Legislation Archives - Samuels Yoelin Kantor LLP

Life after Wayfair: The States Begin to Respond

March 8, 2021August 21, 2018 by Valerie Sasaki

We wrote our initial analysis of South Dakota v. Wayfair on June 21, 2018. Since the Supreme Court issued its Wayfair, we have heard from clients with sales into sales tax-imposing jurisdictions who are concerned about what this means for their businesses.

Many states already had tax systems that would require a seller with no physical presence in their state to collect sales tax, which was the core issue in Wayfair. Other states (for example, Louisiana, North Dakota, and Vermont) adopted systems that would only go into effect if Wayfair was decided in a way that eliminated the physical presence requirement that the earlier Quill Corp. case had endorsed. Not all states had taken proactive measures to implement sales tax economic nexus. Some states are adopting additional, parallel nexus tests in the wake of Wayfair.

California, for example, did not adopt sales tax economic nexus thresholds prior to Wayfair. As it’s a significant market state for many companies, we have eagerly awaited guidance from state revenue authorities about what it will do following Wayfair. The California Department of Tax and Fee Administration (“DTFA”) accidentally posted draft rules containing guidance that requires retailers to register with the DTFA if they deliver $100,000 or more of products into California or if they sell tangible personal property into California in 200 or more separate transactions. These are the same thresholds adopted in Wayfair. This inadvertent guidance also said that the effective date of the rules would be August 1, 2018. California pulled the guidance off its website, so we don’t know what the final thresholds are going to be as of this date.

Washington, on the other hand, did adopt economic nexus standards prior to the issuance of the Wayfair decision. What they’ve chosen to do, post-Wayfair, is layer one on top of the other. The Washington Department of Revenue published guidance on July 1, 2018, that leaves them with a two-prong nexus regime. The first prong is essentially the same thresholds as South Dakota – Retail vendors must collect and remit sales tax if they have $100,000 of sales into Washington or engage in 200 or more transactions. These requirements are effective for periods October 1, 2018 and subsequent. However, due to economic nexus standards already in place in Washington, there is a second prong whereby, if a vendor does not rise to the level of activity of the first prong with the state, but has a mere $10,000 of sales into the state, the vendor must either: (1) collect and remit sales tax to the state or (2) comply with use tax notice and reporting requirements (i.e., disclosure of Washington customers to the Department of Revenue to aid in use tax compliance initiatives).

We expect that as other states adopt nexus standards similar to that in the Wayfair decision, we will also see some variation in the effective date of such legislation. Most of the states that have adopted legislation already seem to advocate for prospective application. Essentially, they pick a date and the new standards apply for transactions after that date. However, because some states have explicitly said that they will apply their taxing authority to the full extent of the law, the specter of retroactive application still exists. This means, that a state could assess a vendor for failing to collect sales tax on a transaction that occurred prior to the issuance of the Supreme Court’s Wayfair decision. While this seems unfair, we’ve seen application of nexus standards for income tax retroactively in several jurisdictions. We will continue to update you as these new rules evolve.

Valerie Sasaki specializes in jurisdictional tax consulting, working closely with Fortune 50 companies involved in audits before the Oregon or Washington Departments of Revenue. She also works with business owners on tax, business, and estate planning issues in Oregon or Southwest Washington.

The Bridge is Out! Senate Fails To Compromise on Estate Tax Fix

March 8, 2021May 28, 2010 by Michael Walker

As reported in a recent article in TheHill.com, bipartisan negotiations over a potential compromise relating to the federal estate tax have broken down. According to Senate Minority Whip Jon Kyl (R-AZ), Senate Democrats are not allowing any legislation to reach the Senate floor which is not supported by a majority of Senate Democrats.

President Obama has previously proposed that the estate tax be continued at 2009 levels, with a total exemption from the estate tax of $3.5 million (potentially $7.0 million for a married couple) and with a top bracket of 45%. While the terms of the failed compromise were not released publicly, it has been reported from a number of sources that the compromise would begin at President Obama’s proposed levels, but then the exemption would increase over a number of years to $5 million with a 35% top bracket. In order to make the reduction deficit neutral, the Senate proposal would have also allowed individuals to prepay the estate tax during their lifetime at a rate of 35%. Presumably, this prepayment proposal would have been accomplished through some type of a “prepayment trust,” in which taxpayers would transfer assets to an irrevocable trust and pay the estate taxes in the year of transfer.

If Congress takes no further action on the estate tax (a possibility which I have discussed in a previous WealthLawBlog article), the estate tax will remain “repealed” for the balance of 2010, but then will return on January 1, 2011 with an exemption of only $1 million and a top bracket of 55%. Some Senators have stated publicly that they are in support of a reduced estate tax exemption. For instance,

Sen. Bernard Sanders (I-Vt.) recently stated: “The idea that we would make significant exemptions within the estate tax to give more tax breaks to the top three-tenths of 1% is nauseating. I will do everything I can to stop that.”

With approximately 11 “legislative weeks” for Congress to accomplish a “fix” to the estate tax, it seems to me that two things are becoming increasingly likely. First, the estate tax will likely remain “repealed” for the balance of 2010. Second, as the champagne flows and 2011 is ushered in, the “new” estate tax will return with the $1 million-55% parameters.

Taxes on Health Insurance Premiums: A New Kind of “Trickle-Down”?

March 8, 2021September 15, 2009 by Michael Walker

Effective September 28, 2009, a new bill passed by the 2009 Oregon legislature imposes a new tax on what a legislative staff summary refers to as a “specified group of health insurers.” In particular, the new law assesses a 1% tax upon the gross amount of premiums earned by health insurance providers. The stated purpose of the new tax is to provide health insurance to low income children – a commendable objective.

As the popularity of insurance companies is probably not high, most people might not have a great deal of sympathy for the plight of the newly taxed. However, the tax has already begun to “trickle down” to the rest of us. I’ve recently read a copy of a letter from a CEO of a major Oregon health insurance provider to a customer. Noting the new tax’s impending effective date, the letter pleasantly informs the small business insurance customer that “your premium rates will be adjusted to reflect the new 1 percent tax.”

However, the “trickle” does not stop with the small business. The owner of that business will now need to make a difficult decision as to whether to raise prices, absorb the cost, cut costs of other employee benefits, or pass the additional costs on to employees. You get the idea – the tax lands upon small businesses and their employees at a time when many such businesses are stretched to the breaking point (assuming they’ve made it this far in the recession).

Is this really the intended consequence of the new policy? I welcome your comments and questions.

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