Expanding Your Digital Value Via State
And Local Tax Advisory Services
Ray Bigley – VP Business Development; Avalara
Andrew Johnson – Partner; Peisner Johnson & Company
December 6, 2013
© Avalara
Today’s Discussion
• Market Forces & Evolving Markets
• Market Place Fairness Act (67 to 29)
• Peisner Johnson & Company – Client Service Opportunities
• Summary
Making sales tax less taxing.
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$55,000,000,000
$107,000,000,000
$130,000,000,000
Making sales tax less taxing.
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Market Forces: State Budget Gap
Making sales tax less taxing.
State Budget Gaps
Making sales tax less taxing.
Market Forces: State Budget Gap
$23,800,000,000
$12,500,000,000
Making sales tax less taxing.
Market Forces
46 States, WA DC & Guam
Making sales tax less taxing.
Sales & Use Taxes In “LOTS” of Jurisdictions
There are over 11,000 North American
Taxing Jurisdictions
Alaska has no State Sales Tax,
But does have Local Sales Taxes
• 46 States (Including The District of Columbia) have some
form of Sales And Use Tax
• NOMAD States – No Sales Tax in NH, OR, MT, AK, DE
Making sales tax less taxing.
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Evolving Markets
Mobile payments (Affirm, Square, GoPayment, Fortumo,
Zong)
Gaming ( mobile devices, Xbox, PlayStation, Wii)
Omni channel Markets: Mobile
Making sales tax less taxing.
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Emerging Markets – Gaming, Mobile Payment
Making sales tax less taxing.
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Omni channel Markets: Gaming
Making sales tax less taxing.
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Next up after Marketplace Fairness?
Digital Goods – MP3 Files, Movie / TV
downloads, Purchased Image, etc.
Virtual Items – Exist within a specified
environment. Example -Xbox Live
marketplace, MapleStory: Flower
bouquets, Games-weapons
Sheldon’s dilemma from the Big Bang Theory
Making sales tax less taxing.
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Marketplace Fairness Act (67 to 29)
“Very Brief Overview”
Grants authority to states to require a remote retailer to collect
sales tax
Defines a remote retailer as any seller who makes interstate sales
of products or services
Applies only to remote retailers with annual remote sales in excess
of $1 million, but remote sales includes exempt sales
Requires very little simplification from states, and most of that is
only for remote retailers
Making sales tax less taxing.
Andrew (Andy) Johnson
Peisner Johnson & Company, LLP
Making sales tax less taxing.
The 5-Point Assessment
1. Nexus
2. Tax Rates and Taxability
3. Use Tax
4. Exemption Certificates
5. Tax Returns
Nexus
What is nexus?
Nexus: A connection; a link or tie
Minimum level of physical presence that
allows a jurisdiction to require you to
register, collect, and remit sales and
use tax
Obvious
Less Obvious
How do states find you?
•
•
•
•
Auditing your customers
Sharing with IRS and other states
Special task forces
Leads
o Former employees
o Competitors
THE PROBLEM NEVER
GOES AWAY…
IT ONLY GETS
BIGGER
Assessment #1
Analyze the Nexus Footprint
Tax Rates and Taxability
Under-Collecting
● Something taxable in one jurisdiction may not be
taxable in another...
● Except when it is.
● Rules are constantly changing - more than 5,000
changes in the last year alone
Tangible Personal Property (TPP)
Fundamentals
Only CERTAIN services are taxable
● ALL sales of TPP are taxable unless
there is a specific exemption for that
item.
● What about digital products?
Fundamentals
Assessment #2
Make Sure Clients Charging
Tax on Taxable Stuff at the
Right Rate
Use Taxes
Online Purchases
Accruing Use Tax
Putting Your System in Place
● Decide who should manage use tax accrual
○ Accounts payable department
○ Purchasing department
● Service opportunity for CPAs
Assessment #3
Make sure clients have a
system for accruing use tax
on taxable purchases —
don’t overpay though
Exemption Certificates
Exemption Certificates
Are Low-Hanging Fruit
Sampling
Assessment #4
Review certificates actually
collected by client.
Tax Returns
Screenshot/CBS
Assessment #5
Review returns filed
Protect Your Clients
The 5 Point Assessment:
1.Nexus
2.Tax Rates and Taxability
3.Use Tax
4.Exemption Certificates
5.Tax Returns
PeisnerJohnson.com
Training
SALTsource newsletter
Blog
Charts and white papers
Who is Avalara
Market Leader in Automated Sales & Use Tax
• Located on Bainbridge Island, WA & Seattle
• Offices across North America, in EU & Asia
• 11,000 customers 60,000 registered users
• 4 million calculations per day – approaching 1.5 billion
annually
• Manage 5 million exemption certificates & file 500,000 sales
tax returns
• Filing & remitting $14 billion in sales & use tax annually
• Original member Streamline sales tax & Certified provider
Making sales tax less taxing.
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Questions
andrewj@peisnerjohnson.com
ray.bigley@avalara.com
Making sales tax less taxing.
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