Happy New Year, again. Once we moved into January, seems like every state Governor has proposed some type of change to their tax system. Some major, some minor, but a lot of them are looking at increasing sales tax rates and/or even the what types of items or services sales tax will be imposed on.
Read the recent New York Times article about how states seem to want to move away from an income tax and increase their sales tax rates. The article seems to suggest that this philosophy has something to do with the idea of moving away from a tax on income, to a tax on consumption (similar to the broader idea of a federal consumption tax).
What do you think?
Should states eliminate their income tax structures and rely on a higher rate, broader base sales tax?
Will these proposals gain any traction and actually get passed?
If you purchased one or more Optional Service Contracts covering computer hardware sold by Dell between April 8, 1999 and June 30, 2008, and paid California sales or use taxes on such service contract(s), you may be eligible to receive a refund of these taxes.
Claim Filing Deadline: May 29, 2013
Deadline to Exclude Yourself from the Settlement: March 19, 2013
Deadline to Object to or Comment on the Settlement: March 19, 2013
Final Hearing: April 18, 2013 9:30 a.m.
Please go to the following website for more information:
If you would like assistance in filing refund claims, please contact me.
Dell and SBE Litigation Settlement on Optional Service Contracts—Claim for Refunds, California State Board of Equalization, January 2013; Mohan v. Dell Inc. Class Action Settlements, California State Board of Equalization, January 2013
The Virginia business, professional, and occupational license (BPOL) tax is a local option tax on the privilege of doing business within a locality. If your company has a place of business in Virginia, it most likely is subject to the BPOL. However, there are exemptions and other issues/questions your company should examine to determine if it is paying too much BPOL, such as:
Is the activity your business is conducting a "licensable activity"?
Do any exemptions apply to your business?
Is your company operating multiple businesses which require multiple licenses?
How is your company handling transactions between affiliated entities?
How does your company determine the amount of gross receipts to be included in the tax base?
Is your company utilizing the "interstate receipts" deduction correctly?
Is your company "sourcing" it's sales accurately?
Is your company able to apportion it's sales?
Has your company properly classified it's business activity?
If your company hasn't reviewed it's BPOL compliance closely, it may be time to take a second look.
Is your company a U.S manufacturer or importer of medical devices? If so, then the federal medical device excise tax which started January 1, 2013 will impact your company.
Why am I talking about a federal excise tax on a state and local tax blog? Well, the medical device excise tax is similar to a state and local sales tax in many ways:
The medical device excise tax is a tax based on the actual selling price of the device (net of permitted exclusions)
The tax requires invoice level substantiation.
The tax base or sales price must be examined to determine what should be included or excluded (i.e, discounts, rebates, etc.)
Exemptions may apply.
Pricing and subsequently, the tax, may depend on the sales channel.
How a device is labeled may impact the taxation of the device.
Requires frequent filing (there is a registration and quarterly filing requirement along with semi-monthly deposits).
There are filing and reporting penalties (also deposit penalties).
Specific rules apply to situations involving contract manufacturers and leases.
What is the medical device excise tax?
It is a federal excise tax of 2.3% which is imposed on US manufacturers or importers on sales or taxable uses of medical devices. The tax must be paid to the IRS by the manufacturer or importer regardless of whether the tax is passed through or not.
ACTION REQUIRED SOON!
Semi-monthly deposits are required beginning January 29, 2013.
Returns are filed quarterly, beginning April 2013.
Companies may need to file IRS Form 637 and obtain a registration number.
QUESTIONS TO ASK
Is your device taxable? Do any exemptions apply? Do you need to use "constructive pricing" rules? Does your company use a contract manufacturer? Is your device listed with the FDA? Is your device labeled correctly? Do you know what to include in the sales price or tax base? Is your system set-up to provide invoice-level substantiation?
If your company needs assistance in complying with this new tax, please contact me.
Is your company considering restructuring its business? Perhaps creating new legal entities or re-aligning its lines of business into different entities? Changing the ownership structure of the legal entities within the commonly controlled affiliated group? Or maybe it is considering acquiring or merging with a new business (unrelated third-party)?
Regardless of your company's situation, in each of the above mentioned scenarios, your company must perform its due diligence prior to completing any transaction or restructuring. That due diligence should take into consideration the impact the restructuring or transaction will have on the business operations, legal obligations, insurance, finance, and tax, etc.
In regards to the tax implications, there can be significant tax ramifications on the transaction or restructuring itself. In addition to the federal tax impact, the state and local tax impact can be material and varied. Some of the potential state and local taxes to take into consideration are: income tax, gross receipts taxes, franchise taxes, sales and use taxes, property taxes and transfer taxes.
Usually the biggest concern in regards to the transaction from a state and local tax perspective are:
Is there any sales tax on the sale or transfer of assets or change in ownership?
Is there any transfer tax on the transfer of assets or change in ownership?
The answers to these questions depends on the state or states involved.
In addition to the above, the impact that the restructuring will have on the business' state tax nexus (taxable presence) position across the country should be reviewed and considered before making any changes.
If your company is currently considering any restructuring or acquisition, don't forget about performing state and local tax due diligence. If the transaction ends up costing the company a significant amount of state tax dollars now or in the future, you may be asked if these issues were considered or reviewed prior to completing the transaction.
My nine year old daughter said to me this week before I left a few days for business - "Have fun and don't be bored." Don't you just love the things that kids say. So simple and yet so powerful.
She didn't know it (or maybe she did) that after the holiday vacation and visits with family, that it is difficult to "flip the switch" back on and get to work. Her simple words actually have helped a lot. Life should be fun, and yes, even work. We should live to make each day count.
We should strive to "love" what we do.
I love preventing and solving problems. I also love representing the underdog and helping them win. I think that is why I love working in the state and local tax field. I think clients can often feel like the underdog when dealing with taxing authorities. Taxing authorities seem to wield a great deal of power by issuing notices, changing the rules (almost daily), and issuing audit assessments forcing taxpayers to prove the assessment is wrong.
I love helping clients resolve audit assessments and providing appeals representation to minimize the assessment. I call it "research with a purpose." I enjoy the process of "digging" to find a way to resolve the matter in a taxpayer beneficial manner.
That's also why I love planning. Planning can allow a company to operate its business in a multistate tax-efficient manner. This can help prevent problems from occurring down the road.
If you haven't noticed by now, I also enjoy writing and connecting with CFOs, Controllers and other tax professionals via the Internet. I started writing this blog in January 2009 and am thankful for all of those who have reached out to me and either signed up via e-mail and/or connected with me via LinkedIn.
In the world of state and local taxes, I think we (state tax professionals) need to become more connected. I also think we need to become more connected with our clients. I want to create something new and exciting in the world of state and local taxes that will help middle market companies deal with the complex burden of operating a multistate business. When a company is trying to be profitable, the last thing they need is to have their profit swallowed-up by multistate taxes (whether expected and properly planned for, or unexpected).
As you get back into "the groove" after a long holiday break, instead of dreading work or feeling blue about being back at work, think about the things you enjoy doing at your job.
That's my word for 2013. Providence is defined as God conceived as the power sustaining and guiding human destiny. Synonyms include: divine intervention, destiny, etc.
I have read many business and motivational books throughout my career and have read that when starting something new (a new venture, new goal, journey, etc.) that the most important thing to do is to take the first step. Pursue that venture or goal and "providence" will occur. When you focus on achieving something, your mind will seek out the "how" to achieve it, and people and ideas that can help you will appear - that's called Providence.
Hence, as this new year begins, I know many of us (if not all) have set goals to achieve new things or change things. Remember the following:
You can do more than you think you can.
Take one day at a time (don't get ahead of yourself - life happens one day at a time; so let your mind and body achieve your goals one day at time)
Be You (don't compare yourself to others; there will always be someone better than you; but no one will be better at being you; be the best you)
Expect Success (hope is a fountain of energy; without hope, your motivation will dissipate; there are no limitations except your expectations)
What is your "word" for 2013?
"When obstacles arise, you change your direction to reach your goal; you do not change your decision to get there." Zig Ziglar