According to the article, states such as Michigan and Pennsylvania are considering adding sales tax to 180 different services – from pet grooming and dating services to dental and legal. Of course, the proposals are strongly opposed by the business marketplace.

“There is little rhyme or reason why we tax some items or services and wholly exempt others, except that in years past someone lobbied to secure favored treatment for themselves at the expense of others,” says Pennsylvania Governor Edward Rendell.  Rendell unveiled a sweeping proposal to reduce the basic sales tax from 6 percent to 4 percent, but would apply it to 74 goods and services currently exempted. The package includes personal and business services, including funeral homes, advertising, accounting and plumbing.
 
“If you do your own laundry, the laundry detergent is subject to the sales tax. But if you have your laundry done, it’s sales-tax free,” says Rendell. “This defies logic.”

In the past, some states, including Arkansas, Connecticut, Ohio and Nebraska, levied sales taxes on various services, but these changes were mostly incremental – not on the scale of the proposed changes in Pennsylvania.

This is the question I pose to many tax professionals I meet – and the response I get is usually lukewarm.  Something like “pretty well” or “it depends.” That’s why I’m writing this blog – because your answer to my title question – “How well do you know your clients?” really matters – especially in this economy! 

People want to do business with people they know, like and trust.  And strangely enough, clients feel they know you better when they believe you know them – and know them well.  If you want to retain your client, you have to take steps in every e-mail, phone and face-to-face interaction to deepen your rapport and know them better.

As elementary as it seems, deepening rapport and building the foundation of trust and partnership requires that you:
• Ask your client personal and professional rapport building questions
• Exhibit your genuine interest in your client’s responses by listening
• Seek and point out areas of common ground or interest
• Use the new information you gather to further clarify your goals and objectives in each engagement and interaction
• Remember what you learn about your client (which always means writing it in the client file or storing it in your contact management system) and referring to it in future client meetings

It saddens me to know that too many of the CPAs in my life don’t take the time to consistently build rapport with their clients, thereby missing real opportunities to develop long lasting friendships, find more meaning in their work, and make a deeper difference for the very real humans they encounter in their work.  We’re all seeking a deeper connection in life – why not in work, too?

In a future blog on this subject, I’ll share some additional ideas for deepening your client relationships.  In the meantime, seriously consider asking more non-tax related questions of your clients as you encounter them in the next several months.  And, if you have an opinion on this blog or rapport building ideas that have worked for you, please post your comments.  I’m interested!

Jennifer Wilson is a partner and co-founder of ConvergenceCoaching, LLC, a leadership and marketing consulting and coaching firm that specializes in helping CPA and IT firms achieve success.  Learn more about the company and its services at www.convergencecoaching.com.

• In Illinois, lawmakers are discussing the idea of a 5 percent increase in the individual income tax rate, plus an even bigger 6.4 percent hike for corporate taxes.

• Washington State is considering a temporary hike in the state’s sales tax, an extra $1 per pack cigarette tax, and eliminating several personal income tax exemptions, including a break on the value of trade-in cars and an exemption for certain out-of-state purchases.

• In Arizona, where officials have already closed prisons, cut 300,000 recipients from the Medicaid program, and slashed wages to state employees by 5 percent, lawmakers are debating a new sales tax to close a $2.6 billion budget shortfall.

Where will this end? Stay tuned.

Johnson’s testimony is related to H.R. 1083, requiring physical presence as a condition for collecting specific sales taxes.

“Reasonable nexus standards must take that into account,” Johnson said. “That is why the current nexus standard for sales tax collection, requiring a physical presence to justify taxation, is not appropriate in the new millennium for either sales taxes or income taxes. Economic presence, taking into account appropriate apportionment formulae, is the fair way to establish basis for collection and payment of tax.”

According to the article, Johnson urged Congress in general to empower states to decide for themselves how to tax businesses operating there.

According to an article on CNNMoney.com, two separate proposals from Rep. Peter Welch and Rep. Dennis Kucinich, two Democratic members of the House Oversight Committee would tax bank bonuses at a rate of 50 percent or more. Last week, two senators, Barbara Boxer and Jim Webb, jointly proposed the “Taxpayer Fairness Act.”  This legislation would enact a one-time, 50 percent tax on employee bonuses above $400,000 at firms that accepted $5 billion or more in bailout money.

Recently, Goldman Sachs and JPMorgan Chase each awarded their CEOs bonuses in restricted stock and options – instead of cash – as a way to tie employee pay to company performance and play down the public’s concern over outsized compensation packages.

According to the Hearing summary, “the taxpayer claimed she was entitled to the agricultural exemption under Tax Code Section 151.316 (a)(7) and Rule 3.296 (a)(5) because the ATV was used exclusively in caring for the horses. The taxpayer showed that her land was designated for special agricultural appraisal for property tax purposes by her local appraisal district. The Property Tax Code defines agricultural use to include producing crops for animal feed or raising or keeping livestock. See Tex. Tax Code Ann. Sec. 23.51(2).”

As noted in the decision, however, the agricultural sales tax exemption “is not triggered by qualifying for the special appraisal.”

Tax Code Section 151.316(a)(7) exempts “machinery and equipment exclusively used or employed on a farm or ranch in the building or maintaining of roads or water facilities or in the production of: food for human consumption; grass; feed for animal life; or other agricultural products to be sold in the regular course of business.” Section 151.316 (c)(1), states that a “‘farm or ranch’ includes one or more tracts of land used, in whole or in part, in the production of crops, livestock, or other agricultural products held for sale in the regular course of business.” [Emphasis added.]

The Comptroller determined that because the taxpayer did not sell horses or any other agricultural product, her ATV purchase did not satisfy the requirements of the agricultural equipment exemption set out in Tax Code Section 151.316(a). The Comptroller upheld the denial of the sales tax refund.

Under a proposed amendment, (N.J. A.C. 18:2-5.8, 42 NJR 56, 1/4/10), the New Jersey Division of Taxation would require taxpayers to submit “sufficient documentation” to allow the division to determine the rationale or basis for the refund to verify the amount of the refund before interest on an overpayment begins to accrue.

What Is “Sufficient Documentation”?

Not sure, but the proposed amendment states a taxpayer must attach documentation to the refund claim form indicating the basis for such claim. You cannot just say that “documentation is available upon request.”

In some cases, a taxpayer may need to include copies of each invoice where tax was incorrectly charged, and proof of payment of the entire invoice amount.

No More “Protective Refund Claims”?

The proposal would also not allow taxpayers to file protective refund claims. According to the New Jersey Division of Taxation, there is no statutory authority that requires the Division to allow protective refund claims.

If you have any questions or would like assistance with the filing of a New Jersey sales tax refund claim, please contact me at brian.strahle@bakertilly.com.
 
Brian Strahle is State and Local Tax Practice Leader at Baker Tilly Virchow Krause, LLP, in addition to being the Founder and Author of LeverageSALT, the State and Local Tax Blog at http://www.leveragestateandlocaltax.com/

Because we received MP3 players for the holiday and loaded up on music, recent figures indicate that the week after Christmas 2009 recorded the largest one-week sales of music downloads ever. Amazon’s Kindle eBook device remained a hot seller this past year as well, driving the sale of downloaded books to all-time highs.

As the sale of digital downloads increase, the resulting reduction in the sale of tangible products has far reaching implications for the state tax coffers and already-strained state budgets.

Currently, states can tax digital downloads under one of two approaches:
1. The state applies existing law and definitions to apply the tax. Included in this approach are Alabama, Arizona, Colorado, Indiana, Louisiana, Maine, New Mexico, Texas, Utah and West Virginia.
2. The state passed legislation explicitly applying sales tax to digital downloads. States passing specific legislation include Idaho, Kentucky, Nebraska, New Jersey, South Dakota, Tennessee, Vermont, Washington and Wisconsin.

Only North Dakota and Washington, D.C. have laws that expressly exempt the sale of digital downloads from sales tax.

Most notably missing from these lists are several of the largest states in terms of population, including California, Florida, Illinois, New Jersey, New York and Pennsylvania. However, these states and many others continue to face large budget deficits. The opportunity to add digital downloads to the tax base is likely to be given serious consideration by the various legislative bodies.

The Streamlined Sales Tax Project (SSTP), which includes 20 states as full members, recently spent significant time addressing the issue of digital downloads, mainly from the standpoint of trying to determine how to “define” them. Even though member states still have to pass legislation specifically addressing the taxation of digital downloads, they will walk away with a uniform definition.

As more and more consumers purchase goods and services over the Internet, state tax bases continue to erode, and the state of the economy continues to take a toll on state budgets, we will likely see many more states pass legislation to assess sales tax on digital downloads.

Pat McCown, CPA, is a partner in the State and Local Tax (SALT) practice for Lane Gorman Trubitt, LLP in Dallas, Texas. He has more than 15 years’ experience in multi-state tax planning, audit representation, refunds and consulting. His client includes manufacturing, oil and gas, transportation, high-tech, healthcare and telecom industries. Contact him at 214.461.1416 or pmccown@lgt-cpa.com.

The case, as Bob Dylan once sang, is “blowin’ in the wind.” It involved BP Wind Energy North America, who wanted to know whether construction and installation of a commercial wind farm on leased premises was considered a capital improvement and subject to sales tax.

The Commissioner of the New York State Department of Taxation and Finance concluded that “installations of BP’s equipment on leased property, pursuant to the terms of its lease agreement, do not constitute a capital improvement to the leased premises. However, the assembly and installation of its wind generation equipment used directly and predominantly in the generation of electricity for sale may nonetheless qualify for exemption from sales tax pursuant to the provisions of sections 1115(a)(12), 1105(c)(3) and 1105-B of the Tax Law.”

However, the opinion states, “Purchases and leases of construction tools and equipment for use by Petitioner, its contractors, or subcontractors in constructing and erecting the facility are subject to sales tax.”

According to an article on CNNMoney.com, customers can use their rewards points to pay their federal income taxes. While this sounds like a great idea, it comes with a small caveat: It takes 200 points to pay $1 in taxes. So, for example, a customer would have to charge $1 million on his or her card just to pay a $5,000 tax bill.

Outrageous? Yes. Logical? Well … yes. There are customers who charge sums this high on their cards. I have a friend, for example, who was responsible for booking his law firm’s retreat in Arizona at a posh Scottsdale resort. Instead of asking for a company check to cover the bill, he charged the $150,000+ bill to his corporate American Express card. The firm’s “perk” for employees was that they got to keep their accumulated points.

While his situation is a whole lot less than $1 million in charges, it’s easy to see how high sums could become a reality. The best part of this, in my mind, is the marketing savvy once again demonstrated by American Express. According to the story, the company wanted to give card members a “practical use” for their rewards points.

Now that’s a card I won’t leave home without.

About the author: For more than 20 years, Scott H. Cytron, ABC, has worked with CPAs and accountants, providing public relations, marketing and communications services. He is a frequent contributor to industry publications covering professional services industries, including accounting, healthcare, legal, financial planning, collections and debt, and high-tech. Scott tweets, blogs, and has pages on Facebook and LinkedIn. Contact him at scott@cytronandcompany.com.