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© Avalara Ray Bigley – VP Business Development; Avalara Andrew Johnson – Partner; Peisner Johnson & Company Expanding Your Digital Value Via State And Local Tax Advisory Services December 6, 2013
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Making sales tax less taxing. 2 Market Forces & Evolving Markets Market Place Fairness Act (67 to 29) Peisner Johnson & Company – Client Service Opportunities Summary Today’s Discussion
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Making sales tax less taxing. 3 $107,000,000,000 $55,000,000,000 $130,000,000,000
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Market Forces: State Budget Gap
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Making sales tax less taxing. State Budget Gaps
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Making sales tax less taxing. $12,500,000,000 $23,800,000,000 Market Forces: State Budget Gap
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Making sales tax less taxing. Market Forces 46 States, WA DC & Guam
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Making sales tax less taxing. 8 Sales & Use Taxes In “LOTS” of Jurisdictions 46 States (Including The District of Columbia) have some form of Sales And Use Tax NOMAD States – No Sales Tax in NH, OR, MT, AK, DE Alaska has no State Sales Tax, But does have Local Sales Taxes There are over 11,000 North American Taxing Jurisdictions
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Evolving Markets Mobile payments ( Affirm, Square, GoPayment, Fortumo, Zong ) Gaming ( mobile devices, Xbox, PlayStation, Wii )
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Making sales tax less taxing. Omni channel Markets: Mobile 10
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Making sales tax less taxing. Emerging Markets – Gaming, Mobile Payment 11
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Making sales tax less taxing. Omni channel Markets: Gaming 13
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Making sales tax less taxing. 14 Next up after Marketplace Fairness? Digital Goods – MP3 Files, Movie / TV downloads, Purchased Image, etc. Virtual Items – Exist within a specified environment. Example -Xbox Live marketplace, MapleStory: Flower bouquets, Games-weapons Sheldon’s dilemma from the Big Bang Theorydilemma
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Making sales tax less taxing. Grants authority to states to require a remote retailer to collect sales tax Defines a remote retailer as any seller who makes interstate sales of products or services Applies only to remote retailers with annual remote sales in excess of $1 million, but remote sales includes exempt sales Requires very little simplification from states, and most of that is only for remote retailers Marketplace Fairness Act (67 to 29) “Very Brief Overview”
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Making sales tax less taxing. Andrew (Andy) Johnson Peisner Johnson & Company, LLP
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1.Nexus 2.Tax Rates and Taxability 3.Use Tax 4.Exemption Certificates 5.Tax Returns The 5-Point Assessment
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Nexus
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What is nexus? Nexus: A connection; a link or tie Minimum level of physical presence that allows a jurisdiction to require you to register, collect, and remit sales and use tax
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Obvious
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Less Obvious
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Auditing your customers Sharing with IRS and other states Special task forces Leads o Former employees o Competitors How do states find you?
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THE PROBLEM NEVER GOES AWAY… IT ONLY GETS BIGGER
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Analyze the Nexus Footprint Assessment #1
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Tax Rates and Taxability
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Under-Collecting
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●Something taxable in one jurisdiction may not be taxable in another... ●Except when it is. ●Rules are constantly changing - more than 5,000 changes in the last year alone
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Fundamentals Tangible Personal Property (TPP)
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Only CERTAIN services are taxable
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Fundamentals ●ALL sales of TPP are taxable unless there is a specific exemption for that item. ●What about digital products?
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Make Sure Clients Charging Tax on Taxable Stuff at the Right Rate Assessment #2
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Use Taxes
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Online Purchases
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Putting Your System in Place ●Decide who should manage use tax accrual ○Accounts payable department ○Purchasing department ●Service opportunity for CPAs Accruing Use Tax
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Make sure clients have a system for accruing use tax on taxable purchases — don’t overpay though Assessment #3
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Exemption Certificates
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Exemption Certificates Are Low-Hanging Fruit
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Sampling
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Review certificates actually collected by client. Assessment #4
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Tax Returns Screenshot/CBS
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Review returns filed Assessment #5
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Protect Your Clients 1.Nexus 2.Tax Rates and Taxability 3.Use Tax 4.Exemption Certificates 5.Tax Returns The 5 Point Assessment:
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PeisnerJohnson.com Training SALTsource newsletter Blog Charts and white papers
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Making sales tax less taxing. Who is Avalara 49 Market Leader in Automated Sales & Use Tax Located on Bainbridge Island, WA & Seattle Offices across North America, in EU & Asia 11,000 customers 60,000 registered users 4 million calculations per day – approaching 1.5 billion annually Manage 5 million exemption certificates & file 500,000 sales tax returns Filing & remitting $14 billion in sales & use tax annually Original member Streamline sales tax & Certified provider
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Making sales tax less taxing. 50 Questions andrewj@peisnerjohnson.com ray.bigley@avalara.com
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