Sales and Use Tax

California Sales and Use Tax Prepayment Is Due on June 24th

Concept of California Palm Trees with Sales and Use Tax Prepayment Info

As a business owner in California, it is important to be aware of the upcoming deadline for the 135% sales and use tax prepayment, which is due on June 24th. This prepayment is meant to help the state manage its cash flow and ensure that its tax revenue is received in a timely manner.

Why Is It Important to Stay Updated with Tax Deadlines?

Staying informed about tax deadlines and requirements is essential to running a business. By meeting the obligations set forth by the state, companies can avoid unnecessary complications and maintain good standing with the tax authorities.

Next Steps

Eligible businesses should make the necessary arrangements and submit the prepayment on time to avoid penalties and interest. You can refer to the instructions provided by the California Department of Tax and Fee Administration (CDTFA) or consult with a tax professional, such as Thompson Tax, for guidance on calculating the prepayment amount.

Reach out to us today! We are your Trusted Tax Advisors and are always just a phone call away.

Colorado Retail Delivery Fee to Increase; Minnesota’s to Take Effect on July 1st

Toy Truck With The Words Retail Delivery Fee Placed On a Laptop and Surrounded by Three Small Carton Boxes

Colorado’s Retail Delivery Fee (RDF), which took effect on July 1st, 2022, will increase again on July 1st, 2024, from $0.28 to $0.29. The fee is imposed on retail sales of tangible personal property delivered to Colorado customers by motor vehicle. It applies only if an item in the order is subject to tax.

Exemptions

If your small business had retail sales of $500,000 or less during the previous calendar year, you are eligible for an exemption from the Retail Delivery Fee on retail deliveries made during the following year.

For more information on updates to the RDF in Colorado or the new $0.50 RDF taking effect on July 1st in Minnesota, please get in touch with Thompson Tax today. We are your one-stop shop for all your sales and use tax needs and are always just a phone call away.

Sales Tax Audits: What to Expect and How to Prepare

Magnifying Glass and Desk Name Plate with the Word Audit

Sales tax audits are standard for businesses and can be a source of stress and anxiety for many business owners. However, with proper knowledge and preparation, you can confidently navigate a sales tax audit.

What to Expect During a Sales Tax Audit

A sales tax audit examines a company’s financial records to ensure it has properly collected, reported, and remitted sales tax to the appropriate tax authorities. Auditors typically review sales records, purchase invoices, exemption certificates, and other financial documents to verify the accuracy of the business’s sales tax filings.

Auditors may also interview key personnel to better understand the company’s sales tax processes and procedures. Additionally, auditors may perform on-site inspections of the company’s facilities to verify the accuracy of the reported sales and ensure compliance with sales tax laws and regulations.

How to Prepare for a Sales Tax Audit

Preparation is vital when it comes to a sales tax audit. Here are some tips to help you prepare for an upcoming audit.

1. Maintain Accurate Records

Keep detailed records of all sales and purchases, including invoices, receipts, and exemption certificates. Having organized and accurate records will make the audit process much smoother.

2. Review Your Sales Tax Processes

Review your sales tax processes and procedures to ensure compliance with all applicable sales tax laws and regulations. If you identify any areas of concern, address them before the audit.

3. Understand The Audit Process

Familiarize yourself with the audit process and know your rights and responsibilities as a taxpayer. Understand the scope of the audit and what documents and information the auditors will be reviewing.

4. Cooperate with The Auditors

Be cooperative and transparent during the audit process. Provide the auditors with the requested documents and information promptly and be prepared to answer any questions they may have.

5. Seek Professional Assistance

A sales and use tax professional can provide the support and guidance you need to navigate the audit process effectively.

Let Thompson Tax Help

While a sales tax audit can be daunting, being prepared and knowing what to expect can help alleviate some of the stress. Remember, preparation is vital. By maintaining accurate records, reviewing your sales tax processes, understanding the audit process, cooperating with the auditors, and seeking professional assistance, you can confidently navigate a sales tax audit.

Contact Thompson Tax today and let us guide you confidently through the audit process. We are your Trusted Tax Advisors.

Sales and Use Tax Considerations for Service-Based Businesses

Close Up of a Laptop Keyboard with the Word Services

When it comes to sales and use tax, service-based businesses often grapple with a myriad of unique considerations that set them apart from product-based businesses. The intricacies of sales and use tax for service-based businesses are not to be underestimated, as they play a pivotal role in compliance and financial planning. Below are some key points that underscore the complexity service-based businesses face when it comes to sales and use tax.

Sales and Use Tax Complexities Service-Based Businesses Face

1. Nexus

Service-based businesses need to be aware of the concept of nexus, which refers to a business’s connection to a state that requires it to collect and remit sales tax. Nexus for service-based businesses can be established through various means, such as having employees or property in a state or reaching a certain level of economic activity within the state.

2. Taxability of Services

Unlike tangible goods, services are often treated differently when it comes to sales and use tax. Some states tax services, while others do not. Service-based businesses need to be aware of the taxability of their specific services in each state where they operate.

3. Exemptions

Like product-based businesses, service-based businesses may be eligible for certain sales and use tax exemptions. For example, some states offer exemptions for specific types of services, such as healthcare or education-related services. Service-based businesses must understand the exemptions available to them and ensure they are correctly applied. It is also imperative to keep the proper documentation on hand for audit purposes.

4. Bundled Services

Service-based businesses that offer bundled services or packages must carefully consider the tax implications of bundling different services together. In some cases, the taxability of a bundled service may differ from the taxability of an individual service when offered separately.

5. Sourcing Rules

Service-based businesses operating in multiple states need to understand the sourcing rules for services, which determine the state where the service is considered to be provided for sales tax purposes. Sourcing rules can vary by state and may be based on factors such as where the service is received or where the benefit of the service is realized.

Non-compliance with sales and use tax regulations can pose significant risks for service-based businesses. The unique compliance challenges they face, such as tracking the taxability of diverse services across multiple states and determining the appropriate tax rates and rules for each service, underscore the importance of staying on top of these obligations.

Navigate the Challenges with Thompson Tax

Service-based businesses can navigate these complexities with confidence if they have a comprehensive understanding of the sales and use tax implications specific to their industry. By staying informed about the taxability of services, exemptions, and compliance requirements across different states, they can avoid potential penalties and ensure financial stability. Seeking professional guidance from tax experts can be a game-changer in this regard. 

Contact Thompson Tax today. We are your Trusted Tax Advisor and are ready to assist with all your sales and use tax needs.

Check Out Our Upcoming Sales and Use Tax Webinars: May 24th & June 5th

Concept of Webinar with Icons and a Person Holding a Laptop Device

Interested in navigating the complex area of Multistate Sales and Use taxation post-Wayfair?  Please join Dan Thompson for two exciting CalCPA Webinars featuring many exciting facets of Multistate Sales and Use Taxation, including California-specific content. 

If you are just starting your career and want an overview of Sales and Use Tax, or you want to learn how to address your company or client’s taxability of products and services, these webinars cater to all interested in learning about taxes. There are many opportunities to join throughout the year, and they offer up to 4-hours of CPE. For more information, please see CalCPA’s event page here.

Meet Daniel Thompson

What Is Streamlined Sales Tax and How Can it Help My Business?

Map of the U.S. Showing the Streamlined Sales Tax Full and Associate Member States

Streamlined Sales Tax (SST) is an initiative that aims to simplify and standardize the collection and remittance of sales tax across different states. It was first implemented in 2005 and has since been adopted by 24 states. The initiative aims to make it easier for businesses to comply with sales tax laws, reduce administrative costs, and create a level playing field for retailers across different states.

What Are the Benefits of Streamlined Sales Tax?

One of the main benefits of SST is uniform definition of products and services across the states. Additionally, SST provides businesses access to free tax administration software, which can help automate tax calculations, filings, and remittances.

Current List of Full Member Participating States

Arkansas Kansas Nebraska North Dakota South Dakota West Virginia
Georgia Kentucky Nevada Ohio Utah Wisconsin
Indiana Michigan New Jersey Oklahoma Vermont Wyoming
Iowa Minnesota North Carolina Rhode Island Washington Tennessee*

*Associate Member State 

For more information about registering for the SST program, contact us today. We are your Trusted Tax Advisor.

Sales and Use Tax 101 – You Don’t Know What You Don’t Know

Sales and Use Tax 101

Sales and use tax compliance can be daunting. Regulations vary by state and jurisdiction making them difficult to navigate, and to make matters even more complex, the rules are ever-changing. 

For many people, the concept of sales tax is just a charge you see on your receipt. Expanding your knowledge base to understand the compliance side of sales tax is far from your idea of fun, however, it’s an essential aspect of conducting business.

The following is a basic outline of compliance, Sales and Use Tax 101, if you will, because, let’s face it, ‘You don’t know what you don’t know.’

What is Sales Tax?

Sales tax is a tax imposed on the sale of goods and services, which is generally calculated as a percentage of the sale price. It is generally collected by the seller at the time of purchase and remitted to the state or local government. 

Sales tax is a jurisdictional tax, which means that each state or jurisdiction has its own set of sales tax rates and rules. The amount of sales tax collected is based on the sales tax rate in the jurisdiction where the sale was made, or where the customer is located.

There are four types of Sales Tax: Sellers Privilege, Consumer Levy, Gross Receipts, and Transaction Tax, and each type is imposed differently, whether on the Seller or Purchaser or on the transaction itself.

What is Use Tax?

Use tax is a tax imposed on the use or consumption of goods and services in a state or local jurisdiction where sales tax was not paid. This tax is typically paid by the consumer directly to the state or local government. Keep in mind, businesses are consumers, too, and may owe use tax on purchases intended for use by the business itself.

Registration and Remittance Requirements

You must register in each state where your company has either physical or economic nexus. Sales and use tax nexus refers to the minimal connection between a business and a state that requires the business to collect and remit sales tax on sales made within that state. Nexus is established when a business has a physical presence in a state, such as a store, office, or warehouse. Nexus can also be established through other means, such as having employees or independent contractors working in the state, making regular deliveries or installations, or engaging in other activities that create a substantial connection with the state. Understanding sales and use tax nexus is important for businesses to ensure compliance with state and local tax laws to avoid potential penalties.

What If My Business Did Not Register When We Had Nexus?

Don’t worry, there are solutions available to help you get back on track. However, it’s important not to wait too long. Once a state contacts you, you may miss out on some of the less costly opportunities available to help you get into compliance.

Once registered, you must prepare a tax calendar and file sales and use tax returns according to the filing frequency assigned to your business.

Taxability of Products and Services

The taxability of products and services varies based on the state and the type of product being sold or service being provided. Generally, tangible personal property is subject to sales tax in most states, but exemptions and exclusions exist. For example, some states exempt certain items, such as food and clothing, from sales tax. Understanding the taxability of products is important for businesses to accurately collect and remit sales tax to the appropriate state agencies. Failing to apply sales tax to products or services properly can result in penalties, interest, and other consequences; therefore, businesses must stay current on state tax laws and regulations to ensure compliance.

Exemption and Resale Certificates

The state issues exemption certificates which allow businesses to claim an exemption from sales tax for specific items or transactions. Depending on the state, an exemption certificate may also be used for purchases made by non-profit organizations or for particular types of equipment or machinery used in production.

A resale certificate allows a business to purchase goods that will be resold without paying sales tax.

Businesses must ensure they are eligible for the exemption they are claiming and should keep accurate records of exemption certificates, resale certificates, and purchases to avoid potential issues with tax authorities. 

Audits

There’s a saying in the tax world, ‘It’s not if you’re going to get audited; it’s when!’ Remember, though, that not all audits end with assessments. Being prepared is an essential step in avoiding a negative outcome. Make sure to keep all documentation (e.g., copies of returns, workpapers, purchase and expense support, exemption certificates) organized and easily accessible and, most importantly, remain compliant.

And More!

Sales and use tax compliance can be complicated, but it is an important aspect of doing business. Companies should familiarize themselves with the rules and regulations in each state where they conduct business in order to avoid penalties and ensure compliance with the law.

Reach out to Thompson Tax today! Let us help you navigate your sales and use tax compliance journey so that you can focus on growing your business. We are Your Trusted Tax Advisor.

California’s AB 2829 Digital Advertising Tax Proposal

California’s Digital Advertising Tax Proposal

California has proposed a new digital advertising tax (AB 2829) that has been met with mixed reactions from businesses and consumers alike. If passed, the tax would be levied on large-scale California businesses that generate over $100,000,000.00 in annual global revenue from digital advertising services and would take effect on January 1, 2025.

Some have hailed the proposal as a way to generate much-needed revenue for the state’s budget, which was hit hard by the COVID-19 pandemic and has not yet fully recovered. Supporters of the tax also argue that it would help level the playing field between brick-and-mortar businesses and digital retailers, which have avoided many of the taxes and regulations that traditional companies face.

Opponents of the tax disagree and argue that the new tax would be harmful to both businesses and consumers alike. Opponents argue that it would make it more difficult for businesses to compete in an already challenging economic environment and that the tax would be difficult to enforce as it raises constitutional concerns surrounding the Due Process and Commerce Clauses. Opponents also argue that although there is an anti-passthrough provision disallowing the tax from being charged to the consumer as a separate fee, surcharge, or line item, businesses would instead pass the cost along to consumers under the guise of higher prices.

This recent California proposal has generated significant debate and controversy, with solid arguments on both sides. What are your thoughts?

Nexus Update: Transaction Counts Eliminated in Indiana and Wyoming

Nexus Update for Indiana and Wyoming

In recent news, both Indiana and Wyoming have eliminated the use of transaction counts (200) as a factor in determining sales and use tax nexus for remote sellers. This is a significant change that will affect many businesses operating in these states.

What Is Sales and Use Tax Nexus?

For those who may not be familiar, sales and use tax nexus refers to the connection between a business and a state that allows the state to require the business to collect and remit sales tax on transactions made within that state. In the past, many states, including Indiana and Wyoming, used transaction counts as a means of determining if a remote seller had established nexus within their borders.

Recent Changes

However, this method of determination has come under scrutiny in recent years, with many arguing that it places an unfair burden on small businesses that may only make a few sales within a state. In response to these concerns, both Indiana and Wyoming have now eliminated transaction counts as a factor in determining sales and use tax nexus for remote sellers.  

This is good news for many businesses, as it means they will only be required to collect and remit sales tax if they meet other criteria, such as having a physical presence within the state or exceeding a specific dollar amount of sales, currently $100,000.00 in both Indiana and Wyoming.  

*Please note that Indiana’s updated nexus threshold is retroactive to January 1, 2024, and Wyoming’s does not take effect until July 1, 2024.  

Let Thompson Tax Help

Although the recent change has made the nexus process less burdensome, the process still has its challenges. Businesses operating in different states still need to be mindful of each state’s sales tax laws to ensure that they collect and remit the correct amount of tax for each transaction.

Do you have Nexus questions? Contact Thompson Tax today to see how we can help. We have your sales and use tax needs covered from A to Z.

Let us be your Trusted Tax Advisor.

The Importance of Maintaining Business License Compliance

Business License Compliance

As a business owner, it is essential to remain compliant with state and local laws to ensure smooth operations. One of the most important requirements is obtaining your business license and permits and then registering for sales and use tax in each state, locale, or jurisdiction where you have met nexus. Many business owners tend to forget, however, that reviewing and updating these credentials regularly is just as important as obtaining them.

Conducting an annual business license and registration review will ensure compliance with the laws of each state where you conduct business. It can help you avoid costly penalties and fines and will identify areas where your business may be at risk of non-compliance.   

An annual review will help you identify any changes or updates that should be made to your license(s) and permits(s) and will ensure that you are aware of any new requirements that may have been added since your last review. This is particularly important if you have expanded your business operations to include new products or services, as you may need to obtain additional licenses or permits to ensure that you are operating within the law.

At Thompson Tax, we understand that maintaining these requirements can be overwhelming, and we are here to help. Contact us today to learn more.

California’s Recent Ruling Regarding Bundled Cell Phone Purchases

California’s New Ruling for Bundled Cell Phones

In a recent court case, the California Court of Appeal for the Third Appellate District ruled that purchasing “discounted” cell phones bundled with wireless services requires paying sales tax based on the cell phone’s full price.  

The case in question, Bekkerman-v-CDTFA, was initiated by consumers who purchased discounted cell phones bundled with wireless services yet were charged tax on the full price of the phones. The consumers argued that the discounted price of the phones should have been used to calculate the sales tax owed.

During the hearing, the court specifically analyzed Regulation 1585. The regulation defines a “bundled transaction” as the retail sale of a wireless telecommunication device that contractually requires the retailer’s customer to activate or contract with a wireless telecommunications service for periods greater than one month as a condition of that sale.  

Based upon this definition, the court sided with the CDTFA, holding that the phone’s full price should be used when calculating the sales tax owed. The court reasoned that retailers were effectively selling the phones at a discount to induce consumers to purchase wireless service and that the full price of the phones was, therefore, part of the consideration for the purchase of the wireless service.  

This ruling was a significant win for the State and has important implications for California retailers. Retailers must be mindful of the taxation requirements of bundled sales, whether involving cell phones or any other type of products and services, and should seek guidance from a tax professional to ensure compliance with state and local tax laws. 

Thompson Tax specializes in sales and use tax across many industries. Contact us today for all of your multistate and local sales and use tax needs. We are your Trusted Tax Advisor.

The Benefits of Conducting a Reverse Sales and Use Tax Audit

Reverse Sales and Use Tax Audit

As companies expand, they become more complex and require more resources to manage.  Due to ever-changing tax codes and regulations, sales and use tax compliance can be particularly challenging, and identifying inaccuracies in this area can be difficult. By conducting a reverse audit, you can potentially spot reporting errors and may even reap some financial rewards if the errors are in your favor. 

How Can a Reverse Audit Help You?

1. Identify Prospective Overpayments

A sales and use tax reverse audit is an excellent way to identify overpayments, which can occur due to incorrect classification of goods and services, incorrect tax rates, or failure to take advantage of available exemptions. By conducting a reverse audit, businesses can recover the money they are owed, significantly improving their financial position.

2. Mitigate Risk

Non-compliance with sales and use tax laws can result in significant fines, penalties, and damage to a company’s reputation. A sales and use tax reverse audit can help businesses identify areas of non-compliance and take steps to correct them before they become a problem. By proactively addressing these issues, companies can mitigate risks and protect their reputation.

3. Improve Processes

A sales and use tax reverse audit can also help businesses improve their processes by identifying areas where errors have occurred. By taking steps to prevent these errors from happening again, companies can improve efficiency, reduce costs, and increase profitability.

4. Increase Cash Flow

Conducting a sales and use tax reverse audit can increase a business’s cash flow by identifying prospective overpayments and recovering money owed. This increased cash flow can then be reinvested into the business, used to pay down debt, or returned to shareholders, significantly improving the business’s financial health.

Thompson Tax Can Help!

Reach out to Thompson Tax today to see how we can help with all of your sales and use tax needs. We are always just a phone call away.

New Minnesota Delivery Fee Goes Into Effect on July 1st

Minnesota Retail Delivery Fee

Beginning July 1, 2024, any business involved in the retail delivery of tangible personal property (TPP) and clothing that is subject to sales tax will be required to pay a “retail delivery fee” of $0.50 that will be used to fund road improvements within the state of Minnesota. The fee will be charged once per transaction and applies to pre-tax sales of $100.00 or more. It does not apply to in-store transactions picked up at retail locations or via curbside delivery.

While the fee may seem insignificant, there are many details to consider, such as who is responsible for collecting the fee, what exclusions and exemptions may apply, should the fee be listed as a separate line item on an invoice, and compliance issues such as registration and remittance.

Although there are many moving parts, Thompson Tax can quickly help you navigate the new law’s requirements. Contact us today for all of your sales and use tax needs. We are your Trusted Tax Advisor.

Get Ahead of Penalties and Interest with a Voluntary Disclosure

Voluntary Disclosure Programs

As a business owner, it is important to be aware of your state’s sales and use tax laws.  However, with so many different rules and regulations to keep track of, it is easy to make mistakes and fall behind on your tax obligations. If you find yourself in this situation, it may be time to consider a sales and use tax voluntary disclosure.

What Are Voluntary Disclosure Programs?

Voluntary disclosure programs, offered by many states, allow businesses to come forward and report any unpaid sales or use taxes without fear of penalties or prosecution. Essentially, it is a way to get back in compliance before penalty, interest, and prospective legal issues have a chance to snowball.

There are several benefits to participating in a voluntary disclosure program. First and foremost, it allows you to avoid any penalties on uncollected taxes and can even provide a reduced interest rate on unpaid taxes. Depending on the length of time you have been out of compliance, these penalties can be significant.

Of course, participating in a voluntary disclosure program does require some effort on your part. You will need to gather all relevant financial documentation and work with a tax professional to ensure that you are accurately reporting your unpaid taxes.

If you are a business owner who has fallen behind on your sales and use tax obligations, do not wait until it is too late to address the issue. Contact Thompson Tax today. By taking proactive steps to get back in compliance, you can protect your business and avoid prospective legal issues down the road.

The Impact of Sales and Use Tax on Mergers and Acquisitions

Impact of Sales and Use Tax on Mergers and Acquisitions

Mergers and acquisitions (M&A) involve complex transactions that require careful planning and execution. One aspect that is often overlooked is the impact of sales and use tax on the transaction. Failure to properly account for sales and use tax can have a significant impact on the deal, including increased costs, potential legal issues, and decreased profitability.

One of the main reasons why sales and use tax can be a challenge in M&A due diligence is that it varies by state. Each state has its own rules and regulations regarding sales and use tax, and these rules can change frequently. This means that companies involved in M&A transactions need to be aware of the specific sales and use tax laws in each state where they operate or plan to operate.

When performing a due diligence review, it is important to address the target company’s sales and use tax exposure by reviewing nexus, previously filed tax returns, payment history, and any audits or assessments. This will help identify any potential liabilities, such as underpayment or non-payment of sales and use taxes.

It is also important to assess the target company’s sales and use tax compliance processes, including the accuracy of tax calculations, the appropriate use of exemptions and credits, and the maintenance of proper documentation.

Another important consideration in a due diligence review is the potential impact of sales and use tax on the transaction itself. In some cases, the buyer may be responsible for any unpaid sales and use tax liabilities of the target company. This can significantly increase the cost of the transaction and impact the profitability of the deal.

To mitigate the risks associated with sales and use tax in M&A due diligence, it is important to engage experienced tax professionals who can provide guidance and support throughout the process. This includes understanding the specific sales and use tax laws in each state, identifying potential liabilities, and developing strategies to mitigate those risks. That is where we can help. Reach out to Thompson Tax today for all of your sales and use tax needs. Let us be your Trusted Tax Advisor.

Sales and Use Tax Issues Faced by The Direct Mail Industry

Sales and Use Tax Issues Faced by Direct Mailers

Direct mailers often face numerous challenges when it comes to taxation. With varying tax laws across different regions, keeping up with the changes and ensuring compliance can be overwhelming.

1. Determine The Correct Sales Tax to Charge 

One of the primary taxation issues for direct mailers is determining the correct sales tax to charge. Sales tax laws vary from state to state and even within different areas of the same state, making it difficult to keep track of the applicable tax rates. For example, if you send mail to customers in multiple states, you may need to charge different sales tax rates for each state. Additionally, some products or services may be exempt from sales tax in certain states, further complicating the matter.

2. Identify The Correct Tax Classification

Another issue that direct mailers may face is determining the correct tax classification for their products or services. Depending on the type of product or service offered, it may fall under different tax classifications, each with its own set of regulations. For example, some states may classify advertising services as taxable, while others may consider them exempt.

3. Be Aware of Tax Implications When Using Third-Party Vendors

Direct mailers should also be aware of the tax implications of using third-party vendors. If you use a third-party vendor to provide services such as printing, mailing, or list management, you may be responsible for collecting and remitting sales tax on those services. However, the tax laws surrounding these services can be complex, and it’s important to consult with a tax professional to ensure compliance.

4. Keep Accurate Tax Transaction Records 

Direct mailers should keep accurate records of all tax-related transactions. This includes keeping track of sales tax collected and any exemptions or deductions claimed. In the event of an audit, having detailed records can help demonstrate compliance and avoid any penalties.

Thompson Tax Can Help!

Although tax compliance can be a significant challenge for direct mailers, understanding the various taxation issues they may face and taking appropriate measures to ensure compliance, direct mailers can avoid complications and focus on growing their business. It’s always recommended to seek the advice of a tax professional to ensure compliance with all applicable tax laws. Contact Thompson Tax today for all your sales and use tax needs and let us be your Trusted Tax Advisor.

California’s New CRV Law and How it Affects the Wine Industry

California New CRV Law

As many of you may know, California’s beverage recycling program has recently undergone significant changes. The program, which aims to reduce waste and promote recycling, has been expanded to include wine and other alcoholic beverages in addition to traditional recyclables like plastic bottles and aluminum cans.

While the changes are certainly a step in the right direction for the environment, they have also significantly impacted the wine industry in California. Many wineries and vineyards are now required to pay additional fees to help fund the recycling program, and they must also comply with new labeling and reporting requirements.

Aside from the challenge of the new requirement to include a recycling symbol on all wine bottles sold in California, the reporting requirements can be time-consuming and complex, requiring beverage manufacturers to track and report on their sales and recycling efforts.  That is where Thompson Tax can help. We can assist your winery with CRV (California Redemption Value) registration and filing compliance. Reach out to us today for all of your beverage deposit and tax needs, as well as any sales and use tax needs that you may have.  We are only a phone call away!

Navigating Wayfair – To Collect or Not To Collect?

Navigating Wayfair

 

If you operate or manage a business, it is likely that the 2018 Supreme Court decision on Wayfair has been on your radar for some time now. Wayfair emboldened states to trigger tax collection from out-of-state businesses, also known as remote sellers, regardless of whether or not they had a physical presence – a standard that remains in effect in light of this decision.  As a result, businesses across the country have had to navigate a slew of new tax obligations and requirements.

While many companies have turned to third-party firms to help them manage their Wayfair-related tax obligations, it is important to remember that the company itself is ultimately responsible for registering and determining if it should register. 

Partnering with Thompson Tax – Your Trusted Sales and Use Tax Advisor – will help you navigate the complexities of Wayfair and address your company’s compliance filings confidently. We specialize in assisting businesses in the aftermath of the Wayfair decision and even partner with small and medium CPA firms to help with sales and use tax issues outside the typical CPA scope. Compliance is crucial, so contact us today for assistance with registration, reimbursement, and remittance.

Digital Goods: Changes to Sales and Use Tax Across the U.S.

Changes to Sales and Use Tax for Digital Goods

 

To keep up with the digital age, over half of the states across the U.S. have implemented sales and use tax laws and regulations related to digital goods, and there are undoubtedly more to come. It is important to stay informed of these changes and to comply with any updates that may affect your business.

Pre-Wayfair, the sale of digital goods was not subject to sales tax, but now, many states require that sales tax be collected on all digital goods sold within their borders. This includes digital audiovisual works, digital audio works, and digital books, to name a few, as well as digital goods sold through a marketplace such as Amazon or Etsy.

These changes vary by state, so it is important to check the specific laws and regulations for any state where you are selling digital goods. As always, it is best to consult with a tax professional if you have questions or concerns about how these changes may affect you or your business. 

Thompson Tax is here to help. Please reach out to us today with any questions you may have. We are your Trusted Tax Advisors.

2024 Ohio Corporate Activity Tax (CAT) Threshold Update

Ohio Corporate Activity Tax Threshold Update

 

A significant change to Ohio’s Corporate Activity Tax (CAT) took effect on January 1st. The CAT, which was implemented in 2005, has had a minimum filing threshold of $150,000.00 in taxable gross receipts since its inception. As of 2024, the filing threshold has increased to three million dollars and will double in 2025 to a threshold of six million dollars.

If you are a current Ohio CAT filer and will no longer meet the new threshold requirements for 2024, you may cancel your account with an effective date of December 31, 2023.

Please contact Thompson Tax for any questions you may have regarding this change. We are happy to discuss your options and can assist with final return filing and account closure if you do not meet the 2024 threshold.

Monitoring Sales and Use Tax Trends in 2024

Sales and Use Tax Trends 2024

Keeping a close eye on sales and use tax trends is an essential business practice. While it’s impossible to predict the future with complete accuracy, several factors can help businesses make informed projections.

One key factor that will impact sales and use tax during 2024 is the continued growth of e-commerce. As more and more consumers turn to online shopping, states will continue to update their sales and use tax laws to ensure they collect the appropriate taxes from online retailers. 

Another factor to consider is the potential for changes in tax legislation at the state level that could impact sales and use tax rates, exemptions, and regulations. 

It is also important to consider the overall economic climate. As the economy continues to recover from the pandemic, businesses should consider how growth or contraction in their industry could further impact sales and use tax revenue. 

Thompson Tax is here to help your business monitor these changes and stay abreast of new tax laws. Please feel free to reach out to us with any questions you may have. We are here for YOU!

Mississippi Offering Direct Pay for Computer Software and Software Services Purchases

Mississippi Sales and Use Tax Direct Pay Permit

Mississippi now offers a Sales and Use Tax Direct Pay Permit for purchases of Computer Software and Software Services.

Vendors who sell, rent, or lease computer software or computer software services do not need to collect sales tax on purchases when a permit is presented. Instead, purchasers utilizing the permit will be required to pay the tax directly to the Mississippi Department of Revenue.

Please note: If you already have a Direct Pay permit, you will not need to apply for a separate Computer Software Direct Pay Permit.

 

Effective 1/1/24, Georgia Will Begin Imposing Sales and Use Tax on Digital Products, Goods, and Codes

Georgia Sales Use Tax on Digital Products Goods Codes Effective January 1, 2024, Georgia will apply sales and use tax on the retail purchase of digital products, digital codes, and other digital goods that are transferred electronically to end-users in Georgia. The new digital sales and use tax will apply to the goods and products outlined below, provided that the end-user uses the digital products for personal consumption and not commercial use and is authorized to use the product, good, or code permanently after purchase with no obligation to continue paying for the product, good, or code after the initial sale.

Taxable Goods Under S.B. 56

  • Specified Digital Products
    • Such as digital audio video works, audio works, digital books, etc.
  • Other Digital Goods
    • Such as artwork, audio greeting cards, video games, newspapers, etc.
  • Digital codes
    • Such as key or activation codes that convey a right to obtain digital goods.

*For a complete list of taxable items, please contact us directly.

Reseller Exemption

Resellers must retain proper records and documentation to be tax-exempt from the new digital tax.

Pre-Written Computer Software Exemption

When recorded properly, the sale of prewritten computer software delivered by means of ‘load and leave’ remains exempt; however, the exemption expressly does not include the taxable sales of digital products, digital codes, or other digital goods as listed above,

Thompson Tax is Your Trusted Tax Advisor

We understand that changes surrounding tax law can be challenging to understand. That is why we aim to clarify the facts for you. Please reach out to us directly for further information.

H.R.25 – The Push for a National Sales Tax

Concept of U.S. Map with Bag Full of Money The Fair Tax Act of 2023 was recently introduced to Congress.  If passed, the Act would allow a federal consumption tax of 23% on all goods and services that would replace most other federal taxes nationwide.

If the Fair Tax Act becomes a law, it would effectively abolish federal corporate taxes, payroll taxes (which include self-employment tax), estate taxes, death taxes, and other federal taxes, such as capital gains.  The legislation also looks to abolish the IRS since the Act aims for individual states to impose the levy beginning on January 1, 2025.

Multiple provisions are included in the bill.  One such provision, the “prebate” provision, would send every household in America a check worth 23% of the poverty line for a household their size to offset some of the burden.  Another provision addresses the collection of Social Security and Medicare funding through the new tax.

Although this bill is in its earliest stage, there are many intricacies that are already stemming marked discussion amongst Parties.  What are your thoughts about this one size fits all tax proposal and the ever-changing sales tax landscape?

Taxpayer Wins in Massachusetts “Cookie Nexus” Case

Concept of Cookie and Gavel with a Map of Massachusetts in the Background

The Supreme Judicial Court of Massachusetts has ruled in favor of the taxpayer in the Auto Parts Network Inc. v. Commissioner case. This ruling denies the Massachusetts Commissioner of Revenue to consider the use of cookies, apps, and content delivery networks (CDNs) while deciding whether a vendor has physical nexus with the State of Massachusetts.

The Commissioner of Revenue argued that cookies, downloadable apps, and CDNs created the physical presence in Massachusetts necessary to enforce taxation laws under the Quill v. North Dakota standard.  By using this standard, the audit division of the Department of Revenue sought to require US Auto Parts to register for, collect, and remit sales tax in Massachusetts.  As additional evidence of the commissioner’s claim, they argued that the standard established by Wayfair v. South Dakota could be applied retroactively to require enforcement of 830 Mass Regs § 64H.1.7 when applied to out-of-state vendors.

After deferring to the Appellate Tax Board and then the U.S. Supreme Court, the Massachusetts High Court ruled in favor of the taxpayer.

Please let us know if you have any questions about this case or how it may affect your business.

California Proposes Certification of Regulation 1684.5, Marketplace Sales

Key on a keyboard that says "marketplace" highlighting California regulation 1684.5

Regulation 1684.5, an emergency regulation that was put into place by the California Department of Tax and Fee Administration (CDTFA) after the South Dakota v. Wayfair, Inc. decision was made in 2018 (138 S. Ct. 2080), is now undergoing the formal regulatory process to propose potential amendments.  The regulation was initially put in place to govern the collection of use tax from out-of-state taxpayers that sell tangible personal property using the internet.  The proposed amendments could impose extra requirements on “marketplace facilitators” and may impact additional taxpayers as well.  Written comments from interested parties will be accepted until January 3, 2023 and a public hearing will be held if requested in writing prior to December 19, 2022.

Maryland Circuit Court Strikes Down Digital Advertising Services Tax

A poster with the Maryland state flag and a gavel to bring awareness to Maryland's digital advertising services tax

On October 17, 2022, Circuit Court Judge Alison Asti ruled that Maryland’s Digital Advertising Services Tax (DAT) which went into effect on January 1, 2022, violates the Internet Tax Freedom Act (ITFA) which prohibits discrimination against electronic commerce, the Commerce Clause which prohibits state interference with interstate commerce, and the First Amendment of the U.S. Constitution.  The Maryland Comptroller is expected to appeal the decision, but for now, although taxpayers are subject to estimated tax provisions, they are no longer required to file a return or pay the DAT. Taxpayers who have already paid the DAT during 2022 should plan to file refund requests if the decision is not overturned by a higher court.

The Maryland DAT, which is the nation’s first tax on digital advertising, is being addressed in federal courts as well.

New Colorado Retail Delivery Fee Goes into Effect on July 1, 2022

Poster of packages on the porch of a house to bring attention to Colorado's new retail delivery fee

 

Beginning July 1, 2022, Colorado will begin assessing a .27 retail delivery fee on purchases of tangible personal property that will be delivered by motor vehicle (USPS, Fed Ex, UPS, etc.) within the state.  If a motor vehicle is involved in shipping, in any way from the time the order is accepted until final delivery, the delivery fee will be assessed.  The purchaser is responsible for paying the fee;  however, retailers and marketplace facilitators are responsible for collection and remittance.  Regardless of how many shipments are required to complete the delivery only one fee will be assessed per purchase.  Remittance of the fee follows the same filing frequency and due date as the Colorado state sales tax return,  but the fee itself is not subject to Colorado sales tax.  *Wholesale sales are excluded unless ordered in combination with purchases subject to sales and use tax.

Both in-state and out-of-state retailers with an active sales tax account, a retailer license, and any sales tax liabilities reported after January 1, 2021, will be automatically registered for a Colorado Retail Delivery Fee account.  Retailers who are not automatically registered can create an account through the CO DOR website, by filing form DR 1786, or via the CO DOR’s Sales and Use tax System (which will be available by the end of 2022).

Tennessee Drop Shipment Rule Repealed

A truck, forklift, and boxes to bring attention to the changes of Tennessee's drop shipment rules

Under Sales and Use Tax Rule 96, Tennessee suppliers were required to collect sales tax on products sold to out-of-state dealers and shipped to the out-of-state dealer’s Tennessee customers unless the dealer provided a Tennessee resale certificate or Streamlined Sales Tax Exemption Certificate which included a Tennessee sales tax ID number.  As of January 10, 2022, Rule 96 was appealed, and Tennessee suppliers are now able to sell tangible personal property and taxable services to an out-of-state dealer and drop ship the products to an out-of-state dealer’s Tennessee customer without collecting sales and use tax by accepting a resale certificate from the out-of-state dealer’s state or a Streamlined Sales and Use Tax Exemption Certificate that includes the sales tax ID number issued by the out-of-state dealer’s state.