Friday, June 26, 2015

So, how many returns DO you file?

Sign Away!

As any good seminar leader will tell you, you need to get your audience interacting a little.  Now a sales tax seminar doesn't lend itself to forming teams to build bridges, or walking around the room trying to figure out people's shoe sizes.  But I do try, at least, to get them to raise their hands once in a while.

One of the things I do is poll the room to figure out the number of returns people file.  This gives me an idea about the complexity of their businesses, and how sophisticated they are about sales taxes.  So I start out saying "How many of you file returns in more than one state?" Usually about half the class raises their hand.

Then I ask, "How many of you file returns in more than 5 states?"  Maybe a quarter of the class responds this time.

Then, "How many of you file in more than 10 states?" At this point, only a few hands go up.

Ever the adventurer, I continue, "How many of you file in more than 25 states?"  Usually no hands go up.  And if they do, I know that I have someone in the room who knows as much about sales and use taxes as me.  So I proceed warily.

This time, I did see one person who was still holding up her hand.  I asked her, "OK, how many states do you file in?"

She said, "45 states plus the District of Columbia - plus the local returns."  In other words, ALL of them.

The audience gasped.  I swear one newbie AP specialist fainted.  But I digress.

"Wow.  I'm impressed.  So how many returns are we talking about?"

"Over 200 a month"

"And what software are you using?"  Cause she has GOT to be using software, right?

"None, I do it all by hand - pen and paper."

At this point, a controller joined the AP specialist in a swoon.  Heck, even I felt a little unsteady.

After I recovered, I stuttered, "Uh, how?"

"I just pull the numbers off the general ledger each month and drop them into the returns.  I allocate about three days to do them all."

Later, I had a chance to chat with her. She had one manufacturing plant at their headquarters, and this particular state didn't have much in the way of manufacturing exemptions.  And she sold a product that was pretty much universally taxable.  The resale exemption was the only one she had to worry about.  And she had nexus everywhere because they had reps wandering aimlessly around the country.  So their business was pretty simple, relatively speaking.  Aside from the unspeakable drudgery, I could see how she accomplished this amazing feat.

So my friends at Vertex SMB, Avalara and the other software companies are probably getting ready to email me and ask who is this heroic woman, that they might save her from her desperate situation.

Frankly, it was a while back. I just remember she was 10 feet tall and had very strong arms.

The Sales Tax Guy

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. and there's more sales tax news and links here

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

Thursday, June 25, 2015

So....we' Facebook now

We've been on Twitter for a while, but finally decided that Facebook is OK too.  Pretty much the same stuff that we post on Twitter (other than retweets) will get posted here.

Now we have to figure out Pinterest.....

Oh!  I almost forgot!

There ya go.

Tuesday, July 29, 2014

Life Coaches?

Looking North on the Fox River - Fall I

I got this question the other day, and since it combines a couple of issues, here ya go...

"I am a life coach. I coach people in various states via phone or Skype. Are these services taxable? What if I physically go to a client location?"

First of all, are your services taxable?
There are a few states where what you do is taxable. You need to research those states and see for yourself. Keep in mind that they may not use the term "life coaching".  But look deeper at things like training, consulting and professional services.  And a few states tax ALL services by default. So your services are going to be taxable somewhere.
This doesn't necessarily mean you have to tax the services that you perform over the phone or Skype.  This only is necessary, for right now, if you actually have nexus in the state where the buyer is receiving the benefit of your services.  Based on my assumption about your business model (I actually know a couple of life coaches), your only physical presence in a state is going to be YOU.
Are you required to collect taxes in those other states?
If you GO TO THAT STATE and perform services, do marketing, etc., you probably have nexus in that state.  Which means you may have to collect that state's taxes (assuming your services are taxable in that state.   
And if you subsequently perform your services online or on the phone, then you will need to collect taxes on your services for the states where you have nexus.  
Note that, at some point in time, your nexus in a particular state will "wear out" if you don't revisit periodically.  So you got that going for you, which is nice.
So, to summarize

1.  Your services may be taxable, depending on the state.
2.  In those states, if you go there and do work, you'll have to collect and pay the tax
3.  When you perform the services online after you've been to the state, you'll have to collect and pay the tax.

Life sucks, doesn't it?

The Sales Tax Guy

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. and there's more sales tax news and links here

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

Tuesday, July 01, 2014

What's taxable when it comes to photography?

I wonder if I'm holding it in the right direction

There was an link on Sales Tax News and Links today that brought up this topic.  I actually wrote about this originally on July 16, 2009.  Amazingly, the article needed little updating.  But I have changed a few things and applied a little wordsmithing.  So for you professional or semi-professional photographers out there, enjoy.

Photography services

Most states don't broadly tax services - but some do. And photography is also considered the delivery of product (the prints), and that product is usually taxable as the sale of tangible personal property. However, these rules vary enormously from state to state.  So you need to research what YOUR state does.

For example, I'm in Illinois, and photography services aren't taxable. Even the delivery of the prints, if they're part of the photographer's service, like doing a wedding or a portrait session, are still not taxable.

However, in Wisconsin (a popular vacation destination for people from Illinois in case you've never seen Stripes), most photographic services, including shooting those portraits and weddings, are taxable. I bet that just bummed out a bunch of photographers I know in Wisconsin.

Film or print processing

Getting prints from the drug store is taxable in most states. It's the delivery of tangible personal property. And if you order prints online and they're delivered to you, you'll owe use tax if they don't charge tax.

Sale of prints

Just like the sale of any other tangible personal property, sales of photographic prints (eg. at an art show) are taxable.

Delivery of images online

In a few states, the delivery of pictures electronically is taxable. But while many states tax downloaded video, music and books, most states just haven't gotten around to photographs yet.  But that will change over time. And the auditor might try to bluff you, just for grins.

And if you deliver the photographs on a flash drive or a DVD, then you've transferred tangible personal property, and the sale is no longer simply a transfer over the internet but a true sale of TPP.

Special tax breaks

There are a few states that have special exemptions for the sale of art - and this usually includes fine art photography.  Don't get excited though.  Only a few states do this.

Here's the cool part

If you're selling your taxable prints, then the paper and ink that you purchase is usually exempt as purchases for resale (or ingredients if you're thinking manufacturing).  Heck, the inkjet printer might even be exempt as manufacturing equipment.

Please remember that, as you saw with Illinois and Wisconsin, the rules vary widely from state to state.  You gotta look it up for your state.  Because it's going to be different there.

The Sales Tax Guy

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. and there's more sales tax news and links here

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

Friday, June 27, 2014

Golden Rule of Sales and Use Taxes: The Seven Factors that Determine the Taxability of Any Sale


What state has jurisdiction?

Generally, with few exceptions, the place where the buyer, or the buyer's agent, takes physical possession or control of the goods is the state that has jurisdiction.  When it comes to services, it's a little messier.  It's usually where the services were performed but sometimes it's where the buyer receives the benefit of the services.

This the first question you have to answer.  All of the other answers depend on the delivery state.

If you're the seller, a corollary factor is whether you have nexus in the state.  If you don't, then you probably don't have to worry about the rest this article.  Yay!

Who is the buyer, or the seller?

In most states, there are exemptions for sales to non-profits and government agencies.  And there are usually more limited exemptions for sales by these types of organizations.  In addition, there are often very specific exemptions for certain organizations who have managed to gain special deals based on how wonderful the politicians think they are.

By the way, you'll usually need exemption certificates for this factor.

How will the purchase be used?

There are exemptions for organizations using the purchase for manufacturing, agriculture, research and development, etc.  Or the buyer may not use it at all, which means it's being bought for resale.  

By the way, you'll usually need exemption certificates for this factor as well.

Where will the purchase be used?

Many states establish geographic areas within the state (I generically call them enterprise zones) where there are loads of exemptions.  In addition, there are variations within a state, based on local jurisdiction rules.  I don't even want to go there.  I'm looking at you, Colorado.

When will the purchase be used

Many states have sales tax holidays for things like clothing, school supplies, guns, energy saving appliances and hurricane supplies.  These holidays are usually only for a limited amount of time - a weekend in most cases.  Then you also have to keep in mind that politicians change their minds.  Or want to limit the amount of the damage they do.  So there are always effective dates when new laws go into effect.  And there are often sunset dates on laws, particularly exemptions.

What is the type of the sale?

Is it a rental or long term lease?  Is it a simple sale or installment sale?  Is it a gift?  Or perhaps it's an occasional sale?  And if it's an occasional sale, is it a business that's selling or buying?

What is being sold?

Finally, there are exemptions for things based solely on what the purchase is.  Is it food or drugs?  In a few states, clothing is exempt.  Maybe it's an intangible.  And of course, just about any service you can name is taxable somewhere.

The Sales Tax Guy

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. and there's more sales tax news and links here

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

Wednesday, June 25, 2014

I hate to make you cry...but....

Ice fishing is such a serene experience, on a lonely lake, out in the wilderness, away from the hustle and bustle of the ... oh...wait...

I was doing a seminar in southern state a few years ago.  And there was a young woman in the class who had just been handed the sales tax responsibilities for her company.  She was in AP and, I'm guessing, just a few years out of school.

She was pretty sharp and stayed with me for the whole day.  But at the end, when I started talking about nexus, she looked a little green.  After the class, she came up to me.

Nice woman: "Uh, we sell fishing tackle* and we have only been filing in our state, no others."

Mean me: "Uh, huh - then what you sell is generally going to be taxable"

Nice woman: "Right.  It certainly is in our state.  Uh, we have independent sales reps that are all over the country.  Do we have nexus in all of those states? They're independent contractors if that helps."

Mean me: "Probably in most of them.  And the fact that they're independent contractors generally doesn't make any difference.  Depending on the state, one or two visits a year will be enough to do it.  In other states, they're a little more laid back.  How often to your people visit the states?"

Nice woman: "Oh, way more than a few times a year.  Every state has outdoor shows and fishing tournaments.  Our people are at all of them."

Mean me: "I hate to say it, but I think you've got nexus in pretty much every state that has a sales tax.  All of them."

Nice woman: "But we only sell off our website."

Mean me: "Doesn't make any difference. Sorry."

At this point in time, tears started flowing.  I've been doing these seminars for over a decade and I have never made someone cry.  I can only imagine how terrified she was.  She was going to have to tell her boss that they have to go from filing a return in just one state, to filing returns in 45 more.  Ugh.

I spent about 45 minutes with her after the class talking about her options, giving her names of consultants that could help, and generally how to go about dealing with this.  Essentially, I was patting her on the shoulder and saying "there there."  I truly ruined her day.  And I never heard from her again.

Don't let nexus ruin your day.  If you ship to multiple states, make sure of your nexus status NOW.  Because we don't want your staff crying.

There's no crying in Sales Tax.

*Fishing tackle was not the product. I'm substituting here to protect they're identity. And I used fishing tackle because I have LOTS of fishing pictures.

The Sales Tax Guy

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. and there's more sales tax news and links here

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.