27th Annual Tuesday & Wednesday, January 23 24, 2018 Hya Regency Columbus, Columbus, Ohio Ohio Tax Workshop NN Best Practices in Sales & Use Tax Exemption Certificate Management Wednesday, January 24, 2018 2:00 p.m. to 3:00 p.m.
Biographical Information Alyssa Marchand, Tax Manager, Tax Technology Group, Inc. 1525 Park Manor Blvd, Suite 263 Pittsburgh, PA 15205 727-412-5676 alyssa@taxtechnologygroup.com Alyssa s career began in 2004 as an implementation consultant for Integrated Dealer Systems in Saint Petersburg, Florida. For two years Alyssa was a team lead for an integrated accounting system geared towards RV and Marine dealerships. In the following three years Alyssa worked as a senior tax accountant at PODS Enterprises, Inc. in Saint Petersburg, Florida. She was responsible for state and local sales and use tax determination and compliance, property tax compliance, state income tax apportionment and compliance as well as all state and local audits. Alyssa then moved to Pittsburgh, PA where she worked as Finance Manager of Employee Engagement & Tax Supervisor at PNC Bank, NA. Here, Alyssa managed the Finance & Accounting Development Program under the CFO. Alyssa joined Tax Technology Group in 2012. Alyssa s responsibilities include managing transaction tax implementations, which includes requirements gathering, functional design and technical design integration process management, testing management and production cut-over support. Design activities include tax policy advisory, research and best practice analysis. Alyssa is a graduate of the University of Tampa with a B.S. In Accounting and received an M.S.T. from Robert Morris University in Moon Township, PA in 2011.
Best Practices in Sales & Use Tax Exemption Certificate Management Workshop NN January 24, 2018
Introduction Certificate life cycle Types of certificates Types of liability standards Statistics Best Practices & Solutions
What are Exemption Certificates? Sales and Use Tax exemption certificates are utilized to satisfy jurisdictional requirements to exempt transactions from sales and use taxes. Exemption certificates are required by law or regulation on specific products (agricultural), usage (resale), or organizational structure (government or non-profit). The laws and/or regulations outline the specific information needed within the exemption certificate, the qualifying transactions, the validity period of the certificate, and the storage requirements.
Why Care About Exemption Certificates? An estimated 28% of sales & use tax audit assessments relate to exemption certificates. If not properly documented and liability standards followed, the vendor is responsible for the tax (penalty & interest). Reputational risk. Easily remedied.
Exemption Certificate Life Cycle
Best Practices Exemption Certificate Management New customer initiation process. Tax department approval process. Centralized tax department storage process. Automation within tax engine or ERP system. Expiration reporting, notices & communications.
Types of Certificates There are two primary types of certificates in use: Blanket Certificates These can be applied to all transactions as outlined by the buyer that meet the usage criteria MTC & SSUTA Limited Use Certificates These are applied to certain transactions Single transaction Limited usage
Common Types of Exemption Certificates Manufacturing Direct Pay Permit Multiple Points of Use Government Non-Profits Construction Resale Agriculture Medical Approximately 190 forms Approximately 38% of domestic spend is spent by these industries. Approximately 200 forms Approximately 15% of domestic spend is spent by these industries.
Commonly Misunderstood Exemption Certificates Multiple Points of Use (MPU) (OH revised code 10/2017) Typically applied to digital goods, when customer is not a DPP holder & knows the jurisdictions in which the digital good will be utilized. Manufacturing, Resale & Direct pay permit Generally provided to manufacturer s that purchase TPP for use in the mfg. process, reselling and/or consumption. Permit relieves the vendor from collecting sales tax, and requires the manufacturer to remit use tax when the TPP is taken from inventory and utilized by the organization in a manner that is not exempt (i.e. own use)
Liability Standards The seller, as a collection agent for the state, can be made liable for the uncollected taxes if the burden of proof is not met, as outlined by state law and/or regulation. Good Faith Acceptance - Defined as Total absence of intention to seek unfair advantage or to defraud another party; honest intention to fulfill one s obligations; observance of reasonable standards of fair dealing. Barron s Dictionary of Business Terms (2000) Strict Liability Acceptance (AL & LA) - Defined as Liability that does not depend on actual negligence or intent to harm, but that is based on the breach of an absolute duty to make something safe. Black s Law Dictionary (2006)
Certificate Validity Certain information must be included on almost all certificates Purchaser name and address Purchaser state tax ID Authorized signature, title, and date Seller name and address Certificates are only valid for the allowable time period before expiring After the expiration date, a new certificate must be supplied to the seller
Expiration Dates State statutes and regulations govern the validity period of certificates independently. TX: many forms never expire FL: resales certificates expire annually The most common rule of thumb (even for certificates that never expire) is to request a new certificate for affirmation of existing certificate every 3 years. The validity period is subject to change per state regulations.
Statistics 28% of SUT Audit Assessments Causes An estimated $85.4 million 10% 12% 48% 14% 16% Inability to Produce Certificate Incomplete or Inaccurate Certificate Inappropriate Usage Out of Date Other
Key Takeaways Automate Market Solutions Outsource Cloud Solutions On Premise Solutions Validate Actively seek renewals Reverse Audit
Q&A