Jurisdiction, Nexus and the Internet: Advanced issues in determining nexus for sales and use tax purposes after Wayfair. What are the limits, if any, for economic presence nexus? Questions of retroactivity, de minimis nexus and foreign commerce implications. State and local responses to Wayfair thus far. Marketplace facilitator obligations. Impact of traditional business practices such as drop shipments, advertising, delivery in company-owned trucks, use of independent contractors, unpaid representatives, maintenance of inventory, occasional visits by employees or representatives. Establishing “temporary nexus” and other safe harbors. Potential effect of having employees work from home. Responding to nexus inquiries; using voluntary disclosure agreements and amnesty programs to best advantage.  

Manufacturing Exemptions: Determining whether a manufacturing exemption is available in a particular state and how far it extends — to manufacturing, processing, fabricating, packaging, R&D, testing, pollution control; to machinery, materials, chemicals, electricity, natural gas, computers, transportation equipment; to the production of intangibles; to retail or service industries. Must the final product be sold? Proving substantial transformation. Manufacturing incentives.

Ethical Issues in Managing Sales & Use Taxes: Ethical and strategic dilemmas involved in conducting sales & use tax audits and running the sales & use tax department, including application of ethical standards set by the AICPA, ABA, state CPA societies, bar associations and the company workplace. The effect of Sarbanes-Oxley on recordkeeping for sales and use taxes; how to put internal controls in place to ensure that the sales and use tax department is run with ethics and integrity. Ethical issues related to working from home and the use of technology in managing the sales and use tax function.

Procedural Issues During Audits & Appeal: Sufficiency of evidence on audit—accepting and maintaining exemption certificates and other records, including those kept electronically, defining good faith, the benefits and burdens of using statistical sampling. Statute of limitations issues, such as whether waivers should be signed and for how long, how to measure the start of the limitations period for purposes of timely filing appeals. Writing an effective protest and other procedural issues.

Computer Software and Information Services: Sales and use tax treatment of computer software and information services under the latest theories used by the states. Determining what is critical to the taxability of software: delivery method, content, licensing, technology transfer, or another distinguishing characteristic. Comparison to, and in-depth discussion of, the standards used for taxation of information services, including identifying the type of service involved in the transaction— SaaS, communication, automated data processing, Internet, canned versus custom, personal or individual, or some other variation- and then determining whether the service is subject to sales or use tax.

Bundled/Mixed Transactions, Cloud Computing, Other Digital Services, Related Sourcing Issues: Tax consequences of bundled/mixed transactions involving both exempt and taxable elements, including use of the true object test to determine whether a particular transaction is entirely taxable or not taxable at all. Structuring the transaction to produce the best result. Sourcing issues for taxable services, especially for those offered electronically or through “cloud computing” including how to deal with multiple or roaming users of the same service and more than one jurisdiction claiming the right to tax the same service transaction. Practical approaches to sourcing service transactions to minimize the possibility of double taxation. The move by states to expand their tax bases to include more digital goods and services.

Accounting for Undisclosed Sales and Use Tax Liabilities: Discussion of obligations under FASB Statement No. 5 (FAS 5 or ASC 450) to book appropriate reserves for undisclosed sales and use tax liabilities. Impact of recent SEC orders related to failure to maintain appropriate internal controls and adequately reflect sales tax liabilities for both public and private companies. Identification of typical tax risk drivers which contribute to undisclosed liabilities. The impact of undisclosed liabilities on mergers and acquisitions. Strategies for identifying, quantifying and mitigating tax exposure, thus reducing undisclosed sales and use tax liabilities.

Problems Session: Practical application of the concepts presented.