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Dillon Tax Consulting provides tax advisory and compliance services and solutions to companies across all industries, ranging in revenue size from several hundred thousand dollars to multi-billion dollars. We are your subject matter experts regarding the following State & Local Tax matters:

  • Sales & Use Tax
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  • Business License Tax
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  • Income/Franchise Tax
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Blog: Dillon Tax Consulting

cloud computing

Sales Tax on Cloud-computing: Rulings Also Mean More Uncertainty and Unpredictability

Michael T. Dillon, Esq., Dillon Tax Consulting LLC
12/13/2016

A number of sales tax decisions in Tennessee, Indiana and Illinois serve to remind us all of the uncertainty involving cloud computing transactions, and the importance to seek guidance from tax practitioners regarding your specific facts.  While each taxpayers’ facts involved the access to and/or provision of cloud-based services, the transactions for each were unique, as were the States and their analysis / conclusions.  One state decided that the taxpayer’s cloud-computing transactions were taxable, whereas the other states determined that the cloud-based transactions were not taxable sales.  These rulings, while pertinent to the taxpayers at issue, only add to ...

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Recent Blog Articles

Recent Blog Articles

MTC Amnesty Program Provides Current Solution for Online Sellers Seeking to Resolve Sales Tax Compliance Nightmares

MTC Amnesty Program Provides Current Solution for Online Sellers Seeking to Resolve Sales Tax Compliance Nightmares

9/7/2017 12:00:00 AM EDT
2 months ago

If you’re an online seller using the Amazon FBA program to facilitate sales, there’s a lot to absorb and consider these days regarding sales tax compliance.  Depending on who you talk to, you may get different advice:

  1. Some attorneys, hungry to fight the legal issues in court (a highly costly endeavor with no guarantees), will advise that if your only activity in the state is inventory in an Amazon warehouse, you do not have to comply with that state’s sales tax laws ... that your inventory in an Amazon warehouse does not establish nexus in that state for sales tax purposes;
  2. They or others may advise that Amazon should collect the sales tax ... that Amazon is acting in an agent capacity on behalf of the FBA sellers and that the sales tax compliance responsibility should fall on Amazon’s shoulders (see South Carolina’s recent announcement espousing this theory);
  3. In contrast, other state tax experts, seeking to minimize your risk – including the author - will advise that your inventory in an Amazon warehouse in a state does establish the requisite sales tax nexus sufficient to require compliance with that state’s sales tax laws, and that arguably Amazon’s activities on behalf of FBA sellers establishes an agency nexus for the online sellers in those same states, regardless of the inventory, but bolstered by the presence of it;  
  4. These experts may also advise that even if Amazon were determined to have taken on the sales tax compliance obligations of its FBA sellers, that the FBA sellers likewise have the same compliance obligations (joint and several liability for both Amazon AND the FBA seller, if you will);
  5. Likewise, they or others may advise that in state auditors can and will hunt down Amazon FBA sellers, subject them to their state’s sales tax laws and assess them for historical liabilities relating to all prior periods in which they had inventory in an Amazon warehouse in the state (witness what California, Washington State and several other states are achieving in this regard). 

MTC Announces Voluntary Amnesty Initiative for Online Marketplace Sellers

MTC Announces Voluntary Amnesty Initiative for Online Marketplace Sellers

8/11/2017 12:00:00 AM EDT
3 months ago

The Multistate Tax Commission (MTC) has just announced a special tax amnesty program for unregistered online marketplace sellers that have established nexus and historical exposure as a result of storing inventory in third-party fulfillment centers that facilitate retail sales into the state (e.g., Amazon FBA program).  Under the program, eligible taxpayers may obtain amnesty from any past due sales/use tax, and if applicable, income/franchise tax liability, including interest and penalties, in connection with online retail sales activity in the participating states. 

Does the Sales Tax Nexus “Physical Presence” Standard Exist?

Does the Sales Tax Nexus “Physical Presence” Standard Exist?

2/22/2017 12:00:00 AM EST
8 months ago

U.S. Supreme Court Declines to Review Florida Sales Tax Imposed on Out of State Inventory Delivered to Out of State Customers

States Are Looking for Unregistered / Unpaid Sales Tax . . . Are You at Risk?

States Are Looking for Unregistered / Unpaid Sales Tax . . . Are You at Risk?

2/9/2017 12:00:00 AM EST
9 months ago

With New Years Day comes New Years Resolutions, some of which we keep, some of which we don’t, and some of which we fail to make because we aren’t even aware that one is needed.  The same holds true for your business.  Often times, “We Don’t Know What We Don’t Know”.  It’s my calling to educate companies about this, with regard to multistate sales tax, nexus and ways to minimize audit risk for your company.  Because with this New Year, state auditors are looking for your company as you read this.

Sales Tax on Cloud-computing: Rulings Also Mean More Uncertainty and Unpredictability

Sales Tax on Cloud-computing: Rulings Also Mean More Uncertainty and Unpredictability

12/13/2016 12:00:00 AM EST
11 months ago

A number of sales tax decisions in Tennessee, Indiana and Illinois serve to remind us all of the uncertainty involving cloud computing transactions, and the importance to seek guidance from tax practitioners regarding your specific facts.  While each taxpayers’ facts involved the access to and/or provision of cloud-based services, the transactions for each were unique, as were the States and their analysis / conclusions.  One state decided that the taxpayer’s cloud-computing transactions were taxable, whereas the other states determined that the cloud-based transactions were not taxable sales.  These rulings, while pertinent to the taxpayers at issue, only add to the uncertainty for taxpayers engaged in similar transactions, and enhance the unpredictability of tax treatment relating to cloud-based transactions, even in the same state.

Florida Sales Tax Case Presents Opportunity for Supreme Court to Revisit the Quill Nexus Standard

Florida Sales Tax Case Presents Opportunity for Supreme Court to Revisit the Quill Nexus Standard

11/8/2016 12:00:00 AM EST
1 years ago

In a petition filed with the Supreme Court of the United States on October 24, 2016, American Business USA Corporation (American Business) seeks a writ of certiori to review the judgment of the Supreme Court of Florida.  [American Business USA Corp. v. Florida Department of Revenue, U.S. Supreme Court, Dkt. 16-567, petition for certiorari filed October 24, 2016]  In its petition, American Business asks whether a state can “collect sales tax on out-of-state property ordered over the internet for out-of-state delivery by relying on this (Supreme) Court’s decision in Quill Corp. v. North Dakota, 504 U.S. 298 (1992) and the state’s connection to the corporation that accepts the order and arranges the sale, or does such a tax violate the Due Process Clause and the dormant Commerce Clause of the United States Constitution by imposing a sales tax on the out-of-state transfer of tangible personal property?”  The granting a writ of certiorari by the Supreme Court means that at least four of the justices have determined that the circumstances described in the petition are sufficient to warrant review by the Court.

Texas Court says the “Essence of Transaction” involving a Provider’s technology platform is not “Data Processing”

Texas Court says the “Essence of Transaction” involving a Provider’s technology platform is not “Data Processing”

5/10/2016 12:00:00 AM EDT
1 years ago

In a decision involving the true object, or  “essence of the transaction” test, the Texas court of appeals upheld the trial court’s decision in favor of the taxpayer refund claim for sales tax assessed on the provision of bill pay services.  In Hegar v. CheckFree Services Corporation, NO. 14-15-00027-CV (Tex. Ct. App., April 19, 2016), the Court of Appeals affirmed the trial court’s judgment in favor of CheckFree, awarding it a refund of sales tax paid on bill pay services provided to banks.  CheckFree contracted with several banks to provide bill pay services through the banks’ on-line banking services to the banks’ customers.  On audit, the Comptroller determined that CheckFree provided taxable data processing services to the banks, under Texas Code Section 151.0035 and 34 Tex. Admin. Code §3.330(a)(1).

Cloud-based Services: “The Wild West” and the Cavalry

Cloud-based Services: “The Wild West” and the Cavalry

11/8/2015 12:00:00 AM EST
2 years ago

The New York Department of Taxation and Finance (Department) recently issued an Advisory Opinion providing their interpretation of yet another Taxpayer's provision of Software As a Service (SAaS).  In TSB-A-15(36)S, Taxpayer sought an Advisory Opinion from the Office of Counsel for the Department, as to the application of New York sales tax to its provision of a cloud-based software platform service delivered through four key offerings: (1) Line-Item IT billing, (2) budgeting and financial reporting, (3) service costing, and (4) business unit planning.  [TSB-A-15(36)S, New York State Department of Taxation and Finance, Sales Tax Advisory Opinion (September 18, 2015)]   The Line Item IT billing service enables the customer to upload data via transfer protocol to Taxpayer’s platform.  Taxpayer is then responsible for processing the data using its platform, using pre-set customer rules.  Taxpayer then provides the customer with information (and access thereto) about the cost of each function performed by the IT department.  The other three hosted services enable the customer to access and use the Taxpayer’s software platform for budgeting and financial reporting, comparing competitor costs and updating IT service costs in its service catalog, and conduct business unit planning at the product, service, application, and business unit by plugging “what if” scenarios into a forecasting engine.