The document discusses state and local tax nexus issues and their impact on mergers and acquisitions. It covers state income tax nexus standards such as physical presence and economic nexus thresholds. It also summarizes the Supreme Court's Wayfair decision that overturned the physical presence standard for sales tax nexus and allowed states to implement economic nexus standards. The document stresses the importance of conducting thorough due diligence on state tax issues during M&A transactions to identify potential liabilities.
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On June 21st, the United States Supreme Court issued its long-awaited decision in South Dakota v. Wayfair, overturning the requirement that an out-of-state seller have physical presence in order for a state to require the seller to collect and remit state and local sales tax. Under Wayfair, substantial nexus exists if the taxpayer “avails itself of the substantial privilege of carrying on a business in that jurisdiction.”
Original air date: Jan. 24, 2018
Recording available at http://www.mhmcpa.com
Several provisions in the new tax reform law will have a significant impact on not-for-profit organizations starting in 2018. From excise taxes to new unrelated business income considerations, organizations will need to take a close look at how tax reform changes affect their financial planning.
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This presentation will discuss recent cases including decisions/settlements that have never been reported as well as best practices/strategies to minimize an area in which even the most conscientious of taxpayers are at risk.
Original air date: Feb. 8, 2018
Recording available at http://www.mhmcpa.com
Administrative, legislative and judicial updates emerge from Washington each quarter that may affect your business. Our free, quarterly webinars provide insight to help prepare you for the tax developments of the most interest to you, your business and other interested stakeholders.
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EBE 2019 - eCommerce and US Sales Tax – why companies are automatingE-Commerce Berlin EXPO
Sacha Wilson
Director, Tax Technology Solutions EMEA Avalara
If you sell to customers in the US, get prepared for the major tax changes taking effect across the United States. The Supreme Court ruling in South Dakota v. Wayfair Inc, is only the beginning of a wave of change impacting companies that sell crossborder in the US. Get the latest updates and learn how companies are turning to tax technology solutions in their ecommerce checkouts, billing systems and ERPs to automate compliance.
Sacha Wilson is Avalara’s Director, Tax Technology Solutions EMEA, whose team helps businesses of all size automate the complexities of global tax compliance. Sacha’s background in business development and ecommerce spans over 20 years and covers blue-chips such as Amazon and Arcelor-Mittal as well as several dotcom start-ups. During 11 years at Amazon he launched and grew a number of programmes including Amazon’s Marketplace, Fulfilment by Amazon, Amazon Pay and Product Ads. He brings a depth in understanding of ecommerce and the tax issues facing European businesses involved in global trade.
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This course will lay out some of the important aspects of state income tax and sales tax nexus concerns, then address the importance of performing detailed state and local tax due diligence. It will also discuss the importance of performing due diligence to address the potential sins of the past before actually entering the M&A market.
On June 21st, the United States Supreme Court issued its long-awaited decision in South Dakota v. Wayfair, overturning the requirement that an out-of-state seller have physical presence in order for a state to require the seller to collect and remit state and local sales tax. Under Wayfair, substantial nexus exists if the taxpayer “avails itself of the substantial privilege of carrying on a business in that jurisdiction.”
Original air date: Jan. 24, 2018
Recording available at http://www.mhmcpa.com
Several provisions in the new tax reform law will have a significant impact on not-for-profit organizations starting in 2018. From excise taxes to new unrelated business income considerations, organizations will need to take a close look at how tax reform changes affect their financial planning.
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Whistleblower and Class Action Lawsuits in Sales Tax: Dammed if You Do, Damne...Levenfeld Pearlstein, LLC
This presentation will discuss recent cases including decisions/settlements that have never been reported as well as best practices/strategies to minimize an area in which even the most conscientious of taxpayers are at risk.
Original air date: Feb. 8, 2018
Recording available at http://www.mhmcpa.com
Administrative, legislative and judicial updates emerge from Washington each quarter that may affect your business. Our free, quarterly webinars provide insight to help prepare you for the tax developments of the most interest to you, your business and other interested stakeholders.
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EBE 2019 - eCommerce and US Sales Tax – why companies are automatingE-Commerce Berlin EXPO
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Original air date: Feb. 21, 2018
Recording available at http://www.mhmcpa.com
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Original air date: Jan. 4, 2018
Recording posted at http://www.mhmcpa.com
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Original air date: March 8, 2018
Recording available at http://www.mhmcpa.com
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Director, Tax Technology Solutions EMEA Avalara
If you sell to customers in the US, get prepared for the major tax changes taking effect across the United States. The Supreme Court ruling in South Dakota v. Wayfair Inc, is only the beginning of a wave of change impacting companies that sell crossborder in the US. Get the latest updates and learn how companies are turning to tax technology solutions in their ecommerce checkouts, billing systems and ERPs to automate compliance.
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During this webinar we will review the current status of the tax world for both business and personal tax. This webinar will dive into how we got to where we are at, what is going on now, and where we might be headed in 2017 and beyond. This presentation will also highlight new, proposed tax reform plans, how they differ from the current plans, and how they might impact both business and personal income tax.
Our Spring Tax Updates will be taking place across the region in March 2018.
The update will include the following:
• Comment on the latest legislative changes
• Provide practical advice
• Help to prepare for the end of the tax year
• Give thoughts on the current tax policy
Our Spring Tax Updates will be taking place across the region in March 2018.
The update will include the following:
• Comment on the latest legislative changes
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• Help to prepare for the end of the tax year
• Give thoughts on the current tax policy
Presentation by Bob Johnson of BKD, LLP about state and local tax laws to the Wichita Metro Chamber of Commerce's September 2015 Small Business CEO Roundtable
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You're in business, now what? You need resources to help your business grow. You want to make sure you cross all the T's and dot all the I's. You need help with taxes, formation, mentoring and marketing? Let us help you "Power Up Your Business".
Registration & Networking from 5:30 - 6pm
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Original air date: Feb. 21, 2018
Recording available at http://www.mhmcpa.com
The tax reform bill was signed into law on Dec. 22, 2017, bringing sweeping and historic changes to our country’s tax laws. These changes generally are effective in 2018 and impact every taxpayer as well as activities such has mergers and acquisitions (M&A). Businesses and their owners have new and unique considerations to take into account as they optimize M&A decisions under these provisions.
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Powerpoint from the 16th Annual Illinois State and Local Tax Conference held Sept. 17, 2015. The presentation, given by Levenfeld Pearlstein, LLC Partner David Blum and Adam Beckerink of Reed Smith LLP, was titled "Audited Through the Courts: The Troubling Trend in False Claims Act, Class Action , and Municipal Litigation"
Original air date: Jan. 4, 2018
Recording posted at http://www.mhmcpa.com
The tax reform bill was signed into law on Dec. 22, 2017, bringing sweeping and historic changes to our country’s tax laws. These changes generally are effective in 2018 and impact every taxpayer, from individuals to businesses to trusts and estates, along with not-for-profit organizations as well. We will explore all of the key provisions of the tax reform bill across these sectors, and will offer insight about how the new law differs from prior law.
Original air date: March 8, 2018
Recording available at http://www.mhmcpa.com
The tax reform bill was signed into law on Dec. 22, 2017, bringing sweeping and historic changes to our country's tax laws. Manufacturers will benefit from lower tax rates and more generous depreciation under the new law, but other nuances require further analysis.
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Director, Tax Technology Solutions EMEA Avalara
If you sell to customers in the US, get prepared for the major tax changes taking effect across the United States. The Supreme Court ruling in South Dakota v. Wayfair Inc, is only the beginning of a wave of change impacting companies that sell crossborder in the US. Get the latest updates and learn how companies are turning to tax technology solutions in their ecommerce checkouts, billing systems and ERPs to automate compliance.
Sacha Wilson is Avalara’s Director, Tax Technology Solutions EMEA, whose team helps businesses of all size automate the complexities of global tax compliance. Sacha’s background in business development and ecommerce spans over 20 years and covers blue-chips such as Amazon and Arcelor-Mittal as well as several dotcom start-ups. During 11 years at Amazon he launched and grew a number of programmes including Amazon’s Marketplace, Fulfilment by Amazon, Amazon Pay and Product Ads. He brings a depth in understanding of ecommerce and the tax issues facing European businesses involved in global trade.
During this webinar we will review the current status of the tax world for both business and personal tax. This webinar will dive into how we got to where we are at, what is going on now, and where we might be headed in 2017 and beyond. This presentation will also highlight new, proposed tax reform plans, how they differ from the current plans, and how they might impact both business and personal income tax.
Our Spring Tax Updates will be taking place across the region in March 2018.
The update will include the following:
• Comment on the latest legislative changes
• Provide practical advice
• Help to prepare for the end of the tax year
• Give thoughts on the current tax policy
Our Spring Tax Updates will be taking place across the region in March 2018.
The update will include the following:
• Comment on the latest legislative changes
• Provide practical advice
• Help to prepare for the end of the tax year
• Give thoughts on the current tax policy
Presentation by Bob Johnson of BKD, LLP about state and local tax laws to the Wichita Metro Chamber of Commerce's September 2015 Small Business CEO Roundtable
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Power Up Your Business is a Workshop created by Lady Bizness to expose business onwers and entrepreneurs to the experts in the state that provide up to date information to help your business be more successful.
You're in business, now what? You need resources to help your business grow. You want to make sure you cross all the T's and dot all the I's. You need help with taxes, formation, mentoring and marketing? Let us help you "Power Up Your Business".
Registration & Networking from 5:30 - 6pm
You will hear from the following organizations:
IRS: Federal Tax Law Compliance Tips | IRS.gov Resources | Business ID Theft | Employment Tax Issues
BLNC: Registering Your Business | Getting the Correct Licenses and Permits | Registering with Tax Organization | Learning about Compliance Issues for Your Specific Business
NCDOR: The basics of NC tax law compliance | Registering your Business | Employee Withholding | Sales and Use Tax Requirements | Programs for Businesses that have fallen behind
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recent California income and franchise tax developments and how those developments compare and contrast with income and franchise tax laws in other states.
[ON-DEMAND WEBINAR] Revealing The State & Local Tax Considerations Of A Remot...Rea & Associates
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#ReaCPA #State&LocalTax #RemoteEmployees
Testimony: Kansas Tax Modernization: A Framework for Stable, Fair, Pro-growth...Kevin Kaufman
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US Sales Tax Guide - Understand How Sales Tax works in US Market
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3. Historical Background:
4.Local Sales Tax Rates:
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It provides an overview of the enacted 2017-2018 Pennsylvania State Budget; a brief update on recently passed Pennsylvania tax legislation and court decisions of interest; and discusses how states, including Pennsylvania, are addressing these changes at the Federal level in their own respective tax structure.
Similar to State and Local Tax Nexus Issues and the Impact on Mergers and Acquisitions (20)
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State and Local Tax Nexus Issues and the Impact on Mergers and Acquisitions
1. State and Local Tax Nexus
Issues and the Impact on
Mergers and Acquisitions
Mary Jo Dolson, CPA
June 20, 2019
2. 2
State and Local Tax
• State and Local Income Tax Nexus Issues/Concerns
• State and Local Sales/Use Tax Nexus in Light of Wayfair
• Importance of State and Local Tax Issues in Relation to
Mergers and Acquisitions
• Conclusion
3. 3
State and Local Tax
Importance of State and Local
Taxes
• As states continue to rebound
from the recession, they look to
different means to raise revenue
• States are expanding their
discovery of efforts to pull in
more taxpayers
States more aggressive in sending
out nexus questionnaires
Conducting audits of out-of-state
businesses operating in state
4. 4
Nexus: What Is It?
The connection between a taxpayer and a taxing jurisdiction
that is constitutionally and statutorily sufficient enough for the
taxing jurisdiction to impose a tax.
5. 5
Nexus
Nexus standards are different for state income tax and sales
tax:
• State income tax – public law protection
• Sales tax – no public law protection
6. 6
State Income Tax Nexus
Complete Auto Transit
• The Supreme Court developed a four-prong test to
determine if a state can impose a state income tax:
For a tax to be viewed as constitutional the tax is applied to an
activity with substantial nexus
Must be fairly apportioned
Doesn’t discriminate against interstate commerce
Fairly related to the services provided by the state
7. 7
Nexus: How to Determine
• Each state has its own
nexus standards
• Common measures for
nexus:
Physical presence
Remote employees
Mobile employees
Employee activity
Registered to do business
Economic threshold standards
Affiliated nexus
8. 8
Nexus: How to Determine
• Physical presence:
Property
Payroll
Inventory – consigned
Inventory at manufacturers
Inventory at printers
9. 9
Nexus: How to Determine
• Remote employees
Temporarily located outside state
Permanently located outside state
• Mobile employees
Traveling for different projects
10. 10
Nexus: How to Determine
• Affiliated nexus
Nexus position new to states
11. 11
State Income Tax Nexus
• Public Law 86-272 protection
Tangible personal property
Services
• Operations in the state
• Assets located in the state
• Employees traveling into state
• Economic nexus
Set amount of property, payroll and sales in the state
‒ Generally enacted by statute
12. 12
Public Law 86-272
• Federal public law to protect certain activities against
income tax across state lines
• Protected activities:
Solicitation of sales of tangible personal property
Services that are ancillary to solicitation of sales
De Minimis activities as compared to protected activities
• Exempts entities from net income tax
Does not exempt entity from sales tax, franchise tax, gross receipts
tax, minimum taxes, etc.
13. 13
Public Law 86-272
• Need to look at what
activities are being
performed by employees
to determine if protected
by Public Law
• Each state might have its
own take on protected
and unprotected
activities for employees
14. 14
Public Law 86-272
• Can a taxpayer still claim
Public Law protection if
taxpayer exceeds an
economic nexus threshold?
• What if taxpayer is
providing a service in the
state—is there Public Law
protection?
• What if a taxpayer has
inventory located in a
state—can they claim
Public Law protection?
15. 15
Public Law Example
Company B sells computer systems to customers in New
York. It has no property or full-time employees in New York.
At the request of its customers, a part of the sale price of the
system includes installation. Now sales staff must install and
service the computer systems as a part of their job.
Does Company B fall under Public Law protection?
16. 16
Public Law Exemption
Company B sells computer systems to customers in New
York. It has no property or full-time employees in New York.
At the request of its customers, a part of the sale price of the
system includes installation. Now sales staff must install and
service the computer systems as a part of their job.
Does Company B fall under Public Law protection?
• No
17. 17
Public Law Protection
Does Public Law 86-272
apply to the performance of
a service?
• What if performing a
mixture of service and
sale of product?
• What if in the state one
year and no activity the
next year?
18. 18
Sales Tax Nexus
• No Public Law protection
• Has been turned upside
down this year
• Physical presence
• Economic nexus threshold
19. 19
Wayfair Decision
Physical Presence Standard
• National Belles Hess
First case addressing physical presence standard
Decided during the 1960s
• Quill v. North Dakota
Case most referred to when discussing physical presence for sales
tax
Decided early 1990s
20. 20
Wayfair Decision
Direct Marketing
• Case decided by the
Supreme Court in 2015
• In deciding the case,
Justice Kennedy’s
concurring opinion
indicated that the states
should find a case for the
court to re-examine Quill
• The states started plotting
just such a case
21. 21
Wayfair Decision
South Dakota
• March 2016 – South Dakota enacted the “economic
nexus” standard that the Supreme Court examined in
Wayfair
The standard is $100,000 in South Dakota sales or 200
transactions.
• South Dakota went after Wayfair, Overstock and NewEgg
for not complying with the new “economic nexus” standard
• Unique about South Dakota – the way the court system
works a case can quickly work its way through the South
Dakota system and get to the Supreme Court
22. 22
Wayfair Decision
South Dakota’s Arguments:
• States, local brick-and-mortar stores and interstate
commerce are harmed (i.e., lost revenue)
• Brick-and-mortar stores are discriminated against (i.e.,
higher price than online retailers)
• The physical presence standard is obsolete in the internet
economy
• There is little burden on vendors
23. 23
Wayfair Decision
Wayfair’s Arguments:
• States receive 75% – 80% of all remote sales tax, and
uncollected amount is declining;
19 of top 20 internet retailers collect tax on most or all states
• Overturning Quill would be a huge burden on businesses
• Retroactive liability would be crippling
• States need to simplify before Quill is re-examined or
overturned
SSUTA: 23 signatory states but only 1/3 of population
24. 24
Wayfair Decision
Supreme Court Action:
• Granted cert January 2018
• Oral arguments heard April 17, 2018
• Decision rendered June 21, 2018
• The decision went 5-4 in favor of South Dakota
“Isn’t the problem not Quill, but the fact that you don’t have a
mechanism to collect from consumers?”
Justice Sotomayor
In dissenting opinion, Justice Roberts indicated “Yes, we got Quill
wrong, but it is up to Congress to enact a fix to the physical nexus
standard.”
25. 25
Wayfair Decision
Supreme Court Action:
• Decided South Dakota’s “economic nexus” standard was
sufficient.
Prior to Wayfair, business was required to have a physical
presence
‒ Employee
‒ Employee visits
‒ Attend trade shows
‒ Property and/or inventory in state
Post Wayfair “economic nexus”
‒ Sufficient amount of sales, or
‒ Number of transactions
26. 26
Wayfair Decision
What Happens Now:
• South Dakota case was remanded to South Dakota
Supreme Court
• Numerous states have similar “economic nexus’ standards
in place – $100,000 in sales or 200 transactions
• The question is, “Where do we go from here?”
Are the changes retroactive?
What about use tax reporting?
Will Congress do anything?
27. 27
Wayfair Decision
• Numerous states already have an “economic nexus” standard
as part of their state statute
• Some states enacted before South Dakota and some since
anticipating the Supreme Court decision
• Questions that need to be addressed:
If part of state statute prior to Wayfair, how will the states handle
prospectively or retroactively?
How do you determine sales for the economic nexus standard?
What is meant by a transaction?
– Entire invoice or each line item?
– Is it taxable sales or all sales?
– What if everything I sell is exempt?
28. 28
Wayfair Decision
Prospective or Retroactive
Treatment
• State’s submitted briefs
during the Wayfair case
indicating they would
enforce prospectively
• Supreme Court in rendering
its decision noted South
Dakota’s prospective
treatment
29. 29
Wayfair Decision
Economic Nexus Threshold
• South Dakota’s is $100,000 in sales or 200 transactions
• The majority of the states with an economic nexus
standard have a similar or higher standard
• It is believed the standards would hold up and can be
enforced
• States are moving forward with enforcement
• We are still awaiting guidance on effective dates
30. 30
Wayfair Decision
Impact to Businesses:
• Online retailers
• Manufacturers
• Service providers
• International businesses
31. 31
State Tax and Due Diligence
• State tax issues increasingly more important
• Many aspects need to be examined:
State income tax
Sales tax
Payroll
Personal property
Unclaimed funds
Casual sales issues
Pre-due diligence
32. 32
State Tax and Due Diligence
State Income Tax
• Nexus concerns
• State income tax returns
• Apportionment information
• Cost of performance / market-based sales
• Audit results
• State tax issues increasingly more important
• Tax clearances
• Required registrations
33. 33
State Tax and Due Diligence
Sales/Use Tax
• Nexus concerns
• Sales/use tax returns
• Use tax filings
• Audit results
• Exemption certificates
• Casual sales / bulk sale exemption
• Audit results
• Tax clearances
• Asset purchase / entity purchase
• Required registrations
34. 34
State Tax and Due Diligence
Payroll
• Withholding returns
• Filing properly
• Required reporting forms
• Audit results
• Tax clearances
• Registration requirements
35. 35
State Tax and Due Diligence
Personal Property Tax
• Review of returns
• Assets being properly
reported
• Requirements after deal
• Accounts
36. 36
State Tax and Due Diligence
Unclaimed Funds
• Are returns being filed?
• Is there an exposure for
unreported funds?
• Any procedures to determine if
unreported funds?
• Procedures if funds
discovered?
37. 37
State Tax and Due Diligence
What steps should you take if you
discover issues during due
diligence process?
• Voluntary disclosure
• Amnesty programs
• Back return requirements
38. 38
State Tax and Due Diligence
Successor liability issues
• Asset deal
• Stock deal
• Escrow
• Bulk sale/casual sale
exemption
39. 39
State Tax and Due Diligence
Pre-Due Diligence
• Get the house in order
before the sale
• Review all filings
• Enter into VDAs to fix
issues
• Help reduce due diligence
in future
40. 40
Conclusion
• State Income Tax Nexus
Public Law Protection
Physical Presence – Economic Nexus
• Sales/Use Tax Nexus
Wayfair Impact
Compliance Issues
• Due Diligence
Pre-Due Diligence Review
Cautious Even With Asset Sale
41. 41
Contact Us
Mary Jo Dolson, CPA
Partner
Phone – (813) 386-3881
Mobile – (216) 316-8070
Email – mdolson@skodaminotti.com