P Todd Kelly

As a Sales Tax consultant, I am often asked how Internet sales should be taxed at the state level. Until now, I was usually able to respond that the rules varied so from state to state and that few states had detailed rules available, so that compliance with the complex web of Sales and Use tax laws is often difficult.

However, the State of Virginia has made it simple for those making Internet purchases in Virginia. According to a press release I recently received at my office from the Virginia Department of Taxation, Virginia expects her citizens to readily comply with their laws and voluntarily send in sales tax on any purchases they make for which they were not charged sales tax.

Most states have Use Tax laws, which would apply to items purchased out of state and most states collect use tax from individuals on their state individual income tax returns.

Here’s what Virginia says:

“Purchase of goods over the Internet:

“When an individual purchases tangible personal property over the Internet, he or she must practice due diligence and verify that Virginia sales tax is being charged on the item(s) purchased.

“Always remember to check your invoices to see whether you owe Virginia tax.  If you ordered an item in Virginia over the Internet and the company did not charge Virginia tax, you owe Virginia sales tax to the Department of Taxation, not the Internet company.”

Virginia is kind enough to provide the following example:

“A Virginia retail business purchases books for its employees as gifts from a book store online. When the invoice arrives the accounts payable clerk notices that the store did not charge sales tax.  The accounts payable clerk calculates the amount of Virginia tax the business owes to the Department of Taxation. The clerk then records the amount of tax owed on the company’s ST-9 form and pays the tax to the Tax Department.”

For more information about Virginia’s policy and to review the entire law visit Virginia’s Policy Library on the Tax Department’s homepage at www.tax.virginia.gov.

Georgia, my home state has undertaken a project whose time has come – Corporate Sponsorship of State Parks. I read with delight this morning, an article by Melissa Maynard, on Stateline.org.

Maynard uses the example of the long-standing relationships around the country between the Boy Scouts and volunteerism in their local state parks. Georgia, however, has ramped that relationship up this year, as the Boy Scouts celebrate their 100th anniversary by building bridges and park benches, and doing their normal service projects. The difference in Georgia is that this time Verizon Wireless is the sponsor.

Click here to read more

This is normally the time of year when the Georgia Department of Revenue is flooded with calls asking the question, “Where is my Refund?” You can read my previous posts on how you can get your refund faster or how to navigate the phone system or what to do if you STILL can’t get a live person on the phone here.

This year, however, they are flooded (literally). I went down to the main office at 1800 Century Blvd, Atlanta, GA today, and found the Customer Service area to be closed.
The first floor of the building flooded over the weekend. I was told that the electrical closet flooded and that the power was out.

What’s interesting about this situation is that I waited in line for a shorter amount of time than normal. One of my regular contacts was there, working the lobby of the Century Center Building and I was able to get my work done quickly. I was there to turn in four alcohol applications for clients.

By the way, if you run a business in Georgia that sells or serves alcohol and need assistance with your local or state license, if you have a sales and use tax issue or any other kind of state tax issue, please do not hesitate to contact us. You can find more information about services we offer on our website at http://www.taxtraxx.com.

Raising Taxes

Across the country, governments at all levels are looking to replace lost tax revenues from lowered property taxes, sales taxes, and income taxes, reductions in fees charged to new businesses for licensing, and reduced collections of delinquent taxes. In another post, I review a proposed Tax Overhaul for the State of Maine and include the commercial with the woman walking her lobster!

Lowering the Cost of Government

One idea that would work universally is to consider, rather than raising taxes, LOWERING the cost of government. In every government agency, in every Federal, State or Municipal office building across the country, you can find redundant services, multiple people doing the same job, or employees filling jobs that are obsolete.

The Sad Story of “Marjory” and How She Wasted State Tax Dollars

Here’s an example from my days as a former “government insider”. In 2001, my team was instructed to audit the hundred of IT “reports” that were printed nightly, weekly, monthly, or on some other schedule. When I say “printed”, I mean printed. These were the last days of mainframe processing and wide carriage “green bar” tractor feed paper. So, we went about our audit, counting every page that was printed and developing cost savings models to present to our boss, the State Revenue Commissioner.

There was one report we couldn’t account for. It was a hundred page report that was printed nightly off site at a remote IT center and delivered by courier to our office building on Atlanta’s Capitol Hill. The report was designated to be delivered by courier to a state employee we’ll call “Margory”.

My job was to find “Margory” and poll her as to her use for the report, why it had to be printed, would she use the same report if delivered electronically on demand. So, off I went. I looked up “Margory” in the agency directory and found where her cubicle was located. I went to her desk and found it empty, except for a stack of green bar tractor fed paper probably 30 inches tall (maybe 20 0r 30,000 sheets total).

I sought out the supervisor of the unit, and asked where “Margory” had gone. I was told that “Margory” had retired about four months earlier and that nobody had replaced her. I asked the supervisor to tell me who was using “Margory’s” report. She said nobody was using it, and that it was one that “Margory” used because she didn’t like to look at it “on the screen”.

After this meeting, I calculated that the Agency had paid roughly $15,000 to have this 100-page report printed nightly for four months, while no one was even using it. It took 30 minutes of my time to ferret out this information. The sad news is that there were many other redundancies and useless expenses showing almost as egregious behavior.

Bottom line is this: there exists stupid and unnecessary overcharges in every agency. Just knocking a few of these out every month would reduce a government’s revenue requirement. One alone is not much, but consider the possibility of eliminating entire sections, divisions, or entire agencies whose usefulness has passed.

Citizens in Maine go to the polls this week to vote on a Tax Reform proposal that would eliminate the State of Maine 4-tiered state income tax system currently in place (with rates of 2%, 4.5%, 7% and 8.5%) and replace it with an across the board state Income Tax Rate of 6.5%, with a .35% “surcharge” on taxpayers making more than $250,000 in income.

The law also replaces lost revenue with Sales Tax rate increases, thereby somewhat transferring the tax burden from Mainers to tourists.

Here’s my favorite TV spot for this vote, showing a woman walking her lobster.

As a consumption tax advocate, I’m all for this. However, this increase in sales tax affects out state vendors and manufacturers who deliver products into the State of Maine. I’m NOT for that.

Next, see an example of Cost-Cutting in Action: Raising Taxes? How About Lowering the Cost of Government?

In this era, when we have become accustomed to blaming every financial woe and strife on the “Great Recession”, some states are attempting to triage their own economic wounds by holding state tax refund checks.

Disclaimer: for more than seven years, I held various management positions in the Georgia Department of Revenue (GA DOR) and for five of those years, I had the responsibility of monitoring most types of tax refunds issued by the department.

Back when I was a “government insider”, the Georgia DOR issued about 2 Million individual income tax refund checks – out of nearly 4,000,000 tax returns filed annually, totally a little more than a $Billion. I do not know what those amounts are today, but I can’t imagine it would be less than that.

I read today that New York, Missouri, Iowa, Rhode Island, and a few other states have delayed issuing refund checks. In my experience, these delays are most often caused by insufficient staffing of state employees to handle the seasonal rush. If that is not the case, and if a Revenue Commissioner, a legislator or other bureaucrat causes these delays, then that’s a different problem.

To delay refund checks on purpose, trying to manipulate financial reporting, does not make political or fiscal sense. Let me explain.

Let’s say your state’s fiscal year ends June 30, as many of them do, and let’s say that you hold 100,000 refund checks totaling $50 Million. To you and me, $50 Million is a lot of money. In a $20 Billion budget, though, $50 Million is a drop in the bucket – a mere quarter of a per cent, or not enough to save the state.

However, having that $50 Million come off your state’s books this fiscal year, rather than the next one, might make a difference – to the tune of several percentage points less revenue than you would otherwise have. Economists will argue this point, but taking the $50 Million shortfall earlier, rather than later, will make your state’s economy SEEM to rebound a month faster than if you held off on taking the shortfall until the next month or fiscal year.

Why? Simple. If you take a $50 Million hit THIS June, that’s $50 Million less you have to collect NEXT June. If things balance out by then and you are back to a more normal rate of collections, then your state’s economy will SEEM to recover one month quicker, comparing June of next year back to June of this year. The converse is also true, in that if you take the $50 Million loss this year, and the economy doesn’t recover, it doesn’t SEEM like next June is quite as bad as it actually is – thus, a political triumph either way you slice it.

Finally, consider the taxpayers – the 100,000 taxpayers in your state with an additional $500 to save or spend becaue they got their refund in June, rather than July. Considering the example above, the average refund in this group would be about $500, which is probably slightly lower than an average state refund would be in actuality. Assuming that hardly anybody saves their refund, pays down a credit card or contributes to charity, that’s a lot of money being put back into circulation in your state. At 7% sales tax, it’s also $350,000 that the state and local governments do not have to refund to anybody.

In another article, we’ll discuss how and when states must pay interest on tax refunds that they pay late and when the states can keep your refunds and not send them to you at all.

If you are in Georgia and need to get in touch with someone about this, please read my previous post How Do I Get a Live Person at the Georgia Department of Revenue, or If You Still Can’t Get A Live Person at the GA Department of Revenue.

Best of all, nearly everyone has their refund already, but if you don’t – Good Luck!

I don’t care what you think about Ray Stevens (disclaimer: my dad says we’re distantly related), but this is right on target.

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Saw this online and wanted to share with you. The Obamapad. If only people could see .  .  .

What a great analogy for the health care debate / Health Care reform / socialized medicine mess – or government waste. Feel free to pass along the link to your friends.

As I write this, the calendar has flipped to April 15th – Tax Day, our national celebration day where we pay homage to Big Government programs, politics, government waste, cumbersome bureaucracy, and coffers bloated by the special interest  groups.

As a tax professional, I try to avoid preparing Personal or Individual Income Tax returns. My business, Tax Traxx, specializes in business taxes, specifically Sales Tax matters in 45 states. Every year about his time, as other accountant-types work double or triple shifts busily preparing their clients’ Tax Returns, people say things to me like, “I know you’re really busy this time of year,” or “I know you’ll be glad when April 16th gets here.”  Even though Personal Income Tax returns are not my specialty, I suffer along with the ever dwindling number of Americans who actually pay taxes.

I prepare an occasional 1040 or 1040EZ form for a client here or there. In fact, I did one today. Let me tell you a little story. Today’s example is a single 21-year-old, recently moved from home and working her first “real” job. Today’s subject had a little over $6,000 in earned income, and paid a little less than $200 in withholding throughout the year. In preparing her return, I realized that she was entitled to claim the full “Making Work Pay” credit, which is a $400 (max.) refundable credit. This whole thing about refundable credits is pure and simple Marxist wealth redistribution. Taxpayers can claim refundable credits that exceed the amount that they paid in withholding during the year, so that they possible receive a refund greater than the amount they paid in. In today’s example, the subject paid a little less than $100 in Withholding, but received a refund of nearly $500. If only she had been 25, she could have also claimed the “Earned Income credit” as well.

Where did that money come from? You and me, brethren.

That’s why every year about this time, I’m shocked when I hear someone say that they didn’t have to pay any taxes – they got ‘em back! They say this, not realizing that each of their paychecks throughout the year was chock full of withheld taxes – money that would have been theirs, had our elected representatives not seen fit to confiscate said money and use it for whichever of their own self-serving political purposes they deem to be more worthwhile than allowing “working Americans” to manage their own money.

This is not meant to be a diatribe against taxation, or against the necessity to fund core government services (the basic functions required by the Constitution, not the fabricated social welfare programs that began to choke us after World War I and have never loosened their grip). There’s plenty of blogosphere out there to host the arguments of the proponents of all the different alternative solutions like the Fair Tax, flat tax options, value-added tax options, etc.

The simple fact remains that the current system is bad. Some would call it “fatally flawed” but I don’t think that is a strong enough description.

So, what will you do to “celebrate” the day today?