VA: Corp President not held liable for unpaid sales

The 20% owner of a tire shop who performed the duties of shop foreman was relieved of personal liability for unpaid sales taxes because he proved that, despite his standing as the President of the corp, he did not meet the VA definition of a corp officer. He did not have enough ownership/authority to control business affairs. He had no actual knowledge that the taxes were not being paid. The duty of reporting and remitting sales taxes fell to others. These factors were taken into consideration and the VA commissioner ruled in his favor. Each state will look at different criteria and apply varying weights to items of evidence but this case provides some insight on who responsible parties might be in cases of unpaid sales taxes.

State Tax Reciprocal Agreements example

From January 2010. These may not always stay the same so please confirm before depending on the info! (DE has no reciprocal agreements of this nature.)

State States with State Tax Reciprocal Agreements Exemption Form


District of Columbia All non-residents who work in DC can claim exemption from withholding for the DC income tax. D-4A

Illinois Iowa, Kentucky, Michigan, Wisconsin IL-W-5-NR

Indiana Kentucky, Michigan, Ohio, Pennsylvania, Wisconsin WH-47

Iowa Illinois 44-016

Kentucky Illinois, Indiana, Michigan, Ohio, West Virginia, Wisconsin, Virginia 42A809

Maryland District of Columbia, Pennsylvania, Virginia, West Virginia MW 507

Michigan Illinois, Indiana, Kentucky, Minnesota, Ohio, Wisconsin - Employers may create their own exemption form or use the line on MI-W4 for claiming exemption from withholding. Employee should write "Reciprocal Agreement" and the state name on that line. MI-W4

Minnesota Michigan, North Dakota MWR

Montana North Dakota NR-2

New Jersey Pennsylvania NJ-165

North Dakota Minnesota, Montana NDW-R

Ohio Indiana, Kentucky, Michigan, Pennsylvania, West Virginia IT-4NR

Pennsylvania Indiana, Maryland, New Jersey, Ohio, Virginia, West Virginia REV-420

Virginia Kentucky, Maryland, District of Columbia, Pennsylvania, West Virginia VA-4

West Virginia Kentucky, Maryland, Ohio, Pennsylvania, Virginia WV/IT-104

Wisconsin Illinois, Indiana, Kentucky, Michigan W-220

Virginia: No deduction for taxes paid to MD in error

If you live in one state but work in another, your employer will generally withhold and remit taxes to the state where you are working - not where you are living. However, you will owe tax to your state of residence on all the income you earn, regardless of where you earned the income. Your home state will probably give you a credit for taxes paid to other states so you will only wind up paying tax to one state. For example, if you are a resident of DE working in MD:

• if you paid $150 to MD but DE would have charged you $100 on that income you will receive a $100 credit.

• if you paid MD $80 but DE would have charged you $100 on that income you will receive an $80 credit.

Some states will not give you the credit at all so you do wind up double paying. Some adjacent states have adopted reciprocity agreements. In these cases, your employer may withhold and remit only the tax for your home state. VA ruled that since reciprocity with MD is available if it is not taken advantage of (i.e. a VA resident working in MD still withholds and remits MD tax) VA will not offer a credit for the taxes paid in error. Hopefully the taxpayer in this case was able to obtain a full refund from MD!

Maryland renews and expands Enterprise Zones

Enterprise Zone Tax Credits

Real property tax credits – Ten-year credit against local real property taxes on a portion of real property improvements. Credit is 80% the first five years, and decreases 10% annually to 30 percent in the tenth and final year.

• Income tax credits – the one-time $1,000 credit per new worker. For economically disadvantaged employees, the credit is $6,000 per employee over three years.

 

Focus Area Tax Credits

Businesses in Baltimore City or Prince George’s County enterprise zones may be eligible for the following tax credits:

• Real property tax credits – Ten-year, 80% credit against local real property taxes on a portion of real property improvements. (does not decline as it does with the standard benefit).
• Personal property tax credits – Ten-year, 80% credit against local personal property taxes on new investment in personal property within a focus area.
• Income tax credits – a one-time $1,500 credit per new employee. For economically disadvantaged employees, the credit is $9,000 per employee over three years.

Here are some links to additional info:

http://www.choosemaryland.org/businessresources/Documents/Enterprise%20Zones/enterprisezones061512.pdf

http://www.choosemaryland.org/businessresources/Documents/Writeable%20Forms/EZQAProperty2011.pdf

http://www.choosemaryland.org/businessresources/Documents/Writeable%20Forms/EZQAIncome2010.pdf

 

NJ Nexus news - part 7

The Director of NJ Division of Taxation may, when necessary, regard a salesperson, representative, independent contractor, solicitor, trucker, peddler or canvasser operating in New Jersey as an agent of the dealer, distributor, supervisor, employer or person under whom the agent operates or from whom the agent obtains the tangible personal property sold by the agent, regardless of whether the agent is making sales on the agent’s behalf or on behalf of such dealer, distributor, supervisor, employer, or person, and that the director may so regard the agent and may regard the dealer, distributor, supervisor, employer, or person as a seller for purposes of the sales and use tax.

NJ Nexus news - part 6

NJ nexus news: Persons who is engaged in the business of selling tangible personal property, directly or through a subsidiary or other related entity, to purchasers in New Jersey by mail, telephone, the Internet or any other media, and who has a contractual relationship with an entity to provide and perform delivery, installation, assembly, or maintenance services for that person’s purchasers within New Jersey will be deemed sellers for purposes of being required to register to do business in New Jersey and collect/remit sales tax.

NJ Nexus News - Part 5

Persons who are engaged in the business of selling tangible personal property, specified digital products, or services, the use of which is subject to tax in New Jersey, and who use a trademark, service mark, or trade name that is the same as the trademark, service mark, or trade name used by an affiliated person in New Jersey will be deemed sellers for purposes of being required to register to do business in New Jersey and collect/remit sales tax.

NJ nexus news - part 4

Persons who derive receipts from the lease or rental of tangible personal property situated within New Jersey will be deemed sellers for purposes of being required to register to do business in New Jersey and collect/remit sales tax.

NJ nexus news - part 3

Persons who hold a substantial ownership interest in, or are owned in whole or substantial part by, a business that maintains an office, distribution facility, sales or sample facility, warehouse or storage place or other similar place of business in New Jersey that delivers tangible personal property or specified digital products sold by the person to customers will be deemed sellers for purposes of being required to register to do business in New Jersey and collect/remit sales tax.

NJ nexus news - part 2

Persons who hold a substantial ownership interest in, or are owned in whole or in substantial part by, a person maintaining a place of business within New Jersey, and who use the in-state facilities or the in-state employees of a related person in New Jersey to advertise, promote, or facilitate sales to customers will be deemed sellers for purposes of being required to register to do business in New Jersey and collect/remit sales tax.

NJ nexus news - part 1

Persons who hold a substantial ownership interest in, or are owned in whole or in substantial part by, a person maintaining a place of business within New Jersey and who sell the same or a similar line of products as the related person in New Jersey under the same or a similar business name will be deemed sellers for purposes of being required to register to do business in New Jersey and collect/remit sales tax.

PA RCT-101 return

Don’t forget that a PA RCT-101 filing is required even for single member LLCs. For many small businesses this is a tedious form resulting in little to no taxes due. It is akin to a PA franchise tax. Instructions for this form are cryptically found by searching for something else as detailed below:

https://revenue-pa.custhelp.com/app/answers/detail/a_id/1289/~/how-do-i-get-instructions-for-completing-old-year-rct-101-forms%3F

Businesses not formed under the laws of the Commonwealth of Pennsylvania whose Pennsylvania activity during a tax year is considered de minimis, as detailed in ct_bulletin_2004-01, may not be required to file a complete PA Corporate Tax Report, RCT-101, for that period. Instead, these corporations may file RCT-101D, affirming PA activity during the period is de minimis. A corporation preparing to file RCT-101D is reminded that a RCT-101D is not a tax report, and the statute of limitations regarding the assessment of tax does not apply.

Google the bulletin for more info but a quick heads up: Only the solicitation to sell tangible personal property is afforded immunity from the corporate net income tax. The sale or delivery and the solicitation for the sale or delivery of any type of service does not qualify. There are MANY other disqualifying factors.

VA has a great idea to bring in more taxable income

vs. just raising taxes on less and less income in order to break even like some other states....

VA has a corp and personal income subtraction for income attributed to an investment in certain tech and start-up companies and taxed as long-term capital gain. The period during which qualified investments may be made has been extended to June 2015 although the website has not been updated yet :

"Entrepreneurs and investors who make qualified investments in early stage technology, biotechnology and energy startups in Virginia beginning April 1, 2010 through June 30, 2013 (2015) will be exempt from paying state income tax on their long term capital gains throughout the life of the investment. If and when investments in these qualified companies are successful over the life of a company, any long term capital gains attributable to the investment will be exempt from Virginia's income tax."

More details here:
http://www.technology.virginia.gov/CapitalGains/

NJ sales tax on contracting services

A water damage remediation company was deemed required to charge and remit sales tax on its services because what they provided did not constitute exempt capital improvements.

Many contracting type services are subject to NJ sales tax and those that are exempt often require the contractor to obtain a signed statement from the customer which describes the nature of the work that was completed. Forgetting to charge/quote a customer the 7% sales tax in a situation where you are required to remit sales tax can really cut into your profit margin!

Find complete details here:

http://www.state.nj.us/treasury/taxation/su_15.shtml

Tax info for volunteer emergency workers

MD now allows a subtraction for US Coast Guard Auxiliary and Maryland Defense Force as well as volunteer fire, rescue and emergency personnel. Many states offer a tax credit of this nature so be sure to mention to your CPA that you are a volunteer.

Volunteer workers can also deduct as charitable contributions the non reimbursed equipment purchases, mileage, and certain other expenses incurred for performing their volunteer work but must reduce this amount by any nontaxable compensation received.

Here is some federal tax info for firefighters:

http://www.irs.gov/govt/fslg/article/0,,id=111350,00.html

Nexus news for anyone with telecommuting employees in another state

A Delaware corporation with an employee allowed to telecommute full-time from her New Jersey residence was subject to the NJ corporation business tax (CBT), and required to register to do business in NJ as well as to file CBT returns and employment tax returns. The employee developed and wrote software code from a laptop computer from her residence in New Jersey and then uploaded it to a repository on the company's computer server in another state. This is no different than an out-of-state manufacturer employing someone to fabricate parts in New Jersey for a product that will be assembled elsewhere. The nexus created by the full-time employee in New Jersey was not de minimus. The corporation was doing business in New Jersey.

PA keystone opportunity zone lives on

PA has extended its Keystone Opportunity Improvement Zone tax exemptions, deductions, abatements, and credits, expanded existing zones, and created additional zones. The sunset date of 12/31/2018 has been repealed. Tax benefits available to businesses and residents located in KOZs, KOEZs, and KOIZs include a sales and use tax exemption, a property tax abatement, and credits against corporate and personal income, capital stock and franchise, insurance gross premiums, bank shares, and mutual thrift institutions taxes. Find more information here:

http://www.portal.state.pa.us/portal/server.pt/community/keystone_opportunity_zones_%28koz%29/14707

VA passes single apportionment factor legislation

VA has passed legislation that requires retail companies operating in multiple states to use a single factor (sales) apportionment factor for computing the percentage of total taxable income attributable to VA. (A retail company has can NAICS code in sector 44-45.) The standard is a 3 factor uitizing sales, payroll, and assets/inventory/rental space value.This will be phased in between 2012 and 2015 in an oddball way so each year will use a different number or apportionment factors. Triple then quadruple (?) then single. Whyyyy?

Nexus news for those shipping tangible personal property to VA eff 1/1/2014 (2)

If a dealer has a location in VA but it can prove that this location does not materially participate in the process of delivering or selling merchandise to VA customers it may exempt itself from the requirement to collect/remit sales taxes. However, the merchant must advise VA purchasers that use tax may be due from them to VA for their purchase from an out of state seller. Dealers will be subject to a penalty of $5 per failure to provide this notice and must further send a second notice by 1/31 which reports the total amount paid by the purchaser in the previous year (plus a variety of other details) for any sales using a billing address in VA. A similar statement must be sent to the VA Division of Taxation by 3/1 of each year. Dealers will be subject to a penalty of $10 per failure to provide each of these last two notices.

Nexus news for those shipping tangible personal property to VA eff 1/1/14

VA now has a presumption that a merchant has sufficient activity within Virginia to require it to register for the collection of retail sales and use taxes if any commonly controlled person/entity maintains a distribution center, warehouse, fulfillment center, office, or similar location within Virginia that facilitates the delivery of items to customers of the business. For example, this would apply in a situation where a customer orders from a call center outside if VA (or online) but the merchandise is drop-shipped from or stored in a VA location. Such warehouse/center even if owned by another business will be treated the same as a VA retail location if owned/controlled by merchant or essentially the same stockholders as the merchant.