Category: tax

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tax

Main Street Fairness Act

What’s in a name? That which we call a rose
By any other name would smell as sweet.

If truth in advertising laws applied to Congress, the so-called Main Street Fairness Act would be renamed as the Main Street Tax Act because it has absolutely nothing to do with fairness for main street. The unstated premise is that our current tax laws that treat online, out-of-state purchases different from offline purchases at bricks-and-mortar stores is unfair to Main Street businesses. However, the bill is all about collecting more sales tax and offers no help to Main Street businesses.

Congress makes the following findings:

(1) States should be encouraged to simplify their sales and use tax systems.

(2) As a matter of economic policy and basic fairness, similar sales transactions should be treated equally, without regard to the manner in which sales are transacted, whether in person, through the mail, over the telephone, on the Internet, or by other means.

(3) Congress may facilitate such equal taxation consistent with the United States Supreme Court’s decision in Quill Corp. v. North Dakota.

(4) States that voluntarily and adequately simplify their tax systems should be authorized to correct the present inequities in taxation through requiring sellers to collect taxes on sales of goods or services delivered in-state, without regard to the location of the seller.

(5) The States have experience, expertise, and a vital interest in the collection of sales and use taxes, and thus should take the lead in developing and implementing sales and use tax collection systems that are fair, efficient, and non-discriminatory in their application and that will simplify the process for both sellers and buyers.

(6) Online consumer privacy is of paramount importance to the growth of electronic commerce and must be protected.

You have to love Congress. Not sure how increasing taxes is fair to anyone but state governments, but there you go. Looking out for Main Street by hiking taxes.

Categories
tax Technology

California Seeks Amazon Tax (ABX8 8)

Following in the footsteps of New York, California seeks to imposed its own version of the Amazon tax. Specifically, ABX8 8 seeks to amend Section 6203 of the Revenue and Taxation Code, which covers the collection of sales tax in the State of California.

(5) (A) Any retailer entering into an agreement or agreements under which a person or persons in this state, for a commission or other consideration, directly or indirectly refers potential purchasers of tangible personal property to the retailer, whether by a link or an Internet Web site or otherwise, provided that the total cumulative sales price from all of the retailer’s sales of tangible personal property to purchasers in this state that are referred pursuant to all of those agreements with a person or persons in this state, within the preceding 12 months, is in excess of ten thousand dollars ($10,000).

Here’s the bill analysis:

Expanded sales tax nexus . A contentious issue in sales and use tax administration relates to the extent to which a state may compel an out-of-state retailer to collect use taxes from its in-state customers. The issue is of considerable importance because, although Californians are required to self-report out-of-state purchases for use in this state, the compliance rate is very low.

In general, an out-of-state retailer must have sufficient business presence in the State (also known as “nexus”) in order to be required to collect and remit the tax. Under current law, a retailer is considered “engaged in business in this state” and required to collect the California use tax on sales made to California consumers when it maintains storage or warehousing facilities in the state or it has a representative or independent contractor operating in this state for the purpose of selling, delivering, installing, assembling, or the taking of orders for the tangible personal property.

Current Board of Equalization regulations specify that the use of a computer server on the Internet to create or maintain a web page or site by an out-of-state retailer is not considered a factor in determining whether the retailer has a substantial nexus with California. The regulations further state that an Internet service provider or other Internet access service provider, or World Wide Web hosting services shall not be deemed the agent or representative of any out-of-state retailer as a result of the service provider maintaining or taking orders via a web page or site on a computer server that is physically located in this state.

This bill provides that the term “retailer engaged in business in this state” includes any retailer that enters into an agreement with a California business or other entity under which the California entity, for a commission or other consideration that depends on actual sales, directly or indirectly refers potential customers of tangible personal property to the retailer. The referral can be by a link or anInternet Web site, or some other means, provided that the cumulative sales price from sales by the retailer to customers in California who are referred pursuant to these agreements exceeds $10,000 during the preceding 12 months.

The measure does not apply to advertising on television, radio, in print, on the Internet, or any other medium, unless the payment for advertising consists of a commission or other consideration that is based on sales of tangible personal property. Thus, banners and “click-throughs” on internet sites, such as Google, which are based on models other than sales commissions for referrals, would not create nexus with California. However, the bill could apply to out-of-state sellers using California-based marketplace sites, such as e-Bay.

The bill is based on legislation enacted in the state of New York in 2008. That law has been challenged on Constitutional grounds, but the challenges were dismissed at the trial court level. Currently, three states (New York, North Carolina, and Rhode Island) have enacted laws requiring remote sellers using on-line affiliates to collect use taxes, and lawmakers in several other states have introduced similar legislation.

I’m not sure about the part about Google though since they do have an affiliate network.

Categories
tax

Swiss Court Slams Shut Barn Door

New York Times: Swiss Regulators’ Demand of UBS Client Data Found Illegal. A Swiss court said Friday that the country’s financial regulator had broken the law when it ordered UBS to hand over data on nearly 300 clients suspected of evading taxes to U.S. authorities a year ago.

Too late. Buried in the fourth paragraph:

[I]t is far too late to halt the transmission of certain clients’ data[.]

No kidding. If UBS sent its client data to the IRS via Outlook, maybe UBS can still recall its e-mail. 🙂 Regardless of the Swiss court ruling, the damage to Swiss banking has already been done. All the King’s horses and all the King’s men, won’t be able to restore the confidence in secret Swiss bank accounts again.

Categories
tax

Sen. Ensign's Taxing Affair

Los Angeles Times: Sen. Ensign admits parents gave money to mistress and family . The gifts to Cynthia Hampton; her husband, Doug; and two of their children were made “out of concern for the well-being of long-time family friends during a difficult time,” said a statement from Ensign’s attorney. The money was paid in $12,000 increments in April 2008, the month that both Hamptons left Ensign’s employ.

What ever happened to round numbers? When I first read the Los Angeles Times article, the $96,000 given by Sen. John Ensign’s parents to his mistress and her family really stood out, and not because $96,000 is a huge amount of money to hand over to someone. Why didn’t his parents give a nice, round $100,000? Taxes.

In 2008, the annual exclusion for gifts was $12,000 per donor/donee. So, Sen. Ensign’s father could gift $12,000 to Cynthia Hampton and $12,000 to Doug Hampton without having to pay the gift tax. Likewise, Sen. Ensign’s mother could gift $12,000 to Cynthia Hampton and $12,000 to Doug Hampton without either gift being a taxable gift. But, that only totals $48,000. So, to really demonstrate their generosity (without incurring a gift tax), Sen. Ensign’s parents each gave $12,000 to two of the three Hampton children. That is how you “gift” $96,000 without being liable for gift taxes.

Another interesting issue is that Doug Hampton intimated that “Ensign paid his wife ‘a lot more than’ $25,000 in severance when she left his campaign and political action committee.” Unfortunately, the article does not indicate exactly how much Ensign paid nor whether Doug Hampton was referring to the $98,000 received from Sen. Ensign’s parents as being part of the “severance.” We’ll just leave it to the IRS to determine whether the $98,000 was a gift where full consideration was not received in return or part of a severance payment. The IRS just might be taxing this affair after all.

Categories
tax

Mileage Tax

Ray LaHood, the Secretary of Transportation, recently suggested that the Obama administration tax motorists based on their mileage instead of their gasoline consumption. The argument goes that as the public starts using more fuel-efficient cars, the government will receive less revenue to fund the construction and maintenance of our roads. This must be an idea straight out of Detroit.

Make/Model Combined
MPG		 Fed Gas Tax
($0.184/G for 100 Gallons)		 Miles Driven
(100 Gallons)
Toyota Prius 46 $18.40 4,600
Toyota Camry 25 $18.40 2,500
Ford F-150 2WD 16 $18.40 1,600
Total $55.20 8,700

So, the table above shows how much the federal government will collect in gasoline sales taxes when the owners of each of the above three cars purchase 100 gallons of gasoline. The combined MPG numbers comes from www.fueleconomy.gov.

Now, I’m no fool. If the government is proposing a new tax formula, I’m pretty sure that it won’t end up being a tax cut. So, at a minimum, to collect the same amount of dollars, but on a mileage basis, this is how the numbers shake out.

Make/Model Miles Driven
(100 Gallons)		 % of Total Miles Driven
(100 Gallons)		 Fed Gas Tax
(Total)		 Fed Gas Tax
(Per Gallon)
Toyota Prius 4,600 52.87% $29.18 0.292
Toyota Camry 2,500 28.74% $15.86 0.159
Ford F-150 2WD 1,600 18.39% $10.15 0.102

How does the mileage tax look now? Imagine pulling up to the pump in a Toyota Prius and noticing that you are paying triple the federal gasoline tax on a per gallon basis as someone driving a Ford F-150 or a Hummer H3?

Categories
tax

Proposition 13: Happy Birthday

SF Gate: Prop. 13 Property Taxes in the Voters’ Hands. Thirty years ago today, California voters overwhelmingly approved Proposition 13 as a way to keep seniors from losing their homes to skyrocketing property taxes. But the 1978 vote also ignited a revolution that dramatically changed the way people across America look at government and taxes.

I think all the usual groups that hate rent control love Proposition 13, which really is a form of rent control on politicians. Prop. 13 amended the California Constitution to limit ad valorem taxes on real estate property to one percent (1%) of the full cash value of such property as shown on the 1975-76 tax bill. However, purchases, new construction or changes in ownership after the 1975 assessment can trigger a new appraisal that may reset the full cash value to market rates. Additionally, Prop. 13 barred the government from increasing the full cash value of a property by more than two percent (2%) on a year to year basis to account for inflation.

Despite all the complaints about Prop. 13, I believe that it actually helps politicians govern better in the end because it stabilizes the growth of property tax revenues. No wild upward swings in taxes that lead politicians to overspend and overcommit. Just look at what happened during the dot.com bubble when Sacramento was flush with tax revenues from one-time stock option gains. The bureaucrats searched for new ways to spend the money.

So, when the SF Gate notes that the state is currently facing a $17 billion budget shortfall, I can be fairly confident that Prop. 13 stopped it from becoming a $34 billion or $68 billion shortfall. So, how does more revenue yield a larger shortfall you ask? Quite simply, more revenues results in more programs and more spending. This is not an indictment exclusive to politicians, but an observation on human nature in general. After all, higher salaries don’t necessarily lead to higher savings for most consumers. Instead, the money is often allocated to increasing the standard of living with better food, a nicer car, larger house, and more debt. Likewise, without Prop. 13, the state bureaucrats would have found additional programs to soak up all the extra money and with a larger spending base comes larger shortfalls when the economy takes a dip.

Categories
criminal law international tax

Offshore Tax Havens

The IRS is conducting an investigation to determine the tax liabilities of US taxpayers who have signature authority over bank accounts at or over American Express, MasterCard, or Visa credit, debit or charge cards issued by banks or other financial institutions in Anguilla, Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Cook Islands, Costa Rica, Cyprus, Dominica, Gibraltar, Grenada, Guernsey/Sark/Alderney, Hong Kong, Isle of Man, Jersey, Latvia, Liechtenstein, Luxembourg, Malta, Nauru, Netherlands Antilles, Panama, Samoa, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Singapore, Switzerland, Turks and Caicos and Vanuatu.

For this investigation, the IRS has sought account records from PayPal, as well as from MasterCard International and VISA International.

And, how does the IRS go about finding these offshore tax havens? Here’s the money quote:

I have reviewed various offshore/tax haven related Web sites on the Internet. A search of the Internet with any search engine using the key words “offshore” or “tax haven” will produce a very large number of hits.

So, while offshore banks can use websites to market to American taxpayers, the IRS, powered by Google, can also find these same websites and figure out which individuals or institutions may dedicated to helping individuals with significant assets preserve or enhance their wealth with anonymity and ease through offshore bank accounts and credit cards.