sales tax exemptions and resale certificates: compliance ...media. 07/04/2020 ¢ sales tax...
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Sales Tax Exemptions and Resale Certificates: Compliance
Issues, State-by-State Requirements and Updates
TUESDAY, APRIL 7, 2020, 1:00-2:50 pm Eastern
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April 7, 2020
Sales Tax Exemptions and Resale Certificates: Compliance Issues, State-by-State Requirements and Updates
Stacey L. Roberts, CPA, State and Local Tax Director
Judith B. Vorndran, JD, CPA, MSBA, Partner
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY
THE SPEAKERS’ FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY
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The information contained herein is of a general nature and based on authorities that are
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determined through consultation with your tax adviser.
Sales Tax Exemptions & Resale Certificates Compliance Issues, State-by-State Requirements and Updates
Presented by Judy Vorndran, Esq., CPA, and Stacey Roberts, CPA
• Specializing in designing tax strategies and solutions that improve business tax outcomes
• 20+ years of public and private sector accounting experience, both practical and in management, she’s gained the essential business acumen necessary to be a key advisor to clients
• Managing all compliance issues related to state income/franchise, SALT, real and personal property and unclaimed property taxes for flow through entities and C corporations; identifying planning opportunities and state and local credits and incentives; and, mitigating state and local tax controversy issues
• Frequent speaker and instructor on SALT issues for industry and professional organizations including the Denver Tax Institute, Product PowerUp, NowCFO and more.
Stacey Roberts, CPA 303-393-2318
• Marrying tax and law exclusively in State and Local Tax (SALT) for 25+ years
• Helped more than 1,000 taxpayers figure out who they are, where they are and how best to comply with tax duties
• Leads the SALT practice at TaxOps, helping clients navigate the morass of issues to make it less taxing
• 3-year appointment to Colorado’s legislative Sales and Use Task Force to help simplify its complex sales tax system
• Dually licensed attorney and CPA, Judy is also president of the Colorado Chapter of the American Academy of Attorney- CPAs
• Nationally recognized thought leader and award-winning instructor
• Successfully changing laws in states and local jurisdictions promoting simplicity
Judy Vorndran, CPA, Esq. 720-227-0093
304 Inverness Way South
Englewood, CO 80112
Collect the Tax or Get
Criteria & Compliance
Banking the cannabis industry
Collect the Tax or Get the Doc
• Every transaction between a buyer and a seller should be taxed or documented
• Business selling into the resale, wholesale, or exempt entity markets must “collect the tax or get the doc”
• Legitimate document attesting to the proper exemption that applies to the transaction
• Document demonstrates a transaction is tax-exempt, relieving the seller a company of collection duties
Tax Exemption Types
• Customers and transaction are tax-exempt for three basic reasons
• Use-based exemptions are linked to products put to use after the transaction is complete (generally, resale products)
• Product-based exemptions relate to the nature of the product being sold (in some states, manufacturing equipment is exempt)
• Buyer-based exemptions relate to the type of buyer purchasing the goods or services (in some states, government and/or non-profit organizations are exempted from paying sales tax)
Role of Sourcing
• Exempt transactions also depend on the location of the buyer and the seller
• Inconsistent application across states, increasing audit risk • Most sales within a state are based on the location of the seller
• Sales made between states are typically based on the consumer’s location
Whose Problem is It?
• Complicated patchwork of nexus rules and sales tax regimes
• Vary from state to state, leading to uncollected sales taxes and risk
• With no universal, clear and complete definition of nexus, every party in the food chain has work to do to see if they need to collect sales tax or get an exemption
• Responsibility falls on various entities throughout a transaction cycle • Originating manufacturer several states away could end up holding the sales tax bag for a
reseller or distributor that isn’t property licensed in the end-user’s state
Manufacturer Distributor Wholesaler Retailer End-user
Sales Tax Risk
• Tripping nexus in any form may create sales tax risk • A business with nexus in Virginia selling to a third party that holds
an exemption certificate in Colorado might not be able to validly exempt the sale in Virginia
Click- through Nexus
Use of Affiliates
Negotiated Direct Pay
Unsigned and Expired Certificates
Certificate to Secure
Sales Tax Risk
• Nexus exposure • Physical
Economic Nexus Snapshot
Source: Avalara Resource Center (As of February 2020)
Drop Ship Nexus Ugly, 3-parties to a Transaction
Drop Ship Nexus It's Complicated!
• Complicated if one of the parties has nexus but the others do not
• Comes down to who gets the resale certificate, and from where, and who collects the tax
Supplier perspective. If you provide drop
shipping, does the seller have nexus?
Seller perspective. If you use drop shipping,
does your company have nexus?
• If no, as a supplier have you exceeded
the threshold on behalf of the seller into
a shipping state?
• If yes, you created nexus for the seller
and must request a resale certificate
• If no, did the supplier exceed thresholds on
your behalf to your customers into a shipping
• If yes, you have nexus in the supplier
shipping state and should register for a sales
tax licenseSource: Avalara
• Before Wayfair, less certificates needed to be collected because supplier may not have nexus
• Post Wayfair, deliveries th