The California Department of Tax and Fee Administration (CDTFA) recently issued a special notice updating out-of-state e-retailers regarding their sales and use tax obligations for products delivered to California consumers. Specifically, beginning October 1, 2019, it will be the marketplace facilitator, rather than the marketplace seller, who will be responsible for collecting and paying sales and use tax on retail sales.
The Internal Revenue Service (IRS) recently announced that, starting May 13, 2019, only natural persons with a Social Security number or an individual taxpayer identification number may request an EIN as the "responsible party" on the application. Entities will no longer be able to use their own EINs to obtain additional EINs.
Beginning in 2010, the Panera Bread Foundation, a non-profit related to the popular restaurant chain, piloted a limited experiment in the "gift economy," whereby customers could "pay it forward" or "pay-what-you-can" at select cafes. The experiment, unfortunately, failed due to lack of financial viability. In a double-hit, the Internal Revenue Service (IRS) now claims the experimental cafes owe back taxes to 2012 on annual revenues exceeding $7.5 million.
Arizona Attorney General Mark Brnovich recently asked the U.S. Supreme Court for permission to file suit against the State of California over the $800 minimum business tax imposed on investors in certain LLCs. Brnovich contends that the California minimum tax, and California's related collection efforts when investors or businesses do not pay, is illegal because the investors have "purely passive investments in California companies." In addition, since the $800 minimum tax is deductible on Arizona tax returns, the California practice is costing Arizona more than $484,000 annually.
January 24, 2019 Update: On January 17, 2019, Assembly Bill AB 71 (Melendez) (seeking to statutorily supersede the narrow holding in Dynamex, by codifying the widely accepted factors in Borello) was referred to the Assembly Committee on Labor & Employment. Assembly Bill AB 5 (Gonzales) (seeking to codify Dynamex and clarify the decision's application in state law) is an active bill and pending referral to a committee.
The California Legislative Analyst's Office (LAO) released a fiscal outlook report recently that indicates California will soon be implementing changes to sales and use tax collection for out-of-state businesses in the wake of the June 2018 Wayfair decision. "The administration plans to start registering out-of-state taxpayers soon," the LAO wrote, and anticipates increases to state revenue from related changes starting around $100 million or more in the next couple years. To read the full report, click here.
California taxpayers who ceased doing business but continue to get requests for unpaid taxes or unfiled returns from the Franchise Tax Board (FTB) may benefit from a new bill, AB 2503, which goes into effect January 1, 2019, and provides two options for an administrative dissolution of qualified domestic corporations and LLCs. The FTB will be able to administratively dissolve a business that has been suspended for 5 years or longer, or has ceased doing business, and meets other qualifications. Otherwise, taxpayers may request that the FTB abate unpaid, qualified taxes, interest, and penalties for years for which the entity certifies under penalty of perjury that it did not do business and has no remaining assets.
The California Franchise Tax Board (FTB) recently announced the 2018 indexed threshold values for determining whether an entity is doing business in the state. If any of the following conditions are met, the taxpayer is considered to be doing business in California:
The Internal Revenue Service (IRS) announced this week that business payments to charities that result in state or local tax credits will be deductible expenses in most cases. This is unlike the manner in which the IRS has said it will treat payments that individuals make to charities (details here). For more information on SALT deductions available to businesses, click here.
Back in June, the U.S. Supreme Court issued a decision in South Dakota v. Wayfair, Inc. that reversed Quill's requirement for physical presence to establish sales tax nexus for out-of-state businesses. Individual states are now hurrying to decide upon economic or transactional thresholds to govern who should be collecting and paying over sales tax concerning primarily e-commerce sales.