Following the Supreme Court’s June 2018 decision in South Dakota v. Wayfair, states have acted quickly to enact economic nexus laws to require remote sellers to pay sales tax. “Economic nexus” is the power of a state to compel remote sellers to pay sales tax on their transactions with purchasers in the state. As of October 1, 2019, economic nexus laws have gone into effect in all states with a statewide sales tax, except Missouri and Florida. States are using economic nexus laws to compel remote sellers, or sellers with no physical presence in the state, to collect sales tax if the seller’s economic activity in the state reaches a pre-determined threshold. Previous laws required the seller to have a physical presence within the state, such as a brick-and-mortar store, office, or warehouse.Continue reading “States Rush to Pass Economic Nexus Legislation”
The Department of Labor (DOL) finalized its proposed rules for overtime eligibility. As some may recall, the DOL attempted to issue new overtime rules back in 2015, but those overtime rules were enjoined by a federal district court in 2016. Below is a summary of the final 2019 overtime rules:Continue reading “New Proposed Fair Labor Standards Act Overtime Rules”
Navigating the Possibility of Incurring UBTI
UPDATE: The Taxpayer Certainty and Disaster Tax Relief Act of 2019 retroactively repealed the tax on employee parking benefits for nonprofit employers by striking paragraph 512(a)(7) from the Internal Revenue Code. An organization that paid the tax may be eligible for a refund. To claim a refund, the organization needs to file an amended 990-T, as further explained by the IRS here.
Nonprofit organizations that provide employee parking benefits may be surprised to learn that they may be subject to incur unrelated business taxable income (UBTI). In addition, organizations with no UBTI may now be required to file form 990-T.
The Tax Cuts and Jobs Act (Act) amended Section 274 of the Internal Revenue Code (IRC) to disallow for-profit employers from deducting certain expenses related to transportation fringe benefits provided to their employees. The Act added IRC Section 512(a)(7) to what constitutes UBTI for nonprofits and other tax-exempt entities. The Act states that tax-exempt entities are required to increase their UBTI by expenses related to transportation fringe benefits provided to their employees. The transportation fringe benefits subject to this tax include expenses associated with:
Don’t be complacent.
Each year tax-exempt organizations in the United States receive hundreds of millions of dollars in donations. Donors contributing to 501(c)(3) organizations are able to deduct their own contributions from their taxes, subject to IRS limitations. Recently, a higher standard deduction has been put in place through the Tax Cuts and Jobs Act. This will likely diminish the number of taxpayers and donors who itemize their deductions, making it tempting for charities to assume that receipting donations is no longer important. However, charities should continue to exercise care in receipting donations for the benefit of the donor. Continue reading “Receipting Donations”
President Trump Sued for Unpaid Overtime
In July 2018, President Donald Trump learned the danger of disregarding employment law when he was sued by his long-time, personal chauffeur for unpaid overtime. In this case, Trump did not abide by state and federal wage and hour rules.
Reportedly, chauffeur Noel Cintron was “forced to work thousands of hours of overtime without compensation,”1 anywhere from 50-55 hours per week. He would begin at 7:00 a.m., five days a week, and stay until Trump, his family, or business associates no longer needed Cintron’s services. Continue reading “Law Suit Shows the Danger of Disregarded Employment Law”
South Dakota v. Wayfair and Its Profound Effects
The U.S. Supreme Court made sweeping changes to how sales tax laws can be enforced by overturning a 26-year-old precedent. In South Dakota v. Wayfair, the Court held that physical presence is no longer necessary for a state to enforce sales tax laws against out-of-state sellers. Countless online retailers have relied upon the “physical presence” requirement over the last three decades to avoid paying sales tax where they had no offices, employees, inventory, or other physical contacts. The Court held that the “physical presence” rule was no longer sound and that states can tax any activity that has a “substantial nexus,” in this case through “extensive virtual presence” within the taxing state. Continue reading “Supreme Court Opens the Door for States to Collect Online Sales Tax”