TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

Does your business have to begin collecting sales tax on all out-of-state online sales? You’ve probably heard about the recent U.S. Supreme Court decision allowing state and local governments to impose sales taxes on more out-of-state online sales. The ruling in  South Dakota v. Wayfair, Inc.  is welcome news for brick-and-mortar retailers, who felt previous rulings gave an unfair advantage to their online competitors. And state and local governments are pleased to potentially be able to collect more sales tax. But for businesses with out-of-state online sales that haven’t had to collect sales tax from out-of-state customers in the past, the decision brings many questions and concerns. What the requirements used to be Even before  Wayfair , a state could require an out-of-state business to collect sales tax from its residents on online sales if the business had a “substantial nexus” — or connection — with the state. The nexus requirement is part of the Comm...

Supreme Court issues an Opinion Allowing States to Force online US Retailers to Collect Sales Tax What a disaster for US online businesses! In SD v. Wayfair, the US Supreme Court slapped online retailers the burden of collecting Sales Tax on sales out-of-state. This means small businesses must comply with thousands of state and local sales tax rates and the different laws of each jurisdiction. This was backed by the big online companies such as Amazon, Apple, Walmart, as well as the big storefront retailers. Compliance will be next to impossible with expensive services and will drive small US online companies out of business, jacking-up prices for consumers. The large online companies and non-US companies will have a big advantage.  Starting a new online business means many people will choose a foreign entity and complicated ownership structures to remain competitive. Poor decision! The full case: https://www.supremecourt.gov/opinions/17pdf/17-494...

The New Jersey Division of Taxation  announced the end of urban enterprise zones for sales tax: Bridgeton Camden Newark Plainfield Trenton The former 3% rate for these urban enterprise zones for sales tax will be changed to the full rate of 6.875% starting January 1, 2017. It is possible that the New Jersey legislature a change this position, but it was part of the negotiated deal by the legislature when it radically increased the New Jersey gasoline tax.

This past Thursday, Philadelphia city Council, under the prodding of its mayor James Kenney, imposed a 1.5 sent tax per ounce of "sugary" soft drinks. The idea is to prevent obesity. Of course, this will prove to be totally useless for several reasons. First, even though the beverage industry is fighting these taxes, the truth is no one could be happier than the beverage industry. It is much more expensive to make a soft drink with sugar or high fructose corn syrup than with NutraSweet or any other varieties of artificial sweeteners. Even though study after study has shown that people who drink "diet" drinks do not lose any weight and fact may have a tendency to gain weight, the beverage industry pushes diet soda to make more profit. Now, Philadelphia, like some other big cities, has decided to play right into the hands of the beverage industry. More people will choose to save the tax (on a 20 ounce soda it is $.30) and start to drink diet sodas. The beverage in...

Cash is a good way to get clobbered for taxes! For many years, small restaurants, bars, pizza parlors, ice cream stands, and other food establishments have used all cash systems to hide their income and not pay sales tax and income tax on the full receipts. In New Jersey, the Division of Taxation has created a very aggressive system where they make up excessively high mark ons from food and liquor purchases, and absolutely slaughter businesses that don’t keep good records. The way this tack works by the New Jersey division of taxation is they subpoena the records from the major food suppliers and liquor distributors. The tax authorities then compared the expenses listed on the tax return to what these third-party sellers reported. Often a business that is trying to hide income lessons the income reported but also lessens expenses but only slightly. The division of taxation then takes the actual expenses and uses very high multiples of the expenses to with the growth should be. Usin...