In April, PPAI will take nearly 70 industry leaders to Washington, D.C. to participate in the fourth annual L.E.A.D., Legislative Education and Action Day.
Industry professionals representing nearly every state will attend approximately 300 meetings with members of Congress. They will discuss specific issues including the use of independent contractors, tax reform and its impact on small business, the value and benefits of safety recognition programs, and the use and benefits of promotional products.
On April 10 and 11, PPAI members will take this message directly to Washington, D.C. You may not be able to attend this year, but you can still be involved in this critical advocacy effort.
The week of April 8, PPAI will send out daily email reminders for industry professionals to contact their Members of Congress through emails and phone calls during L.E.A.D. This step is vital in delivering our message to Congress. By adding your voice to ours, our message will be amplified and become much more powerful. To become involved in this unique opportunity, watch for emails from PPAI the week of April 8 that will help you make your voice heard. If you would like more information about L.E.A.D. or the messages we are taking to Capitol Hill click here.
The Washington Report
Through our legislative contacts and lobbyists, PPAI has access to up-to-the-minute information, insight and analysis that you won’t see published anywhere else. The information in this month’s special Washington Report focuses on the Marketplace Fairness Act and the debate over the collection of sales and use taxes from consumers by out of state sellers. It is timely information that will help you become more aware and better prepared to advocate for your business, profession and industry.
I hope you find this information beneficial to your business.
MARKETPLACE FAIRNESS ACT ADVANCES (SORT OF)
The United States Senate has approved an amendment to its version of a budget for the federal government for fiscal year 2014 that would facilitate passage of the bill to allow states to require out of state sellers to collect and remit sales/use taxes. Yes, that is a mouthful. What does it mean?
In theory, Congress is required to pass a budget each year before it passes appropriations and taxes bills to fund the government for the upcoming fiscal year. Oddly enough, Congress does not have to actually pass a budget to take those other actions and in fact, it has become more common for Congress to not pass a budget, particularly when the chambers are controlled by different parties.
Having said that, the budgets are policy statements that provide some indicator of the strength of a particular point of view. The proponents of legislation, known as the Marketplace Fairness Act, which gives the states the authority to deal with the sales and use taxes issue, decided to use the Senate debate on the budget to take a measure of their colleagues’ interest in this legislation.
The amendment passed by a 75-24 margin. For proponents, that was good news. The bad news for them was that Senator Max Baucus (D-MT), whose state is one of the few without a sales tax, made some strong comments in opposition to the bill. He is the Chairman of the Senate Finance Committee, which has jurisdiction over the Marketplace Fairness Act, so the proponents still have a long row to hoe.
As a refresher, Senators Mike Enzi (R-WY), Dick Durbin (D-IL), Lamar Alexander (R-TN) and Heidi Heitkamp (D-SD), and Representatives Steve Womack (R-AR), Jackie Speier (D-CA), Peter Welch (D-VT) and John Conyers (D-MI) introduced this legislation to address the long-time debate over the obligation of out of state sellers to collect sales/use taxes from consumers for the states in which the consumer resides. The bill (the Marketplace Fairness Act) was introduced as S. 336 in the Senate and as H.R. 684 in the House.
The bill is constructed around acceptance of the Streamlined Sales and Use Tax Agreement (SSUTA) by states. On November 12, 2002, representatives of 33 states and the District of Columbia (now 44 states) voted to approve a multi-state agreement to simplify the nation’s sales tax laws by establishing one uniform system to administer and collect sales taxes on the several trillion dollars spent annually in out-of-state retail transactions. The effort is known as the Streamlined Sales Tax Project (SSTP). The states have been implementing the agreement. Twenty-four states have adopted the simplification measures in the Agreement (representing over 33 percent of the population).
Under the bill, states that voluntarily are already or become Member States of the SSUTA would be able to require remote sellers to collect and remit sales and use taxes after 90 days. States that do not wish to become members of SSUTA would be allowed to collect the taxes only if they adopt certain minimum simplification requirements and provide sellers with additional notices on the collection requirements. The requirements are similar to but not as comprehensive as the conditions SSUTA Members have accepted.
The legislation exempts sellers who make less than $1 million in total remote sales in the year preceding the sale to qualify for an exemption and not be required to collect the tax.
The following states that have passed legislation to conform to the Streamlined Sale and Use Tax Agreement: Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming.
Ways and Means Committee Chairman David Camp (R-MI) has released a discussion draft of his vision for reform of several key tax code provisions of interest to small business. It is one in a series of discussion drafts covering several major areas of the code.
One of the more intriguing provisions has to do with accounting. The draft replaces the current tax accounting rules that apply to small businesses with a uniform rule under which all businesses with gross receipts of $10 million or less may use the cash method of accounting. The draft also coordinates the new cash accounting rules with the uniform capitalization rules generally to exempt small businesses from the complex capitalization rules that require the allocation to their inventory of certain direct costs (e.g., materials and labor) associated with the production of the inventory as well as indirect costs (e.g., overhead and administrative expenses). The big issue is how this change to permit more use of cash accounting will affect businesses, including many in the promotional product industry, that are typically forced to keep inventories by other sections of the tax code. The practical reality is that if you have to use inventory accounting, it is de facto accrual accounting. The ability to use cash accounting for other expenses is a nice change but not dramatic. Through its affiliation with the Small Business Legislative Council (SBLC), PPAI is pursuing efforts to see if the Committee would consider dropping the inventory accounting for all business with $10 million in gross receipts.
In recent comments to the Committee, SBLC said, “Over the last 50 years, the push has been to force small business taxpayers to defer recognition of realized expenses through either accrual accounting or even worse, capitalization (e.g. IRC Section 263A). It has led to only more complexity. Furthermore, it is time to change the dynamic. Rather than accelerating a business’s tax liability why not allow them to recognize the expenses as they are realized? (Indeed that is what the direct expensing allowance achieves for capital assets.) Ultimately, it is about tax liability timing not about reducing tax liability. Once small business taxpayers are on a system the timing issue will smoothen itself out but the small business’s tax liability would better match its real world accounting and cash flow situation. We were actively involved in the discussions that led to some administrative relief in the early 2000’s for some small businesses. The lesson we learned is that the brightest line – no inventory accounting – is the best line. Without it, we do not believe we will be able to tout the move to cash basis tax accounting as a simplicity victory.”