Sales Tax Checklist for technology companies
- You make online sales? (On all internet sales, sales tax … because believing that the product / service is subject. The question is whether the seller is obliged to collect and remit or whether the buyer is required to report themselves.)
- Do you have any partnerships (for generating sales) of out-of state companies?
- Do you have sales representatives travel outside their home state?
- As you participate in exhibitions outside of your home state?
- Do you have employees or agents who perform services on your behalf outside of your home state?
If you answered "yes" to one or more of these questions, you could create a tax liability of sales outside of his native state. Also, remember surtax Nexus discord sales tax binder. These rules are applied differently.
Nexus with 39 & # is a "compound" or "link." Sales and use tax nexus relate to the relationship between an individual or legal entity and tax jurisdiction, that jurisdiction is sufficient to require the person or entity to carry out their sales and use tax laws.
At present, the basis for determining when the tax sale and use of the Nexus, there occurs in two cases the Supreme Court; Quill Corp. against North Dakota [May 26, 1992]And the National Bellas Hess, Inc. vs.Department Illinois Gains [May 8, 1967], In both Quill Corp. and National Bellas Hess, Inc., the Supreme Court ruled in favor of the taxpayer, limiting states & # 39; ability to impose its authority over burdensome interstate commerce. Guide obtained from these two cases may be used today & # 39; s markets to manage sales and use tax compliance obligations.
While most states continue to refer to those cases where the sales tax clearance Nexus thresholds, the state to continue to expand its sales and use tax authority. With Nexus with & # 39 is the main element that requires the company to collect and transfer the sales tax, it # 39; It s important to note some of the difficulties in determining whether a & # 39 is a company with tax Nexus sales or not.
Like most of the sales and use issues related to tax, determining whether or not the sales tax nexus exists, it requires some level of interpretation of the state and # 39; s status as it relates to the activities of the sub & # 39 object. With that background, here are the most common questions, technology companies are struggling with sales tax tie point of view. In addition, it should be noted that sellers do not actually "charge" Sales Tax. Most likely, the seller & # 39; s «to collect and translate the" sales tax. This can be important. For example, as in the case of Internet sales, sales tax is always "because." This problem is whether the seller is obliged to collect and transfer the tax or if the buyer is obliged to report.
# 1. Affiliate Nexus, "Amazon" Laws and Click-Through Nexus
Internet dismissed in changing our buying patterns and reducing the sales tax revenue. With our current tax system and regulations interrelated, as stated above, is a merchant of the state (as well – the seller without a binder able to) the sale of goods to the consumer or business over the Internet is not required to collect sales tax. It is the buyer & # 39; s responsibility for self-assessment tax and voluntarily remit use tax to the state. Most companies are aware of this aspect, but many consumers are not & # 39 are.
States shall ensure compliance with these laws through business auditing; However, the state does not have the capacity, and not from the & # 39 is practical to check each user. So, instead of going after the consumer states seek to abide by the rules, which require heavy idle state businesses to collect taxes.
That's why "branch connection" and "Amazon's law" or "click through bonding" evolved. These are ways in which the government tried to use existing standards require NEXUS released from retailers to collect state taxes that otherwise would not be collected. A typical scenario is when the business is the state forms a relationship with a business in the state (often referred to as an affiliate) with the sole purpose of client referrals by connecting to business & # 39 from another state; s website. For this direction, then in a state of the business it gets some type of commission or other remuneration. Relationships established through affiliate programs create a nexus for business outside the states, creating an obligation for the collection and transfer of local sales tax. Several states, including Illinois and California, recently introduced legislation branch Nexus primarily targeting major online retailers such as Amazon, hence the name «Amazon law." In response to this legislation, Amazon has lowered their affiliate programs in most of these countries. By dropping the affiliate program, the company intends to terminate its relationship with the state and avoid the potential for & # 39; sales tax collection responsibility. However, this can be problematic, since most states consider Nexus exist for at least twelve months following the activity that created the Nexus.
New York State passed a law, known as "granting commission agreement", which creates a rebuttable presumption that a person (the seller) makes the sale of movable property or services to the business extortion at the expense of an independent contractor, or other representative, if the seller enters into a contract with a resident in New York according to which the resident, for a commission or other compensation directly or indirectly reflects the potential customers, whether by reference to the Internet web site or otherwise, to the seller (click through links). The assumption applies if the total gross income from the sale of the seller clients in the state switched to the seller all the inhabitants of this type of agreement with the seller more than $ 10,000 over the previous four quarterly periods ending on the last day of February, May, August, and November. The assumption may be challenged by evidence that the resident with whom the seller has an agreement not to engage in any jurisdiction in New York on behalf of the seller, who meets the requirements of the US Constitution interconnected within four precedenting quarterly periods. NY Tax Law 1101 (b) (8) (VI).
Technology companies should review their affiliate programs and see which states, in particular, have the "Amazon's laws", "Partner Communications" regulations or «Click-Through Nexus» rules. It is constantly changing area that requires careful monitoring. At the time publications, California took 1 year to cancel their «Amazon law" about.
# 2. sales representatives
The idea of a sales representative, sitting in the home office in the state, than where the headquarters are located with a & # 39 is a good example of an activity which establishes the sales tax nexus in a state where a sales representative based. However, what happens when a sales representative travels to other countries to meet with prospects or clients? This kind of activity often occurs with technology companies as a sales representative meeting with a view to demonstrate their product. Or & # 39; is this activity generates sales tax nexus will depend on the condition and the frequency of the activity. Each State & # 39; s rules are slightly different in terms of the threshold that must be performed to create the Nexus. However, for some states, a sales representative, going to state in one day will create sales tax nexus. While other states have more lenient thresholds, the general rule with empirical & # 39 is that the three days of this type of activity will create a nexus for sales and use tax purposes.
Texas provides that from out of state vendors engaged in the sale, rental or lease of taxable items for storage, use or other consumption in Texas are required to collect use tax from the purchaser. «Retailer engaged in this state business" may include, among other activities, any retailer: The presence of any representative, agent, salesman, an agitator or an attorney working in Texas for retail management or its subsidiary to sell, deliver or accept orders for any of the & # 39 objects of taxation. Texas Tax Code Ann. 151.107 (a) (2); Texas Tax Publication 94-108, is engaged in the business (sales and use tax) 2006/01/11.
Nexus Strategy: Instead of face-to-face presentations to customers, technology companies may consider conducting product demonstrations via the Internet through WebEx, GoToMeeting or other similar applications.
# 3. exhibitions
Technology companies with a & # 39 are frequent exhibitors. Typically, companies attending the exhibition to promote their products and services. The company can promote their products and services through a representative or employee of the agent and / or display their goods through a kiosk or booth. In any of these scenarios, the company performs a type of imposition.
This solicitation activity that determines the connection has been established. Nevertheless, a number of countries have established specific thresholds (number of days in attendance at the show), in order to determine when the company participated in the exhibition created a nexus in the state. For example, California has set the standard for more than fifteen (15) days – that is, when you visit the exhibition in California for fifteen days or less, you have not created a nexus in California (provided that this is your only activity within the state). Cal. Rev. and tax. Cd. 6203 (g); Cal. Code Regs. 18 one thousand six hundred eighty-four (b).
Nexus from Michigan will not be created unless the contact person has to Michigan consists of: (1) participate in the exhibition, in which no orders are not accepted goods i is not for sale is not made, or (2) that take part in the exhibition, which nO orders for goods accepted i do not sell are not made less than 10 days cumulatively on a yearly basis. However, this rule does not apply if the person conducts the following activities: soliciting sales; making repairs or providing a service or maintenance of the property sold or to be sold; Captures the current or delinquent accounts, by assignment or otherwise, related to the sale of movable property or services; of the property is sold to customers; installation or installation supervision during or after delivery, or delivery; provide training to employees, agents, representatives, independent contractors, brokers or other persons acting on the seller & # 39 from another state; s name, or for clients or potential clients; to provide customers with any technical assistance or services, including, but not limited to, engineering assistance, service design, quality control, inspection of products or similar services; research, treatment or other assistance in resolving customer complaints; consulting services; or soliciting, negotiating or entering into franchising, licensing or similar arrangements. Michigan Revenue Administrative Bulletin 1999-1, 1999/12/05.
The technology company has to carefully plan where they will be present at the show and understand the nexus thresholds sales tax associated with each state for this kind of activity.
# 4. Employees or agents providing services to
Technology companies that send employees to provide implementation, installation or repair created by Nexus for sales and use tax purposes. The fact that it is not sold or not harassment activity does not mean that this activity does not create sales tax nexus. On the contrary, these acts are likely to create a link to the sales tax and the use.
Washington State Supreme Court, in a recent ruling states that a manufacturer who uses a passenger in a state with the sole purpose of meeting with the clients simply manage relationships was enough to create the Nexus. This activity is considered as a mechanism that created a market in the country and, as a result, creates a link to the producer. RWR MANAGEMENT, INC., Appellant, v. Washington State Department of Revenue, Respondent, 10-332, 06/27/2011.
The use of non-employees to support clients can have the same effect. For example, the hardware business technology, which uses a local resource for repair or performing other maintenance to their customers providing services through a branch, and it is believed that they have created a link to sales and use tax purposes. Or & # 39 are the person providing customer service with a & # 39 is an employee or business does not matter for the states. The fact that the person is in the state and performance of services on behalf of out-of-state business enough to create a nexus for business outside the state.
Technology enterprise should evaluate the activities related to non-sales, which is carried out in every state, including installation and maintenance / support services as well as services provided by a representative of third parties in the evaluation of their sales and use tax nexus foot print.
# 5. Income tax Nexus discord Sales Tax Nexus
There & # 39; it is often suggested that if a company has income tax nexus, they also have sales tax nexus. End of story. This is true, but only partly. The second half of the & # 39 is that the company may have sales tax nexus with no income tax nexus. The threshold for the sales tax is significantly lower than the income tax. For example, a sales solicitation, is generally regarded as the sales tax nexus that generates activity, while the same activity is not, in itself, create income tax nexus (See PL 86-272). The most well-intentioned CPA firm to the belief that, because the connection has not been created for the purposes of income tax, sales and use tax nexus does not exist. This, of course, is not intended, but & # 39 is the result of the limited knowledge of sales and use tax laws.
In Pennsylvania, out of state suppliers / vendors that support business in Pennsylvania and sell or lease taxable tangible personal property or services tax must be registered and Pennsylvania sales and use taxes. On. Stat. Ann. 72 7202; Pa.Stat. Ann. 72 7237 (b); . According to the Code 61 56.1 (a) "Maintenance of the place of business" in Pennsylvania includes, among other activities: regular or substantially soliciting orders in Pennsylvania by proxy, dealer, agent, or representative, regardless of orders received in Pennsylvania ; On. Stat. Ann. 72 7201 (b); On. Code 61 56.1 (b).
Technology companies need to be aware of their special knowledge of CPA firms have to provide tax advice sales. Sales tax with the & # 39 is a unique discipline with different rules from state to state.
Establishment of the sales tax nexus often & # 39 is the culmination of a number of interdependent activities. For example, a business technology can spend three days in a state soliciting orders, two days at the exhibition, as well as in a day or two to sell their products. Each of these activities can create sales tax nexus itself, but also to be seen in connection with other activities regard the establishment.
It is important to note that as soon as the sales tax bond was created, the need to collect sales tax and remit triggered (assuming that you are selling to be exempt from certain state taxes). Sales Tax Nexus is associated with a legal person and covers all sales channels. For example, if you have a direct channel sales and online sales channel, when a connection is established in a state of both channels may be the sales and use tax laws of that State.