TaxConnex Sales Tax Blog

Arizona Teases TPT Simplicity…. AGAIN

Posted by Noelle Ard on Thu, Sep 29, 2016 @ 10:06 AM

I believe it was about this same time last year where I could barely contain my excitement…Arizona (AZ) was FINALLY going to roll out their “simplified” return filing process for all locals which would reduce the number of local level returns that would need to be filed, as everything would then be reported and remitted to the state and distributed accordingly.  Then something happened…. or maybe something didn’t happen, regardless, AZ pulled back on their yearlong commitment of making 2016 a more “simplified” filing year, and halted the “TPT Simplicity Project.”

Fast forward to this week, I received an email alert notifying me that TPT Simplification is drawing near, and effective with the January 2017 liability (due February 2017), TPT Simplification will be up and running and ALL locals will be reported and remitted to the State of Arizona via the Transaction Privilege Tax Return. 

So I quickly logged onto the AZ DOR website to check it out! (https://www.azdor.gov/TransactionPrivilegeTax(TPT).aspx)  The suspense was killing me – could it be?  Like a kid on Christmas morning peeking around the corner to see what Santa left, I clicked on the “What’s New” link with excitement and also a bit of “it’s too good to be true” anxiety.  There it was…

COMING SOON – STREAMLINED FILING & PAYING YOUR TPT!

Beginning with your January 2017 TPT return filed in February 2017 TPT return, the Arizona Department of Revenue will be the single point of administration and collection of state, county and municipal transaction privilege tax.

Taxpayers will be able to file and pay for all jurisdictions to the department. This means if you currently report to a self-collecting city (i.e. non-program city), your last return to that city will be your December 2016 return filed in January 2017.

Like Will Ferrell in the blockbuster ELF, I shouted (to myself) SANTA’s COMING!!!!  Arizona haself-2.jpg committed (again) to launching the streamlined reporting and remittance system and I feel like this is it – this could be the real thing this time! 

If you haven’t subscribed to the AZ DOR’s emails, I would recommend it – it gives you all of the details of what’s going on within the AZ DOR without you having to go and “search” for it.  Simply navigate to https://public.govdelivery.com/accounts/AZDOR/subscriber/new and enter your email address.

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Topics: sales tax, Arizona

Here’s What You Can Expect from the Other Guys

Posted by Brian Greer on Tue, Sep 27, 2016 @ 10:25 AM

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I’m always surprised (maybe frustrated is a better word) when a business decides to use a different sales tax compliance outsourcing firm.  I take it personally and believe that maybe I didn’t understand their issues well enough to articulate exactly how TaxConnex will benefit them. 

Unfortunately, companies often purchase sales tax compliance outsourcing based almost solely on price.  They don’t see the risk of a poorly managed process.  It’s eye opening to talk with a business that is outsourced to a competitor and to hear their struggles.  I wish the first time buyers could hear some of the struggles. 


Here’s a compilation of what I’ve heard over the years from businesses that are frustrated with their sales tax compliance outsourcing vendor and what you can expect to encounter with the “other guy”:

  • Symptom: Our calls and emails are not responded to. All I need is acknowledgement that they received my question.
  • Cause: Sales tax compliance is not their core business.  The vendor might be a software company or a consulting/CPA firm.  They are not focused on sales tax compliance outsourcing.  Ask them what percentage of their revenues are tied to the service you are buying.

  • Symptom: I have to approve everything the vendor is doing.  I have to approve changes to the calendar.  I have to approve every return that is filed.  It takes too much time. 
  • Cause: On the surface this feels like the vendor is providing control to the client.  The reality is that the vendor is pushing the decision – AND THE LIABILITY AND RISK – back to the client.  Wait until there’s a problem to see where the blame falls.  It’s with the client who approved everything.

 

  • Symptom: There are so many notices that we have monthly calls just to review the notices and determine actions to resolve each notice.
  • Cause: The vendor is so busy during the first half of the month that they can’t pay attention to notices and resolve them in a timely fashion.  Their process is designed to manage notices (and often times poorly) rather than to prevent notices.

 

  • Symptom: I have a new point of contact every 3-6 months.
  • Cause: Sales tax outsourcing is not important to the vendor – it’s an ancillary service that is either staffed with clerks who frequently turnover or competent professionals that quickly move into other areas of the business.  Regardless, the result is more time training the new point of contact and errors while the new person is learning the process.

 

  • Symptom: I spend an excessive amount of time overseeing the outsourcing relationship and reviewing the process.
  • Cause: There have been numerous errors and/or notices that result in a lack of confidence in the monthly process requiring excessive oversight to make sure the job is completed properly.

 

Most of these symptoms relate back to the fact that sales tax compliance outsourcing is generally not the core business of most firms.  They are often software businesses attempting to provide a service.  (BTW – providing sales tax compliance outsourcing is a service.)  Or a consulting firm that provides literally a hundred different services of which sales tax compliance outsourcing is just one of them. 


TaxConnex is focused specifically on sales tax compliance outsourcing with well over 90% of our revenue attached to it.  It is our focus.  It is our core business.  If you’re tired of the “other guy” – give us a call.

The TaxConnex Difference

 

Topics: sales tax, sales tax outsourcing

Frustrated with Your Sales Tax Audit?

Posted by Brian Greer on Thu, Sep 22, 2016 @ 11:23 AM

Sales Tax Audit Assessments - How to Avoid An Uphill Battle

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Recently, I’ve had several discussions with companies about a sales tax audit assessment they’ve received.  They come to me in an attempt to negotiate a settlement with the state.  The problem is that they were clearly at fault and are now struggling with the reality of paying the back taxes, penalties, and interest. 

There’s typically not much I can do in this situation unless they are willing to pursue an offer in compromise which requires the tax payer to share their financial details with the state…essentially proving that the full payment of the assessment will put them out of business.  The angle is that the state is better off accepting some percentage of payment on the initial assessment while keeping the company in business long-term…ideally yielding a bigger financial gain long-term.

Voluntary Disclosure Agreements White Paper

I always wish they would have reached out prior to the sales tax audit and been proactive in addressing their sales tax issues.  There are many more options available to a taxpayer when you’re ahead of the curve. 

How do you make sure sales tax receives the attention it should in your business and avoid an audit?  Download our Top Tips to Avoid Sales Tax Audit Assessments to learn how.

  Learn More... Download Our Tips to Survive a Sales Tax Audit

 

Topics: sales tax, sales tax audit, audit

Direct Marketers - How To Play It Safe With Sales Tax

Posted by Brian Greer on Thu, Sep 15, 2016 @ 10:30 AM

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Sales tax compliance questions often start with a review of a company’s sales tax nexus footprint. TaxConnex frequently works with direct marketers to assist them with their sales tax compliance.

As a first step, a direct marketer should review where they have distributors or sales agents. These distributors will generally result in sales tax nexus for the direct marketer.

As a result, a direct marketer can quickly find themselves with a multi-state sales tax compliance obligation.

Managing the cost and risk of compliance can be tricky.

  • Should you register immediately upon signing up a distributor?
  • Should you wait until you make a sale?
  • What if you register and start collecting, but you’re only collecting a few dollars per-month in tax?

Unfortunately, once you have registered, the state is going to look for a monthly return. You may be lucky and get assigned a quarterly or annual filing frequency but often times you have to demonstrate a history of minimal tax collections before you can petition for a reduced filing frequency.

As with most sales tax questions, this is a question of risk and cost.

I have often seen companies wait until they make a sale before registering in a jurisdiction. They’ll go ahead and collect the sales tax, then register, and remit the sales tax collected on the first return. You need to be careful in this situation that you’re not holding the states’ money and not remitting it.

The safer play is to register as soon as you establish sales tax nexus.

The downside is that you’ll be subjected to regular return filings regardless of whether you have sales and regardless of the amount of tax collected.

 

Sales Tax Nexus

 

 

 

Topics: sales tax nexus, sales tax compliance, direct marketers

You Get What You Pay For

Posted by Robert Dumas on Tue, Sep 13, 2016 @ 10:30 AM

One of our biggest challenges as a business is trying to educate our market.  You have read this before in my blogs, but there are tremendous misunderstandings about transactions tax and what it requires to stay in compliance with the laws.  

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We had a recent encounter with a prospect that has tried four different outsource services in the last seven or eight years and is in need of a new service provider again.   For all of their previous outsource services, the prospect has been driven by price alone in their purchasing decision.  They have consistently gone with the service provider that makes the most promises for the cheapest price.  Each time they became fed up with the recurring service failures of their provider, they sought another service provider just like the previous one.  This time, their service provider is cancelling the contract with them because the service provider is losing money and our prospect is unwilling to pay more.  

As Dr. Phil says…if you keep doing what you’re doing, you’ll keep getting what you’re getting (or something like that)! 

 

Here are a few of the reasons companies repeat their mistakes with sales tax compliance outsource providers:

  • The company fundamentally believes that transactions tax compliance is as simple as taking numbers from a spreadsheet and moving it to a form. Believing this fallacy leads to an unrealistic expectation that it only costs a few dollars at most to do this for any given tax return.
  • The decision maker at the company has no first-hand experience with sales tax compliance outsourcing and they do not adequately investigate and consider the experience of their predecessors in the company or other experts.
  • The company ignores its internal costs for managing the compliance outsource despite the fact that their resources are consumed with managing and reviewing the outsource provider.

 For any company looking for an outsource provider, consider this:

  1. Sales tax compliance is transactions based and each transaction matters. The more transactions you have, the higher likelihood of nuances and exceptions that make individual transactions different from others (e.g., credits and adjustments).   It is difficult to consolidate multiple transactions into one or two lines on a tax return because of these nuances and exceptions.
  2. Sales tax compliance can involve hundreds of jurisdictions each month…not just 50 states quarterly or annually. The volume of filings always results in volumes of communications from the hundreds of jurisdictions.  Much of this communication is informational, but it all must be reviewed and assessed.
  3. Sales tax compliance is always urgent and there is no opportunity for filing an extension. As such, the processing time is extremely condensed, which leaves very little margin for surprises or ‘out of process’ activities.
  4. Technology is a necessity for sales tax compliance but it is not a panacea. The technology must be accompanied by strong knowledge and process to manage the out of process transactions and situations, the nuances and exceptions and the condensed filing period. 
  5. It is always best to find a vendor that specializes in a particular discipline or expertise. Sales tax compliance requires dedication and focus.  If sales tax compliance is just another ancillary service for a technology company or a consulting firm, you should know that compliance is not their focus.

 

The bottom line is “YOU GET WHAT YOU PAY FOR”.  There are many things we learned from our parents that are worth remembering.  This is one of them.

The TaxConnex Difference

 

Topics: sales tax compliance, sales tax outsourcing

EYE ON Maryland Sales Taxes

Posted by Jeff Meigs on Thu, Sep 08, 2016 @ 10:30 AM

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The Maryland sales and use tax is imposed on taxable retail sales and the use of tangible personal property and designated services. The statewide general tax rate is 6%.  

While there is no local sales or use tax in Maryland, municipalities can impose certain taxes based on receipts.

Baltimore imposes taxes on the following activities: 

  • Admissions
  • controlled dangerous substances
  • hotel rooms
  • parking services
  • phone service
  • public transportation service
  • utility service

If you are in the mood for a Maryland crab cake, the state sales tax does not apply to sales for consumption off the premises of hard and soft shell crabs, but does apply to crab dishes, such as crab cakes and crab soup, prepared for immediate consumption. 

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With a relatively low sales and use tax rate, Maryland is a manageable state for sales and use tax purposes.  However, dealing with the local jurisdictions and their municipal taxes will prove difficult as they lack adequate guidance and available tax forms. 

 

Stay tuned for more of Jeff's EYE ON series as he blogs aboout sales and use tax State by State.

Identify Nexus Issues. Download our Nexus Questionnaire.

Topics: sales tax, Maryland

The Lone Star State has a New Look for You

Posted by Noelle Ard on Tue, Sep 06, 2016 @ 10:30 AM

Take a deep breath, count to 10…just as you have finally made yourself familiar with the Texas Sales & Use website, things are changing…

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Actually, this is good news, because Texas is one of the few states that actually appears to have their business together when it comes to sales and use tax.  So I’m looking forward to this new and improved website!

On August 29, 2016, Texas sent out a mass email to all sales and use tax subscribers alerting them that “A Brand-New Website is Coming Soon!” 

The email indicates that the new website will launch in the coming weeks and will provide the following:

  • Access popular features quickly at a one-stop business center on the home page.
  • Browse seamlessly for Comptroller content, as many of the agency’s program-specific websites are being consolidated into the main site.
  • Find what you need from any page with a powerful, enhanced search function.
  • Use any device – tablet, phone – computer to browse the Texas Comptroller website.

Additionally, Texas is now encouraging engagement with its customers and vendors via social media (Facebook and Twitter) indicating that the latest Comptroller news and information needed for doing business in the state will be available via these platforms going forward.

While you’re at it, be sure to follow TaxConnex on Twitter and on LinkedIn.

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Topics: texas sales tax

Online Sales Tax Simplification – Finally?

Posted by Brian Greer on Thu, Sep 01, 2016 @ 10:30 AM

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Late last week, Chairman of the House Judiciary Committee US Representative Goodlatte from Virginia released his much anticipated draft bill entitled “Online Sales Simplification Act of 2016”. 

The draft likely signals the end of the Marketplace Fairness Act and Remote Transactions Parity Act. 

If you’ve followed the online sales tax debate over the previous years, you probably recognize Goodlatte as a central figure in the debate.  Back in September of 2013, his release of principles to consider in implementing some type of change essentially killed that version of the Marketplace Fairness Act that was later reintroduced in 2015.  Since then, states have become more and more aggressive in pursuing the collection of sales tax associated with online sales.  Most recently, states like Alabama and South Dakota have put forth economic nexus standards.

At the crux of the Online Sales Simplification Act of 2016 is an origin-based taxing scheme as compared to the current destination-based scheme. 

Currently, for interstate commerce, the tax due is based on the destination. 

Which typically means that for online sales, the tax due is based on where the product is shipped.  In previous bills – for example the Marketplace Fairness Act and Remote Transactions Parity Act – the e-tailer would be responsible for collecting the taxes due at the destination and remitting the taxes to those destinations.  This creates a level of complexity for the e-tailer to conform with the varied rules across the states.

With the Online Sales Simplification Act, the taxing scheme is moved to a hybrid origin. 

Meaning, the tax collected is a hybrid of where the transaction originates AND the destination of where the merchandise is shipped. 

More specifically, the e-tailer would use the rules in the origin state to determine if the item is subject to tax and apply the tax rate based on a single, statewide rate in the destination state (provided the destination state participates in the clearinghouse describe below).  The e-tailer would collect the tax and remit to their home state who would then forward the funds to a clearinghouse that would be responsible for distributing the sales tax to the appropriate states.

Some complexities arise if a state does not have a sales tax (Alaska, Delaware, Montana, New Hampshire, and Oregon) or if a state does not participate in the clearinghouse. 

  • In situations where an e-tailer is based in one of these states, and the state participates in the clearinghouse, then the e-tailer can either report the buyer’s name, address, and amount of the sale to the clearinghouse.  This information will be shared with the buyer’s home state and then that state would be responsible for collecting the tax from the buyer. 
  • In situations where an e-tailer is based in one of these states, and the state does not participate in the clearinghouse, then the e-tailer is required to report the buyer’s name, address and amount of sale to the clearinghouse.  These states would have to participate in order for their citizens to continue to not be taxed on internet transactions.

An additional complexity is the formation of the clearinghouse. 

The clearinghouse will be responsible for establishing protocols for the distribution of collected tax, forms to be used, exemption certificates to be used, data security in the case of personal information provided on the purchase history of buyers, to name just a few.  Additionally, states will need to establish a single state-wide tax rate and also implement new procedures to ensure sales tax is forwarded to the clearinghouse.

My personal opinion?  Still seems to be very complicated – although a step in the right direction away from the Marketplace Fairness and Remote Transactions Parity Acts.

 

Online sales tax blogs

 

 

Topics: internet sales tax, Online Sales Tax Simplification

Myths and Misconceptions - A Guide for Telecom Tax Compliance

Posted by Brian Greer on Fri, Aug 26, 2016 @ 02:00 PM

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I speak with several companies each week that are in the process of launching a new VoIP telecommunications service.  Misinformation abounds including……”Since it’s delivered over the Internet I thought it was tax free.”  I hear the following comment also…..”My carrier is collecting and paying all the taxes and fees for me.”

Let me dispel these rumors. 

First, VoIP is both taxed and regulated.  It is not tax free. 

Furthermore, carriers are generally only collecting those taxes and fees that apply to the wholesale transaction when they sell the service to you.  As a telecom reseller, you are exposed for the applicable taxes and fees on the mark-up at least and potentially for the taxes and fees that you have already paid to your carrier.

As a result of the various myths and multitude of confusion, I developed a quick reference guide for those who are entering the telecom service market.  This guide is not meant to be all encompassing but is meant to provide baseline information and the framework for establishing a process to ensure tax and regulatory compliance for your telecommunications and certain types of VoIP services.

The Top Ten List Includes:

  1. Identify the Federal regulatory requirements
  2. Identify the State and Local regulatory requirements
  3. Determine the State and Local transactions tax applicability
  4. Determine how you will invoice your customers
  5. Apply for the applicable federal licenses
  6. Apply for the applicable State and Local regulatory license(s)
  7. Register with the applicable State and Local tax authorities
  8. Implement a compliance reporting solution
  9. Submit the appropriate exemption documentation to upstream carrier(s)
  10. Calculate, bill, collect, and remit your taxes and fees

 

Click here to download the complete guide,

“Top Ten Guide for Managing Taxes and Regulatory Fees”.

 

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Topics: VoIP tax, VoIP, telecommunications tax

The Complication of Sales Tax Registrations

Posted by Brian Greer on Thu, Aug 18, 2016 @ 10:30 AM

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In the sales tax world, “registrations” can take on multiple meanings. 

Generally speaking, sales tax registrations refer to the authorization to collect sales tax in a particular jurisdiction. 

This type of registration occurs at the Department of Revenue or similar agency – sometimes with a local jurisdiction.  Once a valid application has been submitted and the applicable fee or bond paid, the jurisdiction will issue a sales tax license.

In the past when paper-based applications were the norm, a business could complete and mail the application along with their fee or bond to the Department of Revenue.  Many of these applications would also ask for the Secretary of State (SOS) identification number.  With the paper-based application, a business could leave this line blank and in most situations a sales tax license would be issued without a question.

However, now that the applications have been moved online, most of the states require a SOS identification number before the application can be submitted. 

Thus, a second level of registration is required – this one with the Secretary of State.  The SOS grants permission to conduct business in the state. 

As part of the SOS application process, a business must provide the address of their “registered agent” in the state.  What is this? 

A registered agent is someone (a person or company) that receives legal correspondence within the state and forwards this correspondence to the business. 

Essentially, the state needs to know where to send information in the event of a lawsuit.  This doesn’t have to be a separate company that acts as the registered agent.  If the business has an office in the state, then that location can be used.

That would end the process for a business selling tangible personal property and/or services. 

But what happens when a business provides telecommunications services such as VoIP, wireless communication, broadband connectivity, etc.?

 In this situation there are additional registration requirements.  A business would need to determine in which states their particular telecommunications service is subject to regulation.  If the telecommunications service is regulated, then the business would also need to register with the PUC / PSC – Public Utility or Public Service Commission.  Furthermore, there would be a Federal registration obligation with the FCC.

In summary, if selling TPP and providing services, the following are required:

  • Registration with the Department of Revenue which issues the sales tax license
  • Registration with the Secretary of State that grants the right to conduct business in the state
  • Registered Agent to receive legal correspondence

If providing telecommunications services:

  • Registration with the Department of Revenue which issues the sales tax license
  • Registration with the Secretary of State that grants the right to conduct business in the state
  • Registered Agent to receive legal correspondence
  • Registration with the PUC / PSC if the telecommunications service is regulated in the particular state where service is provided
  • Registration with the FCC if the telecommunications service is regulated

Need Help with  Sales Tax Registrations?

 

Topics: sales tax registrations, Secretary of State ID Number