Corporate Taxes

Not Flat

Ron Tang — Thu, 26 Jun 2008 08:04:00 -0400

PL 86-272 provides that if the only in-state activities a business has is the solicitation of orders for tangible personal property that is approved and filled from outside the state, the state may not impose a net income tax on the business. States set the rules, within due process and commerce clause constraints of the U.S. Constitution, for businesses that sell services or intangibles.

States tend to take broad approaches. A 2007 Illinois Department of Revenue ruling notes that "as a general rule, the Department interprets the concept of nexus as broadly as possible (No. IT 07-0033… more

Gross Receipts Taxes

Ron Tang — Thu, 22 May 2008 10:34:00 -0400

In recent years, concern over declining corporate tax collections, aggressive tax planning and state revenue needs have led a few states to consider and even enact a gross receipts tax (GRT) on companies that do businesses within its borders. On the surface, a GRT is simple since it allows no deductions. The broad base allows for a very low rate that can make the tax more palatable. Further, all businesses are typically subject to the GRT, with the result that all businesses contribute something to state coffers.

Yet, many oppose the GRT because of its inherent flaws, one being that it… more

Gross Receipts Taxes

Ron Tang — Thu, 24 Apr 2008 06:21:00 -0400

Recent tax reform efforts in Ohio, Texas and Michigan have led to an increase in the number of states imposing gross receipts taxes (GRT). Let's take a closer look at GRT and some important legal issues surrounding it.

Overview

The Multistate Tax Compact defines a GRT as "a tax, other than a sales tax, which is imposed on or measured by the gross volume of business, in terms of gross receipts or in other terms, and in the determination of which no deduction is allowed which would constitute the tax an income tax" (Article II (PDF)).

In 2005, Ohio enacted a… more

Throw Out the Tax Code

Ron Tang — Sun, 20 Apr 2008 07:25:00 -0400

Politicians don't like to talk about taxes except to brag about cutting them. But with California's widening budget deficit threatening deep cuts in education and other public services, it's difficult to avoid discussions about raising taxes.

Unfortunately, what's likely to be lost in the upcoming partisan melee over whether new taxes are needed to close the $16-billion gap is an equally important tax issue -- California's aging and often unfair tax system needs to be overhauled.

The goal of tax reform should be twofold. One is to generate a more reliable revenue stream. The other is to make the tax… more

The 50th Anniversary Of Public Law 86-272

Ron Tang — Thu, 27 Mar 2008 07:29:00 -0400

Public Law 86-272, addressing circumstances under which a multistate business may owe state income taxes, was enacted as a stopgap measure on September 14, 1959. For the past several years, efforts to reform this law have raised issues similar to those of 1959. This article provides a brief history and the issues surrounding PL 86-272 and poses the question -- when the 50th anniversary milestone is reached, will PL 86-272 be in its historic form or a new form (and what might that be)?

1959 Supreme Court Decision

In February 1959, the U.S. Supreme Court issued its opinion in Northwestern Cement v.… more

Don't Link School Spending To Oil Companies' Profits

Ron Tang — Fri, 21 Mar 2008 08:33:00 -0400

Last week, a bill was proposed by a majority of Assemly Democrats to impose extra taxes on oil companies to help prevent pink slips for teachers. A March 12 vote, mostly along party lines, failed to garner the required two-thirds majority for passage of a tax increase.

But Assembly Speaker Fabian Núñez has said he does not plan to give up on the idea.

Despite the importance of not laying off teachers, failure to pass was a good result. The bill, ABX3 9, is not the solution for keeping teachers employed or solving California's budget problems.

Budget problems cannot be solved with taxes… more

Corporate Tax Under the Microscope

Ron Tang — Thu, 24 Jan 2008 00:00:00 -0500

S corporations now account for two-thirds of U.S. corporate tax returns (see NTA report) and while designed for simplicity, they’ve become increasingly complex and harder for regulators to standardize and monitor.

As the number of small businesses has exploded, the number of S corporations formed has more than quadrupled since the last review (of 1984 returns) while the number with assets exceeding $10 million has increased 10-fold. Today’s S corporations are not necessarily small, and not necessarily easy to classify for tax reporting purposes.

In fact, the National Taxpayer Advocate’s (NTA) 2007 Annual Report to Congress (January 2008) identifies… more

The Future of the Corporate Income Tax

Articles — Thu, 25 Oct 2007 15:33:00 -0400

Two great concerns leading to calls for tax reform are (1) that changes in the world economy are reducing the likelihood that the U.S. will be assured of a dominant role and (2) inordinate complexity that leads to disrespect for the tax system, economic inefficiencies and increased costs of tax compliance. Yet, despite numerous calls for tax reform, the major changes we have seen to the system recently have actually increased its complexity. Examples include the addition of Schedule M-3 for large corporations and the IRC §199 manufacturing deduction. Why? This article summarizes the primary reasons for tax reform discussion,… more

Nexus Confusion: Sales and Use Tax

Articles — Fri, 05 Oct 2007 12:46:00 -0400

The best way for a business to simplify its nexus determination for sales tax purposes is to set up a sales office in the state in question. Then, it clearly has nexus and must collect sales tax there. But, this approach isn’t the business reality or plan for Internet-era businesses. Businesses without an obvious physical presence in a state, but with customers there, may be challenged to know if they should collect sales and use tax. This article looks at the reasons for uncertainty and what improvements might be made.

Sales and Use Tax Nexus

For a state to subject a vendor… more

An L.A. Tax That’s Really Gross

Articles — Fri, 06 Apr 2007 18:05:00 -0400

If Los Angeles business leaders were looking for somebody to carry the torch on one of their most important causes, it’s a safe bet that Wally Knox wouldn’t rank very high on the list.

The former Democratic assemblyman acknowledges that he had a reputation in the state capital as a "wild-eyed, union-loyal liberal." He is perhaps best remembered for his authorship of the 1999 law that secured overtime pay for Californians who work more than eight hours a day -- legislation that many from the corporate world condemned as government meddling into the decisions of private employers.

So when Knox starts… more