Your SlideShare is downloading. ×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Introducing the official SlideShare app

Stunning, full-screen experience for iPhone and Android

Text the download link to your phone

Standard text messaging rates apply

Retail Industry Tax Update

171
views

Published on

The retail industry is changing fast. You need to react swiftly to market trends and exceed consumer expectations to remain competitive. If that’s not enough, the constant flux of tax regulations only …

The retail industry is changing fast. You need to react swiftly to market trends and exceed consumer expectations to remain competitive. If that’s not enough, the constant flux of tax regulations only complicates matters. Join us as we discuss federal and state tax updates for the retail industry and how to be better equipped to deal with these issues.

Published in: Business, Technology

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
171
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
6
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. CPE Credit is not available for viewing archived programs. Please visit http://www.grantthornton.com/events for upcoming programs. Retail Industry Tax Update Original Broadcast Date: October 2013 © Grant Thornton LLP. All rights reserved.
  • 2. Presenters Giles Sutton Partner State and Local Tax Dallas, Texas Bill Stickney Partner Corporate Tax Philadelphia, Pa. © Grant Thornton LLP. All rights reserved. 2
  • 3. Guest presenters Mark Sullivan Retail Industry Practice Leader Chicago, Ill. Jim Wittmer Regional partner Strategic Federal Tax Services Philadelphia, Pa. © Grant Thornton LLP. All rights reserved. 3
  • 4. Retail Industry Tax Update Learning objectives • Explain how the newly released repair regulations impact retailers • Identify emerging trends retailers face, including multichannel retailing and global supply chain issues and explain related tax implications • Identify valuable tax credits available to retailers • Explain which operational issues are the biggest concern to retailers today © Grant Thornton LLP. All rights reserved. 4
  • 5. Retail Industry Tax Update Agenda • Tax update for Retail • Federal legislative update • Repair Regs: What has changed? © Grant Thornton LLP. All rights reserved. 5
  • 6. Current Retail Operational Issues • Current Operational Issues facing retailers – Multichannel issues – Global supply chain – Technology driven centralization – Cost rationalization © Grant Thornton LLP. All rights reserved. 6
  • 7. Current Operational Issues in Retail Multichannel Issues • What's the issue? • 28% growth in online sales in 2012 over 2011. • Triple-digit year-over-year growth in sales through mobile and tablet devices. • 46% of U.S. consumers use their smartphones to check prices and reviews while shopping at retail stores, then nearly half buy a less expensive product elsewhere. • Emergence of "omnichannel" retailing (a unified view of the brand in the marketplace). © Grant Thornton LLP. All rights reserved. 7
  • 8. Current Operational Issues in Retail Multichannel Issues (continued) • Why is it important for retailers? • How are retailers responding? – Retailers can not grow or be competitive if they depend solely on in-store retailing. – Brands get separated from the in-store experience. 90% of consumers trust peer recommendations through social media, only 14% trust ads. – When physical stores, online/social media and mobile technologies work cohesively (omnichannel retailing), sales can skyrocket. © Grant Thornton LLP. All rights reserved. – Analytics solutions – Social media risk assessment – Integration: In-store, online and mobile point of sale (POS) systems; controls for managing functions that overlap between online and in-store; policies for returns and responding to customer requests. 8
  • 9. Current Operational Issues in Retail Global Supply Chain • What's the issue? • Continuously evolving retail supply chain. • The five "P's" of Powerful weather, Pandemic, Political instability, Port closures, and Primary sourcing can easily cause supply chain disruption. (will sequester budget cuts also become disruptive?) • Near-shoring/ home-shoring as retailers rethink end-toend supply chain. • Retailers cutting costs not directly related to the customer experience, especially in the supply chain. © Grant Thornton LLP. All rights reserved. 9
  • 10. Current Operational Issues in Retail Global Supply Chain (continued) • Why is it important for retailers? • How our retailers responding? – Supply chain fraud and theft of intellectual property in a global supply chain. – Smooth operations , especially when costs are being cut . – Adapting to multichannel retailing. © Grant Thornton LLP. All rights reserved. – Risk management – financial, operational, compliance (California Transparency in Supply Chain Act, Conflict Minerals, etc.) – Forensic, Investigative and Dispute services – IT selection and implementation -solutions to manage supply chain risks (data security, supply chain disruptions/business continuity, inventory management) – Tax transfer pricing 10
  • 11. Current Operational Issues in Retail Technology-based centralization • What's the issue? • Multiple operating systems • Information flowing from multiple channels (point of sale, CRM systems, social media, etc.) • Rapid pace of technology innovation • Reducing non-customer focused labor in stores © Grant Thornton LLP. All rights reserved. 11
  • 12. Current Operational Issues in Retail Technology-based centralization (continued) • Why is it important for retailers? • Easier reporting and forecasting • Improved analysis of 'big data' - finding patterns in data • Stronger controls over various risks, particularly when 3rd party vendors are involved How retailers are responding? • Business intelligence and analytics • Cloud technology – software as a service (SaaS) • IT planning and assessment • Cybersecurity focus • More powerful POS systems © Grant Thornton LLP. All rights reserved. 12
  • 13. Current Operational Issues in Retail Cost Rationalization • What's the issue? •Changes in consumer demand may drive need to restructure or build new business models •Creating operational efficiency so dollars can be spent on customer-centric strategic priorities •The uncertain impact of economic factors – rising fuel costs, consumer sentiment, Affordable Care Act and other regulatory factors, etc. © Grant Thornton LLP. All rights reserved. 13
  • 14. Current Operational Issues in Retail Cost Rationalization (Cont.) • Why is it important for retailers? • Reducing costs without losing competitive edge or marketplace differentiation • Need to invest in technology that will propel the company into the future • Slow growth forecast for 2013 How are retailers responding? • IT planning and assessment, cloud technology – software as a service(SaaS) • Focus on financing arrangements/securitizing receivables to lower borrowing costs • Restructuring to reduce tax costs • Seeking performance improvement • Effectively dealing with health care reform © Grant Thornton LLP. All rights reserved. 14
  • 15. Retail – State Tax Issues – – – – – – Sales tax systems and POS changes – Outsourcing – C&I and purchased credits – Gross receipts taxes – Sales tax procurement structures & cloud computing © Grant Thornton LLP. All rights reserved. 15 Sales taxation of services Entity rationalization Leverage Planning NOL Utilization Group Reporting Issues
  • 16. Current Retail SALT Issues Procurement Structures & Cloud Computing • Retailers are a large consumers of software and cloud-type products – It helps to manage IT costs • Identifying tax issues and solutions around such transactions are, and will be, important to the retail community • Procurement structures can often help – the objective: – Owning the tax determinations pertaining to cloud purchases © Grant Thornton LLP. All rights reserved. 16
  • 17. Current Retail SALT Issues Entity Rationalization • • • • Entity simplification Supply chain orientation Off-shore planning Unitary determinations – Instant unity (for M&A transactions) – Treatment of foreign source income – 80/20 – Water's-edge elections © Grant Thornton LLP. All rights reserved. 17
  • 18. Current Retail SALT Issues Complexity of Tax Regimes Impacting Retailers • • • • • Extra-Jurisdictional reaches (Chicago/Illinois) Sales tax holidays Bag taxes Food stamp transactions Gross receipts taxes – State (CAT, B&O, Delaware, TX Margins) – Local (San Francisco, Philadelphia, BPOL) – Local sales taxes (origin vs destination sourcing) • Reduction in collection allowances • Transaction taxes should be transparent, fair, easy to administer and understandable! © Grant Thornton LLP. All rights reserved. 18
  • 19. Current Retail SALT Issues The Changing Face of Nexus • What is the current nexus standard? – Known nexus standards • Physical presence (Quill) • Agency nexus • Bright line nexus • "Amazon" agency + bright-line nexus – New "click-through" nexus regimes in 2013: KS, ME, IA and MO • KS law broadens the "agency" type relations the will create nexus for a remote seller including another person (including unrelated 3rd parties) that uses trademarks, trade names, or service marks in the state similar to those used by the retailer – Public contracting laws (KS and IA) – a retailer selling to state agencies, must register as must their retail affiliates must registers for sales and use tax – Remote seller notice requirement (KY) – Unitary nexus (WV) effectively expanding the definition of "retailer engaging in business in this state" to certain related members of a unitary group © Grant Thornton LLP. All rights reserved. 19
  • 20. Current Retail SALT Issues The Changing Face of Nexus • Gift cards – What if they really don't know where the gift cards are going (due the use of 3rd part distributors) – Do gift cards create physical presence nexus? • Big box, specialty, e-commerce – What is fairness? • Big box - cutting deals with states (credits) and local jurisdictions (incentives) • Specialty – (de minimis credits) • E-commerce /small business (just liabilities?) © Grant Thornton LLP. All rights reserved. 20
  • 21. Retail Industry Tax Update Webcast Agenda • Tax update for Retail • Federal legislative update • Repair Regs: What has changed? © Grant Thornton LLP. All rights reserved. 21
  • 22. Federal Legislative Update • Section 336(e) Regulations Issued • IRS Guidance Issued after Supreme Court Strikes Down DOMA • Other Items You May Have Missed © Grant Thornton LLP. All rights reserved. 22 22
  • 23. Federal Legislative Update – Section 336(e) Regs. What is the effect of a Sec. 336(e) election? Who makes the election? What is the effective date of the regulations? See T.D. 9619 for details. © Grant Thornton LLP. All rights reserved. 23
  • 24. Federal Legislative Update – IRS Issues DOMA Guidance The Supreme Court held that section 3 of the Defense of Marriage Act (DOMA) was unconstitutional. What are the implications? What did the IRS recently decide? What should or can employers do? © Grant Thornton LLP. All rights reserved. 24
  • 25. Federal Legislative Updates – Items You May Have Missed What happened? • IRS will no longer issue Section 355 comfort letters • Deduction denied for costs associated with stock offering • IRS cuts refundable corporate AMT credit © Grant Thornton LLP. All rights reserved. 25 25
  • 26. Retail: Current Federal Issues Federal Tax Credits • Certain federal tax credits are applicable and very attractive to retailers, such as: – R&D – IRC Sec. 45B (Restaurant retail) – IRC Sec. 49O (limited applicability) © Grant Thornton LLP. All rights reserved. 26
  • 27. Retail: Current Federal Issues Retail M&A Issues • There is a fair amount of retail M&A going on – Buying concepts out of distressed position – Buying assets – Buying smaller innovative e-commerce plays • Tax planning opportunities – Transaction cost analysis – Post acquisition integration – Attribute analysis © Grant Thornton LLP. All rights reserved. 27 27
  • 28. Retail Industry Tax Update Webcast Agenda • Tax update for Retail • Federal legislative update • Repair Regs: What has changed? © Grant Thornton LLP. All rights reserved. 28
  • 29. What was issued? • Final regulations under 162 and 263(a) – Amounts paid to acquire, produce, or improve tangible property • Re-proposed regulations under 168 – General asset accounts and disposition of depreciable property • IRS and Treasury expect to finalize these regulations in 2014 © Grant Thornton LLP. All rights reserved.
  • 30. Repair regulations: What has changed? Agenda • Improvements to tangible property • Dispositions • De Minimis • Materials and supplies • Effective dates © Grant Thornton LLP. All rights reserved.
  • 31. Improvements to property General rule A TP must generally capitalize an amount that IMPROVES a unit of property ("UOP") if the amount: (1) Is for a betterment; (2) Restores the UOP; or (3) Adapts the UOP to a new or different use. © Grant Thornton LLP. All rights reserved.
  • 32. Highlights Improvements to real property Significant changes New elections • Replacement of significant portion of a major component of a building is restoration • New and revised examples • Routine maintenance safe harbor now applies to buildings • Safe harbor for buildings of small taxpayers • Election to capitalize repair costs Issues and opportunities What's the effect? • Annual elections need to be considered each year – not available retroactively • New examples in the restoration area provide increased replacement percentages over old examples • §263A applies- no plan of rehabilitation • Safe harbor elections made each year = no 481(a) adjustment • Repair or capitalize changes = 481(a) adjustment • Addition of a major component and material increase in capacity are betterments • Treatment of removal costs © Grant Thornton LLP. All rights reserved.
  • 33. Highlights DISPOSITIONS Significant changes New elections • Asset for disposal purposes is no longer building structure and building components- building is the asset (eliminates need for general asset account election) Partial disposition election • Partial disposition election for buildings and personal property • Required partial disposition for casualty, tax-free exchanges and sales What's the effect? Awaiting guidance on availability of retroactive partial disposition election Issues and opportunities • For years starting after 1/1/14, partial disposition election can only be made in the year disposition occurs- requirement for clients to track each year • Regs. provide that reasonable methods can be used to determine basis of assets disposed (i.e. replacement trending, study, allocation methods) © Grant Thornton LLP. All rights reserved.
  • 34. Highlights DE MINIMIS Significant changes New elections • • De Minimis safe harbor • • No ceiling limit or tracking requirement Safe harbor based on invoice/item price: – TP w/AFS = $5,000 – TP w/o AFS = $500 Includes transaction costs and other costs of acquisition (i.e. labor and OH) If elected, applies to all materials and supplies What's the effect? Only applies to amounts incurred in the year adopted: no retroactive adjustment Issues and opportunities • Election must be made each year- statement attached to return • Taxpayers without audited financial statements can now take advantage of a de minimis deduction • Written accounting policy must be in place on first day of taxable year to which election applies • Amounts not subject to de minimis must meet clear reflection or capitalize © Grant Thornton LLP. All rights reserved.
  • 35. Highlights MATERIALS AND SUPPLIES Significant changes New elections • Definition now includes property with acquisition or production cost of $200 or less (increased from $100) Election to capitalize now only applies to rotable, temporary or emergency spare parts • Definition of emergency spare parts What's the effect? Final regulations only apply to amounts incurred on or after 1/1/14, unless early adopt. No retroactive adjustment Issues and opportunities • Clear definition of materials and supplies • Can elect to deduct under de minimis, applies to all eligible materials and supplies © Grant Thornton LLP. All rights reserved.
  • 36. Transitional rules • Revenue procedures expected to be issued late October or November • Expected to provide for late partial disposition election for 2012, 2013, and 2014 tax years • Will provide guidance on changes made under the temporary regulations © Grant Thornton LLP. All rights reserved.
  • 37. Effective dates • Final and re-proposed regulations effective for years beginning on or after January 1, 2014 • TP may choose to apply the final, reproposed, temporary or any combination thereof for 2012 and 2013 • Transitional relief for elections in 2012 and 2013 © Grant Thornton LLP. All rights reserved.
  • 38. Comments? Questions? © Grant Thornton LLP. All rights reserved. 38 38
  • 39. Contact Information Giles Sutton Mark Sullivan Partner State and Local Tax Retail Industry Practice Leader Giles.Sutton@us.gt.com Mark.Sullivan@us.gt.com Bill Stickney Jim Wittmer Partner Corporate Tax Regional partner Strategic Federal Tax Services William.Stickney@us.gt.com Jim.Wittmer@us.gt.com © Grant Thornton LLP. All rights reserved. 39
  • 40. Disclaimer ********************** IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the U.S. Internal Revenue Service, we inform you that any U.S. federal tax advice contained in this PowerPoint is not intended or written to be used, and cannot be used, for the purpose of (a) avoiding penalties under the U.S. Internal Revenue Code or (b) promoting, marketing or recommending to another party any transaction or matter addressed herein. ********************** The foregoing slides and any materials accompanying them are educational materials prepared by Grant Thornton LLP and are not intended as advice directed at any particular party or to a client-specific fact pattern. The information contained in this presentation provides background information about certain legal and accounting issues and should not be regarded as rendering legal or accounting advice to any person or entity. As such, the information is not privileged and does not create an attorney-client relationship or accountant-client relationship with you. You should not act, or refrain from acting, based upon any information so provided. In addition, the information contained in this presentation is not specific to any particular case or situation and may not reflect the most current legal developments, verdicts, or settlements. You may contact us or an independent tax advisor to discuss the potential application of these issues to your particular situation. In the event that you have questions about and want to seek legal or professional advice concerning your particular situation in light of the matters discussed in the presentation, please contact us so that we can discuss the necessary steps to form a professional-client relationship if that is warranted. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. © 2013 Grant Thornton LLP, the U.S. member firm of Grant Thornton International. All rights reserved. Printed in the U.S.A. This material is the work of Grant Thornton LLP, the U.S. member firm of Grant Thornton International, Ltd. © Grant Thornton LLP. All rights reserved.
  • 41. Thank you for viewing this presentation. Visit us online at: www.GrantThornton.com twitter.com/GrantThorntonUS linkd.in/GrantThorntonUS © Grant Thornton LLP. All rights reserved.