What Proposals Will Make a Difference?

Among the proposals is the Marketplace Equity Act, introduced in October, which seeks to provide a framework for states to collect sales taxes from out-of-state online retailers who sell products to their residents. Recently introduced was the Marketplace Fairness Act, the third and final major sales tax measure introduced at the end of 2011. “It’s not just about retail. Fair sales tax laws are needed so budget cuts don’t force layoffs for essential workers like police, firefighters and school teachers,” notes Shay. Shay isn’t alone in his view of the overall picture. Results from a poll conducted by Purple Strategies for the NRF found:

1) 83 percent agree that “we need a clearer approach that will simplify how sales tax is collected.”

2) 70 percent agree that “the current law hurts businesses and consumers by setting two different standards for collecting sales tax.”

3) 61 percent agree that “the current sales tax rules deny states critical revenue they need to pay for schools, police and firefighters.”

With federal legislation that ensures simpler, more uniform collection of sales tax, $24 billion in additional revenue will be available to state and local governments. “In a 21st Century retail industry, we ought to have a 21st Century system to ensure uniform collection of sales tax. A modern approach to this issue would provide states with additional revenue in order to protect jobs that are badly needed to support American families and keep our communities economically healthy,” adds Shay.

To read more on the polling data about sales tax fairness, click HERE.

Taxing Rules, Regulations and Conditions for the 2012 Tax Season

First, favorable business tax rules may be extended.?While numerous tax rules are set to expire at the end of 2011, they will more than likely be extended, at least through 2012. However, action on extension may not occur until 2012 (i.e., extension will be retroactive to the start of the year). Some of the key provisions include:

1) 100 percent bonus depreciation and up to $500,000 of first-year expensing (the Section 179 deduction).

2) 100 percent exclusion for gain from the sale of qualified small business stock (stock in certain C corporations held more than five years).

3) Research credit.

4) Work opportunity credit for hiring individuals from certain targeted groups (only certain veteran groups are set to apply after 2011).

Other less favorable conditions to expect are unemployment taxes and an increase in tax audits.? Some states borrowed from the federal government to pay for unemployment benefits, but not having repaid the borrowed sums in full has resulted in an unemployment tax for employers in these states. These employers cannot use the full credit state unemployment taxes when figuring their FUTA liability. As for tax audits of businesses, according to one KPMG survey, they are on the rise. Corporate executives who were surveyed reported a 61 percent increase in federal tax disputes; 37 percent reported an increase in state tax audits.

And when it comes time to file, small businesses will not only be following new rules and regulations, but also new filing systems. In fact, filings will be almost exclusively online.? Starting with the 2012 tax season, paid tax return preparers are required to e-file client returns if they expect to file more than 10 forms in the 1040 series and/or 1041 (the income tax form for trusts and estates). E-filing isn’t limited to personal income tax returns.

This piece has been adapted from an article by Small Business Trends, where you can learn more expected trends for the 2012 tax season.

Amazon Spending Big Bucks for a Big Win?

The firings were nothing more than a distraction, however, as Amazon planted real plans for disaster. With a referendum scheduled for June 2012 to overturn the new Internet sales tax law, the online retailer has already spent $5.25 million in campaigning, a scare tactic against legislators and the retailers favoring and financing the tax law and its enforcement. The New York Times notes “Political observers say that by spending more, earlier, Amazon is showing potential opponents that its ultimate campaign spending could soar even higher.” And while a close eye is on Amazon’s campaign spending and its impact on deep-pocketed retailers like Walmart who are in favor of the tax law, legislators are faced with another concern in the effort to make Amazon pay.

There is fear that the vote and Amazon’s financial fate could lay in the hands of the public. “Loni Hancock, a state senator who wrote the law Amazon is trying to overturn, has begun a quixotic quest to keep California voters from weighing in on whether online retailers should be required to collect sales tax. She pushed a new bill through a legislative committee that election law experts said could prevent Amazon from putting a referendum on tax collection before the voters,” The New York Times reports. It is feared voters don’t know the detrimental effects the state and the public would feel if the law were overturned. “It means a lot of teacher that aren’t in classrooms and police that aren’t on the streets,” Hancock emphasizes. Online retailers such as Amazon have been flying under the radar in regards to the collection of state sales tax for too long, relying on the upstanding honesty of online shoppers to declare taxable purchases when it comes time to file.

To read more about Amazon’s fight against Internet sales tax, click HERE.

Just last year, local retailers in Texas and Connecticut saw a jump in activity as the states rolled out annual tax-free shopping events. “We’ve had lots of sales and specials and reductions to go with the tax-free holiday,” one retailer said. “I’m just happy that the state added more school supplies to the tax-free list because that helps the families who really need it.” In Connecticut, 2010 marked the state’s 10th annual Sales Tax-Free Week, saving consumers from paying a 6 percent sales tax. “Both consumers and retailers benefit from this annual end-of-summer ritual: Families get a price break and store owners get increased ‘foot traffic’ in their stores. That’s good for our economy and, in turn, good for keeping and growing jobs — our top mission right now,” Connecticut Governor Jodi Rell said in a statement.

The participating states vary a little from year to year. Arkansas is the only new adopter for 2011. Florida is observing this year. Florida residents will enjoy the following: clothing and footwear, which costs less than $75 per item, and school supplies, which cost less than $15 per item, will be exempt from state and local taxes of up to 7.5 percent from Friday, Aug. 12, to Sunday, Aug. 14. According to Bloomberg Businessweek, “State economists estimate Florida and its local governments will lose more than $30 million as a result of this year’s tax holiday. Yet, the Retail Federation’s study, conducted by the Washington Economics Group Inc. of Coral Gables, concludes Florida’s tax revenues increased by  $7 million due to last year’s tax holiday despite official estimates that it’s a money-loser.”

Below are a few of the other states holding tax holidays this summers, to learn of more click HERE:

Connecticut: Connecticut is one of just two states to observe a week-long holiday. The grace period from the state’s 6 percent sales tax lasts from Sunday, Aug. 21 to Saturday, Aug. 27. It includes clothing and footwear that cost less than $300 per item.

Maryland: Like Connecticut, Maryland’s tax holiday lasts for seven days: Sunday, Aug. 14 to Saturday, Aug. 20. The state’s 6 percent sales tax won’t apply to the purchase of clothing and footwear that costs less than $100.

Massachusetts: Signed into law just in time for back-to-school shopping, Massachusetts will observe two days of tax free shopping, on Aug. 13 and 14. Nearly as generous as Louisiana, Massachusetts will lift its 6.25 percent sales tax on almost any tangible, personal property, costing less than $2,500.

Taxable online purchases once an issue in New York, but since then resolved by legislation, now burden legislators and independent retailers in Connecticut.

Understanding the Loophole

The loophole refers to the 6 percent sales tax Connecticut levies on most transactions, and the fact that most online retailers do not collect and forward the tax to the state. Perhaps this is a loophole for those online retailers or Internet wholesalers, but for the state of Connecticut it’s a crater of immense proportions. Unfortunately, the federal government declared what it thought was an equitable solution when the U.S. Supreme Court ruled in 1992 that a state cannot force a business to collect sales tax if not physically located within the state.

As CT Mirror reporter, Keith Phaneuf, revealed in a recent piece, “While the sales tax raised just under $3.1 billion last fiscal year, less than $8.3 million of that involved online sales later reported and paid through consumers’ income tax filings….In all, states lose a total of $7 billion a year in sales tax revenue, according to an analysis by the Center on Budget and Policy Priorities…” Although Connecticut residents feel they are saving a few dollars in their wallet, it is advocates of the new bill that believe Connecticut residents are only hurting themselves in the long run, as these funds go towards a myriad of resources that individuals use on a daily basis.

Business Update: What Does This Mean for Independent Retailers?

As all pending legislation, there are two sides of debate. Those local retailers and small businesses facing the competition of such online retailers as Amazon, will be glad to compete on a more level playing field. However, for those 2,800 Connecticut companies affiliated with online retailers the legislation could be devastating, especially if these online retailers decide to avoid the legislation by removing service availability statewide.

To learn more about the pending legislation and online retailers’ reactions read the full CT Mirror piece.

Shoppers shrugged off higher gas prices and cool temperatures to give retailers a surprisingly strong March, new reports say. Retail revenue figures extend the streak of solid spending from late last year, and indicate that recent job growth is tempering worries about higher pump prices. “Neither the lack of the Easter Bunny, nor cool temperatures or spiking gas prices could keep consumers at bay,” Ken Perkins, president of RetailMetrics LLC, a research firm, said in a statement. “There is still a significant amount of pent-up demand. I think the job recovery is catching on.”

The results are particularly encouraging because March 2010 spending was boosted by an early Easter. This year, Easter falls on April 24, three weeks later than last year. That puts holiday spending into April and depressed March’s results anywhere from three to five percentage points, as many retailers were expected to report declines. Analysts say combining March and April figures gives the best read on consumer spending. According to a preliminary count by Thomson Reuters, 11 retailers beat expectations, while four missed. Analysts say that March’s revenue results shows that shoppers focused on the solid gains in job growth, which gained momentum last month. Companies added workers at the fastest two-month pace since before the recession began.

The full story can be accessed HERE.

“Grocery stores make an average profit of less than two cents on the dollar. It’s a very competitive industry,” Leslie G. Sarasin, Food Marketing Institute president and CEO, told Progressive Grocer. “The big banks make more money per transaction from swipe fees than what the store will make in profit. Every month that reform is delayed means $1.3 billion a month in banks and card company pockets,” he added. The Federal Reserve expects to finalize its proposed rule in time to meet the July 21 implementation date set by Congress. Two separate bills have been introduced on Capitol Hill seeking to delay the final rule. “It is imperative that these reforms go into effect this year so Main Street businesses and their customers benefit from a more fair and transparent process,” Sarasin said.

Grocery store owners met with lawmakers, encouraging them to stand up for their businesses and their customers. Debit card interchange swipe fees have continued to increase since the passage of debit card fee reform last summer, and the cost of accepting debit cards is among the fastest growing expenses for small businesses. Uncertainty about debit card swipe fee rates makes it difficult for businesses to plan ahead, budget and make hiring decisions.

More on this story can be found HERE.

State Tax Nexus Issues for Retailers. For gift card issuers to be subject to state taxation, the issuer must have nexus, a physical or economic presence sufficient to establish jurisdiction to tax in that state. It is important for companies to understand what establishes nexus in the various states in which their gift cards are sold, since each state’s rules differ.

State Unclaimed Property Rules. The increasing popularity of gift cards also makes the management of unclaimed property, or escheat liabilities an important issue. All U.S. states and the District of Columbia, as well as Puerto Rico, Guam, the U.S. Virgin Islands and certain other foreign jurisdictions, have explicit unclaimed property reporting requirements. Unclaimed property liability is not a tax, but rather a liability under state succession laws relating to property rights.

Breakage and Generally Accepted Accounting Principles. Retailers routinely sell gift cards to individuals, with the expectation that a certain portion of these cards will never be used, called breakage, which mostly results from lost cards. If the card does not fall under specific state escheat rules, the question arises as to when companies can recognize income from breakage for financial statement purposes under GAAP.

In addition, the white paper also looks at recent IRS directives on gift cards, both favorable and unfavorable to retailers, and how the IRS plans to focus on revenue recognition in connection with gift card sales. “The sales and use of gift cards continues to increase. Therefore, retailers will continue to focus on maximizing revenue and earnings from gift card sales,” says Sutton. “Maximizing earnings is dependent on minimizing breakage, subject to state escheat laws, managing state income tax consequences of issuing and distributing gift cards, and achieving the ability to defer revenue from the sale of gift cards for federal income tax purposes. These will be ongoing issues for retailers for the foreseeable future.” To download a copy of the report, visit www.GrantThornton.com/giftcards.

Protect Your Returns. Before you begin any type of online tax work, you need to make sure your computer is secure and protected. The only thing worse than no tax refund would be losing your financial records to a virus, or inadvertently sharing those records with the outside world. Make sure you protect yourself and your system with the latest antivirus and antispyware software, install effective wireless security and firewalls, create passwords in combinations of numbers and letters, and change them frequently.

Plan Ahead. Check out software or online tools that can make life run more smoothly. Current options include Quicken, or the free online tool, Mint.com. Consider some of these tools to help you stay organized throughout the year. If you own your own business, calendar your tax year in advance so that quarterly payments and forms are submitted on time. You can even easily program email reminders so that you don’t miss a deadline. Also be sure to catalog receipts and deductions via spreadsheets throughout the year, so that tax time is much less stressful. Finally, be sure to check with your bank for any new applications they may have. Different types of financial software can speak directly to your bank, making checkbook balancing, bill paying and record keeping much simpler.

Do Some Research. Although there are many legitimate free federal efile services available, consumers need to be wary of offers for free tax services. Some scammers create official looking emails to dupe recipients into entering personal information that leads to identity theft. Whenever you are entering in personal financial information, double check that the HTML address in your web browser starts with https://, as opposed to http://. The “s” in https:// means the site is secure. Some trusted efile providers include www.efile.com and www.eztaxreturn.com. These sites are secure and offer step by step instructions.

Save Data and Delete Stress. Backup, backup, backup. Accidents will happen, but losing a year’s worth of tax records should not be one of them. Purchase an external hard drive and regularly backup your important financial data to the drive. Printing out your financial records isn’t a bad idea either.

The preceding was adapted from a report by Best Buy’s Geek Squad. For more information, visit www.geeksquad.com.

But, Beemer adds, this spring, more Americans plan to stretch their dollars by shopping at discount chains rather than the pricier department stores and specialty chains, the survey shows, with 753 out of 1,000 survey participants picking discounters as potential shopping destinations for spring. Even at the lower end, there will be intense competition, Beemer warns. “Wal-Mart has a new enemy called the dollar stores,” Beemer says, adding that dollar stores could win more customers as they offer more grocery items and food.

Rising gas prices are their biggest concern about the U.S. economy right now, a whopping 62 percent of those who participated in the survey say. Less than 15 percent worried about high unemployment and government spending too.

The full story can be found HERE.