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Unlocking Digital Value: State & Local Tax Advisory Services

Explore how market forces, evolving markets, and the Marketplace Fairness Act impact state budget gaps and sales taxes. Learn about nexus, tax rates, taxability, and exemption certificates to enhance compliance and minimize risk.

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Unlocking Digital Value: State & Local Tax Advisory Services

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  1. Expanding Your Digital Value Via StateAnd Local Tax Advisory Services Ray Bigley – VP Business Development; Avalara Andrew Johnson – Partner; Peisner Johnson& Company December 6, 2013

  2. Today’s Discussion Market Forces & Evolving Markets Market Place Fairness Act (67 to 29) Peisner Johnson & Company – Client Service Opportunities Summary

  3. $55,000,000,000 $107,000,000,000 $130,000,000,000

  4. Market Forces: State Budget Gap

  5. State Budget Gaps

  6. Market Forces: State Budget Gap $23,800,000,000 $12,500,000,000

  7. Market Forces 46 States, WA DC & Guam

  8. 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

  9. Evolving Markets • Mobile payments (Affirm, Square, GoPayment, Fortumo, Zong) • Gaming ( mobile devices, Xbox, PlayStation, Wii)

  10. Omni channel Markets: Mobile

  11. Emerging Markets – Gaming, Mobile Payment

  12. Omni channel Markets: Gaming

  13. 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

  14. 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

  15. Andrew (Andy) Johnson Peisner Johnson & Company, LLP

  16. The 5-Point Assessment Nexus Tax Rates and Taxability Use Tax Exemption Certificates Tax Returns

  17. Nexus

  18. 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

  19. Obvious

  20. Less Obvious

  21. How do states find you? • Auditing your customers • Sharing with IRS and other states • Special task forces • Leads • Former employees • Competitors

  22. THE PROBLEM NEVER GOES AWAY… IT ONLY GETS BIGGER

  23. Assessment #1 Analyze the Nexus Footprint

  24. Tax Rates and Taxability

  25. Under-Collecting

  26. 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

  27. Tangible Personal Property (TPP) Fundamentals

  28. Only CERTAIN services are taxable

  29. ALL sales of TPP are taxable unless there is a specific exemption for that item. • What about digital products? Fundamentals

  30. Assessment #2 Make Sure Clients Charging Tax on Taxable Stuff at the Right Rate

  31. Use Taxes

  32. Online Purchases

  33. Accruing Use Tax • Putting Your System in Place • Decide who should manage use tax accrual • Accounts payable department • Purchasing department • Service opportunity for CPAs

  34. Assessment #3 Make sure clients have a system for accruing use tax on taxable purchases —don’t overpay though

  35. Exemption Certificates

  36. Exemption Certificates Are Low-Hanging Fruit

  37. Sampling

  38. Assessment #4 Review certificates actually collected by client.

  39. Tax Returns Screenshot/CBS

  40. Assessment #5 Review returns filed

  41. Protect Your Clients The 5 Point Assessment: Nexus Tax Rates and Taxability Use Tax Exemption Certificates TaxReturns

  42. PeisnerJohnson.com Training SALTsource newsletter Blog Charts and white papers

  43. 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 5million exemption certificates & file 500,000 sales tax returns • Filing & remitting $14 billion in sales & use tax annually • Original member Streamline sales tax & Certified provider

  44. Questions andrewj@peisnerjohnson.com ray.bigley@avalara.com

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