Course Syllabus General Course TA 352.C1: Taxation of Electronic Information Commerce and Remote Sellers Instructor David Hardesty Information E-mail: david@davidhardesty.com Telephone: 415-925-1120 ext 104 Fax: 415-925-1140 Course Examines the federal, state, and international tax rules related Description to companies doing business using the Internet. The key topic areas are website development costs, Internet startups, state sales and income tax on Internet-based sales, U.S. tax on foreign Internet companies, foreign tax on U.S. companies, valued added tax on electronic commerce, Internet-based bartering, advance payments for online services, and accounting methods for online sellers. Course The objective of this course is to gain an understanding of all of the tax Objectives issues that are important to companies that do business through the Internet. Course Prerequisites: TA 318, Advanced Federal Income Taxation, and Requirements TA 329, Tax Research and Decision Making Recommended While not a required prerequisite, TA 321, Principles of Courses International Taxation, is a helpful course in maximizing the understanding of the material presented in this course. Required The following texts are required for the course: Texts David E. Hardesty, Electronic Commerce: Taxation and Planning (Warren Gorham & Lamont) with current supplement. Internal Revenue Code Treasury Regulations
Course Topics Unit 1 Overview; Introduction to Electronic Commerce Overview of the course; introduction to the business of electronic commerce; terms used in electronic commerce; functional analysis of Internet websites. Obtain an overview of the subject matter of the entire course Understand the basic terminology of electronic commerce Understand basic types of transactions taking place online Be able to perform a functional analysis of a website Become familiar with the basic activities associated with building websites Unit 2 Website Development Costs - Part 1 Basic accounting rules for the costs associated with website development costs, focusing on those costs that are particular to websites; including software, research and experimentation costs, and intangible assets. Identify capital versus deductible web site costs Identify and account for software used in a website Understanding the tax accounting rules for website content Identify research and experimentation costs Unit 3 Website Development Costs - Part 2 Accounting for Internet startup costs; research and experimentation credits for website development costs; special accounting issues related to website development costs. Identify and account for start-up costs Learn special accounting rules for online companies Identify costs eligible for research and experimentation tax credits
Unit 4 Business acquisitions and dispositions Account for intangibles acquired as part of the acquisition of a Web-based business. Unit 5 Learn to identify Section 197 intangibles acquired in connection with the acquisition of a Web-based business. Learn to account for transfers of assets to new Webbased businesses. Learn to account for dispositions of assets held by Webbased businesses. State Sales and Use Tax - Seller Nexus Identification of states in which Internet-based sellers have sales tax nexus (a seller with sales tax nexus in a state must collect that state's sales and use tax). Learn how the physical presence rule limits sales tax nexus Learn to apply the physical presence rule Learn how affiliates in a state can cause an out-of-state seller to have sales tax nexus in the state Learn how a seller's agents in a state can cause nexus Learn the impact of the Streamlined Sales and Use Tax Agreement Learn special rules for sellers registered under the Streamlined Sales and Use Tax Agreement Unit 6 State Sales and Use Tax - Taxability of Products and Services Identification of products and services that are subject to sales and use tax when sold online. Learn general rules for determining what physically delivered products are subject to sales and use tax when sold online Learn what products are subject to sales and use tax when delivered electronically Learn what Internet-based services are subject to sales and use tax Learn the impact of the Internet Tax Freedom Act
Learn special rules for sellers registered under the Streamlined Sales and Use Tax Agreement Unit 7 State Income Tax - Seller Nexus Identification of states in which Internet-based sellers have state income tax nexus (a seller with income tax nexus in a state must pay that state's income tax). Learn the basics of multistate income tax, as they apply to online sellers Learn how physical presence affects income tax nexus Learn how affiliates in a state can cause an out-of-state seller to have income tax nexus in the state Learn how a seller's agents in a state can cause nexus Unit 8 State Income Tax - Allocation and Apportionment Allocation and apportionment of state income for Internet-based sales; focus on special rules for drop shippers, and sellers of electronically delivered products and services. Learn the basics of allocation and apportionment of income for state income tax Learn how to assign sales of tangible products for apportionment purposes Apply the special rules for drop shipments of tangible goods Learn to apply the throwback rule for online sales Understand the special rules for assigning sales of electronically delivered products and services Unit 9 International Taxation - Character and Source of Income Introduction to international taxation of electronic commerce; determining the character and source of income from electronic commerce. Obtain an overview of the areas of international taxation that the course will focus on Learn how to differentiate different kinds of income from online sales Learn how to determine the source of income from online sales (i.e., the country from which income arises)
Unit 10 International Taxation - Outbound Transactions Learn the basic rules for determining whether a foreign country has the right to tax a U.S.-based Internet seller; and learn how much income may be subject to tax in those countries Understand when a foreign country has the right to tax the business profits of a U.S. Internet-based seller Learn the potential for taxation in a foreign treaty country versus a foreign non-treaty country Apply the rules for attributing profits to a foreign permanent establishment Understand the difference between taxation of business profits versus royalty income Unit 11 International Taxation - Inbound Transactions Learn the basic rules for determining whether a foreign Internetbased seller is taxable in the United States; and learn how much income may be subject to U.S. tax Understand when the United States has the right to tax the business profits of a foreign Internet-based seller Learn the potential for taxation of a foreign resident of a foreign treaty country versus a foreign non-treaty country Apply the rules for attributing profits to a U.S. permanent establishment Apply the rules for U.S. taxation of income that is effectively connected with the conduct of a U.S. trade or business Understand the difference between taxation of business profits versus royalty income
Unit 12 International Taxation - Foreign Corporations Owned by U.S. Persons Learn the basic rules for U.S. taxation of foreign corporations owned by U.S. persons, including transfers to foreign corporations and the rules for controlled foreign corporations Learn the potential for taxation of property transferred by U.S. persons to foreign corporations Understand the special rules under which U.S. shareholders of controlled foreign corporations are directly taxed on profits earned by those corporations Learn the special issues faced by foreign corporations engaged in sales of electronically delivered products and services Unit 13 International Taxation - Value Added Tax Introduction to Transfer Pricing Learn the basic rules for European value added tax, as they apply to Internet-based sellers. Learn the basics of European valued added tax Understand the special European VAT rules for Internetbased sellers of services Understand the basics of transfer pricing in electronic commerce
Unit 14 Special Accounting Rules for Online Sellers Special accounting rules, including taxation of advance payments for Internet-based services, the domestic production deduction, overall methods of accounting, barter transactions, and exempt organizations Learn how online barter transactions are taxed Identify unrelated business income of exempt organizations that operate websites Apply the rules for advance payments received in respect of online services Learn how to determine when online sellers must use either the cash or accrual methods of accounting Apply the domestic production deduction rules for sellers of online services Unit 15 Final exam part 1. This is a take home exam that is not proctored. Unit 16 Final exam part 2 This is an open-book proctored examination. Grading Policy Grades will be based on class participation and the student's performance on the mid-term and final examinations, weighted as follows: Class Participation 10% Final Examination (take home) 63% Final Examination (proctored) 27%
Office Hours The instructor checks in with the class and answers email 7 days a week. Students are encouraged to call the instructor with any questions or concerns. (415) 925-1120 ext 104. Hour for telephone consultation are Monday to Friday, 9am to 5pm, Pacific Time. Estimated This course is rigorous and will require much of the student's Workload time to complete. The student should anticipate that the course will require between 8 to 12 study hours per week. Final Exam The final examination is in two parts. The first part is a takehome examination, taken during the second to last week of the Information course, and submitted by email to the instructor. This part of the final exam is not supervised. The second part of the final examination is a supervised open-book exam taken during the last week of class, which meets the CyberCampus (entirely online) course requirement of at least one supervised exam per term. Discussions Every CyberCampus course includes a web-based discussion Information area where you interact with your instructor and classmates. Participation in the class means posting questions, answers, and comments in the discussion area. 10% of a student's grade is based on participation in the discussion area. The Discussions area simulates traditional classroom discussions, except that participation is asynchronous. This means that students can visit or contribute at any time. Participating in online discussions is easy! All you need is the browser you are using to view this page. No other software or plug-ins are required. You may post text, graphics, HTML, and Internet links in the course discussions. Online RIA Checkpoint System Resources
Biography of David Hardesty is a CPA, and a vice president of Wilson Markle David E. Stuckey Hardesty & Bott, CPAs. He is a nationally recognized Hardesty expert on the taxation of closely-held companies, and specializes in technology companies and electronic commerce. David is also a nationally recognized expert on taxation and accounting for share-based payments (stock options), corporate governance, and Sarbanes-Oxley. Although he focuses primarily on closelyheld companies, David also provides services to public companies. He also serves as an expert witness in areas of his expertise. In 2004, 2006 and 2007, David was named by Accounting Today as one of the Top 100 Most Influential People in Accounting, and was named by CPA Magazine as one of the Top 100 Most Influential Practitioners for 2005 and 2006. David is the author of a large number of textbooks on taxation and accounting topics, including the following (all of which are published by Thomson RIA): Taxation books Choice of Entity Title 1 of RIA Tax Advisors Planning System Electronic Commerce: Taxation and Planning. Taxation of Electronic Commerce Title 43 of RIA Tax Advisors Planning System. Accounting books Share-Based Payments: An Analysis of FASB Statement 123(R). SEC Expert (in progress) Corporate governance books Practical Guide to Corporate Governance and Accounting: Implementing the Requirements of the Sarbanes-Oxley Act, 2007 Edition. Corporate Director s Deskbook David has been teaching as in adjunct professor at Golden Gate University's Graduate School of Taxation since 2000, and is a
member of the GGU Graduate School of Taxation Advisory Board, and the GGU School of Accounting Advisory Board. He teaches TA 352, Taxation of Electronic Commerce, and TA 356, Choice of Entity. David received his BA in accounting and MBA in taxation from Golden Gate University. For a complete list of David's books and articles, go to: http://www.davidhardesty.com/hardesty.htm