Gov. Deal Signs Tax Bill Into Law

Nathan Deal signed H.B. 386 into law this week.

Highlights include:

• Eliminating the state sales tax on energy used in manufacturing. The tax will be phased out beginning Jan. 1 and will be fully eliminated Jan. 1., 2016. The governor has said this provision helped the state land Baxter International and Caterpillar, two recent economic development triumphs. Eliminating the tax could eventually cost the state about $95 million, and estimates show local governments losing up to $100 million.

• Increasing the income tax exemption for married couples filing jointly from $5,400 to $7,400. This takes effect Jan. 1.

• Eliminating the annual property tax on motor vehicles that owners must pay by their birthdays. Car buyers beginning March 1 will no longer have to pay the tax to their county. Instead, they will pay a one-time fee when they buy a car.

• Reinstating sales tax holidays for shoppers seeking back-to-school products Aug. 10-11 and energy-efficient appliances Oct. 5-7. The former covers a wide range of items, including clothing, computers, books and paper. The latter covers federally approved energy-efficient appliances and goods for personal use, including dishwashers and windows.

• Eliminating a sales tax on certain products used in agricultural industries. The exemption takes effect Jan. 1.

• Requiring many online retailers to collect state sales taxes. Beginning Oct. 1, retailers who have a physical presence in the state, including online affiliates, will have to collect sales taxes from consumers.

• Capping the retirement income exemption for seniors at $65,000 ($130,000 per couple) beginning Jan. 1.

• Creating a permanent 1 percent sales tax exemption on commercial aviation fuel beginning July 1.

In subsequent posts, I will expand on a few thoughts of the specific provisions.

If you have any questions about how the new law may affect you, please contact me.

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Colorado's "Amazon" Law Held To Be Unconstitional

U.S. District Court for the district of Colorado has found the State's "Amazon Law" to be unconstitutional.

The law would require out-of-state retailers with sales in excess of $100,000 who do not collect and remit Colorado sale tax to:

• Notify the purchaser that the retailer does not collect Colorado sales tax and the the purchaser is obligated to self-report and pay use tax. (Transactional Notice)
  
• Provide each customer who purchases more than $500/year from the retailer with an annualreport of the prior calendar year's purchases and infomr the customer that the retailer is required to file an annual purchase summary reporting the customer's name and total purchases to the Colorado Department of Revenue. (Annual Purchase Summary)
• Provide the Department of Revenue with an annual customer information report stating the name, billing and shipping address, and total purchases for each of its Colorado customers. (Customer Information Report)

A state tax will be sustained against a commerce clause challenge provided it:

• is applied to an activity with a substatial nexus with the taxing state
• is fairly apportioned
• does not discriminate against interstate commerc
• is fairly related to the service provided by the state

These requirements were found to be unconstitutional because they violate the Commerce Clause regulating interstate commerce. These requirements would have been imposed on out-of-state retailers and not in-state retailers. Therefore, these requirements are discriminatory. In order for the law to stand Colorado would have needed to prove that there was justification in the local benefits that would flow from the law and the unavailability of nondiscriminatory alternative adequate to preserve the local interests at stake.

The plaintiff argued that there were alternatives to collecting use tax:

• Some states include a line on their resident income tax returns on which residents report use tax due
• The DOR could increase audits of business consumers
• Consumer education and notification programs may increase compliance with use tax obligations.

The state said that it had not previously included a line on its income tax returns for reporting use tax. However, it said that Colorado did include a consumer use tax return with income tax return forms but that practice was discontinued because the amount of tax collected did not justify the printing expense.

As it stands, Colorado can not rely on out-of-state retailers to collect and remit sales and use tax on Colorado residents. My prediction is that states will continue to attempt to collect use tax through "Amazon" type laws. Those state will use the Colorado law as a starting point and attempt to correct it on constitutional grounds. Those grounds may include requiring all retailers both in-state and out-of state to report customer purchases. This might get by the discriminatory part. States may also increase audits of residents to seek compliance.

What are your thoughts on "Amazon" style tax laws?

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Avoid Late Filing Penalties

It's Tax Deadline Eve. The only proper way to celebrate is to make sure you have either filed (and have received confirmation) or to file an extension if you need more time. Filing an extension doesn't allow you more time to pay (without interest) but it could save you some money in penalties. An extension can be granted for 6 months of additional time but filing Form 4868. It can be mailed or e-filed.

If you need more information, please contact me.

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Last-Minute Suggestions For Accuracy

Here are ten suggestions for those still working on their taxes:

• File electronically
• Check the identification numbers
• Double-check your figures
• Check the tax tables
• Sign your form
• Send your return to the right address
• Pay electronically
• Follow instructions when mailing a payment
• File of request an extension to file on time
• Go to IRS.gov for forms and instructions

I would add that if you file electronically be sure to check on a confirmation that the IRS and any states have received the returns. If you mail your return, it is wise to send it return receipt so that you have proof of filing.

If you have any additional questions, please contact me.

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Making Federal Tax Payments

Today the IRS provides a list of 10 tips to make sure your federal tax payments are properly credited to your account. Beyond the obvious advice of not sending cash, you're advised to write you SSN on the front of your check made payable to United States Treasury. Be sure to include a Form 1040-V voucher. You can also pay by phone using a debit or credit card. If you e-file, you can have the funds electronically drafted from a bank account.

You can see the full list here.

If you have any tax questions, please contact me.

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How To Get IRS Tax Help

Today's IRS Tax Tip tells how to get information or assistance about tax issues. The Tax Tip lists how you can:

• Check on your refund
• Get forms and publicatoins
• Get previous years' tax info
• Set up payment plans
• Get small business questions answered
• Understand a notice
• Get help for specialized reasons

If you need additional information, please contact me.

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How To Determine If Your Gift Is Taxable

The IRS has some information regarding gifts you make to others. The general rule is that gifts you make are taxable with the following exceptions:

• Gifts that do not exceed the annualu exclusion for the calendar year, $13,000 for 2011 and 2012. Married couples can choose to have gifts made one-half by each spouse which allows for a total gift of up to $26,000. Gift-splitting requires a gift tax return to be filed. Use Form 709.


• Tuition or medical expenses you pay directly to a medical or educational institution for someone.


• Gifts to your spouse.


• Gifts to a political organization for its use.


• Gifts to charities.

The eight tips the IRS recommends can be found here.

If you would like to consider the tax aspects of making a gift, please contact me.

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Tips For People Who Pay Estimated Taxes

The IRS provides some helpful information concerning paying estimated taxes. The main thing to remember is that you generally must pay estimates if your balance due is expected to be at least $1,000 AND your withholding and tax credits is less than the smaller of 90% of your current year's total tax or 100% of last year's total tax. For calendar year taxpayers, the due dates of estimated taxes are April 15, June 15, September 15 and January 15 of the following year.

Here is the link to the six tips from the IRS.

If you have any tax questions, please contact me.

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