Multi-State Sales and Use Tax Webinar

Jason Skrinak, CPA

jskrinak@macpas.com

Introduction

• Principal – State and Local Taxes, McKonly & Asbury, LLP

• State and Local Tax Committee and Legislation Committee member of the Pennsylvania Institute of Certified Public Accountants

• PICPA’s “40 under 40” for 2009

Summary

• What is nexus?• What creates nexus?• What to do once nexus is determined?• What are some common state issues?

What is Nexus?

• Minimum level of presence or connection one has to a state tax requires registering, filing and paying a tax

• Is nexus the same for different types of tax?– No, the minimum connection differs from tax to

tax within a state.

Nexus – Sales and Use

• Nexus established through court cases– National Bellas Hess

– Complete Auto Transit

– Quill Corporation

• Cases require physical presence

What Creates Physical Presence Creating Nexus?

• Owning buildings or property• Having employees within state• Providing services within state (maintenance,

installation, training, etc.)• Solicitation of sales (property or services)• Affiliate nexus• Agency or subcontractor nexus

What if I Have Nexus?

• Do nothing (not recommended)• Assess potential exposure• Be proactive• Review amnesty and voluntary disclosure

programs

How Do States Locate Taxpayer’s with Nexus

• Through your customers (via audits)• Information sharing with other states• Competition• Employees (current and former)• Stake outs• All can lead to Business Activity

Questionnaires or possible assessments

How Do I Handle BAQ’s?

• Do nothing (not recommended).• Have someone within organization complete

& submit.• Have someone knowledgeable with regards

to nexus complete and have consultant review.

What are the Benefits of Being Proactive over Doing

Nothing?• Limit look back period• Potentially limit late filing/payment penalties

for prior years• Potentially limit interest for prior years• Avoid civil penalties and revocation of

business license

Do All States Have Similar Sales and Use Tax Rules?

• No – varies greatly with regards to taxable property, taxable services, calculation of purchase price, who is deemed to be end user, taxation at local levels, etc.

Do All States Have Similar Sales and Use Tax Rules?

• Construction vs. non-construction• Exemptions available

– Manufacturing– Processing– Research & Development

• Entities exempt from tax– Schools & universities– Government entities– Other nonprofits

What are Some Common Multi-State Sales and Use

Tax Issues?• No nexus with state, but customer wants you

to collect tax.• Collecting tax and remitting to wrong state.• Not requiring exemption certificates or

collecting erroneous certificates.• Taking someone else’s tax liability through

acquisition

What Should Be Done Going Forward Once Nexus

is Established?

• Properly register• Timely file and remit tax• Maintain complete and current exemption

certificates

What if We are Audited for Sales Tax?

• Prepare for audit.• Address issues during audit.• Review potential refund opportunities.• Know appeal rights and deadlines.• Attempt to reduce assessment

administratively.• Review assessment and correct any issues

going forward.

What Should I Take from This Webinar?

Do not pay someone else’s bill!

Contact InformationJason Skrinak, Principaljskrinak@macpas.com

(717) 972-5828