Sales and Use Tax
The expansion of the digital economy and the increasing focus of states on taxing software and services, creates unique sales tax issues regarding the proper characterization of products and the appropriate sourcing of sales to user jurisdictions. Our tax attorneys are experienced in undertaking detailed analyses of the facts and law to assist clients with navigating the significant challenges posed by state sales and use tax laws.
The portion of global and national income generated through the performance of services is increasing. Services may be performed anywhere and the benefit of the services received by customers can occur in multiple locations. States have reacted to the expanding service economy by altering the ways that income is apportioned. The inconsistency among state apportionment formulas and allocation rules increases the chance that the same income will be taxed in multiple jurisdictions. Our attorneys are skilled in identifying the situations where tax duplication may occur and in employing the techniques that minimize the possibility of excess taxation. Our tax lawyers are also adept at addressing the challenging problems created by states that impose gross receipts taxes in lieu of income taxes.
Determining the circumstances that create tax nexus is a crucial step for business organizations to ensure compliance with state tax filing and tax collection obligations. Our tax lawyers are experienced in advising clients regarding the nuances of income tax and sales and use tax nexus, including the identification of those situations where states adopt expansive nexus positions arising from incomplete federal nexus guidelines.
The taxation of e-commerce transactions varies from state to state and state tax laws are frequently inadequate to address modern day technologies and business transactions. As a result, commerce conducted “in the cloud” is susceptible to inconsistent tax treatment among the states. Our attorneys are dedicated to pursuing optimum state tax solutions for e-commerce service providers and consumers.
Apportionment and Allocation (Sourcing)
Inconsistencies or ambiguities in state tax laws may cause certain transactions to be sourced to multiple jurisdictions. Our knowledge of federal and state taxing principles and our analytical attention to factual details enables our clients to benefit from legal positions designed to minimize adverse sourcing outcomes.
Each year, thousands of companies across the U.S. experience audits to determine whether they are in compliance with state laws regarding unclaimed property – defined as property (gift cards, uncashed payroll checks, customer credits, bank accounts, life insurance proceeds, shares and others) that has not been claimed by its owner for a specific period of time. Failure to comply with these laws can have a direct effect on financial performance because of the substantial penalties and interest charges that may be assessed following an audit. Our tax lawyers and lawyers that specialize in consumer affairs are experienced in advising clients regarding state unclaimed property laws and how these laws apply to modern day commerce and business relationships.