Gross Receipts Taxes Who Handles Them?

Transcription

1 Gross Receipts Taxes Who Handles Them? Jeff McGhehey Senior Manager Indirect Tax The Home Depot 2455 Paces Ferry Rd., B12 Atlanta, GA Phone: (770) Fax: (770) HomeDepot.com Mark A. Loyd Partner and Chair, Tax and Employee Benefits Practice Group Bingham Greenebaum Doll LLP 3500 National City Tower 101 South Fifth Street Louisville, KY Phone: (502) Fax: (502)

2 Learning Objectives / Agenda Recognize the various types of gross receipts taxes; Identify whether any gross receipts taxes apply to your business activities in various jurisdictions; Investigate if there is potential liability for unpaid gross receipts taxes at your company; Recognize the considerations for determining which team is the right fit for managing gross receipts taxes; and Appraise and verify whether your company s approach makes sense. 2

3 Types of Gross Receipts Taxes General Sales Income VAT Industry Utility Construction Bottling Vending Excise 3

4 Types of Gross Receipts Taxes Sales-based Excise tax Business License Privilege tax Broadly imposed, low rates Income-based Net income or similar calculation 4

5 Jurisdictions Imposing Gross Receipts Taxes State State-Level Local-Level AL -- Cities CA -- Cities DE Yes -- GA -- Cities KY LLET Cities/Counties HI Yes Yes MO -- Cities NM Yes NV (new in 2016) State -- OH CAT -- PA -- Cities/Boroughs SC -- Cities TN Yes Counties/Cities VA -- Counties/Cities WA Yes Cities WV -- Cities 5

6 Investigate Potential Unpaid Gross Receipts Taxes Nexus Situs Gross Receipts 6

7 Nexus Doing Business Standard Legal domicile/commercial domicile ( headquarters ) Own or lease property Individuals performing service Interest in PTE doing business in State Deriving income from source within State Directing activities at customers in State 7

8 Nexus Does P.L (15 U.S.C. 381 to 384) protect a taxpayer from the imposition of gross receipts tax where the taxpayer solely engages in protected solicitation activities in the State? 8

9 Situs of Gross Receipts Origin / Destination Sales of t.p.p. originating from one jurisdiction delivered into another Services sold from one jurisdiction, but installed and/or benefit received in another 9

10 Washington Business & Occupation Tax Nexus Economic Nexus standard (9/1/2015) extended to wholesale sales. Prior to 9/1/2015, wholesale sales used a physical presence standard. Eff. 9/1/2015, Services or Wholesale Sales $267,000 of Washington-sourced sales; $53,000 of payroll or property in WA; or At least 25% of worldwide sales, property, or payroll in WA. 10

11 Washington Business & Occupation Tax Revenue Classification 17 classes, rates from to.015 Deductions (Retailing) Bad debts, Cash/trade discounts, Interstate sales B&O taxes imposed by approx. 40 cities Physical presence standard 11

12 Gross Receipts - LLET Tax Base - Sales (KRS (8)(c) and 103 KAR 16:270) Gross receipts include the total amount of consideration, including cash, credit, property, and services, paid for the sale, lease, rental or use of property Gross Receipts do not include receipts from non-business & non-taxable (e.g., dividends) income 12

13 Gross Receipts - LLET Tax Base Sales and Gross Profits Kentucky gross receipts means an amount equal to the computation of the numerator of the sales factor under the provisions of KRS (8)(c), and includes the proportionate share of Kentucky gross receipts of all wholly or partially owned limited liability pass-through entities, including all layers of a multi-layered pass-through structure [KRS (1)(a)]. 13

14 Gross Receipts - LLET Tax Base - Sales (KRS (8)(c) and 103 KAR 16:270) Assignment of receipts from intangible property to Kentucky regardless of domicile. Test is use, location, control, management, possession 14

15 Nevada Commerce Tax Gross Revenue Tax on businesses with Nevada gross receipts greater than $4,000,000 Due August 15, 2016 for the fiscal year ended June Tax rates vary from.051% to.331% based on NAICS Industry classifications If you operate in multiple NAICS classes, the tax rate is based on the NAICS with the highest %-age of revenue 15

16 Nevada Commerce Tax Deductions allowed: Bad debt Returns and refunds Industry specific deductions Upside, if any Up to 50% of the Commerce Tax paid will be creditable against the NV Modified Business Tax 16

17 Gross Receipts Ohio CAT Base Taxable gross receipts subject to the Ohio CAT are gross receipts sitused to Ohio under ORC [ORC (A) & ORC (G)] Gross Receipts - the total amount realized by a person that contributes to the production of gross income [ORC (F)] Without deduction for the cost of goods sold or other expenses incurred Includes the fair market value of any property and any services received, and any debt transferred or forgiven as consideration. 17

18 Gross Receipts Ohio CAT Base Gross Receipts Assigned to Ohio [ORC ]: From rents, royalties or sales of real property located in Ohio From rents and royalties from tangible personal property sitused in Ohio From sales of tangible personal property if the property is received in Ohio by the purchaser From intellectual property based on the amount of use in Ohio From services (and other receipts) in the proportion of the purchaser's benefit in Ohio to everywhere with respect to what was purchased 18

19 Gross Receipts Tax Team Income Tax, Sales Tax, Other Primary measure of tax? Sales or Net Income Nuances of these may be lost on the wrong team. Types of revenue, the source used for reporting, and how it is sourced in that database is important. The right answer might be, It depends. The nature 19

20 Evaluate Company Approach to Gross Receipts Tax Nexus Sourcing Origin, destination Classification Revenue by type: services, retail, wholesale, etc. Reporting needs 20

21 Questions?