State and Local Taxes: What Will Happen in 2011?

What do you think are the "hot" state and local tax (SALT) issues in 2011?  What do you think will impact your clients the most? 

Well, to help you get started, here are a few of the topics I see impacting companies this year:

  1. Economic nexus standards - currently 42 states say they have economic nexus standards and yet only 5 have adopted "bright-line" standards.  Therefore, the other 37 states have not provided clear guidance on how to apply their economic nexus standards.  Will they adopt "factor-presence" nexus standards or a "bright-line" test? 
  2. Will P.L. 86-272 become irrelevant?  As states look more to economic nexus or "bright-line" nexus standards, will they also seek to adopt gross receipts or non-income based taxes so they can apply economic nexus to all companies, not just service providers and sellers of intangibles? 
  3. Will all states follow the trend and adopt "market-based" sourcing of service income?  Currently, 13 states utilize "market-based" sourcing or sourcing service income based on where the benefit of the service is derived; generally, the location of the customer.  The other states currently source service income based on where the service is performed.  The combination of "market-based" sourcing and economic nexus may cause service providers to become subject to tax in new states.
  4. Amazon.com or "click-thru" nexus - Since January 1, 8 new states have proposed legislation to adopt Amazon.com nexus standards similar to those already adopted by New York, Rhode Island and North Carolina.  Will the legislation pass?  Will other states jump on the bandwagon?
  5. E-commerce retailers and remote retailers are under attack either via Amazon.com nexus standards, other nexus presumption standards and the imposition of notification and reporting requirements (similar to Colorado and Oklahoma).  It appears these options are popular tactics to help states close the "use tax" gap.  Will this trend continue?
  6. Sales taxation of software, software-as-a-service (SaaS) and Cloud Computing - as the methods in which companies provide and purchase software/services have changed, eventually the sales taxation of software/services will change as well.  The states are currently behind in addressing this change and will soon seek ways to tax it - either by saying the new method is a sale of tangible personal property or by expanding the imposition of their sales tax to services.

Overall, our economy has become predominantly a service economy (whether this is good or bad, is yet to be seen).  We are also moving more and more towards an electronic economy (e-commerce).  The problem is that our current state tax laws were built for a manufacturing economy.  The economic recession's impact on state budgets may just be the "tipping point" which leads or allows states to change their tax laws to more aptly address our economy.  Unfortunately for taxpayers, I think that means more taxes.

This blog

Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States.  He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect."  For more info, visit his website: www.leveragestateandlocaltax.com

You can reach Brian at strahle@leveragesalt.com.

Connect with Brian on LinkedIn. Follow Brian on Twitter. Join the Leverage | SALT LinkedIn Group, connect and contribute with your colleagues!  

Because state and local taxes are deceptively simple and endlessly complicated.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

38856

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

69991

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

43646

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

80640
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
17510

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

50642

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

74546

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

22430

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

58672

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

31531
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
94966
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
22462

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

47316
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
24326
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
28287

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

91209

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

29741

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

102011

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

54710

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

36039
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
61932

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

87254

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

48361