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Reaching The Safe Harbor with Technology

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Reaching the Safe Harbor with Technology

By Tasneem Esmael

Your future is a mirage but if there is one thing that is certain, it is called ‘Technology’. Technology is synonymous to money in a way. I am sure we all have heard the phrase, “Money is the root of all evils.” Technology can be used with the same reference by the orthodox, religious zealots. There is an Arabic verse, translation of which, says it for me, “Your deed is defined by your motive.”

So, what is your motive to invest in technology? Less carbon emission in the air will make our air cleaner. Therefore, investing in renewable energy is a good thing. Technology is bringing the world together, closer, more intimately intertwined. A friend in Pakistan recently remarked, “The world is a global village.” The days of segregated systems, departmental chaos, and information silos is over. Most of us in the industry are familiar with this phenomenon called ‘ERP.’ Enterprise Resource Planning. It is a system that helps small, medium and enterprise size businesses become leaner, smarter and agile by better managing company’s resources. ERP helps to achieve knowledge management in an organization. With ERP we integrate tax automation systems that help to simplify the world of taxation. Before we analyze how technology helps with KM, let’s first analyze what is knowledge management:

1) Data

An organization gathers data. Data can be static, factual, discrete, unprocessed and unorganized

2) Information

Refined form of data is information which is more meaningful

3) Knowledge

Knowledge is the acquired form of human learning and experience. It is not information and information is not data. But knowledge is acquired from information and information is acquired from data.

How ERPs and Tax Automation softwares help with Knowledge Management is by bringing people together from different departments on one platform, recognizes their intellectual capacities and leverages their wisdom in a company-wide system.

It is important to note that an ideal organization is one where a conducive and unpolitical environment is provided for a smoother exchange of knowledge across functional areas by using technology and established processes. A successful leadership knows how to manage the overlapping factors that is people, organizational processes and technology. None of the three areas can function independently of one another.

So, your motive to invest in technology was to manage your company’s knowledge by the use of ERP and/or a Tax Automation software. There are a few things to keep in mind that I encountered on my various ERP and Tax software implementations to be essential tools of investments for managing knowledge:

1) Change Management

Sounds pretty simple, doesn’t it. It sure is not. It involves letting everyone know who is going to be effected by the change; that you are going to make a change before you make it. No, you don’t pick up the mic and announce it. It is quite an involved system. It is a process. 1. First you propose in writing what the change is about. 2. You identify the right candidates of the change who will be affected by it. 3. Then you notify them about the change. 4. Explain them how they should effectively respond to accomplish this change 5. Keep them informed while you proceed to accomplish this change.

Two things are accomplished with utilizing this process:

a) Historical data of changing system processes is preserved

b) Leaves a trail of information for the new team or associates to act upon, saving time and company’s resources

2) Data Cleansing

It is one of the most relentless task at hand. Cleansing data is quintessential to a successful implementation, daily operation and error-free functioning of a system. A clean master data is important on the 1st day of go-live and few years down the road. Companies usually tend to forget with more important tasks at hand, they overlook the enormous data sitting in company’s systems taking space and creating clutter. It might be worthwhile to bring a fresh team on board just to clean and create a clutter-free environment if the task seems out of control for those who already have enough on their hand and there are only so many hours for the job. A re-engineering project team or consultants would make for a good investment.

3) Business Processes

Business Processes can become obsolete. A company needs to know when they should adapt to a newer version or newer and better technology. Some companies tend to keep legacy systems as it is for their strategic advantage or conform to the newer trends. Multinational and mid-sized companies tend to be more flexible with conforming to the newer trends to keep up with the industry’s ever-changing technology. It is the small to mid-size firms that tend to lag behind and overlook the necessity for change. If it makes for a good investment, it will be worthwhile to adapt to the changing world and become more techno prowess.

Investing in your future, may it be an individual, a group, a company or a nation is a worthy cause and a cause for much mind probing and thought provoking effort, an effort that should not be taken lightly but intelligently and with the right frame of mind will be a job well-done in the end.

Tasneem Esmael is the Principal Consultant at Taxnologi Solutions, LLC (“Taxnologi”). She has over 12 years of Financial Business, IT and Consulting experience helping clients with ERP implementations, re-engineering projects, sales and use tax and VAT automation.You can learn more about Tasneem on Firm’s Featured Tax Consultants page. Questions and comments can be submitted through the COMMENT feature following her posts – or by using the REQUEST link on the company’s Firm Profile.

Who Is Really CEO

           

 

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Who Is Really CEO?

By Joni Johnson-Powe, JD, CPA
GOD spoke to me this morning. I know this is not your typical opening for a LinkedIn or website posting but at 3 O’clock in the morning, that is precisely what happened. He told its okay to pull off my Super Woman Cape I had so carefully designed, crafted, and proudly sewn on with badges of super womanliness:

  • Holding the Colorado State Triple-Jump record for 14 years
  • Attending College and Law School on athletic and academic scholarships
  • Passing CPA and Bar exam on 1st try within 2 months of each other
  • My Big 4 Accounting Career
  • CEO of my own companies at 32
  • Mothering 4 children including my last at 41
  • Serving on boards in many capacities
  • Setting up my 529 plans for my kids and getting my first college student to Berkeley this year
  • Cooking dinner at least 3 -4 nights a week when not traveling
  • Always having a Plan A and (of course) Plan B, C & D
  • Tithing on Sunday’s at Church

I sit here at 46 years old in my rented medical bed looking out my bed room window. It’s 17 days after surgically having a 3.5 cm cancerous tumor removed, 5 lymph nodes dissected including two with cancer, and a double mastectomy with reconstruction. My first day after my surgery when the nurse asked if I was ready to take my first walk, I just “had” to pull out my Super Woman Cape and walk not just to the nurse’s station as she suggested but all the way to the end of the hall and back. Because that is what Super Women do, right? We can’t just do the average or the norm with anything.

You not only run your own business, lead boards, attend all your kid’s athletic events, throw fabulous parties, plan family trips with husband in tow, keep the house clean and finish laundry every Sunday, BUT you also continue to work in your bed researching, holding conference calls and coordinating carpools when you should be healing from major surgery 4 days earlier.

I am not trying to send out a controversial religious message to you but my inner voice was my Savior Christ, but your voice may be Allah, it may be a mother, father, grandparent or sibling passed or living, a friend, or your inner spiritual guide that I feel we all have in one form or another.

What I am saying is that life is a GIFT and sometimes we need to STOP and listen to those voices around us and think about what is REALLY important. I was blessed to have found my cancer lump by a simple early morning kick from my sleeping 4-year-old and I just happened to feel that area at that very moment.

But finding cancer was still not enough for me to take off my Cape. Until this morning I finally, finally heard and listened to that Voice. I love my career in tax, accounting, serving clients, and the industry as a whole. I feel blessed to have been given this ability to serve in an area I love.

But I also know for me a Change is coming. A change in how I live, love and interact with people. A change in how I give, who I give to and how I give more to myself. I am not sure when, where and exactly how it will take hold, but He will lead me along that path when its time and I will follow. I know who the REAL CEO in my life is.

May 2016: From maintenance to martial arts, more states are taxing services

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May 2016: From maintenance to martial arts, more states are taxing services

Repost from Avalara

There’s no doubt Americans consume a lot of stuff, but we now spend far more on services than goods. For the first time in history, we dine out more than we buy food to prepare at home. We stream music and movies rather than purchase CDs or rent DVDs. We even pay people to help whip us into shape, and then pay others to make our worn-out bodies feel better.

The shift to a service-based economy has many consequences. For example, service industries like healthcare and social services are now the largest employers in 34 states, while once-dominant manufacturing is king in only seven states. (You could chalk this up to off-shore manufacturing, but that’s not the only cause—even China’s economy is shifting to services.)

States that rely on sales tax revenue to balance their budgets are particularly affected by the change, and they’re reacting. On March 1, 2016, North Carolina extended sales and use tax to many previously exempt services, notably installation, maintenance and repair services (service contracts became subject to tax in 2014). On January 1 of this year, charges for martial arts and many other athletic and amusement activities became taxable in Washington State. In 2015, among other changes, website hosting services became subject to Connecticut sales tax, Chicago slapped a tax on many amusement services, and cloud computing and video game services became taxable in Tennessee.

If this looks like a trend, it’s because it is. An increasing number of states are taxing a growing number of services for the first time. As consumption in the United States continues to shift from goods to services, states that rely on sales tax revenue will look to tax more services to keep their budgets in the black. For businesses that provide or consume services, understanding service taxability will become increasingly critical to sales and use tax compliance.

 How states determine sales tax on services

There are two ways for states to approach taxing services:

  • Impose tax on specifically enumerated services (all others are exempt)
  • Impose tax on all services, except those specifically exempted

Four states take the second approach, imposing sales tax on all services except those specifically exempted by law: Hawaii, New Mexico, South Dakota and West Virginia. Five states tax fewer than 20 services: Colorado, Illinois, Massachusetts, Nevada, Virginia.

The majority of states take the first approach, applying sales tax to only certain, specifically enumerated, services. And five states (Alaska, Delaware, Montana, New Hampshire, and Oregon) do not have a general sales tax.

 How state define services

Services are generally broken up into four categories:

  • Business services
  • Personal services
  • Professional services
  • Maintenance and repair services

As consumers, most of us don’t stop to consider if we’re purchasing a “personal service” or a “professional service.” However, the distinction is important because the type of service often affects taxability.

 Business services

Services primarily consumed by businesses are known as business services. These are numerous and include advertising, computer services, human resources services, lobbying and consulting, and payroll services. Some surprising states, including New York, Texas, and the District of Columbia, tax several business services.

 Personal services

Personal services are primarily consumed by individuals, although they may also be purchased by businesses. They include dry cleaning, hair care, hunting and fishing guide services, and tanning. Hawaii, New Mexico and South Dakota tax all personal services; a few other states tax most personal services.

 Professional services

Professional services providers include architects, attorneys, doctors, engineers—people who need to obtain special certification, education and licensing in order to practice in a state. As with personal services, they are consumed by both businesses and individuals. Little or no tangible personal property is involved in these transactions, but when it is (e.g., architectural or engineering plans), taxability can be impacted.

Again, Hawaii, South Dakota and New Mexico tax a broad range of professional services. States that don’t tax the service typically tax the business inputs.

 Repair, maintenance and installation services

Repair, maintenance and installation services can be provided to tangible personal property (like your refrigerator or car) or to real property (like your house).

Often—but not always—these services are taxable if the tangible personal property (TPP) is taxable and exempt if it’s exempt. It can be critical for businesses to separately state service charges on invoices that include TPP, as some states exempt services if they’re separately stated but tax them if they’re combined.

The taxability of services provided to real property often hinges on whether the property is residential or commercial and whether the project is new construction or a remodel. Here again, the fact that tangible personal property is often involved (e.g. materials) can complicate taxation. To make matters worse, states don’t define construction services in the same way.

 Sourcing rules for services

Determining whether or not a service is subject to tax in a particular state is the first step. Next comes figuring out the proper rate to apply to the transaction. This can be complicated because states source the sale of services in one of two different ways:

  • The location where the service is performed
  • The location where the benefit of the service is received

Often the location is the same, as when hair is cut or a car is repaired. But that’s not always the case. In fact, one reason many states have opted not to tax many professional services is because it’s easy to purchase those services from providers located in other (more tax friendly) states.

Once sourcing is understood, varying rules and rates can come into play and make sales tax compliance more complex. For example, confusion can arise when a service provider is located in a state that applies tax based on where the service is performed but the consumer is located in a state that applies tax based on where the benefit is received. Audits invariably arise.

 States are changing the rules

It’s not easy for states to broaden sales tax. Neither businesses nor individuals want to pay tax on anything that’s always been exempt. When the District of Columbia expanded sales tax to yoga in 2014, scores of people performed the warrior pose on Freedom Plaza in protest. Earlier this year, a political action committee in Missouri started to craft a constitutional amendment that would prevent the state from taxing professional services. Businesses tend to fight tooth and nail to keep the services they most use exempt, and professional services providers such as attorneys often have influential friends in state capitals.

Nonetheless, the trend to tax more services continues:

  • The governor of Maine strove to broaden sales tax in 2015 (that effort failed so he is now working to increase the state rate).
  • A fiscal report in Indiana called sales tax regressive but noted there are good reasons to broaden the sales tax base (including the need for more revenue).
  • The Vermont General Assembly has called for “an examination and rethinking of Vermont’s current sales tax base”; it has charged the Department of Taxes to extend sales and use tax to select consumer services (but not business to business services).
  • If Pennsylvania lawmakers ever agree on a budget, it will almost certainly include a substantial expansion of the sales tax base. The 2015-16 budget proposal included 21 pages of enumerated, newly taxable services.

For a more comprehensive look at services taxation nationally, download Avalara’s Service Taxability by State guide to learn more about which services are taxable in each of the 50 states.

The best way to handle sales tax compliance related to services is to automate. Avalara’s AvaTax software instantly and accurately applies the right tax rates and rules to all your transactions. Now that’s service with a smile (which is what you’ll be doing because your sales tax is handled).

READ NOW

 

The Changing World of (Sales) Tax Technology

By: Joni Johnson-Powe JD, CPA

As I look back on my career over the past 16+ years, not only have tax technology services changed but the accounting industry is much different place. I actually started off doing tax software implementations of telecom tax software which generally spanned at least a year from project kick-off to go-live. My counterparts in the “Sales tax” practice usually had a 3-6 month implementation timeframe with tax research and taxability determination set up. However, telecom tax had a much more detailed project scope and timeline because the complexity involved not only sales tax but a wide array of regulatory surcharges, 911 fees and other gross receipts taxes that could apply to a single charge. There were only a few software vendors to choose from but usually it was narrowed down to 1 or maybe 2 depending on price point, industry, and ERP system. Our team usually worked with IT consulting firms such as Bearing Point and Accenture to assist with the “technical” aspects of the projects such as API (“Application Program Interface”) development.

 

Read the full article here!

Obama Calls On Congress to End U.S. Tax Loopholes for Wealthy

Washington Times | April 5, 2016

By Dave Boyer

President Obama used a burgeoning scandal about offshore tax havens Tuesday to call on Congress to enact tax fairness measures that he said would benefit middle-class taxpayers.

The president said the so-called “Panama Papers” scandal, in which foreign heads of state and other wealthy individuals have avoided paying taxes at home, is proof that “tax avoidance is a big global problem.”

“There are loopholes that only powerful individuals and corporations have access to,” Mr. Obama said, turning his attention to the U.S. tax code. “They are gaming the system.”

Pointing to the Treasury Department’s action Monday to prevent U.S. firms from avoiding domestic taxes, Mr. Obama said, “These loopholes come at the expense of middle-class families. Those revenues have to be made up somewhere.”

See the full article here.

 

How State and Local Sales Tax Rates Differ in US

Accounting Web | April 5, 2016

By Terry Sheridan

Sales taxes, for all their transparency and ease of understanding compared to other taxation, have more pervasive influences than taxpayers, business owners, and policymakers might think. They can affect where taxpayers choose to shop and buy, bolster online purchases, and influence where businesses decide to locate – all of which, naturally, affects local economies.

That’s the underlying message in the Tax Foundation’s recent report, State and Local Sales Tax Rates in 2016.

There’s a wide gamut nationwide among states that collect state sales taxes, or state and local sales taxes, or none at all.

  • Statewide sales taxes are levied in 45 states and the District of Columbia.
  • Local taxes are collected in 38 states.
  • The five states with the highest average combined state and local sales tax rates are Tennessee (9.46 percent), Arkansas (9.30 percent), Louisiana (9.0 percent), Alabama (8.97 percent), and Washington (8.90 percent).
  • The five states with the lowest average combined rates are Alaska (1.78 percent), Hawaii (4.35 percent), Wisconsin (5.41 percent), Wyoming (5.42 percent), and Maine (5.55 percent).
  • The five states that don’t levy state sales taxes are Alaska, Delaware, Montana, New Hampshire, and Oregon. But Alaska and Montana allow local governments to levy sales taxes.

Read the full article here.

Learn How to Avoid Unexpected Nexus Liabilities – Webinar

Thursday, March 31, 2016
10:00 AM PT | 12:00 PM CT | 1:00 PM ET

Can you use tips on how to avoid making key mistakes when completing a state nexus questionnaire and how to deal with problems you may discover? Would you like to understand what business activities create nexus or tax liability in a state, or what having nexus requires you to do?

Join Nicole Huberty, manager, US tax research and content at Thomson Reuters for this complimentary nexus Web presentation.

Discussions include:

  • The legal definition and background of nexus
  • If potential changes to nexus impact you
  • Responsibilities when you have nexus
  • Consequences of not being in compliance
  • Gaining more control and getting in compliance
  • Q & A with a Thomson Reuters tax expert

View & Register Here

IASB faces battle to reconcile divergent views on ‘prudent’ accounting

I&PE | March 22, 2016

The International Accounting Standards Board (IASB) has received strong support for the reintroduction of the concept of ‘prudence’ into its conceptual framework – but little clear direction on how it should do so.

According to a staff summary of comment letters on the board’s recently issued exposure draft, some three-quarters of respondents commented on plans to bring back an an explicit reference to prudence.

The IASB removed the concept from the 2010 iteration of its framework.

But whatever path the board takes on the issue over the course of its new deliberations, one board member warned it against “playing games” with words.

 

Read the full article here.