Oct 08, 2019

Sales and Use Tax Highlight PICPA Multistate Tax Conference

William HayesBy William J. Hayes, managing editor, Pennsylvania CPA Journal

As touched upon in a previous blog by PICPA Multistate Tax Conference panelist Drew VandenBrul, the Supreme Court’s decision in South Dakota v. Wayfair was going to be a focus of PICPA’s yearly conference for multistate tax professionals. Eileen R. Dempsey, CPA, state and local tax engagement director for CliftonLarsonAllen LLP in Plymouth Meeting, Pa., would concur. Dempsey discussed, among other things, the responses of Pennsylvania and bordering states in the area of sales thresholds and measurement periods, as well as Wayfair’s impact on tech company sales and purchases. I recently met with Dempsey to preview her session at the Oct. 29 conference.

How would you categorize state responses to the South Dakota v. Wayfair decision? Has the reception been fairly uniform, or has it varied?

Eileen R. Dempsey, CPAAs is common with state and local tax, the responses have been varied. Differences exist regarding enforcement dates, definition of sales includible in thresholds, dollar amount of sales or number of transactions. Several states have also enacted similar legislation to set bright line thresholds for other tax types, not just sales tax.

In Pennsylvania, are there any particular concerns that could be impactful to CPAs within the state?

One concern is Pennsylvania’s prior legislation regarding use tax reporting. The low $10,000 threshold was overlooked by many out-of-state sellers who now find they have nexus under Wayfair. How to deal with the prior exposure from not complying with use tax reporting is an issue, and we are waiting to see if Pennsylvania will allow relief from the substantial penalties for noncompliance.

How are tech companies and makers of digital products dealing with recent developments, and has there been any Wayfair impact on their sales? What are they doing to offset the issues?

Tech companies and makers of digital products have been greatly impacted, not only by Wayfair, but also by recent trends in the states to enact legislation to increase revenues by including electronically delivered software, SaaS, and digital products in the tax base. Due to the level of sales by tech companies, many are finding they have nexus under Wayfair, without having a physical state presence. As a result, many companies are engaging professional services firms to conduct nexus studies for prior exposure, produce taxability matrixes, perform sales tax process reviews to develop necessary policies to properly tax transactions, and purchase sales tax compliance software. 

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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.