Remote Seller + New Year = New Sales Taxes

Remote Sellers…..Are you ready?

Seven states implemented their economic nexus sales tax rules for remote sellers with the new year.

These States all have effective dates of January 1st.

  • District of Columbia
  • Georgia
  • Iowa
  • Louisiana
  • Nebraska
  • New York
  • Utah

Do you have your sales tax rates in place for each state?  Do you know if you meet the thresholds? See our Economic Nexus Chart for a complete overview of the States and their guidelines.

 STATE$ Gross Receipts
Limit
# Retail Sales
Transactions
EFFECTIVE DATEDOR LinksFAQs
Alabama>$250,000October 1, 2018AL InfoFAQs for AL
Arkansas>$100,000200July 1, 2019AR InfoFAQs for AR
Arizona>$200,000 in 2019
>$150,000 in 2020
>$100,000 in 2021 +
October 1, 2019AZ Info
California>$500,000April 1, 2019CA InfoFAQ for CA
Colorado>$100,000December 1, 2018CO Info
Connecticut$100,000"and" 200December 1, 2018
Revised July 1, 2019
CT Info
Delaware
District of Columia>$100,000"or" >200January 1, 2019DC Info
Florida
Georgia>$250,000 in 2019
>$100,000 in 2020
"or" >200January 1, 2019GA InfoFAQs for GA
Hawaii$100,000 +"or" 200July 1, 2018HI Info
Illinois$100,000 +"or" 200October 1, 2018IL InfoFAQ for IL
Indiana>$100,000"or" 200October 1, 2018IN InfoFAQ for IN
Iowa$100,000January 1, 2019IA Info
Kansas0October 1, 2019KS Info
Kentucky$100,000 +"or" 200October 1, 2018FAQs for KY
Louisiana>$100,000"or" 200January 1, 2019LA Info
Maine>$100,000"or" 200July 1, 2018ME Info
Maryland>$100,000"or" 200October 1, 2018MD Info
Massachusetts>$500,000"and" 100October 1, 2017MA InfoFAQs for MA
Michigan>$100,000"or" 200October 1, 2018MI InfoFAQs for MI
Minnesota>$100,000
in 10+ transactions
"or" 100October 1, 2018MN InfoFAQs for MN
Mississippi>$250,000September 1, 2018MS Info
Nebraska>$100,000"or" 200January 1, 2019FAQs for NE
New Jersey>$100,000"and" >200October 1, 2018NJ Info
New Mexico> $100,000July 1, 2019
New York>$300,000"and" >100January 1, 2019NY InfoFAQs for NY
North Carolina>$100,000"or" 200November 1, 2018NC InfoFAQs for NC
North Dakota$100,000"or" 200October 1, 2018ND InfoFAQs for ND
Ohio>$100,000"or" 200August 1, 2019OH InfoFAQs for OH
Oklahoma>$10,000
>$100,000 in 2019
July 1, 2018
November 1, 2019
OK Info
Pennsylvania>$100,000July 1, 2019PA Info
Rhode Island$100,000"or" 200July 1, 2019RI Info
South Carolina>$100,000November 1, 2018SC InfoFAQs for SC
South Dakota>$100,000"or" 200November 1, 2018 SD Info
Texas$500,000October 1, 2019TX Info
Utah>$100,000"or" >200January 1, 2019UT Info
Vermont$100,000"or" 200July 1, 2018VT InfoFAQs for VT
Virgina>$100,000"or" 200July 1, 2019VA Info
Washington>$100,000"and" 200October 1, 2018WA Info
West Virginia>$100,000"or" 200January 1, 2019WV Info
Wisconsin>$100,000"or" 200October 1, 2018WI Info
Wyoming>$100,000"or" 200February 1, 2019WY Info

We Have The Tax Rates

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Sales Tax or Use Tax – Either Way you Pay

use tax requirements

use tax requirements

Know the use tax requirementsA Mississippi air business dinged for confusion over sales verses use tax

State officials frown upon efforts to circumvent use tax requirements, as an airplane dealer in Mississippi recently learned.

What is Use Tax?

Most states assess either a sales tax or a use tax of personal property. The use tax applies when no sales tax has previously been paid.

Two men formed a partnership in Tate County, Mississippi, called Johnny Reb, ostensibly to buy and sell airplanes. Johnny Reb paid no tax on the planes it purchased. Therefore Johnny Reb either had to sell the planes – and collect Mississippi’s 3% sales tax – or pay an identical amount in use tax if it used the planes for any other purpose.

A Hefty $160,000 Fine

According to Mississippi officials, Johnny Reb did neither. Instead, a state audit revealed the partners were using planes for personal use and, in effect, running a charter air service. Indeed, Johnny Reb’s tax returns and website identified it as a “charter” or “airplane leasing” business, not a dealership. Based on this information, the Mississippi Department of Revenue assessed Johnny Reb for unpaid use taxes (plus interest) of more than $160,000.

Fine Overturned in Chancery Court

Johnny Reb appealed the department’s assessment to the Tate County Chancery Court. The Chancery Court is a trial court that handles certain administrative cases. The chancery judge reversed the department’s decision. He re-examined the facts of the case, including new information presented by Johnny Reb, and determined the company really was a dealership exempt from use tax. And even though there was evidence Johnny Reb used its planes to transport passengers, that was not the company’s “principal business” and it never made a profit from providing charter service.

Chancery Court Overruled in Appeals Court

But in a decision issued on Oct. 14 of this year, the Mississippi Court of Appeals reversed the chancery judge and reinstated the department’s original use-tax assessment. The appeals court said the chancery judge exceeded his authority in questioning the department’s determination of the facts. A chancery court may not reverse a tax decision because he personally disagrees with it; rather, he must find there was no “substantial evidence” supporting it. That was not the case here.

Moreover, the Court of Appeals said the use tax applies to Johnny Reb regardless of its “principal business” or whether it made a profit on charters. The department agreed Johnny Reb was primarily in business to sell planes. The problem was that it wasn’t doing that. It was using the planes, which meant it had to pay a use tax.

S.M. Oliva is a writer living in Charlottesville, Virginia. He edits the international legal blog Bonham’s Cases.

Planning for sales taxes when you close a business

close a business

close a business

Handling sales tax when you close a businessIf you need to close a business, you need to make sure the shutdown goes smoothly and doesn’t create problems for you later on. One point you need to address are the final sales taxes for your business. This process is pretty straightforward and there are just a few things to watch out for.

Report the closing to the state government

Your state government needs to know that you are closing down your business. The government should have a form that gives this notice. For example in California you would submit a Form BOE-65, Notice of Close Out. This is so the agency in charge of sales taxes knows that your business is going to stop collecting taxes. You’ll also need to return your business’ sales tax certificate. If you had to make a deposit to get your certificate, the state should return this money after you’ve filed your last return and returned the certificate.

Process a transfer

If you are transferring or selling the business to someone else, the process is similar to closing your business. You need to report the transfer to the authorities and you still need to return your sales tax certificate. The new owner can’t use your certificate and will need to apply for a new certificate in his or her name. You may also need to collect sales taxes for selling some of your business assets to the new owner. These will need to be submitted with your final business sales tax return.

File a last sales tax return 

You’ll also need to file your business’ last sales tax return before you can shut down. Make sure that your business will make no more sales and won’t need to collect any more taxes before you file. This includes the sale of your business assets to a new owner, if applicable. Once you are sure your business won’t have any more income, put together your final sales tax return, calculate the remaining tax you need to pay, and submit the return plus taxes to the government.

Mishandling the close

If you don’t properly close out your business for sales taxes, it can lead to costly problems down the road. If you don’t submit your final sales tax return and taxes on-time, the state government could add extra interest, taxes, and penalties to the amount you owe. If you don’t return your certificate for sales taxes promptly, you could forfeit your deposit. You should also never let another person use a sales tax certificate in your name. This is a misdemeanor and get you in serious legal trouble.

If you can follow the process in this guide though, sales taxes won’t create any lingering problems after you close your business. This way you can move on to your next project with a clean slate.

Higher sales taxes in Mexico creating more business for American retailers

Higher sales taxes

Higher sales taxes

higher Sales taxes in Mexico

Sales taxes in Mexico are nearly double that of areas of the United States just across the border prompting some Mexicans to send their business north.

American retailers are starting to see a sales boost thanks to a higher sales taxes in Mexico. Mexican lawmakers voted to increase the sales tax rate for Mexican states on the U.S. border. They increased the sales tax rate from 11% up to 16%.

Lawmakers said this increase was necessary because it would make taxation fairer across Mexico plus residents in these areas have higher incomes and can afford to pay more. However, perhaps an unintended side effect is that Mexicans are finding it more affordable to shop in the United States. In comparison, the sales tax rate in Texas is only 8.25%, nearly half what border residents would pay in Mexico.

Steps to help you survive an audit

survive an audit

survive an audit

States have been under enormous pressure to balance budgets without raising taxes. With so many Americans still unemployed or under-employed, states are bringing in reduced sales and income tax revenues while being asked to provide expanded social services. As a result, states have been increasing the number of audits they perform and they’re using high-tech methods to examine every penny. Keep in mind that this audit-your-way-to-fiscal-balance-method works very well, but it has made it necessary to hire many new and inexperience auditors. Some of these hires have very  little training and are often learning while on the job. While audits can be somewhat less enjoyable than passing a kidney stone, there are some simple steps you can take to help get you through the pain and survive an audit.

  1. Schedule the audit to begin on a date when you will have adequate manpower available to assist the auditor by providing documentation and answering questions.
  2. Make sure you have a sales tax/accounting manual and that your procedures show regular updates have been occurring.
  3. Review your documentation to make sure it is up to date and orderly, including:
    • Sales figures
    • Accounts payable
    • Exemption certificates
    • Purchases, including out-of-state
    • Ledgers, journals, and adjustments
    • Filed returns
    • Credits and claims for refunds
  4. Treat the auditor as a professional with appropriate courtesy. Provide them with adequate working conditions.
  5. Be consistent with your answers. Do NOT lie.
  6. Convince the auditor that you are confident in your compliance. Keep in mind that you know a lot more about how your business operates than the auditor does.
  7. Watch for overpayments.
  8. Be prepared to get professional help.
  9. Be prepared to negotiate.

Remember, audits are like the holidays -they seem to sneak up on you out of the blue, they create chaos, and you have to spend a lot of time with people you don’t really care for. You’ll get through it, I promise. Just smile, play nice, and stock up on Alka-Seltzer. And when it’s over, if you feel the need for a little passive-aggressive payback, you can always thank your auditor with a nice fruit cake left over from last Christmas.

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