CPA Practice Advisor

MAY 2016

Today's Technology for Tomorrow's Firm.

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May 2016 • www.CPAPracticeAdvisor.com 19 A Year in the Life of a SALT Accountant is sponsored by Avalara c c o u n t a n t b y A v a l a r a MAY SALT Checklist Review engagement letters with SALT clients to make sure you are protected from risk (see ac- companying article). Create a checklist to use with clients to discuss their SALT-related plans for the year ahead, in- cluding planned capital expenditures, hiring plans, and training needs. Determine potential for negotiating SALT-related credits and incentives with taxing jurisdictions, and then develop plan for moving forward with these negotiations. Update your calendar with SALT continuing educa- tion opportunities for the months ahead. Make sure you are on mailing lists for SALT news in all states where you have clients doing business. Yet soda ta xes are not without controversy. In the months leading up to the vote on Berkeley's soda tax in 2013, the A merican Beverage Association (aka: Big Soda) waged war on the ta x. Te industr y has successfully defeated proposed soda taxes in San Francisco and two other California towns, but Big Soda isn't the only soda tax adversary. Many individuals say they smack of the nanny-state. Others argue they're a doubling down on a tax — sales tax — that's already regressive. A lter- natively, proponents speak of the win-win nature of taxing products k nown to cause health problems: consumption declines and revenue to treat the problems increases. Recently, Democratic presidential candidates took on the issue. W hile campaigning for the Pennsylvania primar y, Senator Bernie Sanders spoke out against a soda ta x pro- posed by the mayor of Philadelphia. A lthough he supports the universal preschool it would fund, he said, "I do not support paying for this proposa l t h rough a reg ressive ta x on soda that will signifcantly increase taxes on low-income and middle-class A mericans." Hillar y Clinton spoke in favor of it: "I'm very supportive of the mayor's proposal to tax soda to get universal preschool for kids." A lthough it isn't ofen referenced by presidential candidates, sales tax has always been political. State legislators spend a fair bit of time carving out sales tax exemptions and discussing the pros and cons of rais- ing taxes, lowering taxes, eliminat- ing taxes and broadening taxes. A nd afer decades of the enactment and repeal of sales tax legislation in 45 states plus the District of Columbia, sales tax compliance is complicated. Nowhere is this more evident than with the food and beverage industry. It's all in how you slice and serve it Food taxability ofen hinges on the darndest things. For example: • In New Jersey, taxation depends on the percentage of business that is prepared food sales and whether or not utensils are actually given to the consumer (as opposed to just being made available). • In New York, candy and soda sold for $1.50 or less are subject to sales tax when sold in a store but exempt when sold from a vending machine. • In Utah, deli salads and donuts served with utensils are taxed at the general rate of sales tax; if utensils are not provided, a reduced rate applies. States aren't soft on soda tax Back to soda ta xes. Ver mont imposed a ta x on soda and many other sugar y beverages beginning July 1, 2015. In September of that year, many retailers and consumers were still sorting out which products were subject to the tax and which were not. A lthough the Vermont Department of Ta xes strove to facilitate the transition and worked over time to answer questions, confusion reigned rampant. Vermont imposes sales tax on "sof drinks," defned as "nonalcoholic beverages that contain natural or artifcial sweeteners." In its fact sheet on the tax, the Department of Taxes clearly states that sof drinks are not: • Beverages that contain milk or milk products, soy, rice, or similar milk substitutes • Beverages that contain greater than 50% of vegetable or fruit juice In order to comply w ith the new policy, labels must be read. A nd label reading is exactly what many retailers in Vermont spent the frst months doing. How else to distinguish between botled waters with sweeteners and those without, or beverages containing 40% fruit juice versus those with 51% or more? Make sales tax manage- ment more palatable Te complex nature of product ta xability, especially for food and beverages, can be a lot to swallow. For a look at just how mixed up sales ta x rules on food and beverages can be, check out this short Will's W hiteboard video on How Food Gets Taxed . Each state determines how these products are taxed diferently. W hen multiple jurisdictions and products are involved, time spent on sales tax management can quickly snowball. Sales tax automation sof ware like Avalara AvaTax takes this tedious task of your plate so you can fll your time with activities that generate profts, not eat away at them. The Skinny On The Soda Tax Debate By Gail Cole S oda taxes are popping up all over the place. Berkeley and Mexico have one; Homer, Alaska, Barbados, and Vermont too. Britain soon will, and Philadelphia is working to implement one. Te list goes on. Gail Cole is a sales tax expert at Avalara with a penchant for digging through the depths of BOE sites and discovering and reporting rate changes across the country. ✓ ✓ ✓ ✓ ✓

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