Message Font: Serif | Sans-Serif
 
No. of Recommendations: 2
Are you an accountant? Because it sure doesn't sound like it. All I know is that I spend too much time as it is researching sales tax issues in different states.

If you want to see how fun it can be, research the following issues in different states (it varies by state):
* Are software licenses taxable?
* What if they are transferred electronically?
* What about load and leave?
* What about customized software?
* What constitutes customized software?
* What about software maintenance?
* What about software maintenance separately stated on the contract, invoice, and/or books and records?
* What constitutes maintenance?
* Is software consulting taxable?
* What about software training?
* What about software installation and implementation services?

**************************************

Actually, when I was in my early 20’s I was pressed into service handling the tax compliance – payroll taxes, sales & use, occupancy, etc, etc – for a company with several thousand employees. The company never had a clue as to their peril. By the time I was eventually CFO for a competitor, ADP was able to handle the payroll filings most reliably, and the IT folks had figured out some efficient sales tax reporting solutions. By that time I no longer had an excuse to similarly torture some other 23 year old.

With those customized software and service contract examples, it sounds like you are addressing mostly B-to-B sales - commercial customers - and their related sales and use tax issues. If you aren’t capturing these taxes for some distant jurisdictions, then we would assume (make that ‘hope’) that these commercial customers are fulfilling their use tax obligations on their end. In other words, someone is probably required to be doing this work already.

Back in the early ‘90’s, the Supreme Court agreed that internet sales taxes were too tough – too much of a burden on the internet retailers. Just mailing the remittances would be a nightmare. But we’ve come a long, long way since then in our ability to capture information and efficiently make electronic remittances. There are a couple of solutions being tossed around. About half the states are already jointly working on a streamlined sales tax, under an initiative of the National Governor's Ass'n: http://www.streamlinedsalestax.org/. If it looked like internet sales tax revenue collection was about to be a reality, we might see all states with sales taxes jump on this program pretty quickly.

"The following states that have passed legislation to conform to the Streamlined Sale and Use Tax Agreement: Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming. Recently, conforming legislation was introduced in Texas, Massachusetts, Florida, Illinois, Virginia, Missouri, Maine, California, and Hawaii....

...Most businesses use software to manage their sales tax responsibility. The states partnered with the private sector suppliers of sales tax administration software to certify the accuracy of their software....Any business that uses Streamlined - certified software is immune from audit liability for the sales they process through that software. In addition, the states pay the cost of this service for any business that does not have a physical presence in the state. There are currently four certified companies..."


Another proposal being kicked around is to have the credit card companies that are processing these on-line sales capture the tax, tack it onto the customer's charge account, and wire the remittances to the jurisdictions. And there are plenty of other alternatives.

The real issue is that internet retailers really, really don’t want this. And neither do enough consumers. But if we believe that sales taxes are a legitimate source of state and local revenues, then at the very least we should be consistent in application.
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.