Avalara

• Revenue neutral
• Treat all business owners equally by using one flat rate
• Eliminate loop holes and special treatment
• Simplify administration of the tax to reduce compliance cost for businesses.

A business owner would choose one of three ways to calculate taxable receipts, selecting the one that results in the lowest tax burden. Calculating the taxable margins could be based on:

• Total gross receipts minus labor costs, or;
• Total gross receipts minus all production costs except labor, or;
• 60 percent of total gross receipts.

Since June 1, there have been several hundred tax rate changes across the United States. In addition, more than two dozen states have updated or expanded their tax jurisdictional boundaries, assigning as many as six taxing authorities to a single street address in some states (state, county, city, special tax jurisdictions, etc.).  When states change rates, Avalara adapts. Avalara has recently and dramatically updated their rate data in response to a sharp uptick in the number of the states’ changes in sales and use tax rates, jurisdictional changes and other revenue-enhancement moves.

In addition to rate and boundary changes, Avalara added 172 new taxability rules to its database, covering such items as a week-long “Show Me Green” sales tax holiday on certain energy-efficient products in Missouri, massages by unlicensed therapists in the five boroughs of New York City and software maintenance contracts in Utah.   While there were a few tax holidays, such as a month-long suspension on sales tax for clothing items in Mississippi, most changes represented rate increases.

"DMA and its members are filing suit against the state of Colorado in Federal Court. DMA will act as the plaintiff so that no one business has to feel the brunt of any recourse from the Colorado Department of Revenue. DMA is acting now and you need to as well. Tennessee and California are considering similar legislation and others will soon follow."

Listen, we recognize that we end up in central New York a little more often than some other corners of the USA, but hey, we got two Syracuse grads in the office so be happy it isn't salt potatoes, snow and Dinosaur Bar-B-Q 24/7, OK?

In any event, this business news article from the shores of Lake Erie has some great quotes.  And as they say 'we couldn't have said it better ourselves' ... :


A Historical Perspective:
 

“For years and years, when clients failed to pay their taxes, we didn’t worry too much about it. We just put them in Chapter 13 for repayment,” said Jeffrey M. Freedman, senior partner at Jeffrey Freedman Attorneys at Law, which sponsored the event. “Today it’s a whole new ballgame. People with lots of back taxes are being charged with crimes.”

The Trend:

Criminal tax fraud prosecutions have increased to 327 in the fiscal year 2009-10, up from just 33 for the same period in 2006-07.



From the Trenches:

“The best advice to give clients,” (William Comiskey) said, “is to treat this money like it doesn’t belong to you — because it doesn’t.”



And finally, the Capstone Sentiment:


“My problem doesn’t focus on cheats; it focuses on the state’s failure to educate people on what they need to do to comply,” said Gabriel J. Ferber, an attorney with Nesper, Ferber & DiGiacomo.



The take away?  Due to the fiscal messes that most states find themselves in, aggressive sales tax compliance scrutiny is upon vendors in all jurisdictions.  Finding a trusted partner in the sales tax realm is becoming more and more of an imperative.

• purchases of taxable property or services made outside of New York State;
• purchases of taxable property or services made over the Internet, from catalogs, or by phone from businesses that are located outside of New York State;
• purchases of taxable property or services on an Indian reservation;
• purchases where the taxable property or services are used in a different local taxing jurisdiction in the state from where they were purchased or where they were delivered;
• withdrawal of taxable property from inventory for use by the business; and
• use of taxable property that is manufactured, processed, or assembled by the business.  "

"Council President Larry Atencio, who favors licensing and regulating the businesses  said all indications are the marijuana centers have plenty of patients or customers.

"Voters have said people have a right to use medical marijuana for certain health conditions," Atencio said. "That's fine, but I'm also willing to tax the heck out of them. I'm all in favor of sin taxes, so a 4.3 percent tax sounds fine to me." "

 The Sooner State legislature has just incentivized Oklahoma vendors to pay a little more attention to management of their customer's sales tax exemption certificates.  

From a political angle, this issue bubbled up in the context of veterans groups and the sales tax exemptions they typically are in possession of.  But the expanse of the final legislation (signed into law 6-7-10) provides penalties for non-compliant transactions with any holder of a sales tax exemption certificate.

The message from Oklahoma City is delivered via this piece of legislation  (search for Bill SB1321).  

Look closely though, the law has a twist we didn't see coming until we read it ourselves.  This law is not concerned with vendors who avoid sales tax collection by honoring fraudulent or incomplete exemption certificates.

Here, the enhanced penalties are for vendors who refuse to honor valid exemption certificates.  The new law enhances the penalties for charging sales tax in opposition to a valid exemption certificate.  Not what you thought, is it?   Read on.

This particular enhancement has some real teeth:

" A second or subsequent violation of this subsection shall be unlawful and constitute a misdemeanor offense punishable by a fine of not more than Five Hundred Dollars ($500.00) per such offense, in addition to any administrative fine. The Tax Commission shall refer any vendor who has more than once willfully or intentionally refused to honor the exemption, whether fined or not, to the district attorney where the vendor is located for prosecution."68 O.S. 2001 Sec. 1361.1 (B.)

Whoa!  In the everyday world of state and local words like "misdemeanor" or "district attorney" or "prosecution" are thankfully rare.  Even when we do hear about one or the other or the other, the story generally relates to under-reporting or under-remitting type of, ahem, incident.

Here, we see the threat of criminal prosecution for collecting the sales tax in contravention of a valid exemption certificate. 


Wait! There's more:

"  For the purposes of this subsection, "vendor" means any individual most responsible for supervising, and the conduct of, any employee who intentionally refuses to honor the exemption including, but not limited to, a manager, owner, partner or corporate officer."  68 O.S. 2001 Sec. 1361.1 (B.)

It looks like the liability under this law may extend to the managers or officers as well as owners of a violating vendor.   Vendors must have "actual knowledge" that a customer has a valid exemption certificate and then "willfully" or "intentionally" refuse to honor the certificate in order for the really bad stuff to kick in.

Quotes added because that is what the law says, but also to highlight the rather subjective nature of the requirements for "prosecution".   Since the law lacks precision, vendors who have concerns about their own exemption certificate management might consider automating exemption certificate management in an effort to avoid miscalcualtion of sales taxes on exempt customer's invoices, deliberately or not.  (Hint, hint, hint...)

Of course, no one can predict future enforcement of any new rule or reg.  And believe us, we aren't exactly a bunch of chicken littles, the sky is not falling on Oklahoma vendors. And no one is expecting the OK Tax Comminssion to start throwing the book at every vendor who issues a taxable invoice to an exempt customer.  But there is a bigger point.

The big point?  This rule illustrates the need for effective, accurate sales tax exemption certificate management.  It might be counter-intuitive for some vendors to imagine the need for criminal penalties for over-collection of sales taxes, but in Oklahoma at least, thats the new rule in town

Finally: This blog does not constitute legal advice.  This blog is intended to be a source of general sales tax information, not a source of legal advice.  Please consult with your tax and legal professionals to let them apply the law to your specific facts and circumstances.