Sales and Use Tax Reserve Strategies: Setting Reserves Under Government and Audit Scrutiny THURSDAY, MARCH 19, 2015, 1:00-2:50 PM EASTERN WHOM TO CONTACT For Additional Registrations: -Call Strafford Customer Service 1-800-926-7926 x10 (or 404-881-1141 x10) For Assistance During the Program: -On the web, use the chat box at the bottom left of the screen If you get disconnected during the program, you can simply log in using your original instructions and PIN. IMPORTANT INFORMATION This program is approved for 2 CPE credit hours. To earn credit you must: • Participate in the program on your own computer connection (no sharing) – if you need to register additional people, please call customer service at 1-800-926-7926 x10 (or 404-881-1141 x10). Strafford accepts American Express, Visa, MasterCard, Discover. • Listen on-line via your computer speakers. • Record verification codes presented throughout the seminar. If you have not printed out the “Official Record of Attendance”, please print it now. (see “Handouts” tab in “Conference Materials” box on left-hand side of your computer screen). To earn Continuing Education credits, you must write down the verification codes in the corresponding spaces found on the Official Record of Attendance form. • Complete and submit the “Official Record of Attendance for Continuing Education Credits,” which is available on the program page along with the presentation materials. Instructions on how to return it are included on the form. • To earn full credit, you must remain connected for the entire program.
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Transcript
Sales and Use Tax Reserve Strategies: Setting Reserves Under Government and Audit Scrutiny
THURSDAY, MARCH 19, 2015, 1:00-2:50 PM EASTERN
WHOM TO CONTACT
For Additional Registrations:
-Call Strafford Customer Service 1-800-926-7926 x10 (or 404-881-1141 x10)
For Assistance During the Program:
-On the web, use the chat box at the bottom left of the screen
If you get disconnected during the program, you can simply log in using your original instructions and PIN.
IMPORTANT INFORMATION
This program is approved for 2 CPE credit hours. To earn credit you must:
• Participate in the program on your own computer connection (no sharing) – if you need to register additional people,
please call customer service at 1-800-926-7926 x10 (or 404-881-1141 x10). Strafford accepts American Express, Visa,
MasterCard, Discover.
• Listen on-line via your computer speakers.
• Record verification codes presented throughout the seminar. If you have not printed out the “Official Record of
Attendance”, please print it now. (see “Handouts” tab in “Conference Materials” box on left-hand side of your computer
screen). To earn Continuing Education credits, you must write down the verification codes in the corresponding spaces found
on the Official Record of Attendance form.
• Complete and submit the “Official Record of Attendance for Continuing Education Credits,” which is available on the
program page along with the presentation materials. Instructions on how to return it are included on the form.
• To earn full credit, you must remain connected for the entire program.
Sound Quality
When listening via your computer speakers, please note that the quality
of your sound will vary depending on the speed and quality of your internet
connection.
If the sound quality is not satisfactory, please e-mail [email protected]
immediately so we can address the problem.
Viewing Quality
To maximize your screen, press the F11 key on your keyboard. To exit full screen,
- Jurisdictions vary as to the "life" of an exemption certificate with some making it
very clear (ex. Florida – 1 year) while others are silent.
- Common issues include the following:
1.) Incomplete certificates (ex. no date)
2.) "Un-timely" receipt of certificates
3.) "Stale" certificates
4.) Name or legal entity changes
5.) Missing or inaccurate descriptions for products purchased
6.) Certificate application to various jurisdictions
*** Various tools from Avalara, Vertex, etc. can help with all of this. ***
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Web-Based Sales
- If your company has internet sales, make sure you explore the
potential sales/use tax issues.
- Common issues include the following:
1.) Traditional "Nexus Footprint"
2.) "Amazon" legislation
2.) Collection of proper customer exemption information
3.) Drop Shipments Rules
4.) Tax treatment of freight, postage, shipping &
handling charges
5.) Potential "Disclosure Provisions"
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Taxation of "Software" and Services
The sales/use treatment of "software" and services are probably amongst the most complicated areas of state and local taxation due to the impact of technology and the lack of guidance by the Departments of Revenue.
I. This can impact your purchases and sales requiring a thorough analysis.
II. Jurisdictions are struggling to understand the technology and the evolving nature of services while applying tax concepts designed for sales of tangible personal property.
III. "Digital equivalents" under SSTP illustrate the transition of traditional sales/use taxation.
***Companies do not properly "source" transfers or sales of "software".***
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Final Reminder
• Don't forget the "Local" in state and local
• Very aggressive and expanding Departments of Revenue.
• Also quite creative with new taxes and approaches to
technology.
• Not afraid to litigate
• Traditionally active in the states of Alabama, Louisiana, and
Colorado.
• City of Chicago, Cook County (Illinois), and City and County of
Los Angeles are other well known locals.
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LOSS CONTINGENCIES AND ASC 450 EXAMPLES
Myron Vansickel, Experis
ASC 450 Examples
I. Unrecorded Liability
II. Contingency Reserve
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Unrecorded Liability
Client X has changed outside auditing firms and the new firm has question the
client regarding their sales and use tax policies and procedures.
Client installs various WiFi systems within colleges and universities, hotels and
some commercial businesses.
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Unrecorded Liability
Client has been in business for 10+ years and is now looking back at what they
may owe and have to pay for their past sells to customers.
The Client has decided not to go back to their customers now to collect tax as it
has been several years for may of these sales
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Unrecorded Liability
The Client has estimated the amount of tax that is owed by its customers for each
taxing jurisdiction that the client conducted work that taxes these types of
system installs.
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Unrecorded Liability
Is this an unrecorded liability where you have to provide a reserve sales tax
reserve or is this a
contingency reserve where you are in dispute with some taxing authority as to
what may be owed once the tax issues are resolved?
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ASC 450
I. Contingency Reserves
Go back to the definition of what is a contingency reserve.
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ASC 450
Review what a contingency liability is and then review the next client details.
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Slide Intentionally Left Blank
ASC 450
Client Y purchased a business that has a website that is basically a “virtual event
center”. Buyer and seller are trying to establish an escrow amount regarding
whether this software on the web is a SaaS, i.e., a service or is it a transfer and
use of software subject to tax.
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ASC 450
New Jersey: The New Jersey Division of Taxation did provided a private letter
ruling that SaaS is not subject to tax.
Here the taxpayer had a monthly subscription fee for customers to use a web
application that was hosted by the Taxpayer’s computer systems.
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ASC 450
Any reserve required here?
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ASC 450
Client Y now needs to know how Massachusetts will decide whether their SaaS will
be deemed to be a service or taxable software?
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ASC 450
The MA private letter ruling was opposite of the NJ ruling.
MA theory was that the “virtual event center” transferred taxable software to the
subscriber to customize its detail that it wanted to present in the virtual event
program, thus giving the subscriber use of the canned software.
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ASC 450
Should the buyer and seller establish an escrow based on the MA private letter
ruling?
Because it is in escrow, how would you record it on the buyers financial