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QUESTIONS?
NEED MORE INFORMATION?
Contact one
of the Tronconi
Segarra &
Associates’ State
& Local
Tax Services Team
Leaders:
David E. Werth
J.D., CPA, Partner
Andrew J. Toth
CPA, Principal
Thomas E. Mazurek, Jr.
CPA, Senior Manager
State and Local
Tax Services
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Tax Tips – September 2011
Have a question about state and local taxes? Struggling with a sales & use tax issue? Help is just a click away! Send an email to the Tronconi Segarra & Associates state and local tax team. They will answer your question personally, and then publish questions (anonymously) with their answers in a future newsletter issue. Click here to email your question to Tronconi Segarra & Associates.
State Amnesty Programs At-a-Glance
| State |
Amnesty Period |
Benefits |
| Colorado |
Oct. 1 to Nov. 15, 2011 |
½ Interest & Penalties waived |
| Ohio |
May 1 to June 15, 2012 |
½ Interest & Penalties waived |
Denver Tax Amnesty
The City and County of Denver has established a Tax Amnesty program for sales, use and occupational privilege taxes. This program gives taxpayers the opportunity to pay unreported back taxes in exchange for a 50% reduction of interest and a waiver of penalties and criminal prosecution. This program is only available from October 1, 2011 through December 30, 2011. For more information on the Denver Tax Amnesty click here.
The Denver Tax Amnesty is different from the State of Colorado Tax Amnesty program, which also starts October 1 and runs through November 15, 2011. Denver, like many localities in Colorado, administers its own sales tax, which is reported separately and not included with state-collected sales taxes. Businesses thinking of taking advantage of the Colorado Tax Amnesty program should check to see which counties and cities are state-collected versus self-administered.
Remote-Seller Nexus Postponed
CA
On September 23, 2011, Governor Jerry Brown signed a bill (A.B. 155) delaying the implementation of sales & use tax nexus provisions that were enacted July. Under the terms of the compromise reached with Amazon.com (the internet retailer had threatened to push for referendum on this measure), the commencement of “click-through” nexus and affiliate nexus provisions are now conditioned on developments in federal legislation requiring states to collect taxes on sales of goods to in-state purchasers without regard to the location of the seller.
The new law restores, as of June 28, 2011, the definition of "retailer engaged in business in the state" to the version of the definition in place before A.B. X1 28 was enacted in July. It also reenacts the nexus provisions of A.B. 28x1 and makes them operative on:
September 15, 2012 – if federal authority is not enacted on or before July 31, 2012; or January 1, 2013, if federal authority is enacted on or before July 31, 2012, but California does not elect to implement the federal law on or before September 14, 2012.
The law also increases the reporting threshold for the re-enacted “click-through” nexus provisions. Instead of $500,000 in total sales to California customers (previously included in A.B. X1 28), the new threshold is now $1 million in total sales to California customers.
As part of this compromise, Amazon has indicated that the Company plans to hire 10,000 workers in California and invest over $500 million in new facilities, including distribution centers, over the next five years.
When electronically delivered software . . . isn’t
VA
In Virginia, the sale of prewritten software delivered electronically to customers does not constitute the sale of tangible personal property and is generally not subject to sales and use taxation. See Va. Code § 58.1-609.5 1 and Public Document (P.D.) 05-44 (4/4/05)
But just what is Virginia looking for as evidence of electronic delivery? In P.D. Ruling 11-112 (Jun. 20, 2011), the Virginia Tax Commissioner suggests that the bar is pretty high.
In Ruling P.D. 11-112, the Taxpayer contested the assessment of use tax on the purchase of software that purportedly was electronically downloaded and therefore not subject to taxation. As evidence of the electronic download, the Taxpayer presented a letter from the Chief Financial Officer (CFO) of its software vendor stating that such vendor's standard method of delivery of licensed software is by electronic download. The CFO went on to state that the Taxpayer's installation did not vary from such standard method, and no tangible personal property was transferred in conjunction with the delivery of such software. As additional proof, the Taxpayer furnished copies of three emails to prove that the vendor electronically delivered the computer software by file transfer protocol (FTP).
However, the Taxpayer’s purchase order stated that, “Unless otherwise indicated on the order form of this purchase order, seller must ship products using ground transportation and seller will select the carrier.” While the purchase order as well as the vendor invoice listed the Taxpayer's street address as the shipping address, none of them mentioned any type of FTP delivery. The purchase agreement presented also made no mention of FTP delivery of the computer software.
The Tax Commissioner concluded that the documentation presented suggested that the computer software was delivered by both electronic and tangible means (and therefore was taxable). The certification by the vendor’s CFO and the email messages documenting the FTP transfer did not satisfy the minimum documentation requirements outlined in P.D. 05-44. The sales invoice, contract or other sales agreement (and not a letter or email message) must expressly certify the electronic delivery of the software and that no tangible medium for that software will be furnished to the customer.
So while electronic delivery seems to be the norm today, if your software contract doesn’t have the P.D. 05-44 language, consider amending the contract before you get a Virginia audit notice!
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