State Tax Alerts - This Week's Stories Worth a Second Look

Rusty Little

In case you missed them, the following is a summary of a few key state tax developments, news articles, and observations during the past week:

Groupon and Living Social are two popular Internet companies offering online discount vouchers for deals at your favorite business establishment.  This business model opens up a can of worms for sales tax - Opening Up A Can Of Worms 
 
The US Supreme Court declines to hear the KFC Corp v. Iowa and Lamtec v. Dept of Rev. of Washington cases - from the Tax Foundation
 
California FTB issues guidance on series LLCs - from TEI's blog
 
SEC/EDGAR filing is considered a "telecommunications service" in Tennessee - from the CCH Community blog

The latest with Amazon:

• Amazon to collect Tennessee sales tax beginning in 2014 and will add 2,000 full-time jobs at new distribution centers - from The Charlotte Observer
• Pennsylvania introduces click-through nexus bill (H.B. 14) - from CCH

Wal-Mart and Amazon.com - Strange Bedfellows??

Rusty Little

Wal-Mart and Amazon.com probably don't see eye-to-eye on many things because they are in fierce competition in the retail marketplace (nor do any of the other big box retailers and the other large online sellers). 

But arguably, they are in the same boat with regard to many sales tax collection issues.  Beginning yesterday, there have been a lot of stories in the main stream media regarding Wal-Mart not collecting sales tax on certain online sales.  This article from the LA Times attempts to sum up the recent revelations regarding Wal-Mart's "failure to collect California sales tax" on sales by CSN Stores (based in Boston) that are made through Wal-Mart's website.

Sure, there is some degree of comic irony in the fact that Wal-Mart is one of the leaders in the fight to force Amazon.com to collect sales tax on its online sales.  Furthermore, it doesn't help the public's perception that CSN Stores has posted on its website (in broad daylight, no less) that "one of the best things about buying through CSN Stores is that we do not have to charge sales tax . . ."

However, the thing that the media frenzy on this subject will not indicate is whether Wal-Mart is legally required to collect sales tax on these particular sales.  It all depends on the facts (and many times, the facts seem to be unimportant in the mainstream media).

Wal-Mart is a great company, and they collect sales tax when they are legally required to do so.  Amazon.com is also a great company, and they collect sales tax when they are legally required to do so.  There is nothing wrong with that.  Just because these companies dominate in their respective markets doesn't give the states carte blanche to force them to collect sales tax because it is easy for them to do so, or because the states think they are missing out on potential tax revenues.

Wal-Mart and Amazon.com could become strange bedfellows in an environment where states are attempting to cross legal boundaries just because they need budgetary relief from what the U.S. Constitution has limited them from doing.

Surprise! Surprise! Surprise! - The State Auditor Looked at Your Website???

Rusty Little

While this entry is more of a random musing than a highly technical analysis, it addresses a common issue faced by many taxpayers.

Many times taxpayers have a "Gomer Pyle moment" when a state tax auditor refers to a company's website to corroborate something they have been told or to support their position.  This happens most frequently with potential nexus questions and when an auditor is trying to determine exactly what activities a company may be performing in the state.  Any state tax auditor worth his or her "salt" (pun intended), is going to review a company's website to gather intelligence.  This is going to happen both in the world of on-site audits and also in the world of desk audits/nexus questionnaires.

When you answer nexus questionnaires and/or reply to IDRs, be sure to check your answers against what the company is telling the world on its website.  Company websites often tend to "over sell" because they are a marketing vehicle by design.  But if the company website says something like "we will install or service our widgets for you no matter where you live" or "our sales representatives are also available to train your employees," then you might have some explaining to do.

The mining of company websites by state tax auditors for information is nothing new and is not just limited to questions of nexus either.  Information pertaining to sourcing of sales, intercompany transactions, arm's length relationships, and many other issues can be gleaned from a simple review of a company website.

Any tax professional worth his salt should be very familiar with what a company is telling the world on their website long before a state auditor or nexus questionnaire ever arrives.  Company websites are a rich source of information for states looking for low hanging fruit (potential audits) and also for auditors who are currently working on company income tax, sales tax, and/or abandoned property audits.

It is prudent to try to avoid those Gomer Pyle moments . . .

Which State is Not Like the Others?

Virginia has some unique rules in determining whether a taxpayer is "doing business" within its borders. Ruling Request P.D. 10-279 provides an interesting view regarding Virginia's determination of who is "subject to tax" when compared to the wave of nexus decisions sweeping the nation. 

Read complete announcement here.

Digging Deep [WebCPA]

The reality of the recession has affected the tax policies of nearly every state, as dwindling receipts coupled with constant or increased expenses have left most states in a budgetary crisis mode.


In this article, Geoff Christian discusses the difference in filing methods can amount to several million dollars.

Read full story here at Accounting Today for the WebCPA.