Between the new Tax Law, court cases impacting sales tax and nexus in general and a virtual tidal wave of new technology for tax and accounting work, it’s hard not feel a bit intimidated by it all.
But fear isn’t the answer, getting educated on what it all could mean for your clients and your business is the better way to go. It’s what we try to do here at AccountingWEB, by giving a voice to other tax and accounting professionals as well as influencers in this field. Also, having attended the Avalara Crush 2018 event, I feel a bit more educated myself and I’m happy to share what I learned.
First off, if you don’t know who they are Avalara has grown to become one of the premier sales tax and compliance tools out there and no they didn’t pay me to say that. Facts are what they are and this is a world they’ve lived and breathed for the better part of 14 years, so when I chose to attend their user event I knew I’d be around businesses that use them, as well as tax professionals that do too.
But it wasn’t just about them and their product, the world we’re in now with legislative and technological changes seemingly almost daily, it’s kind of made tax and compliance a bit, dare I say...sexy?
Taking a look at the legislative side of the coin, if you’ve been paying attention there’s a Supreme Court case currently being heard that could have a large impact on sales tax nexus, something that affects retailers and even buyers across the country. Specifically, the case of Wayfair v. South Dakota currently has a 50-50 chance of going the state’s way. If it does, it may add more confusion than we have today, according to foremost sales tax expert Scott Peterson, who happens to be Vice President of U.S. Tax Policy and Government Relations for Avalara.
“Accounting and tax professionals also have a right to be worried. If South Dakota wins, a CPA or accounting service provider exceeds $100K in revenue then South Dakota has the right for that CPA to collect sales tax.”
Peterson also noted that in Colorado retailers have to tell shoppers that live in that state that the retailer does not charge sales tax and they may owe the money. After the end of the year the seller has to send a report on what buyers bought and that they may owe the tax.
Peterson had much more to say on impact of the South Dakota case in a recent article.
Then there’s the issue of tax on software as a service (or SaaS as we know it). Right now only four states have legislatively said they want to tax SaaS companies, historically it's not been good for any high-tech business clients for the state to collect tax on you, according to Stephen Kranz, a tax attorney who, along with his wife Carolynn have become authorities on digital tax issues. That said, he noted that right now 24 states have laws related to tangible personal property when it comes to tax and computer services.
“The critical issue when it comes to digital tax is what exactly are you buying and what are you selling,” said Carolynn Kranz. She also referred to the state of Pennsylvania which says if something is available in printed form as well as digitally it is then taxable. It used to be that only tangible items were taxable and not services, that has changed.
These are just a few of the things to be aware of in the world of tax, rest assured it will get more interesting and with the rise of automation tools in this space it could very well make yours and your client’s lives a bit easier.