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


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

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.