Posted by John Tennant on 3/13/11 6:07pm
Msg #376054

Internet Tax Freedom Act

This will effect all California Notaries, and possibly later, the rest of the country.

As a California Registered Tax Preparer, yesterday, I received a letter from the State Board of Equalization outlining my responsibilities as a Tax Practitioner in California.

Following is an excerpt from that letter:

"Practitioners should take steps now to ensure their clients are use tax compliant. As a tax practitioner, you can assist your clients by reviewing their out-of-state catalog, mail order, and internet purchases to determine if the retailer collected the tax. You can also help them by establishing a record keeping system which would track future purchases to determine if use tax is due or if it has been paid to the retailer.

Please be aware that California is increasing its use tax compliance initiatives and non-compliant taxpayers risk additional penalty and interest charges when the use tax is not paid in a timely manner."

In addition, "The Internet Tax Freedom Act was inacted in 1998 to place a moratorium on charging taxes on internet access fees. However, it does not provide an exemption from tax for purchases made on the internet."

FWIW, I am a tax preparer, not a policeman. Do I believe that California will eventually go after those of us that buy out of state and do not pay taxes. Yes. My attitude on this is "catch me if you can". Not the right attitude for someone in the tax business I'm sure.

Just a wake up for my fellow notaries.

Reply by JulieD/KS on 3/13/11 6:36pm
Msg #376057

Same here. I am a one-woman tax office, a tax professional and an enrolled agent. I am not a babysitter nor am I in the business of reviewing receipts to be sure sales tax is being collected.
The fact that California issued such a mandate shows just how desperate they are for tax dollars.
They need to trim their budget and leave the beleaguered taxpayers alone.

Reply by Linda_H/FL on 3/13/11 7:02pm
Msg #376060

Are you not required to keep records of the returns you do? Will they have subpoena power to audit your records for the information they're looking for you to collect?

Believe me, not arguing, just curious ...

Reply by JulieD/KS on 3/13/11 8:13pm
Msg #376065

Linda, I'm required to either keep the tax return OR a list of Name/SS#/tax return prepared (e.g. 1040 or 1120S, etc) but I don't do sales tax returns. Other than as an itemized deduction, sales tax doesn't enter into the equation. Yes, there is a compensating use tax but shoot, I'm about as organized as I can be...and even I couldn't tell you if I paid sales tax on everything I bought on the internet.
I guess I should add that question to the 2 pages of questions I already ask my clients. <sigh>
Taxes are becoming so burdensome.

Reply by John Tennant on 3/13/11 9:22pm
Msg #376071

Hi Linda, yes we are required to keep all records for our clients going back at least 3 years. In California they can audit our clients and we must provide all information regarding their returns. This is done during the audit process and does not require a subpoena.

Other information I have received suggests there will be a line added to the State income tax form that will provide the opportunity to report the clients tax payments, or tax due. I have not received anything "official" on this yet but will not be surprised when it happens.

Julie is right, the State is in really bad shape so nothing they do is surprising.

For California, it could mean millions of dollars. "Moonbeam will leave no stone unturned".

Reply by MW/VA on 3/13/11 7:47pm
Msg #376062

IMHO this is getting into a very touchy area. I understand the states & their concern over lost tax dollars from tv, internet, etc. purchases. Again, IMHO it is the responsibility of the companies to pay taxes to the state where the purchaser is. This use tax issue is going to get very confusing. Again, how will they ever be able to enforce it? I have done tax prep also. The tax preparer or an accountant or anyone else can only prepare taxes according to the info the client provides.

Reply by GOLDGIRL/CA on 3/13/11 9:07pm
Msg #376069

Speaking of taxes .....

Why do some SSs not send 1099s, which I understand kick in at $600?? This happens every year, but more so this year - at least five have not sent me 1099s - and apparently aren't going to. I've lumped all the income from them in the "other" income category, so I can easlily separate it out if a 1099 comes in late ... but, still, just curious ....?

Reply by John Tennant on 3/13/11 9:26pm
Msg #376072

I totally agree with you, however, there is movement here in California to try to make the preparer somewhat responsible if obtaining the sales tax information. Is this movement wrong. In my opinion, yes. Will I do it. NO. They want to take my tax preparation ID away, so be it.

Reply by MW/VA on 3/14/11 8:10am
Msg #376083

Good for you, John. This is pretty scarey. Does CA have a state constitution? I can't imagine that this is legal.

Reply by C. Rivera Chicago Notary Services on 3/14/11 6:57am
Msg #376079

Thanks for the info John...our lame duck governor signed a

Bill recently that basically says, anyone living in Illinois, and buying anything over the Internet must pay a sales tax on the item purchased!? Like that's going to voluntarily happen...yeah right!

And you're right, as a Tax Preparer, you're so not going to police your clients, not your duty as a preparer, and ultimately, its up to the CLIENT to provide you with that information voluntarily of course...this gustopo shit with the Feds MUST stop!

Reply by JanetK_CA on 3/14/11 3:49pm
Msg #376137

Scratching my head...

Maybe I read this wrong, but I thought this was about a state law. I don't get how this leads to "gustopo shit with the Feds". But I guess it could explain how certain very popular, but unfounded, ideas become accepted as fact by so many. (Sorry, I couldn't resist...)

Reply by MikeC/NY on 3/14/11 9:45am
Msg #376087

They tried this in NY a few years ago

There was (may still be) a line on the state income tax form for reporting unpaid sales tax on Internet purchases, so that the state could collect it. The problem with voluntary compliance programs like that is that very few people comply voluntarily, which is pretty much what happened... It would be extremely difficult, if not impossible, for the state to track down purchases made at out-of-state stores - who's going to supply them with that information?

Reply by C. Rivera Chicago Notary Services on 3/14/11 10:34am
Msg #376091

Re: They tried this in NY a few years ago

yeah Mike, I totally agree...the same here on our forms...I use a tax software program, and it actually asks that question on the state form...folks are looking at me like I'm crazy when I ask them...

Reply by Susan Fischer on 3/14/11 1:33pm
Msg #376117

I seem to remember Idaho doing the same - for garage

sale "income." That dog didn't hunt worth beans...

Reply by Lee/AR on 3/14/11 1:33pm
Msg #376118

I dunno...

This goes back many years to when I was a R.E. Broker and ordering yard signs from Dee Sign Co. in Ohio. Dee was THE sign co. back then. First, we got 'told' that they knew we ordered from Dee Sign, so pay up. (Actually hadn't that year, so it was just a fishing expedition.)
But, eventually they forced Dee Sign to start collecting various state's Sales tax.

Reply by JanetK_CA on 3/14/11 3:56pm
Msg #376138

Re: I dunno...

I can see where this would be a huge localized pain for small internet businesses, although I would think that there would be software programs that could help them handle the accounting on this. [I don't know...] But with the increasingly popularity of online shopping, California - and other states, I'd assume - has been losing tons of sales taxes that formerly were a key revenue source. This is true at city and county levels, as well, which directly impacts services that most of us expect, like police, fire, schools, etc.

Reply by MikeC/NY on 3/14/11 6:29pm
Msg #376156

Re: I dunno...

"First, we got 'told' that they knew we ordered from Dee Sign, so pay up. (Actually hadn't that year, so it was just a fishing expedition.)"

Exactly - they would just be fishing. My response to a demand like that would be "prove it."

"But, eventually they forced Dee Sign to start collecting various state's Sales tax. "

The Supreme Court has already ruled on how this can be done. Some states, such as CA, are trying an end-run around that, but this will likely take years to resolve.

Reply by Mary Ellen Elmore on 3/14/11 4:27pm
Msg #376141

TN ans SC have had similar tax for laws for years--if you travel out of state and reside in TN or SC and you make a purchase of anything and bring back with you--you have to pay sales and use tax in TN or SC (whichever state you reside in).