While we’re busy changing light bulbs and discovering more and more renewable energy sources, sales tax issues related to green energy recently hit New York State.

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.”

Ever wondered what to do with all those American Express points?

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.

Texas shares a similar problem other states have as well. Based on somewhat unexpected population growth over last several decades, a single zip code no longer represents just one city. Many cities have, in fact, zip codes that represent the city and outside areas.

Susan Combs, Texas Comptroller of Public Accounts, included this quote in the October 2009 report on sales tax computation:

“Because many cities in Texas share a common ZIP code and many ZIP codes encompass an area both inside and outside a taxing jurisdiction, we do not recommend using them as a method of reporting local sales and use tax.”

To provide a workable solution, Texas has a Tax Rate Locator on its Web site, enabling users to enter a specific address to determine the taxing jurisdiction(s) at that address.

SpeedTax offers a similar, free service for real-time calculations that are mapped to any U.S. address, the SpeedTax Sales Tax Calculator. This service determines rates at the rooftop level, and splits out the total rate by taxing jurisdiction (state, county, municipality, special districts).

Like it or not, the outlook for sales tax revenues for 2010 continues to be less than desired, according to an article on WSJ.com.

According to the Census Bureau, sales tax revenues for third quarter 2009 fell 9 percent to $70 billion compared to the same period in 2008, while income tax revenues fell 12 percent in the same period. Sales and income tax revenues make up about half of state and local tax revenue.

“We expect continued weakness well into 2010, if not further,” says Lucy Dadayan, an analyst at the Rockefeller Institute of Government at the State University of New York. A full report published by the Rockefeller Institute is available for download.

In state-by-state news, 22 states – including Connecticut, Illinois and Oregon – saw third-quarter revenues decline more than 10 percent. Several states depending on revenues from the energy industry had decreases in tax revenue, including Wyoming, Texas and Oklahoma. Only three states – Nevada, New Hampshire and Rhode Island –had quarterly increases.

California hopes to collect $631 million in use tax revenue from service businesses over the next three years, according to a recent Los Angeles Times article by Cyndia Zwahlen.

“The use tax was added so out-of-state vendors not subject to California’s sales tax didn’t have a price advantage over in-state retailers who did have to pay the tax.”

While the use tax laws have been in effect since the 1930’s, it’s only recently that California’s Board of Equalization (BOE) has made a concerted enforcement effort. In addition – and this is indicative of California’s financial fix – laws have changed so that service businesses such as legal and accounting firms, Lasik eye surgery centers and child care companies that bring in more than $100,000 in annual revenue can be included in the use tax enforcement efforts.

BOE has sent out 164,000 letters to small businesses to date.

“The tax board is looking for out-of-state purchases, especially of expensive equipment, fixtures or software that might be subject to the levy, known as ‘use tax.’”

Businesses receiving a letter from BOE are required to register with the tax board. Then — and here’s the education part — they must report and pay use taxes dating back three years, or show why they’re exempt from the tax. These taxes are due by April 15, 2010.  If a business does not respond to the letter, BOE will, by February, register them automatically.

The end of the calendar year always signals a bunch of “best of” lists with eye-catching witticisms. I like these kinds of lists because they sum up, in just a few words, what
we accomplished, how we fell short and what we can look forward to for the following year.

That’s why PC Mag’s “Best of the Decade” list caught my eye. Is it really the end of a decade? Yes, and no. Just like a newborn is “0” years old when born, we really won’t enter the new decade until 2011. Regardless, any way you slice it, it’s still hard to believe 10 years have gone by since Y2K!

In addition to the personal references we all share with technology, the list on PC Mag is, of course, also important to the business marketplace and even to the accounting profession. As more and more of the profession’s clients realize their increased capabilities through technology, the firms and companies who serve these clients (and customers) also must realize the benefits technology brings to the table – and use these to their fullest extent.

I won’t reveal my source, but a Louisiana accountant told me the other day that, if they had their druthers, most others in his professional group would still be on DOS… and that “1-2-3” thing.

While amusing at the time, it got me thinking. Is it the profession’s responsibility to educate itself about technology, or should we rely on technology providers to do this for us?

In this day and age, if you are going to deliver tax services to your clients, you had better understand the role technology plays in delivering these services. With technology ranging from cloud computing to the virtual office and remote access, we just can’t get away from technology. Yet, we must use technology in efficient ways, not just for the sake of displaying the latest bells and whistles.

We must be vigilant in absorbing innovations. We must ask others to explain the most complex configurations to us. We must take the initiative to do this as a group – not wait for others to come along and explain it to us first.

In 2010, let’s work hard to meet our clients’ expectations with regard to efficient uses of technology, while trying to stay one step ahead of them.

There’s an app for that, isn’t there?

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, has pages on Facebook and LinkedIn. Contact him at scott@cytronandcompany.com.

As states scramble to increase sales tax revenues, pro and con views of online sales tax are still being debated.

A story that ran on Forbes.com discusses e-tail sales tax and tax simplification:

“Two things are getting in the way of taxes on e-tailing. One is a lack of enthusiasm in Congress for the proposed enabling legislation that would allow states to go after the mail-order industry. Why be branded a tax hiker when the revenue won’t ameliorate the federal government’s budget problems? The other is that interstate sales taxing probably can’t work without a lot more uniformity from state to state in what gets taxed. State legislators would have to give up their pet causes–New York’s sales tax exemption on clothes costing less than $110, for example, or New Jersey’s sumptuary tax on furs.”

With New York State facing a $6.8 billion budget deficit in 2011, and California facing a shortfall of $14.4 billion, federal legislation for tax simplification may be the answer. Similar to the way states participate in the Streamlined Sales and Tax Use Agreement, states certainly would have to compromise and make special exceptions.

According to the Forbes article, there’s no way to compare apples to apples between states. Perhaps Amazon, eBay and other e-tailers should step up and propose a plan?

A story on Stateline.org reports solid revenues from a somewhat unlikely source: visiting sports teams.

Known more familiarly as the “Jock Tax,” Pennsylvania and New Jersey tax the income of visiting athletes. According to the Philadelphia Inquirer, Pennsylvania alone collected $18.6 million in 2008 from the state’s seven major-league football, baseball, hockey and basketball teams. This amount includes taxes levied on visitors’ salaries.

“While the concept of the jock tax is simple, calculating the right amount can be tricky,” reports the article on Stateline.org. “Visiting athletes are taxed for each ‘duty day’ spent in the state, defined by the city of Philadelphia as any day ‘on which (an athlete) participated in a game, practice or workout in Philadelphia.’”

For example, the New York Yankees were charged for five duty days for the three World Series games at Citizens Bank Park.

California was actually the first jurisdiction to tax visiting athletes.

Texas sponsors one of the most progressive job retention incentive programs in the United States. The Texas Enterprise Zone (EZ) Program provides a sales and use tax rebate on the state portion of Texas’ sales and use tax (6.25%) for taxpayers making capital investment and retaining employees. The rebate does not extend to the local portion of the sales and use tax. The rebate is $2,500 per employee for capital investment of $40,000 or more, but less than $150 million. The rebate can be $5,000 or $7,500 per employee for larger projects. Ironically, a taxpayer need not be in an EZ to qualify as long as the company meets certain hiring requirements for new employees.

In order to take advantage of the program, the taxpayer must receive the nomination of his city or county, and complete an application that is submitted to the Governor. Application deadlines under the program fall quarterly on 3/1, 6/1, 9/1 and 12/1, but given the involvement of local government, planning for taking a benefit under the program should begin three to six months before the application deadline.

The retention benefit of the Texas EZ program requires the taxpayer to maintain its existing headcount 90 business days before the quarterly application deadline (significantly longer than 90 calendar days). However, the retained employees do not need to meet any specific hiring requirements. Employees hired to replace retained employees must meet certain percentage hiring requirements. For taxpayers in an EZ, 25% of replacement hires must be either EZ residents or meet certain economically disadvantaged criteria. For taxpayers not located in an EZ, 35% of replacement hires must meet this residency or economically disadvantaged criteria.

This program has been taken advantage of by many large concerns in Texas, including Deloitte, Anheuser-Busch and NRG.
cheap software

Mark Scimemi, J.D.
PKF Texas
(713) 860-5456
mscimemi@pkftexas.com

About the author: Mark Scimemi is a Tax Senior Manager in State and Local Tax at PKF Texas. Business incentives advisory services to large and small companies is an important part of his practice.

For some time, we’ve talked about state sales tax audits on the SpeedTax blog, primarily how these audits are being increased as a way for states to make up for lost sales tax revenues. It’s good, however, to also sound a wake-up call regarding how businesses handle the more popular “audit” of personal and company tax returns.

Lane Gorman Trubitt, LLP, an accounting firm in Dallas, Texas, recently published its own guide on how small businesses can prepare for an audit, including steps prior to the audit and what businesses can expect during the audit itself.

One piece of advice from the guide rings truer than ever: “The important thing to remember is that you maintain adequate records - that way you are able to produce them when asked by the auditor. If you are unable to do so, the auditor is legally permitted to estimate your income and expenses as well as impose a separate penalty for failure to keep records.”