The L.A. Times reported this week on Assemblywoman Nancy Skinner’s bill that seeks to impose sales tax on merchandise sold online. Skinner’s AB 153 is another Main Street Fairness bill that aims to create a level playing field and help brick and mortar businesses regain their balance when competing against e-tailers not currently charging sales tax.

The story details the inevitable bid by California legislators to claim what is surely the lowest-hanging fruit in the face of a $25 billion budget gap:

“The state has long had a back-up tax. A 35-year-old statute requires both businesses and individuals to pay a use tax on purchases when sales taxes aren’t collected. While businesses have shown spotty compliance, individuals almost universally ignore the use tax, experts said.”

The Times asserts that, as the Democrats control both houses of the California Legislature, Skinner’s bill will likely pass, joining states like New York, North Carolina, and Rhode Island in opening up a major new source of revenue.

Michael Cohn of Accounting Today reported this week on North Carolina’s Department of Revenue pulling back from an attempt to force Amazon.com and other online retailers to turn over data related to customers’ purchases. The ACLU has asserted that customers’ First Amendment rights would potentially be violated if online retailers complied with North Carolina DOR’s request.

Cohn quotes Jennifer Rudinger, executive director of the ACLU of North Carolina, who asserts:

 “The NC Department of Revenue does not need access to private customer records that reveal which specific customers in North Carolina have ordered which specific books, music or movies in order to complete its audit of Amazon and collect any taxes owed.”

Cohn’s article also discusses North Carolina DOR getting pushback, in the form of a lawsuit filed by travel-related website companies (Orbitz, Travelocity, Hotels.com), “claiming that recent amendments to North Carolina’s sales tax laws that took effect on Jan. 1 are unconstitutional and constitute a violation of the Internet Tax Freedom Act.  The amendments require that the fees paid to the travel sites for hotel room bookings be included in the gross receipts of the hotels and thus subject to sales and hotel taxes.”

Read the complete text of Cohn’s article here. 

TaxProf Blog author Paul Caron, the Charles Hartsock Professor of Law at the University of Cincinnati College of Law, reports that state sales tax revenues increased for the second consecutive quarter, up 2.2% for second quarter 2010.

The number comes from the Nelson A. Rockefeller Institute of Government. According to the Institute, corporate income tax decreased 18.8%, personal income tax increased 1.6% and sales tax increased 5.9%.

The largest increase was in the Northeast at 8.3%; the largest decrease was in the Rocky Mountain area at 4.4%. Overall, state tax revenues rose in 30 states.

The entire report  is available online.

According to new research compiled by the Tax Foundation, Tennessee has the highest combined state and average local sales tax rate of any U.S. state – 9.44 percent. California came in second at 9.08 percent; Arizona third at 9.01 percent.

A story on CNNMoney.com also reports that Birmingham and Montgomery, Ala. are tied for the highest combined state, county and city sales taxes at an average of 10 percent on purchases.

Although Chicago previously had the highest metro area sales tax, Cook County lowered its rate by .5 percent in July, making it the sixth highest rate at 9.75 percent. Of all other metro areas with a population of 200,000+, five California cities – Long Beach, Los Angeles, Oakland, Fremont and San Francisco – were at 9 percent.

(This is the first in a series of blogs featuring research compiled by Rick Telberg of CPA Trendlines. Telberg and his partner, Jean Caragher of Capstone Marketing, assist accountants with practice management through their Seven Keys to Success in CPA Firm Management.)

According to the Bureau of Labor Statistics, CPA firms retained 391,700 non-seasonally-adjusted employees for June, representing  a marginal decline from May’s 392,700 and a 3.7% drop from June 2009.

However, tax preparation services reported non-seasonally-adjusted employment sank to 50,300 workers, down 19% from the month before and 5.8% from the year before.

July’s employment for the industry represented a 3% decline from the previous July, and, possibly, an acceleration in job losses because the 3% year-to-year decline in July followed a 2.8% year-to-year decline in June, 2.9% May-to-May, and 1.8% for both March and April.

Seasonally-adjusted total industry employment peaked in January 2008 at 970,100 workers, making the workforce in July about 7.9% smaller.

Read the full story for more information.

It’s that time of the year again, when states offer residents a “sales tax holiday” – almost always focused on the back-to-school buying season.

This year, for the first time ever, Illinois will offer residents a sales tax break on school supplies, clothes and shoes that cost up to $100 without paying the 5 percent state sales tax. Lost tax revenues for the period of August 6-15 are estimated at $60 million.

This is obviously great for shoppers, but every year when the tax holidays kick in, some agencies remain skeptical and focus on the negatives, such as lost revenues, according to the story on Stateline.org. For example, the Tax Foundation argues that sales tax holidays don’t actually encourage shoppers to buy anything. Instead, shoppers purchase things they would have bought anyway, but on a different day.

Sixteen states will participate in this year’s sales tax holiday. The article includes the viewpoints of other groups as well. Read the full story here.

According to a study conducted by professors at Georgia State and Niagara Universities, in one 24-hour period, only 18% of eBay sellers of consumer electronics collected sales tax on products they sold – even in their own home states. Data such as this adds steam to Rep. Bill Delahunt’s nascent Main Street Fairness Act, a bill that, if passed, would let states simplify their sales tax collection methods (as more than 20 states have already done) to require out-of-state merchants (including online sellers) who do not have physical presence (nexus) in the state in question to collect sales taxes.

This new data, and its relationship to the Main Street Fairness Act, is highlighted in a story on Forbes.com.

The Georgia-Niagra study, originally published in the National Tax Journal, notes that compliance rises dramatically with the size of the merchant. However, one of the professors, Mikhail I. Melnik of Niagara University, said he was surprised to find that even among eBay sellers with 10,000 to 15,000 ratings – those with many unique customers who do not necessarily qualify as “occasional” sellers – only half bothered to collect sales taxes on in-state sales.

“They appear to be real businesses who have decided deliberately not to comply with state sales tax,” Melnik said. “That’s a violation of law.”

As states continue to scramble for additional revenue in the midst of all manner of fiscal crises, Melnik points to one of the study’s key findings, underscoring the big push for passage of the Main Street Fairness Act: “the real gold for revenue-hungry states is to be found by reaching across state lines.”

Knowing an organization’s data is safe and secure – and lowering the risk of expanding too much, too fast – are two of the reasons Michael Hugos believes cloud computing will continue to explode in usability and popularity over the next several years.

Hugos, a former CIO and a principal of the Center for Systems Innovation, is co-author of a forthcoming book on cloud computing, and was profiled in a recent CFO.com article, “Certainties: Death, Taxes, and the Cloud.”

Cloud computing is certainly not without its share of controversy, where many concerns come from IT departments, says Hugos.

“Cloud computing is not happy news to many people in the IT world,” he says. “Most IT jobs are for system administration, and that’s going to be outsourced. It will be the equivalent of what happened to blue-collar manufacturing jobs here in the United States in the 1980s.”

For many companies, profits are directly tied to data centers, so Hugos says it’s hard to argue with the success many large companies have found so far in cloud computing, including Amazon, Google, IBM, and Hewlett-Packard.

“In the showdown between security and profitability, profitability will win,” says Hugos. “I’m not suggesting that companies get rid of all their data centers in the next six months. But over the next four or five years, as they need to refresh their servers, I don’t see why they would want to continue adding hardware that is becoming obsolete.”

A new white paper, “Three Key Tech Strategies of Successful 21st Century Accounting Firms,” authored by Jim Bourke, CPA.CITP, and Partner at WithumSmith+Brown, PC, was presented during the press appreciation reception hosted by SpeedTax and Fujitsu ScanSnap at the recent AICPA TECH+/Practitioner’s Symposium Conference.

By all accounts, the event was a huge success, thanks to Jim Bourke’s contributions and the many attendees who visited with members of the accounting press. The event was held on Monday, June 7 at the Bellagio Hotel in Las Vegas.

Representing the AICPA were Bob Harris, Chairman of the AICPA; Tommye Barie, a new AICPA Board member and Chair of the AICPA’s National Accreditation Commission; Jim Metzler, Vice President, Small Firm Interests; and Mark Koziel, Director of Specialized Communities and PCPS/Firm Practice Management. Other staff included Joann David-Parrilla and Janis Parthun. 

Representing the press were Alexandra DeFelice and Loanna Overcash, Journal of Accountancy; Bill Carlino and Seth Fineberg, Accounting Today; Gail Perry, AccountingWEB; Greg LaFollette, The Tech Gap; and Scott Cytron, The CPA Technology Advisor.

Attendees included Peyton Burch, event chair for the AICPA TECH+ conference, as well as many members of the TECH+ and Practitioner’s Symposium Committees.

The press also had a chance to meet with key SaaS vendors at the reception, including Rene Lacerte, CEO of Bill.com; Dan Druker, SVP at Intacct; Ed Jennings, CEO of Copanion; Kimberly Kovacs, CEO of OptionEase; Mark Albrecht, CEO of XCM; and Leslie Cedar, Vice President, Ketera.

Special thanks to Fujitsu for its support and participation in the event. Representing Fujitsu were Doug Cripps, Megan Fowler, and Fujitsu ScanSnap’s primary contact to the accounting profession, Kimberly Hogan.

Although levying a tax on accounting, healthcare and other professional services isn’t new, it is somewhat revolutionary to add managed service providers to the list as part of various states’ efforts to replenish depressed state coffers. The story was reported in ChannelPro.

Managed service providers include vendors offering cloud computing, hardware as a service (HaaS), and software as a service (SaaS).

State auditors are confused as they attempt to delineate between managed service providers providing a “good” and/or a “service.” If companies provide “goods,” then the tax is clear cut. If they provide “services,” coming to terms with potential tax is more difficult. Previously, any professional service was not taxed.

“But where it gets tricky is if the MSP provides ongoing management and maintenance not on the device per se, but the data on it,” says Charles Weaver, president of MSPAlliance. “But now you have auditors who look at an invoice for a piece of hardware and see what looks like a one-year maintenance agreement, and say you have to pay sales tax on that whole year of revenue. Public-policy-wise, it’s really foolish to start taxing IT and IT services, the one sector that is actually thriving in this economy.”