28th Annual Tuesday & Wednesday, January 29‐30, 2019 Hya� Regency Columbus, Columbus, Ohio Workshop Y Highly Competitive Transportation & Logistics Industry … Major Income & Sales Tax Issues Tuesday, January 29, 2019 4:15 p.m. to 5:15 p.m.
Biographical Information Timothy D. Adams, Shareholder State and Local Tax Schneider Downs & Co., Inc. One PPG Place, Suite 1700, Pittsburgh, PA 15222 (412) 697-5250 Fax (412) 261-4876 tadams@schneiderdowns.com Tim has more than 20 years of experience in public accounting, including more than 10 years with a national accounting firm. His focus is in state and local tax matters, including multi-state income and franchise tax, sales and use tax, gross receipts tax, incentives/credits and unclaimed property. Tim has successfully represented or assisted clients in state and local tax matters in nearly every state across the country, including audit representation and appeals, refund reviews, and multi-state consulting and planning that have yielded significant value to his clients. Member- PICPA State Tax Committee The Ohio Society of CPAs - Ohio Tax Reform Task Force Member – American and Pennsylvania Institutes of Certified Public Accountants Board Member – National Aviary Past Chair – Western Pennsylvania Tax Conference Committee Executive Committee Member – PICPA Pittsburgh Chapter Past President – Economic Club of Pittsburgh Tim is a graduate of Grove City College with a B.S. in Accounting. Emery (Jack) Stewart, Senior Manager State and Local Tax Schneider Downs & Co., Inc. One PPG Place, Suite 1700, Pittsburgh, PA 15222 (412) 697-5443 Fax (412) 261-4876 estewart@schneiderdowns.com Jack began his sales and use tax career with Chartwell Advisory Group in 1998 specializing in sales and use tax refund reviews for construction projects with exempt entities in Pennsylvania. In 2001 Jack joined the state and local tax practice of PricewaterhouseCoopers in Pittsburgh, where he specialized in sales and use taxes providing services such as nexus analysis, compliance and refund reviews, audit defense, taxability matrixes managed compliance agreements, and various tax appeals before various state agencies. Jack joined the state and local tax practice of Schneider Downs and Co., Inc. in Pittsburgh, Pennsylvania in 2005. Jack continues to specialize in sales and use tax matters for a wide range of industries including construction, manufacturing, gas and oil as well as transportation. Jack is a graduate of Rollins College with a B.A. in History and received a Post Baccalaureate in Accounting from Robert Morris University in Pittsburgh, Pennsylvania.
Highly Competitive Transportation & Logistics Industry…Major Income & Sales/Use Tax Issues Ohio Tax Conference January 29, 2019
Agenda • State Tax Filings and Compliance Considerations. • Income Tax Nexus – What creates income tax nexus for transportation companies? • Apportionment Methodologies for Income Tax Nexus. • Sales and Use Tax Matters. • Sales and Use Tax Audit Issues. • Due Diligence and Successor Liability Matters. 2
State Tax Filings and Compliance Considerations • State Income and Sales & Use Tax Filings – Income Tax – Indiana, Kentucky, Michigan and Pennsylvania. – Commercial Activity Tax (CAT) – Ohio – Sales and Use Tax – Indiana, Kentucky, Michigan, Ohio and Pennsylvania. 3
Income Tax Nexus –What creates income tax nexus for transportation companies? • General Activities that Can Create Nexus for Income Tax. – Property in the state, owned or leased, real or personal. – Employees in the state. – Relationships with independent contractors in state. – Using company vehicles to make deliveries and pick-ups in the state. – Using company vehicles to pass through the state to make deliveries or pick-ups in other states. – Sales or meeting the definition of “doing business” in the state. 4
Income Tax Nexus –What creates income tax nexus for transportation companies? • Trucking activities that may create nexus for income tax. – Indiana Indiana – Back-hauling goods originating in the state and/or delivery or picking-up goods in the State. – Ke Kentucky – Back-hauling goods originating in the state and/or delivering or picking-up goods in the state. 5
Income Tax Nexus –What creates income tax nexus for transportation companies? • Trucking activities that may create nexus for income tax. – Michigan Michigan – Being physically present in the state for 2 or more days. Back-hauling goods originating in the state and/or delivering or picking-up goods in the state. – Pennsylv nnsylvania ania – Having deliveries or pick-ups in the state creates a reporting requirement if either the trucking company makes one trip with a pick-up or delivery and has 50,000 loaded annual Pennsylvania miles or makes more than 12 trips with pick-up or deliveries and has a Pennsylvania mileage apportionment factor greater than 5%. 6
Activities that Create Nexus for Ohio’s Commercial Activity Tax • Bright Line Nexus Activities (CAT) – Has at anytime during the calendar year property in Ohio with an aggregate value of at least $50,000. – Has during the calendar year payroll in Ohio of at least $50,000. – Has during the calendar year taxable gross receipts of at least $500,000. – Has at any time during the calendar year within Ohio at least 25 percent of the person’s total property, total payroll, or total gross receipts. – Is domiciled in Ohio as an individual, or for corporate, or other business purpose. 7
Activities that Create Nexus for Ohio’s Commercial Activity Tax • Trucking activities that can create bight line nexus for the CAT. – Application of the property test to highway transportation services. • Persons providing highway transportation services will presume to have at least fifty thousand dollars of property in the aggregate during the calendar year if the person has property of such value in this state for more than thirteen days, which need not be consecutive. (Information Release CAT 2006-05) 8
Apportionment Methodologies for Income Tax • Indiana – Uses a three factor formula. Moveable equipment, interstate employees and revenue from transportation is assigned to Indiana on the basis of total miles traveled in Indiana over total miles traveled everywhere. • Kentucky – Uses a three factor formula. Sales factor is determined by the mileage driven in state divided by total miles driven. Property factor is determined by the value of property in the state divided by the value of all property. However, the value of over-the-road equipment is excluded from the computation. 9
Apportionment Methodologies for Income Tax • Michigan – Determines Michigan receipts by applying a ratio of revenue miles in Michigan to the revenue miles everywhere. • Ohio (CAT) - Gross receipts are situs in proportion to miles traveled within the state compared to miles traveled everywhere. – Even if a taxpayer has bright line nexus, the taxpayer must also have at least one hundred fifty thousand dollars in taxable gross receipts to be liable for the CAT. – The threshold applies to a person who would otherwise be a separate taxpayer or to a group of persons who would otherwise be members of a combined taxpayer group, but does not apply to members of a consolidated elected group. 10
Apportionment Methodologies for Income Tax • Pennsylvania – Business income of trucking companies is apportioned by multiplying the income by a fraction. The numerator is the taxpayer’s total revenue miles in Pennsylvania, and the denominator is the total revenue miles of the taxpayer everywhere. “Revenue mile” means the average receipts derived from transportation of persons or property one mile. Nonbusiness income is allocated under the standard allocation provisions. 11
Sales and Use Tax Exemptions for Transportation Companies • Indiana – Provides an exemption for purchases of tangible personal property that is consumed and is necessary for providing “public transportation services”. – “Public transportation” is moving, transporting or carrying persons and/or property for consideration, when the transportation is done by a common carrier, contract carrier, household goods carrier, carrier of exempt commodities, or other specialized carrier performing public transportation services. 12
Sales and Use Tax Exemptions for Transportation Companies • Indiana – Relevant factors the Department looks at to determine whether or not a carrier is engaged in “public transportation”. • Carrier must be hauling property of another. • Carrier must maintain all relevant shipping/transportation documentation. • Carrier must receive compensation for the services it provides. • Carrier must hold and pay for the appropriate public transportation insurance. • Carrier must be fully and independently authorized by federal and/or state authorities to provide public transportation services. 13
Recommend
More recommend
