While a lot of attention has been focused on the Wayfair decision and how it can require an out of state seller to collect sales taxes on behalf of a state under certain conditions, it is important to remember that prior laws that were written to work with the Quill decision are still on the books.  As the Supreme Court noted in the Wayfair decision, Quill seemed to stand for the proposition that any physical presence in a state enabled a state to impose a sales tax collection requirement.  Thus, such statutes were sometimes drafted with a very low de minimis exception for out of state sellers, well below the $100,000 level found in South Dakota’s statute.

The state of Idaho has announced plans to continue to move forward with enforcing the state’s affiliate agreement nexus law and that the Idaho State Tax Commission has contacted 500 out of state sellers to “remind” them of the requirement to begin collecting the tax (“Some out-of-state retailers required to collect Idaho sales tax”, Idaho State Tax Commission News Release).

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While the Wayfair decision involved sales tax issues, the fact that the Supreme Court found that there was no need for physical presence for a business to be required to collect sales taxes suggested it was unlikely that such a test would apply for other types of taxes.  Shortly after the Wayfair decision was announced, Wells Fargo announced it was picking up an additional $481 million in state income taxes on its financial statements.[1]

Now the Oregon Supreme Court has ruled that the state’s corporate income tax does not require the physical presence of the corporation in the case of Capital One Auto Finance, Inc. v. Department of Revenue, Docket No. SC S064803.

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The AICPA won and then lost in the case of American Institute of Certified Public Accountants v. IRS, Case No. 16-5256, DC CA.

The AICPA had instituted a challenge to the IRS’s Annual Filing Season Program, established in Revenue Procedure 2014-42.  The opinion describes the program as follows:

The Program grants an annual “Record of Completion” to any participant who has obtained a preparer tax identification number, taken the annual “federal tax filing season refresher course,” passed a comprehension test, completed a minimum of eighteen hours of continuing education, and “consent[ed] to be subject to the duties and restrictions relating to practice before the IRS in subpart B and section 10.51 of Circular 230 for the entire period covered by the Record of Completion.” Id. § 4.05(1)-(4).

The IRS offers two incentives to participate in the Program. First, the IRS lists unenrolled agents with a Record of Completion in its online directory of tax preparers alongside attorneys, CPAs, and enrolled agents. Second, the IRS gives them the “limited practice right” to represent a taxpayer in the initial stages of the audit of a return he or she prepared; for this the unenrolled agent must have a Record of Completion for both the year of the return and the year the IRS initiated the audit. Id. § 6. Before the Program was established, all unenrolled agents had this limited practice right.

The IRS appealed District Court opinion that ruled the AICPA had no standing to bring this suit on behalf of its members.  The AICPA appealed that ruling to the DC Circuit Court of Appeals which reversed the District Court and held that the AICPA had standing to bring the suit.

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The much anticipated proposed regulations on the IRC §199A deduction related to qualified business income have been released by the IRS ([REG-107892-18]).  The proposed regulations give the first official insight into how the IRS is planning to administer the new provisions found under IRC §199A.

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Proposed regulations to implement the changes to bonus depreciation made by the Tax Cuts and Jobs Act have been released by the IRS in REG-104397-18. 

The preamble provides that taxpayers may rely upon the proposed regulations until final regulations are issued:

Pending the issuance of the final regulations, a taxpayer may choose to apply these proposed regulations to qualified property acquired and placed in service or planted or grafted, as applicable, after September 27, 2017, by the taxpayer during taxable years ending on or after September 28, 2017.

Some of the key features of the proposed regulations are discussed below.

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The IRS has now issued guidance on how businesses may obtain automatic consent to change accounting methods to use the new “small business” methods contained in the Tax Cuts and Jobs Act in Revenue Procedure 2018-40.

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Reports today from various sources have noted that a majority of states that impose a sales tax have now put in place requirements for out of state sellers to collect and pay over sales taxes.  The dates for beginning enforcement have ranged from July 1 (which means sellers may already be in violation) to January 1, with a number of states looking to begin collection requirements on October 1, 2018.

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The state of Minnesota in a news release announced that it will being enforcing its remote seller sales tax collection statute effective October 1, 2018, as well as its statute requiring certain marketplace providers to collect and remit sales tax.

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Yet another U.S. District Court has decided that the IRS must follow the terms of its own regulations and limit the maximum penalty for a willful violation of the FBAR rules to $100,000.  In the case of Wadhan v. United States, US DC Colorado, Case No. 1:17-cv-01287, the IRS was limited in the amount of penalty that could be assessed for the same reasons cited by the U.S. District Court for the Western District of Texas in United States v. Colliot.

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The latest state to act to force out of state sellers to collect sales tax is Utah.  In a special session, the Utah Legislature passed SB 2001 which conforms the state’s rules requiring out of state sellers to file with Utah with the provisions found in South Dakota’s law.

Utah’s triggers for filing by an out of state seller will conform to South Dakota’s, effective on January 1, 2019.  As well, the previous rule that allowed sellers who voluntarily collected Utah tax to retain 18% of the tax collected will be repealed effective on the same date.

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