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Serving Clients
Nationwide I
Sales & Use Tax Diagnostic Review
Why Should A
Company Conduct A Diagnostic Review?
Companies that operate in multiple states or have experienced rapid growth
often do not have the time or resources to be sure they are complying with the
various tax laws in each state. In addition, most states' statutes and
regulations are convoluted and confusing. This results in many companies having
unrecognized Sales & Use Tax liabilities, potential Sales Tax refunds, and
possible savings opportunities due to unrecognized state and local Sales Tax
exemptions and/or exclusions.
We can alleviate
this burden and possibly save you tax dollars by doing a pre-emptive review of
your current compliance functions, with the objective of identifying and
resolving any material Sales & Use Tax exposure, identifying states in
which the company has a sufficient presence in to be subject to Sales & Use
Tax compliance obligations, and evaluating which services and products are
subject to Sales or Use Tax. We will compare a given state's requirements with
your company's current compliance practice to identify areas of potential Sales
& Use Tax exposure, refund opportunities and saving areas due to an
unrecognized state exemption or exclusion.
What Will
Olivier & Associates Do?
We will obtain a detailed understanding of your company's multi-state
activities and products and services. We will review your books, records,
invoices, current compliance procedures, and the taxability of your products
and services to identify if your company has a Sales & Use Tax collection
and filing obligation in a given state. We will expose areas of potential Sales
& Use Tax liability, possible refund opportunities, and saving
opportunities due to unidentified Sales Tax exemptions and exclusions. We will
evaluate your current procedures in relation to collecting and keeping
exemption, resale and direct pay permits in a given state to ensure proper
procedures are being used. Once the analysis of your day-to-day operations has
been completed and areas of liability or savings opportunities have been
identified, we will recommend alternatives to resolve material issues,
recommend procedures to reduce a future risk of exposure, and decrease future
audit defense cost.
Do You Have
Nexus And A Corresponding Filing Obligation In A State?
Nexus is a term used when an out-of-state company has sufficient contacts with
a given state allowing the state to require the company to collect and remit
Sales Tax on taxable sales. As established by federal case law, for a state to
have jurisdiction to tax an out-of-state business, that business must have a
minimum connection within the taxing state. Physical Presence is the general
legal principle governing nexus as announced in Quill Corp. v. North Dakota,
112 S.Ct. 1904 (1992), National Bellas Hess, Inc. v. Illinois Department of
Revenue, 386 U.S. 753, 87 S.Ct. 1389, 18 L.Ed. 2d 505 (1967), Scripto, Inc. v.
Carson, 362 U.S. 207 (1960) and other prominent U.S. Supreme Court cases. If a
seller's connection with a state involves clear physical presence, such as the
presence of the business itself, then the seller has nexus and can be required
to collect the tax. If a seller's connection with a state is remote, however,
and does not meet the legal requirements for nexus, then the seller cannot be
required to collect tax. This is a gray area with no consensus among the states
regarding the minimum presence required to establish nexus. Some states are
pursuing what is termed Affiliate Nexus, seeking to require a business to
register and remit Sales & Use Tax due to an affiliate company's presence
in their state. A typical example is that of an on-line business entity with no
physical presence in a state being required to comply in that state due to the
presence of a sister company's brick and mortar store.
Many states will
take the position that any contact beyond the most infrequent is enough to
create nexus. Generally, every state will have a statute mandating that a
retailer engaged in business in the state must collect the Sales or Use Tax.
Most state statutes define "engaged in business in the state" very
broadly. Regardless of a state's broad definition, the constitutional
limitations discussed above apply to the state's ability to assert jurisdiction
over an out-of-state retailer. Nevertheless, states generally extend their
Sales & Use Tax as far as possible and arguably beyond these constitutional
limits. We can help sort out the rules and determine whether your company has
sufficient physical presence and recommend whether registration is required or
beneficial in a given state.
What Is
Physical Presence?
Physical presence is typically found if a business has a permanent presence in
the state such as a business location, resident employees, tangible property
(leased or owned), an independent contractor, or other third party acting as an
agent for a company to conduct business on its behalf. Physical presence may
also be found when the business only has temporary presence (i.e., visits by
employees or agents), provided the visits are regular and systematic. However,
a de minimis presence (i.e. a "few" floppy disks or some visits)
should not create a Sales & Use Tax collection and filing
obligation.
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Contact us
today or call
1-888-466-2829 for a no-obligation consultation about your Sales &
Use Tax issues.
