Brian Gordon, CPA, is the Director of State and Local Taxes at Sanders Thaler Viola & Katz, LLP. Previously, Brian was with the NYS Department of Taxation and Finance as the District Audit Manager in Manhattan and Brooklyn. He is a member of the NYSSCPA New York, Multistate & Local Taxation Committee and writes and speaks on various tax issues. He can be reached at 516-704-7130 or 516-510-6041 and email: bgordon@st-cpas.com.

STVK in the News

Happy Spring! I hope you had a great tax season.

Tax Audit Success

Once again, we completed a residency audit with the ultimate in success; a no change. And, once again, this was a case that was referred to me by another CPA who was unsuccessful. At the point of referral, they had already received a statement of audit changes holding the clients to be New York State (NYS) residents, though the clients were claiming to be Florida residents.

I was able to convince the NYS Tax Auditors that the clients had changed their domicile to Florida prior to the years under audit, and the statement of audit changes was recinded. The non-resident returns were accepted as filed – no change.

I certainly appreciated this referral, and I am thrilled that everything worked out well for the client, but I maintain that it is best to refer audits to me when they start, rather than having to convince the audit division that their first decision was erroneous.

Due to my background of 30 years with the NYS Department of Taxation and Finance, many of those years as District Audit Manager in the Metropolitan area, I was able to develop knowledge, experience and an understanding of the nuances of how an audit position should be defended. My consistant success in audit defense is a testament to that.

If you have any audit questions or issues please call me, Brian Gordon, at 516-704-7130 or email at bgordon@st-cpas.com.

Upcoming Speaking Engagements

News and Tax Issues

Economic Nexus in Wisconsin – Any Activity at All?

In many states, there is an income tax filing requirement if you perform services and your customer receives the benefit of your services in a foreign state. You do not have to have a physical location in that state, nor do you or one of your employees have to step foot in that state. This is one description of Economic Nexus.

States have written laws with regard to new nexus requirements and, thus far, state courts have upheld these laws. In most of these cases, the states have initiated a threshold where nexus is created only if sales in that state exceed that threshold. For example, New York State initiated Economic Nexus in 2015 with a threshold of $1 million in sales. If your sales of services which would be apportioned to New York exceed $1 million, you are deemed to have nexus in New York for Corporation Tax purposes.

Wisconsin does not have a dollar value threshold, so why am I focusing on Wisconsin?

They are sending out tax notices asserting nexus and their tax department is claiming that a corporation that has any sales of services at all, where the customer receives the benefit of the service in Wisconsin, is subject to Corporation Tax.

What does the law actually say?
71.22 (1r): “Doing business in this state” includes … regularly performing services outside this state for which the benefits are received in this state…

It appears that they do have a threshold, although it is not stated in dollars. The threshold is: “regularly.” When I finish wrestling with the state of Wisconsin tax department, I will let you know what ‘regularly” means.

Nexus laws are changing quickly; state by state, involving all types of state taxes. Many practitioners are utilizing my services to do nexus reviews. If you have any questions on nexus, please call me, Brian Gordon, at 516-938-5219 or email at bgordon@st-cpas.com.

New Economic Nexus Laws for Sales Tax

When you have sufficient activity in a state that requires a business to register and file business taxes or to collect sales tax, you are said to have nexus in that state.

There was a time not long ago that, if a business was only located in New York State, we did not pay much attention to nexus issues in other states. Physical presence of property or personnel was required to create nexus. In the past few years however, we’ve been introduced to economic nexus for Corporation and Income Tax. That is, nexus based on economic activity – not physical activity. Now, we must pay attention even if your only contact with states is having sales to customers in those states.

Economic nexus is now also being applied to Sales Tax collection responsibilities. If you believe that sales shipped out of state are not subject to sales tax, you may be wrong, depending on the state you’re shipping to. Wyoming just became the newest state to pass legislation to require remote sellers with no physical presence there to collect Wyoming sales tax. The law signed on March 1 becomes effective July 1, 2017.

A business with no physical presence will be required to collect Wyoming sales tax if in the current or preceding year:

• You have more than $100,000 in sales into Wyoming or
• You have 200 or more separate sales transactions into Wyoming.

Why are the states doing this?

Online shopping is increasing and local store shopping is decreasing. When people shop online, often the vendor is not located in their state; therefore sales tax is not charged. As tax professionals know, even though sales tax is not charged by the out of state vendor, the purchaser owes use tax to their home state. We also know that very little of this use tax is actually paid, and it is almost impossible to monitor this and enforce collection. States now feel that they must pass these new laws to regain their lost revenue.

You might ask…Isn’t there a Supreme Court decision, Matter of Quill, that established that physical presence is required before a state can claim that you have nexus for sales tax collection?

The answer is yes. However, states like Wyoming are challenging Quill by passing new laws and forcing companies to collect their state sales tax. We can challenge these laws in court, but state courts are not likely to overturn them and the U.S. Supreme Court has not been accepting any nexus cases. In fact, in a related matter, a Supreme Court Justice expressed sympathy to the states that are losing sales tax revenue as a result of internet sales and suggested that the decision in Quill should be revisited.

South Dakota and Alabama have already passed similar laws, and several other states have proposed them. Colorado took a different approach, instead requiring vendors with sales of over $100,000 into Colorado to notify customers of their use tax responsibility. The vendors must also send information on customer purchases to the state of Colorado. This practice is similar to a federal Form 1099 for income reporting.

If you have any questions about nexus, please call me, Brian Gordon, at 516-704-7130 or email at bgordon@st-cpas.com.

For more information regarding State and Local Taxes, please visit
Brian Gordon's S.A.L.T Blog at:
www.st-cpas.com/blog.