The recent debate over the so-called “Amazon tax”, while obviously about what its name would suggest, mainly the power of states to tax online retailers like Amazon, is really a debate about nexus.  Nexus means all the connections between a taxpayer, whether a person or a corporation, and a political jurisdiction–a state in this case.  Those connections can be affiliate marketing contracts, sales to state residents, physical presences within the state, and so on.  The key point is this: once your nexus passes a certain point, a certain threshold, you will be deemed to be “doing business” in that state and that means the state has the power to tax your sales.

The most clear cut case of nexus is when you have a physical presence in a state.  It should be noted that while a brick and mortar presence is the gold standard as it were of nexus, employees and contractors within a state can also count.  The recent Amazon tax debate is really over extending, or perhaps clarifying, the definition of nexus.  It seems fairly obvious that having affiliate marketers in a state constitutes a nexus, but is that enough to qualify as doing business in that state and thus open the company up to that’s states sales taxes?  The answer of the new laws passed in Illinois and other states has been, simply enough, yes.

In many cases, nexus can be a nebulous concept.  It can be difficult to tell if a particular company or other taxpayer’s presence within a state is sufficient to make them liable to that state’s taxes.

For more information on nexus or other sales tax and use tax concerns, contact the Chicago tax lawyers at Horowitz & Weinstein.

Legal Disclaimer.

Last year’s tax amnesty program saw many gas station operators coming forward.  With the program now over, those who could have participated but did not will now face doubled fines and interest.

In addition to the owed taxes, those the state has indicted face penalties for tax evasion and interest on their unpaid taxes.

For more information on sales tax audits, tax evasion cases, or other tax law concerns, contact the Chicago tax lawyers at Horowitz & Weinstein.

Disclaimer.

The Act calls for payroll taxes to be cut in half on the first $5 million in payroll.  The White House says this will cover 98% of businesses in the country.  The Act also calls for an elimination of the payroll tax for firms that increase their payroll by adding staff.  This measure is currently capped at $50 million in payroll increases.

The 100% expensing measure passed as part of the extension of the Bush Tax Cuts last winter would be extended through 2012.  The Act also contains a number of additional reforms and regulatory reductions to help entrepreneurs and small businesses.

For workers, the Act will cut payroll taxes in half for 160 million workers in 2012, extending the payroll tax cut passed last winter.

As with any legislation, the American Jobs Act is likely to change before (and if) it becomes law.

For more information on the American Jobs Act, payroll taxes, or other tax related legal concerns, contact the Chicago tax lawyers at Horowitz & Weinstein.

Disclaimer.

The IRS has recently clarified the rules regarding failure to report reportable transactions and clarified the penalties for failing to do so.  There had previously been some uncertainty around the issue, specifically how provisions in the Small Business Jobs Acts of 2010 had affected the regulations and the penalties.

The IRS has since clarified the situation.  Failure to report reportable transactions means failing to include any information required by the Internal Revenue Code when submitting a return or other statement.

The new regulations the IRS released have clarified several issues such as the window for leniency on failure to file and the penalty amount for failure to file, but the IRS has not yet clarified other issues such as how exactly those penalties are computed.

For more information on failure to report cases or other IRS and tax related legal concerns, contact the Chicago Tax Lawyers at Horowitz & Weinstein.

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Because of Hurricane Irene, the IRS has decided to extend the application deadline for the 2011 Offshore Voluntary Disclosure Initiative to September 9th.  The deadline had previously been August 31.  This extension also applies to Report of Foreign Bank and Financial Accounts (FBAR) forms.

The OVDI is a tax amnesty initiative by which taxpayers with undisclosed offshore or foreign tax liabilities receive reduced penalties in exchange for coming clean with the IRS.

For more information on the current OVDI or for other offshore and foreign tax concerns, contact Horowitz & Weinstein.

Disclaimer.

In 1992 the Supreme Court ruled in a case about mail order that a state could not charge sales tax on an out-of-state company unless that state had sufficient nexus within that state.  The gold standard since then has been a brick and mortar presence.  Companies with physical stores in a state charge sales tax on online purchases for that state while companies without physical stores do not.

In 2008, New York passed a first of its kind law that expanded the definition of nexus to include companies with affiliate ties to that state.  The statute stated that if a company received business through referrals from New York affiliates, then that company had sufficient presence within the state to be charged sales tax.  Since 2008, eight states have passed their own versions of New York’s law, Rhode Island, North Carolina, Colorado, Illinois, Arkansas, Hawaii, Connecticut and California.  For the most part in these states, e-retailers like Amazon have responded by discontinuing their affiliate programs rather than charging sales tax.

Currently Vermont, New Mexico, Massachusetts, Missouri and Minnesota are all considering affiliate tax bills of their own.  Meanwhile South Carolina and Texas have given Amazon in particular, the online retailer that has become somewhat of the flagship in this debate (they have sued to have the New York law declared unconstitutional and are sponsoring a ballot measure to repeal California’s law) special protections against sales tax to encourage the company to build facilities within their states and bring jobs.

The 1992 Supreme Court ruling left open the possibility for Congress to pass new laws, to set new rules for interstate commerce, thus allowing mail order and online retailers to be required to collect sales tax.  For several years now a proposal for this has waxed and waned in popularity and exposure, something called the Streamlined Sales Tax Agreement.  The idea is that states join the Agreement and agree to abide by some common rules for sales tax in exchange for the ability to collect sales tax on out of state retailers.  The biggest push in support for this measure has come most recently from Senator Dick Durbin (D-IL) who has introduced the Main Street Fairness Act into the Senate.  It would provide official Congressional support for the SSTA and would allow it to go into effect once 10 states approved it.

Perhaps most importantly, online retailers like Amazon and Overstock.com have put their support behind Senator Durbin’s initiative, arguing it is the fairest resolution to the current debate.

For more information on the affiliate tax, other sales or use tax issues, or for assistance with any tax law concern, contact Horowitz & Weinstein.

Disclaimer.

It can be helpful to think of sales tax and use tax as mirror images of each other.  They’re closely related and they’re generally two ways of getting at the same thing.  In both cases the state is collecting a tax on a purchase or a service.  The main difference is whether that tax appears on the receipt (sales tax) or whether it’s the responsibility of the purchaser to report and pay the tax later (use tax).

In Illinois there are four main types of sales and use tax.  They are the Retailers’ Occupation Tax (ROT), the Retailers’ Use Tax (RUT), the Service Occupation Tax (SOT) and the Service Use Tax (SUT).  There are other sales and use taxes, but these four are the main ones.

It can be confusing to try to keep these four taxes straight.  Try to think of them as pairs.  There’s a sales tax and a use tax for retail purchases (ROT and RUT) and then there’s also a sales tax and a use tax for services (SOT and SUT).

So if you go to the drugstore on the corner and make a purchase, the sales tax on your receipt is ROT.  If you bought something out of state and used it in Illinois you are required to declare that purchase and pay use tax (RUT) on it.  SOT and SUT work in the same way, the only difference being that they are assessed on services instead of retail products.

For more information on the four kinds of sales and use tax in Illinois or for help with other tax related legal concerns, contact the Chicago tax lawyers at Horowitz & Weinstein.

Legal Disclaimer.

California has joined the roster of states to institute its own version of New York’s 2008 affiliate tax law.  The addition of California is particularly significant because New York and California tend to be trend setters among states.  Laws often start in one of those states and eventually spread to whole of the union.  To have both of these big names behind the online sales tax discussion will likely add impetus to the conversation.

It was first mentioned back in April, but now Senator Dick Durbin (D-IL) has finally submitted his Main Street Fairness Act, which would allow states to charge sales tax to online retailers like Amazon and also on mail order retailers, both of which can currently avoid paying sales tax in states where they do not have a brick and mortar presence.

The Act achieves this through something first proposed in 2002, the Streamlined Sales and Use Tax Agreement (SSUTA).  SSUTA has been previously endorsed by Amazon and other online retailers.  It is an agreement states voluntarily join.  They agree to common sales and use tax rules and in exchange they gain the power to charge sales tax on online and other out of state retailers. Currently, the sales tax systems in the country vary wildly state to state.

At present the Act has been submitted to the Senate and a counterpart is in the House.

For more information on sales tax, use tax or other tax related legal concerns, contact the Illinois tax attorneys at Horowitz & Weinstein.

Disclaimer.

The recent debate over the so-called “Amazon tax”, while obviously about what its name would suggest, mainly the power of states to tax online retailers like Amazon, is really a debate about nexus.  Nexus means all the connections between a taxpayer, whether a person or a corporation, and a political jurisdiction–a state in this case.  Those connections can be affiliate marketing contracts, sales to state residents, physical presences within the state, and so on.  The key point is this: once your nexus passes a certain point, a certain threshold, you will be deemed to be “doing business” in that state and that means the state has the power to tax your sales.

The most clear cut case of nexus is when you have a physical presence in a state.  It should be noted that while a brick and mortar presence is the gold standard as it were of nexus, employees and contractors within a state can also count.  The recent Amazon tax debate is really over extending, or perhaps clarifying, the definition of nexus.  It seems fairly obvious that having affiliate marketers in a state constitutes a nexus, but is that enough to qualify as doing business in that state and thus open the company up to that’s states sales taxes?  The answer of the new laws passed in Illinois and other states has been, simply enough, yes.

In many cases, nexus can be a nebulous concept.  It can be difficult to tell if a particular company or other taxpayer’s presence within a state is sufficient to make them liable to that state’s taxes.

For more information on nexus or other sales tax and use tax concerns, contact the Chicago tax lawyers at Horowitz & Weinstein.

Legal Disclaimer.

New guidelines for audits of attorneys have just been released by the IRS.  It focuses on several potential problem areas unique to attorneys and specifies how audits should be conducted in the context of those.

Many of the particulars of attorney audits revolve around how attorneys are paid (noncash payments like stock or legal services exchanged for reduction of debt) and what attorneys do with their payment, such as deferring payment in trusts.  There can also be issues with determining unreported income because of the use of trusts and multiple accounts.  There are a number of other specific areas of confusion of difficulty that can arise regarding how attorneys structure and use fees and payments.

As with many fields of business, the W-2 versus 1099 issue can come to a head with attorneys, specifically whether an attorney has misclassified an employee as an independent contractor, and whether attorneys misfield or failed to filed 1099s.

Form 8300, the form filed to report cash transactions of greater than $10,000, is also mentioned as a potentially important aspect when auditing attorneys.

We have represented attorneys in audit situations with the IRS and other organizations.  For more information on attorney audits, or other legal situations and tax law concerns, contact the Chicago Tax Lawyers at Howoritz & Weinstein.

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