multistate Considerations for Inbound Companies Tuesday, January 23, 2018 3:00 p.m. to 4:00 p.m.
Biographical Information Curtis Ruppal, CPA, Partner, State & Local Tax Group Plante & Moran, PLLC 634 Front Ave, NW, Suite 400, Grand Rapids, MI 49504 616.643.4069 Fax: 248.233.9000 curtis.ruppal@plantemoran.com Curtis is the practice area leader for the firm’s State and Local Tax Group and serves as the Tax Director for the Grand Rapids and St. Joseph offices. He specializes in providing clients with multistate tax consulting services, including implementation of solutions to minimize income and franchise taxes, sales and use taxes, property taxes, and other state and local taxes. He also provides taxpayer representation in state and local tax audit and controversy proceedings. Curtis has over 25 years of tax and accounting experience serving middle-market, both closely held and private equity owned, and Fortune 500 companies. He has experience with a variety of industries, including manufacturing, distribution, transportation, business and professional services, technology, retail, construction and real estate. Prior to joining Plante Moran in 2001, he spent several years with a national accounting firm, as well as time with a large manufacturing company in the tax and corporate finance areas. Curtis is a member of the American Institute of Certified Public Accountants and the Michigan Association of Certified Public Accountants and its State and Local Tax Task Force. He is a member of the Michigan Chamber of Commerce Tax Policy Committee, where he previously served as Chair and Vice Chair, and is also a member of the Grand Rapids Chamber of Commerce Tax Policy Committee. Curtis received his bachelor of business administration degree in accountancy from Western Michigan University. Doug A. Hummer, CPA, Tax & Compliance Manager Chromaflo Technologies Corp. 2600 Michigan Ave., Ashtabula, OH 44004-3140 440-997-5137 dhummer@chromaflo.com Since July 2015, Doug Hummer has served as the tax and compliance manager at the Ashtabula, Ohio, site. He is responsible for the company’s tax compliance, tax planning and accounting for income taxes. Doug is a certified public accountant and holds a bachelor’s degree in accounting and finance. He most recently served as business consultant for various organizations across the U.S. Doug has a strong tax background at various multi-national companies, as well as a robust educational background and certification.
Biographical Information David M. DeCew, CPA, MST, Senior Manager, State & Local Tax Group, Plante & Moran, PLLC, 1098 Woodward Avenue, Detroit, MI 48226 313.496.7297 Fax: 248.233.8820 dave.decew@plantemoran.com David is the firm’s state and local tax resource for the Detroit, Auburn Hills, and Macomb offices. He specializes in providing clients with multistate tax consulting services, including implementation of solutions to minimize income and franchise taxes, sales and use taxes, property taxes, and other state and local taxes. He also provides taxpayer representation in state and local tax audit and controversy proceedings. David has over 10 years of tax and accounting experience serving middle-market and Fortune 500 Companies. He has experience across a variety of industries, including manufacturing, transportation, business and professional services, entertainment, retail, restaurant, and healthcare. David also applies his expertise working on mergers and acquisitions, performing buy and sell side due diligence services to his private equity fund clients. Prior to joining Plante Moran in 2008, he spent several years with an international accounting firm. David received his bachelor of science in accounting from Oakland University, and his masters of science in taxation from Walsh College.
International Companies with U.S. Activities . . . Multistate Considerations for Inbound Companies Presented by: Curtis Ruppal, Plante Moran Dave DeCew, Plante Moran Doug Hummer, Chromaflo Technologies
Agenda • Type of Taxes Levied • States Ability to Tax (Perm Establishment v Nexus) • Income Taxes • Indirect Taxes • Transfer Pricing Considerations • Planning Considerations
Type of Taxes Levied • State Income Tax – state adjusted actual OR “pro‐forma” federal taxable income X state income tax rate • Franchise, Net Worth or Capital Stock tax – apportioned equity X state franchise tax rate • Gross Receipts Tax – gross receipts from taxing state’s sources X tax rate (i.e. Ohio CAT, Washington B&O) • Sales and Use Tax – taxable sales or services into the taxing state X sales tax rate • Property Tax – assessed value of real or personal property located in the state • Employer Withholding Tax – employee wages X state tax rate • Unemployment Insurance Tax – wage base X employer’s tax rate
State and Local Taxes at a Glance • Corporate income tax • 45 states + D.C. • Sales and use tax • 45 states + D.C. • Gross receipts tax • 4 states • Property tax • 50 states + D.C.
Agenda • Type of Taxes Levied • States Ability to Tax (Perm Establishment v Nexus) • Income Taxes • Indirect Taxes • Transfer Pricing Considerations • Planning Considerations
Permanent Establishment Defined by treaty with specific country, but generally • Fixed place of business through which the business of an enterprise is wholly or partially carried on, including • Place of management • Branch • Office • Factory • Building site or construction or installation project exceeding X months • Person, other than independent agent, in the U.S. that has and habitually exercises authority to conclude contracts
Permanent Establishment Often excluded from permanent establishment are: • Maintenance of inventory for the storage, display or delivery of inventory • Maintenance of inventory for the purpose of processing by another party • Use of facilities for the storage, display or delivery of inventory • Maintenance of a fixed place of business for the purpose of purchasing goods or collecting information • Place of management • Branch • Office
State Tax Nexus What is Nexus? • Connection between a taxpayer and a state that is necessary before a state can impose taxes Income tax nexus differs from sales tax nexus • Income tax nexus: limited by Public Law 86‐272 • Sales tax nexus: limited by “physical presence” or “Quill” requirement
Nexus for Income Tax: PL 86‐272 Federal law prohibits states and cities from imposing a net income tax on an out‐of‐state company engaging in interstate commerce if only connection is solicitation of sales of tangible personal property PL 86‐272: General Rule • Company must be selling tangible personal property • Sales of services or intangible property not protected • Only activity in the state is solicitation of sales • Order for good must be sent outside the state for approval • Goods are shipped from out‐of‐state • Only applies to U.S. corporations, but some states extend to foreign (non‐U.S.) corporations
Nexus for Income Tax: PL 86‐272 Activities exceeding PL 86‐272 federal immunity generally include… • Approval of sales order at in‐state customer site vs. out of state home office • Extension of credit • Engaging in post sale activities (i.e. troubleshooting, quality control, collections, installations) • Deliveries to customers in company owned or leased vehicles (varies state by state) vs. common carrier
Nexus for Income Tax: PL 86‐272 States that extend PL 86‐272 to foreign commerce: • Regulation (7) – AL, IL, KY, ME, MT, UT, VA • Published Administrative Guidance (3) – AZ, HI, MI • BNA 2017 State Revenue Department Survey (18) – AK, AR, FL, IN, IA, LA, MD, MA, MO, NE, NM, NY, NC, ND, OR, PA, RI, WV
Nexus for Income Tax: PL 86‐272 States that indicate PL 86‐272 DOES NOT apply to foreign commerce: • Regulation (2) – OK, WI • Published Administrative Guidance (1) – CA • BNA 2017 State Revenue Department Survey (8) – CO, DE, DC, KS, MN, MS, NJ, TN
Nexus Trends Economic Nexus and Factor Presence Nexus • Nexus merely by having economic activity connected to the state • Factor presence nexus creates bright‐line based on a specific minimum dollar amount of sales sourced to the state (factor presence may also be created by minimum threshold of property or payroll) • Applies to income from services, royalties, interest, digital goods • PL 86‐272 protects sales of tangible property, but may not apply to foreign co.
Nexus for Sales Tax: Physical Presence!? • States generally prohibited from imposing sales tax collection requirements on out‐of‐state vendors lacking physical presence (Quill Corp. v. North Dakota, 1992) • Examples of Physical Presence – Solicitation of sales in‐state by employees , independent contractors, affiliates – Deliveries in company owned vehicles or backhauling property – Occasional visits by sales persons or other personnel – Trade Shows (limitations) – Fulfillment centers and warehouses – Servers an/or hosted websites – Agents and affiliates performing in‐state services for you – Consigned inventory & vendors managed inventory – Warranty work
Recommend
More recommend
