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Presented By: NACM and  Tax Technology Services,  LLC Exemption Certificate  Management
<ul><li>A basic knowledge of what defines a sales tax exemption certifcate. </li></ul><ul><li>Identify common mistakes tha...
Exemption Certificates <ul><li>Matthew MacNeil </li></ul><ul><li>Principal, Tax Technology Services, LLC </li></ul><ul><ul...
Exemption Certificates <ul><li>Exemption Certificates </li></ul><ul><ul><ul><li>Definition </li></ul></ul></ul><ul><ul><ul...
Exemption Certificates <ul><li>“ Everything is Taxable until proven otherwise”  </li></ul><ul><li>An Exemption certificate...
Exemption Certificates <ul><li>Describes your status as a tax agent for the State. </li></ul><ul><li>You are only required...
Exemption Certificates <ul><li>Common Nexus Indicators </li></ul><ul><ul><li>Physical Presence </li></ul></ul><ul><ul><li>...
Exemption Certificates <ul><li>Manufacturing exemption </li></ul><ul><li>Purchase for resale </li></ul><ul><li>Purchase by...
Exemption Certificates <ul><li>Most States have specific certificates </li></ul><ul><ul><li>Exemption form </li></ul></ul>...
<ul><li>Pros: </li></ul><ul><li>Seller is off the hook if all data elements are collected </li></ul><ul><li>Data can be ob...
<ul><li>Pros: </li></ul><ul><li>One form for many states </li></ul><ul><li>Advantageous for retail solutions </li></ul><ul...
Exemption Certificates <ul><li>When a seller accepts an order from a buyer and then the seller delivers goods to a third p...
Exemption Certificates <ul><li>Some States assume items for resale and they are automatically exempt </li></ul><ul><li>Som...
Controlling Certificates <ul><li>Audits can occur at regular intervals.  Mistakes can turn into costly penalties. </li></u...
Controlling Certificates <ul><li>Audits becoming more aggressive </li></ul><ul><li>Regulations are changing – SST and new ...
Controlling Certificates <ul><li>FULL SST MEMBERS </li></ul><ul><li>Arkansas </li></ul><ul><li>Indiana </li></ul><ul><li>I...
Controlling Certificates <ul><li>Forms are incomplete </li></ul><ul><li>Inappropriate use of forms </li></ul><ul><li>Outda...
Controlling Certificates <ul><li>Each state has unique laws. </li></ul><ul><li>States do not like contractors. </li></ul><...
Controlling Certificates <ul><ul><li>Standard paper </li></ul></ul><ul><ul><ul><li>Organize by State, then by company name...
Controlling Certificates <ul><li>Be Proactive </li></ul><ul><li>Consult your tax department </li></ul><ul><li>Evaluate you...
Controlling Certificates <ul><ul><li>Collect and organize what records you currently have on hand </li></ul></ul><ul><ul><...
Controlling Certificates <ul><ul><ul><li>Do you have WRITTEN policies and procedures around Certificate Management? </li><...
Exemption Certificates <ul><li>More complicated, more taxes and exemptions. </li></ul><ul><li>Sales and use tax audits are...
Exemption Certificates <ul><li>Washington State constantly changing exemption laws. </li></ul><ul><li>More states are look...
Exemption Certificates <ul><li>Your Tax Department! </li></ul><ul><li>State Specific Websites </li></ul><ul><ul><li>Salest...
Exemption Certificates <ul><li>www.CertCapture.com </li></ul><ul><ul><li>Free Forms for each state </li></ul></ul><ul><ul>...
Exemption Certificates <ul><li>Questions? </li></ul>
<ul><li>THANK YOU! </li></ul>For more information: Matthew MacNeil [email_address]
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Exemption Certificate Management

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Provides a basic knowledge of what defines a sales tax certificate, identifies common mistakes that can cost you money, and provides resources.

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Transcript of "Exemption Certificate Management"

  1. 1. Presented By: NACM and Tax Technology Services, LLC Exemption Certificate Management
  2. 2. <ul><li>A basic knowledge of what defines a sales tax exemption certifcate. </li></ul><ul><li>Identify common mistakes that can cost you money. </li></ul><ul><li>Resources that you can later utilize to get more information. </li></ul>Exemption Certificates Issues and Best Practices This Seminar will Provide:
  3. 3. Exemption Certificates <ul><li>Matthew MacNeil </li></ul><ul><li>Principal, Tax Technology Services, LLC </li></ul><ul><ul><li>Former Controller and Accounting Manager with Revenue recognition responsibilities. </li></ul></ul><ul><ul><li>Designed CertCapture and is responsible for CertCapture Client maintenance and satisfaction. </li></ul></ul><ul><ul><li>B.A. Purdue , M.B.A. Tulane University </li></ul></ul>Presenter
  4. 4. Exemption Certificates <ul><li>Exemption Certificates </li></ul><ul><ul><ul><li>Definition </li></ul></ul></ul><ul><ul><ul><li>Nexus defined </li></ul></ul></ul><ul><ul><ul><li>Drop Shipments </li></ul></ul></ul><ul><li>Controlling Certificates </li></ul><ul><ul><ul><li>Common Problems </li></ul></ul></ul><ul><ul><ul><li>Regulation Changes </li></ul></ul></ul><ul><ul><ul><li>Contractors </li></ul></ul></ul><ul><li>A Look Ahead </li></ul>Agenda
  5. 5. Exemption Certificates <ul><li>“ Everything is Taxable until proven otherwise” </li></ul><ul><li>An Exemption certificate is a legal document declaring they are using goods/services in a manner that is non-taxable in a specific State. </li></ul>Background
  6. 6. Exemption Certificates <ul><li>Describes your status as a tax agent for the State. </li></ul><ul><li>You are only required to collect sales taxes and certificates if you have nexus in the State. </li></ul><ul><li>Be familiar with what it takes to achieve nexus in most states. </li></ul><ul><li>Based on 1992 Quill Vs. ND Court case. </li></ul>Nexus
  7. 7. Exemption Certificates <ul><li>Common Nexus Indicators </li></ul><ul><ul><li>Physical Presence </li></ul></ul><ul><ul><li>Representative Presence </li></ul></ul><ul><ul><li>Delivery of product in company owned vehicles </li></ul></ul><ul><ul><li>Affiliated Presence </li></ul></ul><ul><ul><li>Regular Visits for Solicitation </li></ul></ul><ul><ul><li>Economic Nexus </li></ul></ul>Nexus is defined as a substantial connection a company has with a state
  8. 8. Exemption Certificates <ul><li>Manufacturing exemption </li></ul><ul><li>Purchase for resale </li></ul><ul><li>Purchase by charitable organization </li></ul><ul><li>Purchase by government/non-profit </li></ul><ul><li>Direct Pay permits </li></ul>Types of Exemption Certificates
  9. 9. Exemption Certificates <ul><li>Most States have specific certificates </li></ul><ul><ul><li>Exemption form </li></ul></ul><ul><ul><li>Resale </li></ul></ul><ul><ul><li>Special use </li></ul></ul><ul><li>Streamlined Sales Tax (SST) </li></ul><ul><li>Multistate Tax Commission (MTC) </li></ul><ul><li>Pre-Printed or State Issued forms </li></ul><ul><ul><li>Direct Pay Permits </li></ul></ul><ul><ul><li>Florida issues annual Resale forms </li></ul></ul><ul><ul><li>State issued letters of exemption </li></ul></ul>Types of Forms
  10. 10. <ul><li>Pros: </li></ul><ul><li>Seller is off the hook if all data elements are collected </li></ul><ul><li>Data can be obtained electronically </li></ul><ul><li>Cons: </li></ul><ul><li>State regulations can change rejecting certain sections </li></ul>SST Form
  11. 11. <ul><li>Pros: </li></ul><ul><li>One form for many states </li></ul><ul><li>Advantageous for retail solutions </li></ul><ul><li>Cons: </li></ul><ul><li>Harder to maintain expiration dates </li></ul><ul><li>State regulations can change the acceptance of this form </li></ul><ul><li>Some areas open to interpretation for acceptance </li></ul>MTC Form
  12. 12. Exemption Certificates <ul><li>When a seller accepts an order from a buyer and then the seller delivers goods to a third party. </li></ul>Drop Shipments Seller Buyer Customer Delivery Invoice Invoice
  13. 13. Exemption Certificates <ul><li>Some States assume items for resale and they are automatically exempt </li></ul><ul><li>Some states require the third party exemption certificate </li></ul><ul><li>Some states tax based on sellers price, others based on buyers price. </li></ul><ul><li>Problem States include CA, FL, DC, HI, IL, LA, MD, NV, OK – your Buyer really should be registered or else charge tax. </li></ul>Drop Shipments
  14. 14. Controlling Certificates <ul><li>Audits can occur at regular intervals. Mistakes can turn into costly penalties. </li></ul><ul><li>Customer short pays after the tax has been reported to the State. Getting money back from the state is not always an easy process. </li></ul><ul><li>Documents can become lost or expire. You have no proof on hand, but still consider the customer tax exempt. </li></ul>Common Problems
  15. 15. Controlling Certificates <ul><li>Audits becoming more aggressive </li></ul><ul><li>Regulations are changing – SST and new state regulations </li></ul><ul><li>Many states are now in a deficit </li></ul><ul><li>Nexus is being redefined in many areas. </li></ul><ul><li>Penalty fees are increasing </li></ul>Audit Trends and Regulations
  16. 16. Controlling Certificates <ul><li>FULL SST MEMBERS </li></ul><ul><li>Arkansas </li></ul><ul><li>Indiana </li></ul><ul><li>Iowa </li></ul><ul><li>Kansas </li></ul><ul><li>Kentucky </li></ul><ul><li>Michigan </li></ul><ul><li>Minnesota </li></ul><ul><li>Nebraska </li></ul><ul><li>Nevada </li></ul><ul><li>New Jersey </li></ul><ul><li>North Carolina </li></ul><ul><li>North Dakota </li></ul><ul><li>Oklahoma </li></ul><ul><li>Rhode Island </li></ul><ul><li>South Dakota </li></ul><ul><li>Vermont </li></ul><ul><li>Washington </li></ul><ul><li>Wisconsin </li></ul><ul><li>West Virginia </li></ul><ul><li>Wyoming </li></ul>Member states are marked on the map in Yellow. Orange states are associate members expected to join SST in the future. Grey states do not have sales tax on a state level.
  17. 17. Controlling Certificates <ul><li>Forms are incomplete </li></ul><ul><li>Inappropriate use of forms </li></ul><ul><li>Outdated/Expired forms </li></ul><ul><li>Forms cannot be found </li></ul><ul><li>All these items will cause penalties and interest to be charged to you. </li></ul>Audit rejection of certificates
  18. 18. Controlling Certificates <ul><li>Each state has unique laws. </li></ul><ul><li>States do not like contractors. </li></ul><ul><li>Certificates are normally site dependant, not customer dependant. </li></ul><ul><li>When in doubt get: </li></ul><ul><ul><li>Exemption certificate with Contractor information </li></ul></ul><ul><ul><li>Exemption certificate for job site </li></ul></ul>Contractors
  19. 19. Controlling Certificates <ul><ul><li>Standard paper </li></ul></ul><ul><ul><ul><li>Organize by State, then by company name </li></ul></ul></ul><ul><ul><li>Spreadsheets </li></ul></ul><ul><ul><ul><li>Can track expirations </li></ul></ul></ul><ul><ul><ul><li>Some basic reporting areas </li></ul></ul></ul><ul><ul><li>Utilize a specialize software </li></ul></ul><ul><ul><ul><li>Costs are higher </li></ul></ul></ul><ul><ul><ul><li>Brings special skills to you </li></ul></ul></ul>Ways of handling exemption certificates
  20. 20. Controlling Certificates <ul><li>Be Proactive </li></ul><ul><li>Consult your tax department </li></ul><ul><li>Evaluate your customers </li></ul><ul><li>Determine which states you should be collecting certificates (Nexus) </li></ul><ul><li>Create an expiration matrix </li></ul>What you need to do first
  21. 21. Controlling Certificates <ul><ul><li>Collect and organize what records you currently have on hand </li></ul></ul><ul><ul><li>Maintain a simple spreadsheet documenting what you have and important information. </li></ul></ul><ul><ul><li>Contact your customers that are missing documents as soon as possible </li></ul></ul><ul><ul><li>Maintain a forms library available for users. Subscription services do exist. </li></ul></ul>Begin at the Beginning
  22. 22. Controlling Certificates <ul><ul><ul><li>Do you have WRITTEN policies and procedures around Certificate Management? </li></ul></ul></ul><ul><ul><ul><li>Does everyone “who matters” know what a valid certificate looks like? </li></ul></ul></ul><ul><ul><ul><li>Who actually controls if the exemption happens in your system? </li></ul></ul></ul>Some Questions to Address
  23. 23. Exemption Certificates <ul><li>More complicated, more taxes and exemptions. </li></ul><ul><li>Sales and use tax audits are becoming more invasive, detailed and electronic </li></ul><ul><li>Virtual audits </li></ul><ul><li>The emergence/demise of SST ? </li></ul><ul><li>Federal Sales Tax (FairTax) replacing income tax </li></ul>A Look Ahead
  24. 24. Exemption Certificates <ul><li>Washington State constantly changing exemption laws. </li></ul><ul><li>More states are looking into ways to control contractors. </li></ul><ul><li>Idea of VAT being passed around in California. </li></ul>A Look Ahead
  25. 25. Exemption Certificates <ul><li>Your Tax Department! </li></ul><ul><li>State Specific Websites </li></ul><ul><ul><li>Salestax.Wordpress.com </li></ul></ul><ul><li>NACM/CRF Courses and brochures </li></ul>Resources
  26. 26. Exemption Certificates <ul><li>www.CertCapture.com </li></ul><ul><ul><li>Free Forms for each state </li></ul></ul><ul><ul><li>Quarterly newsletter with regulation updates and reminders </li></ul></ul>Resources
  27. 27. Exemption Certificates <ul><li>Questions? </li></ul>
  28. 28. <ul><li>THANK YOU! </li></ul>For more information: Matthew MacNeil [email_address]

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