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Avalara Ray Bigley VP Business Development; Avalara Andrew Johnson Partner; Peisner Johnson & Company Expanding Your Digital Value Via State And Local Tax Advisory Services December 6, 2013 Slide 2 Making sales tax less taxing. 2 Market Forces & Evolving Markets Market Place Fairness Act (67 to 29) Peisner Johnson & Company Client Service Opportunities Summary Todays Discussion Slide 3 Making sales tax less taxing. 3 $107,000,000,000 $55,000,000,000 $130,000,000,000 Slide 4 Market Forces: State Budget Gap Slide 5 Making sales tax less taxing. State Budget Gaps Slide 6 Making sales tax less taxing. $12,500,000,000 $23,800,000,000 Market Forces: State Budget Gap Slide 7 Making sales tax less taxing. Market Forces 46 States, WA DC & Guam Slide 8 Making sales tax less taxing. 8 Sales & Use Taxes In LOTS of Jurisdictions 46 States (Including The District of Columbia) have some form of Sales And Use Tax NOMAD States No Sales Tax in NH, OR, MT, AK, DE Alaska has no State Sales Tax, But does have Local Sales Taxes There are over 11,000 North American Taxing Jurisdictions Slide 9 Evolving Markets Mobile payments ( Affirm, Square, GoPayment, Fortumo, Zong ) Gaming ( mobile devices, Xbox, PlayStation, Wii ) Slide 10 Making sales tax less taxing. Omni channel Markets: Mobile 10 Slide 11 Making sales tax less taxing. Emerging Markets Gaming, Mobile Payment 11 Slide 12 Slide 13 Making sales tax less taxing. Omni channel Markets: Gaming 13 Slide 14 Making sales tax less taxing. 14 Next up after Marketplace Fairness? Digital Goods MP3 Files, Movie / TV downloads, Purchased Image, etc. Virtual Items Exist within a specified environment. Example -Xbox Live marketplace, MapleStory: Flower bouquets, Games-weapons Sheldons dilemma from the Big Bang Theorydilemma Slide 15 Making sales tax less taxing. Grants authority to states to require a remote retailer to collect sales tax Defines a remote retailer as any seller who makes interstate sales of products or services Applies only to remote retailers with annual remote sales in excess of $1 million, but remote sales includes exempt sales Requires very little simplification from states, and most of that is only for remote retailers Marketplace Fairness Act (67 to 29) Very Brief Overview Slide 16 Making sales tax less taxing. Andrew (Andy) Johnson Peisner Johnson & Company, LLP Slide 17 1.Nexus 2.Tax Rates and Taxability 3.Use Tax 4.Exemption Certificates 5.Tax Returns The 5-Point Assessment Slide 18 Nexus Slide 19 What is nexus? Nexus: A connection; a link or tie Minimum level of physical presence that allows a jurisdiction to require you to register, collect, and remit sales and use tax Slide 20 Obvious Slide 21 Less Obvious Slide 22 Auditing your customers Sharing with IRS and other states Special task forces Leads o Former employees o Competitors How do states find you? Slide 23 THE PROBLEM NEVER GOES AWAY IT ONLY GETS BIGGER Slide 24 Analyze the Nexus Footprint Assessment #1 Slide 25 Tax Rates and Taxability Slide 26 Slide 27 Under-Collecting Slide 28 Something taxable in one jurisdiction may not be taxable in another... Except when it is. Rules are constantly changing - more than 5,000 changes in the last year alone Slide 29 Fundamentals Tangible Personal Property (TPP) Slide 30 Only CERTAIN services are taxable Slide 31 Fundamentals ALL sales of TPP are taxable unless there is a specific exemption for that item. What about digital products? Slide 32 Slide 33 Make Sure Clients Charging Tax on Taxable Stuff at the Right Rate Assessment #2 Slide 34 Use Taxes Slide 35 Online Purchases Slide 36 Putting Your System in Place Decide who should manage use tax accrual Accounts payable department Purchasing department Service opportunity for CPAs Accruing Use Tax Slide 37 Make sure clients have a system for accruing use tax on taxable purchases dont overpay though Assessment #3 Slide 38 Exemption Certificates Slide 39 Exemption Certificates Are Low-Hanging Fruit Slide 40 Sampling Slide 41 Review certificates actually collected by client. Assessment #4 Slide 42 Tax Returns Screenshot/CBS Slide 43 Slide 44 Slide 45 Review returns filed Assessment #5 Slide 46 Slide 47 Protect Your Clients 1.Nexus 2.Tax Rates and Taxability 3.Use Tax 4.Exemption Certificates 5.Tax Returns The 5 Point Assessment: Slide 48 PeisnerJohnson.com Training SALTsource newsletter Blog Charts and white papers Slide 49 Making sales tax less taxing. Who is Avalara 49 Market Leader in Automated Sales & Use Tax Located on Bainbridge Island, WA & Seattle Offices across North America, in EU & Asia 11,000 customers 60,000 registered users 4 million calculations per day approaching 1.5 billion annually Manage 5 million exemption certificates & file 500,000 sales tax returns Filing & remitting $14 billion in sales & use tax annually Original member Streamline sales tax & Certified provider Slide 50 Making sales tax less taxing. 50 Questions andrewj@peisnerjohnson.com ray.bigley@avalara.com