SALT Newsletter - Spring 2013

Thank you for your continuing interest in our State & Local Tax e-newsletter. Beginning in August, we will publish our newsletter quarterly. Our focus will be on the predominant state and local tax issues that we believe many of you face on an ongoing basis. As always, we will discuss ideas and solutions designed to help you manage your risk and maximize your wealth.

State Amnesty Programs At-a-Glance

State Amnesty Period Benefits
Ohio - Consumer's use tax
Oct. 1, 2011 to May 1, 2013
Interest & Penalties waived

(1) Depending on specific circumstances. For additional informamtion on Ohio's consumer's use tax amnesty program, click on the following link: http://www.tax.ohio.gov/sales_and_use/index_use.aspx

Proposed budget includes credits and other tax provisions

New York Gov. Andrew M. Cuomo has released his 2013-2014 executive budget, which contains corporate and personal income, sales and use, property, motor fuels, and other tax provisions but no tax increases. Among other things, the proposed budget would:

  • extend the MTA business tax surcharge for five years;
  • extend the film production tax credit for five years, enhance the credit, and improve transparency;
  • establish the New York Innovation Hot Spots Program;
  • extend the high income charitable contribution deduction limitation for three years;
  • close the royalty income "loophole";
  • extend and enhance the historic commercial properties rehabilitation tax credit;
  • establish the Charge NY electric vehicle recharging equipment tax credit;
  • establish tax-free sales and the sale of alcoholic beverages at Taste-NY facilities;
  • update criteria for refusal and revocation of a sales tax certificate of authority;
  • expand the cigarette and tobacco retailer registration clearance process;
  • increase the civil penalty for possessing unstamped cigarettes; and
  • allow local governments to extend existing sales tax rates without state legislative approval.

Source: 2013-2014 New York State Executive Budget, Revenue, Article VII Legislation, New York State Division of the Budget, January 22, 2013

 

SALT_BUBBLE_Spring_2013.jpg

   

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
Principal


State and Local
Tax Services

Audit Representation Reverse Audits Nexus Review Voluntary Disclosure Research & Analysis Managed Compliance Agreements Sales Tax System Development Outsourcing Merger & Acquisition Planning Compliance Management

Resale and Exempt Sales Certificates

Does your company have a policy for maintaining exempt sale documentation?  When is the last time anyone has reviewed your company’s resale and exempt sale documentation?

Most taxpayers look at their exempt sale documentation the week before the sales tax auditor is scheduled to arrive. The usual finding is the documentation is woefully inadequate.  Common problems are:

  • No exempt certificate on file
  • Expired certificate
  • Incomplete certificate
  • Invalid certificate

The next step is to devote all company resources to obtain the required documentation before the auditor arrives. This could have been avoided by having a plan in place to maintain exempt sale documentation.  A few simple procedures performed periodically can greatly reduce audit exposure.   

Review exempt documentation periodically to ensure the documentation is accurate and complete. Missing or incomplete certificates should be obtained as soon as possible.

Obtaining sales exemption documents becomes more difficult as time passes from the date of sale.  It also increases the likelihood that unforeseen circumstances such as customer ownership changes or business closings could occur and make it impossible to obtain a valid certificate. In many states certificates do not expire.

However, certificates can become invalid for a number of reasons including specified time period, specified purchase or change of ownership. A policy to validate or update certificates on a periodic basis will reduce the occurrence of invalid certificates. 

Review your company’s current policy to determine if it is adequate.  If your company does not have a policy, consider implementing one.  A well-executed plan will save a great deal of time and reduce audit exposure when the next audit occurs.

Ohio Commercial Activity Tax Update

Finally, you need to prepare yourself for the inevitable fact, that at some point, your company will be audited for state and local tax purposes. States are desperately trying to close budget gaps and looking to generate additional revenue to fund their programs, and audits are one way to accomplish this. Audits are not fun, but they shouldn’t keep you up at night either, as long as you are organized and prepared for the auditors, their information requests and sometimes endless questions. One of the ways to do this is to verify that you have proper documentation (exemption or resale certificates) to substantiate non-taxable sales. Another way is to review the supporting documentation for your tax returns to determine that it is complete and actually reconciles to your financial reporting system. Know where you may have taken an aggressive position on a return and prepare your arguments to support that position and likewise know where you may have the opportunity to utilize refunds or credits to offset any tax that maybe assessed.

Most importantly, know when it is time to consult a third party who may more experience than you or your employees in a particular tax or potential issue. The last thing you want to do is let an auditor discover a large deficiency and not be able to explain what happened or try to haphazardly explain the matter. This will not only hurt your relationship with the auditor but will lead to mistrust and doubt about the company’s business activities.

The steps described above may not be easy and may require some research, discussions with sales, IT and accounting personnel and an extensive review of a large number of tax returns and related information to determine whether your company is sufficiently in compliance with state and local tax laws. However, given the nature of the economy today and the aggressiveness of state and local tax auditors, how can you not take the time to assess your potential exposure and address the financial implications and risk of noncompliance.

Internet Sales Tax Update

By a vote of 75 – 24 (enough to overcome any potential filibuster), the U.S. Senate passed a nonbinding proposal (the Marketplace Fairness Act) on March 23,2013 to allow states to collect sales tax on Internet sellers that have no presence within their borders. This proposal was an amendment to a 2014 budget bill that the Senate debated Friday. According to proposal backers Senator Mike Enzi (R), WY and Sen. Dick Durbin (D), IL, it is an attempt to level the playing field between online retailers and other bricks & mortar counterparts. The bill would have to pass through Congress and be signed by the President before a tax is imposed.

Request for Proposals

If you have an upcoming State & Local Tax or Sales & Use Tax project and would like Tronconi Segarra & Associates to submit a proposal or quotation for that project, please send us an email at this address:
Based on your needs, we would be happy to provide you with a proposal outlining the services that we believe would be the most appropriate solution(s) for your needs.
If you are not issuing a formal RFP and would prefer to discuss your needs in person or by phone, we are available at your convenience for a complimentary meeting. Please contact us at 716-633-1373 to schedule a discussion.