“Wholesale changes” and “fast-moving” aren’t phrases often used to describe tax law. However, as we approach the second anniversary of the passage of the Tax Cut and Jobs Act (TCJA) and are now over a year removed from the Supreme Court’s ruling on the Wayfair Case, these terms have been used much more frequently. With the end of the calendar year quickly approaching it’s a good time to revisit some of the developments stemming from Wayfair and the TCJA to prepare for what’s next.
Wayfair: Not Just for Retail.
The June 2018 Wayfair ruling brought with it a flurry of sales tax activity at the state level. Gone are the old physical presence standards of yesterday, replaced by minimal sales and/or transaction thresholds, making it even more challenging to stay on top of tax liability if you conduct business in multiple states. Sales tax compliance is now required in most states when reaching $100,000 in sales or 200 transactions. Recently, a state tested new waters under the Wayfair ruling by issuing a sales tax filing threshold of $1. It’s easy to see how the new filing requirements could add up for businesses with transactions throughout the United States.
Think that the Wayfair decision is only for retailers? Think again, while it’s much clearer cut for retailers, they are far from the only ones impacted by Wayfair. Each state’s laws regarding what is and isn’t subject to sales tax differs. Meaning that even if your product or service is exempt from sales tax in your home state, you may have an obligation to collect and remit sales tax in other states. Even if exempt, you may still have reporting requirements.
Most states do allow sales tax exemptions for B2B (business to business) transactions. What’s becoming more apparent is that the burden of proof is on the seller, both to obtain evidence of buyer’s exemption from sales tax, and to report sales activity to the other states to rightly claim the exemption. Because of this, filing requirement thresholds, for many states, are determined based on gross sales, not taxable sales.
If the complexities of keeping up with state tax laws weren’t intricate enough, almost immediately following the Wayfair decision, state taxing authorities began to aggressively seek out businesses that owe money. Nevertheless, there are ways you can be proactive and address these issues before they become compliance problems. We’ll be discussing those in detail on our upcoming webinar.
Tax Cuts & Jobs Act
It’s hard to believe, but tax reform is nearing its second anniversary, and as it does, clarity into its impact continues on several fronts. For example, the IRS recently issued final regulations on the 100% bonus depreciation provisions contained in reform. And, we learned many lessons from the first filing season completed under the recent tax reform. As more regulations are issued, we are certain to gain further insight into the true impact of tax reform and the best ways for a business to prepare and respond.
While tax reform has caused quite a stir, there are many planning opportunities that you can take advantage of no matter your business size or industry. These options can help minimize, or even eliminate, taxes created under reform.
Understanding the value of incorporating taxes in your overall business strategy is critical. Join us as we review both Wayfair and Tax Reform, look at the year ahead to identify potential regulatory updates, and help you plan for the remainder of 2019 including strategies to maximize tax deductions.
Shane Finn, Strategic Tax Advisory Manager
As a leader of SN’s State and Local Tax (SALT) Practice, Shane applies his significant experience to help clients navigate the complex SALT environment, ensure compliance, and enhance profitability. Working with clients in a wide range of industries including Professional Services, Construction, Real Estate, and Manufacturing, Shane has specific expertise in Credits & Incentives, Excise Tax, Income & Franchise Tax, Mergers & Acquisitions Due Diligence, Property Tax, Research & Development Tax Credits, Sales & Use Tax, and Unclaimed Property.