Solar eclipse forecast: Sunny day for state tax collectors?

From 10:17 a.m. Pacific time until 2:47 p.m. Eastern time, give or take a few minutes before and after, on Monday, Aug. 21, millions of Americans will be watching — safely, please! — the first total solar eclipse visible in the continental United States in more than 38 years.

Path of totality August 21 2017 solar eclipse_Ernie Wright_NASA-Goddard-SVS

The line shows the entire path of totality across the contiguous United States for the Aug. 21, 2017 total solar eclipse. Click image for a larger view. (Map by Ernie Wright, NASA/Goddard/SVS)

That also likely will mean a big boost in businesses, both long-established and pop-ups related to the astronomical event as it moves along a 70-mile wide total darkness path across 14 states.

And that means more money for the retailers’ state treasuries. 

Maybe.

Many states, many taxes: Tax officials in states that are expecting an influx of eclipse visitors are trying to get the word out that tax laws apply regardless of what happens in the heavens.

The Idaho State Tax Commission has posted a one-page fact sheet detailing when individuals must collect taxes the day of the eclipse. For example, note Gem State tax officials:

  • The state’s 6 percent state sales tax applies to all those eclipse T-shirts you sell, as well as any other solar souvenirs and food.
  • If you’re renting out your yard to observers, you’ll owe a 2 percent travel and convention tax, the state sales tax and local sales taxes on that money.
  • If your visitors are overnighters or longer, be they renting a room in your personal residence, vacation home or that trailer out back, you’ll need to collect Idaho’s 6 percent sales tax and any other local sales taxes that apply, as well as the state’s 2 percent travel and convention (aka lodging) tax.

If you use Airbnb to rent your property during the eclipse, that home rental clearinghouse might take care of collecting the tax from your short-term renters. If not, it’s up to you to take care of tax tasks. That, in many locations, includes local permits.

Note, too, to keep track of the days your sky gazing guests are there. Their stay this weekend/early next week counts toward the 14 days you can lease your property and avoid facing any federal income tax on the rent. But also remember that this is a federal law; your state might have different income tax rules.

Eclipse Stages by Rick Fienberg_TravelQuest International and Wilderness Travel

Eclipse stages by Rick Fienberg, TravelQuest International and Wilderness Travel

Idaho isn’t alone in trying to get the tax word out to solar eclipse entrepreneurs.

Illinois Revenue has posted a special fact sheet for vendors at the 2017 Carbondale Eclipse Market Place. Those participants, remind Land of Lincoln tax collectors, must collect and remit at 9.75 percent of their total sales. Failure to do so, according to the notice, “will jeopardize your participation in future Illinois events.”

Compliance vs. getting caught: “There are people who will rent out their driveways and their street corners for parking,” Verenda Smith, deputy director of the Federation of Tax Administrators, told Bloomberg BNA. “You’re trying to teach people to pay attention and not get caught later.”

If you’re in the prime eclipse path and you haven’t seen anything in your local media about potential taxes on event related retail or rentals, check with your state tax department. As Smith notes, it’s always better to comply with tax laws from the get-go instead of trying to clean up after the fact.

Of course, many event-only entrepreneurs and even some businesses that have been around for years might just decide to blow off tax collection on special eclipse related products and services. After all, how diligent will tax officials be in trying to track down every tax penny for a short-term, special event.

That’s true. But there’s always the chance that you could be among those who does get caught in an eclipse-related tax trap. So don’t hide in the shadows.

Conduct your business on Monday’s eclipse day just like you would all the other 364, including collecting the proper taxes.

If you’re traveling to an eclipses location, are you staying at a traditional hotel or in a short-term residential rental? If it’s someone’s house, take note of whether you’re charged taxes and let me and the ol’ blog’s readers know by leaving a comment.

I’m not trying to rat out anyone, so general reports only, please. But I would love to hear at least anecdotally how many folks complied with tax laws in connection with eclipse-sparked transactions.

You also might find these items of interest:

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Source: http://www.dontmesswithtaxes.com/2017/08/solar-eclipse-forecast-sunny-day-for-state-tax-collectors.html

House conservatives aren’t giving up on Obamacare repeal

Virginia GOP Rep Thomas Garrett_Obamacare repeal petition sponsor_Fox News

Virginia GOP Rep. Thomas Garrett, sponsor of a legislative petition to force a House vote on a clean repeal of Obamacare without any replacement measure. (Screen shot from appearance on Fox News)

Congress isn’t meeting this month, but that hasn’t stopped a group of conservative Republicans in recent days from devising a plan they hope will, as they’ve promised for seven years, repeal Obamacare.

House Freedom Caucus members are looking to force a straight repeal of the Affordable Care Act, known as the ACA or more (un)popularly Obamacare, and the health care law’s related taxes.

The erasure of the law, however, wouldn’t actually take place for two years if the House and then Senate agree. During that time, say the measure’s supporters, they would come up with replacement health legislation. 

Roundabout repeal effort: The conservative GOP group has launched a petition to, in legislative lingo, discharge a health care repeal measure to the House floor for a vote. To accomplish that, the petition needs 218 signatures.

In taking this legislative tack, discharge petition supporters noted that nearly every current House Republican has voted to repeal the ACA in the past. They want to challenge their colleagues to cast the same vote again.

“Republicans already sent this bill to the president in 2016, and should do it again,” said Rep. Mark Walker (R-North Carolina), chair of the Republican Study Committee, in a statement supporting the discharge petition. “The only thing that changed since then is that with Donald Trump as president, this bill would actually be signed into law.”

The same approach was tried last month in the Senate. Rep. Thomas Garrett (R-Virginia), sponsor of the House effort, said the 45-to-52 failure in upper chamber was in part because Senators didn’t believe a straight repeal without an immediate replacement health measure could pass the House.

Garrett says his discharge petition will show that the Senate’s excuse for not repealing Obamacare is not valid.

Will House Republicans get support from their constituents for a separate ACA repeal and replace while they’re back home in their districts this month?

Garrett believes so. We’ll find out in a couple of weeks.

You also might find these items of interest:

 


Source: http://www.dontmesswithtaxes.com/2017/08/house-conservatives-arent-giving-up-on-obamacare-repeal.html

Shopping trends and taxes

I like to look at trends because they are interesting and many have tax implications.* Trends may indicate a need to update or modernize tax rules or systems. I’m a bit behind on blogging on this, but several weeks ago, there was an article in Fortune – Phil Wahba, “Major Wall Street Firm Expects 25% of U.S. Malls to Close by 2022,” 5/31/17. Reasons included bankruptcies and continuing growth in retail e-commerce sales.

I remember when the US Census Bureau first started reporting retail sales for e-commerce in the 1990s and it was less than 1%.  They just updated data for 2015 and report that e-commerce retail sales represent 7.2% of total sales for 2015 (it was 6.4% in 2014).  That doesn’t seem like a lot to me. In contrast, the US Census Bureau reports that for 2015, e-commerce sales of merchant wholesalers represented 30.2% of total sales (it was 28.1% in 2014).

Are retail e-commerce sales going to increase to the point were 25% of US malls will close in the next five years? Seems high to me.  I expect re-purposing where, perhaps, we might do more online shopping while at the mall looking at samples of what we can buy, and getting a latte and recharging our smartphones.  That would use less retail space. Malls might add more ways for people to hang out – activities, fairs, etc.

Tax implications?  A few:

  • More online shopping can mean more uncollected use tax although I suspect a lot of the e-commerce growth will be with Amazon that collects tax in all states (at least on their direct sales).
  • If malls turn into abandoned buildings or vacant lots, property taxes will go down. Is there another need for them?  With an aging population, perhaps the space gets turned into living spaces for older folks – single level, close to public transportation and medical facilities, etc.
What do you think? Will we see 25% of malls close? What will happen to the space?
*For some nostalgia, see this June 2008 blog post on some trends relevant to tax reform.

Source: http://21stcenturytaxation.blogspot.com/2017/08/shopping-trends-and-taxes.html

17 states now impose some fees on electric autos

Electric-cars-charging-Ontario-Canada_EVObsession

Many drivers worry about the accessibility of electric vehicle recharging stations. That’s not a problem for the owners of these electric cars charging along an Ontario, Canada, street. (Photo courtesy EVObsession.com)

President Donald Trump signed an executive order today designed to streamline the approval process for building roads, bridges and other infrastructure.

Contractors and the transportation industry say that will help improve the building and repair of the country’s roads, bridges and other infrastructure projects.

Critics say the Administration’s approach could lead to rubber stamping permits without adequate scrutiny, especially when it comes to environmental effects of such construction.

One thing, however, isn’t up for debate yet. That’s how Uncle Sam will pay for any upcoming infrastructure projects.

The White House says it will release a legislative package this fall, which is rapidly approaching, with details on Trump’s campaign pledge of $1 trillion in U.S. infrastructure.

Early indications are that the Trump plan will include $200 billion in federal dollars to be allocated over 10 years to pay for projects. The Administration hopes the federal money will prime the pump for the remaining $800 billion it wants to come from states, localities and the private sector.

That won’t be easy, on the fiscal and political fronts.

States speeding ahead: Meanwhile, states have gotten tired of waiting on federal help to fix their crumbling roads and bridges.

A January report from The Council of State Governments found that ways to pay for transportation funding was at the top of legislative agendas in as many as 16 states.

Several states followed through by hiking fuels taxes to pay for road projects.

Now some states are going further.

A growing number of states are imposing new fees on electric vehicles as officials scrounge for ways to pay for infrastructure projects they say are long overdue.

At least five states, including California, this year passed bills targeting electric vehicles, reports CNBC.

That brings to 17 the number of states that have imposed such fees, which typically range from $100 to $200 a year. Greentech Media says the states with electric car charges — financial in this case — are: 

California North Carolina
Colorado Oklahoma
Georgia  South Carolina
Idaho Tennessee
Indiana Virginia
Michigan Washington
Minnesota West Virginia
Missouri Wyoming
Nebraska   
   

The reasoning is that since the autos don’t use gas, they are not contributing to the upkeep of the roads they use.

Attitude shift toward electric autos: California’s decision to tax electric vehicles is notable since it’s home to Tesla, one of the most prominent names in electric vehicles.

It also underscores a shift in the traditional vs. electric auto industry. 

At the height of the electric vehicle craze, the federal government established a tax credit for such vehicles It is still in place. Many states joined Uncle Sam in encouraging drivers to switch to more environmentally friendly autos by creating their own tax incentives and other measures.

Now they’re demanding these drivers pay.

In addition to the new fees, Sierra Club research found seven states have eliminated rebates for purchasing an electric vehicle.

The reason for the attitude shift easy to see.

As the market for cleaner cars grew, so did the number of potholes on state roads. Now cash-strapped states are looking to take back money from those drivers it previously rewarded.

California Gov. Jerry Brown praised the Golden State’s new electric vehicle fee as a matter of equity. And jobs.

“Safe and smooth roads make California a better place to live and strengthen our economy,” according to a statement issued by Brown when the bill passed this spring. “This legislation will put thousands of people to work.”

Concern from eco-advocates: Environmentalists aren’t as thrilled.

“We see this as a concerning trend,” said Gina Coplon-Newfield, director of the electric vehicles initiative at the Sierra Club, told CNBC. “We certainly want to see funding raised to support roads and bridges and transit. … But penalizing electric vehicle drivers is not the way to solve this problem.”

Do you agree with the states that have added charges for owners of electric autos?

Or do think the environmental benefit of the vehicles is enough to exempt them from non-fuel fees?

Personally, I’m a user fee kind of gal. And as I’ve watched the number of Teslas increase here in Austin, I’ve also cursed the continued deterioration of the roads that those drivers use, too.

You also might find these items of interest:

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Source: http://www.dontmesswithtaxes.com/2017/08/17-states-now-impose-some-fees-on-electric-autos.html

Fees for special IRS advice now must be paid electronically

Dear IRS letter ruling pen and pad

“Dear IRS, …” — If you have a question about how a tax law or regulation affects your particular set of circumstances, you can ask, in writing, for the Internal Revenue Service to weigh in. But be prepared to pay for the advice and, effective Aug. 15, pay electronically.

Taxes are complex. That’s why it’s often wise to get professional help.

In some cases, however, even tax pros need some guidance. This is particularly true when taxpayer circumstances are such that the individuals and their advisers feel the need for further interpretation as to how tax laws or administrative rules apply to their situations.

In these cases, the taxpayer and tax professional go straight to the Internal Revenue Service and seek advice in a variety of official ways.

One of those is through a private letter ruling, or PLR. It’s also sometimes called simply a letter ruling.

PLR for specific tax situation: As the name suggests, a PLR is a written statement issued to a taxpayer that interprets and applies tax laws to the taxpayer’s represented set of facts.

The IRS issues a PLR after receiving a written request from the taxpayer.

And, as the name indicates, a PLR is private. That is, it is specific to and applies only to the taxpayer seeking the clarification.

Further, notes the IRS, a PLR may not be relied on as precedent by other taxpayers who believe they are in similar situations. Neither does a PLR require the IRS to take that particular stance when considering the tax circumstances of different taxpayers.

Costly advice: While most of us who rely on IRS advice are used to getting it for free, either via the agency’s telephone tax hotlines or online at IRS.gov, PLRs are not cheap.

In a Revenue Procedure, an official statement published in the Internal Revenue Bulletin, released on Jan. 3, the IRS noted that the cost to obtain a PLR in 2017 would be the same as it was in 2016, a whopping $28,300.

Other fees noted in that first IR Bulletin of the new year included an increase from $9,100 to $10,000 to obtain Section 9100 relief (certain requests for extensions of time for regulatory elections).

The price of a request for non-automatic Forms 3115, “Application for Change in Accounting Method,” also was hiked from $8,600 to $9,500.

And a request for a reduced user fee for certain letter ruling requests, method or period change or a closing agreement was hiked from $2,200 to $2,400 for persons with gross income of less than $250,000 and from $6,500 to $7,600 for those with income between $250,000 and $1 million.

The new user fees took effect for requests submitted after Feb. 1.

It’s obvious from these fees that PLRs are for select taxpayers. These are the folks who have a lot more riding on a favorable IRS PLR decision than what it’s costing to pay tax experts to ask for special clarifications.

Electronic PLR now required: So why do I care about PLRs since I personally will never seek one and, let’s be honest, neither will most of you, my dear blog readers?

Because tomorrow is a big day for PLRs and other special requests for IRS determinations.

On Aug. 15, taxpayers who request private letter rulings, closing agreements and accounting method changes must pay the associated fee electronically using the Pay.gov system.

Under Pay.gov, taxpayers can use a credit card, debit card or a direct debit or electronic funds withdrawal from a checking or savings account.

When the actual PLR or other IRS determination request is sent to the tax agency, taxpayers should attach a copy of the e-payment receipt with their submissions.

Previously, taxpayers could pay by check or money order for such special IRS advice. You can still pay that way through today. But when the calendar page flips to tomorrow, get ready to e-pay only.

I’m sure the IRS wasn’t having an issue with bounced PLR etc. checks. Rather, this change is yet another step down the agency’s path to a more digital service.

You also might find these items of interest:

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Source: http://www.dontmesswithtaxes.com/2017/08/fees-for-special-irs-advice-now-must-be-paid-electronically.html

Seattle bucks Washington State’s no-income-tax rule, choosing to tax earnings of the city’s wealthier residents

Downtown Seattle Washington_Space Needle_Mount Rainier_Rattlhed via Wikimedia Commons

Downtown Seattle seen from Queen Anne Hill, with the Space Needle standing out and Mount Rainier in the background. (Photo by Rattlhed via Wikimedia Commons)

Washington is one of seven states that does not have a personal income tax, but it’s largest city plans to collect one from its wealthiest residents. If the courts let it.

On July 14, Seattle City Council bill 119002 became ordinance 125339, which beginning in 2018 will officially impose an income tax on high-income residents.

The 2.25 percent tax will apply to individuals within the city’s borders with an annual income exceeding $250,000 a year, double that income threshold for joint filers. Supporters say that would be around 20,000 of the than 660,000 Seattle residents.

The earnings subject to the tax will come from the Seattle residents’ annual federal tax returns, specifically line 22 of Form 1040, line 15 of Form 1040A, line 9 of Form 10401 or “the equivalent on any form issued by the Internal Revenue Service that is not reported on Schedule K-1 for a beneficiary.”

Not all income taxed: Don’t panic high-earning Seattle residents. The tax won’t apply to all your money.

It will be calculated only on the amounts more than the filing status thresholds. So up to $250,000 of a single Seattle taxpayer’s income will remain tax free, with the 2.5 percent tax applied to the amount that’s more than that. The same process applies to the $500,000 threshold for joint Seattle filers.

The tax is scheduled to take effect in 2018. That could change however, as lawsuits challenging the measure already have been filed.

Seattle city income tax returns and payments will be due on the federal schedule, that is, April 15 of the year following the tax year.

And beginning in 2019, the income thresholds that trigger the tax will be adjusted for inflation.

There are a lot of figures associated with the Seattle income tax, but the winner, so to speak, of this week’s By the Numbers honor is the tax rate itself, 2.5 percent.

More money: Supporters of the new income tax on these wealthier residents should generate, based on 2014 federal income tax data, about $125 million per year for Seattle.

Cities seeking added revenue is nothing new. Seattle’s lawmakers, however, say there’s an urgent need to find additional funding because of political changes in Washington, D.C.

“The President of the United States has proposed to imminently eliminate millions of dollars per year from Seattle’s budget both directly and indirectly through cuts to state funding,” says the new law. “Without additional revenue tools, Seattle is in a weak position to respond to proposed federal budget cuts.”

Among the city programs at risk without a new source of funding are a variety of education initiatives, as well as the city’s goal to achieve zero next greenhouse gas emissions by 2050.

“An income tax on high-income residents provides a progressive revenue source to fund [these] crucial needs and will help the City continue to grow and thrive for all of its citizens,” according to the law.

Specifically, the law calls for using the income tax money to:

  • lower the property tax burden and the impact of other regressive taxes, including the business and occupation tax rate,
  • address the homelessness crisis,
  • provide affordable housing, education and transit,
  • replace federal funding potentially lost through federal budget cuts, including funding for mental health and public health services, or responding to changes in federal policy,
  • create green jobs and meet carbon reduction goals and
  • administer and implement the new income tax.

A fairer tax system: In addition to bringing the city more money, advocates of the move say the limited Seattle income tax is only fair.

According to the fact sheet issued during debate of the Seattle income tax proposal:

Washington state has one of the most regressive state and local tax structures in the nation. A regressive tax structure is one in which taxpayers with relatively low incomes pay a higher share of their income in taxes than do higher income taxpayers. The City of Seattle’s tax structure is regressive because it receives about 45 percent of General Fund revenue from retail sales and property taxes, both of which are very regressive taxes. The City is seeking to use a tax on high-income households to reduce the regressive nature of its tax system.

Seattle Mayor Ed Murray reiterated that tax approach, as well as the change in federal help for states and cities, in a statement on his website.

“Seattle is challenging this state’s antiquated and unsustainable tax structure by passing a progressive income tax,” Murray said. “Our goal is to replace our regressive tax system with a new formula for fairness, while ensuring Seattle stands up to President Trump’s austere budget that cuts transportation, affordable housing, healthcare, and social services. This is a fight for economic stability, equity, and justice.”

Fighting the tax: Whether the tax will ever be collected is unclear.

Opponents say the Seattle tax is in violation of state law that prohibits a city or county from taxing “net” income. State law, however, doesn’t explicitly define to what “net” refers.

So far, the city is facing three legal challenges to the new income tax.

The first, filed the day the ordinance took effect, is a challenge by Seattle resident S. Michael Kunath, who makes more than $250,000 annually.

Two more lawsuits were filed against the Seattle income tax on Aug. 9. One was filed by the Freedom Foundation. The other was filed by the Opportunity for All Coalition.

City lawmakers saw the litigation coming.

At a rally before the final vote — which, by the way, was 9-to-0 for the tax — -Seattle’s mayor Murray said, “We welcome that legal challenge. We welcome that fight,” adding that if the city wins, “it won’t just be Seattle that’s doing a progressive income tax.”

And that possibility of more widespread tax expansion, say opponents, is the real problem.

No-tax states: I know you’ve been wondering since this post’s first sentence. The seven states that don’t have any type of income tax are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

Two states — New Hampshire and Tennessee — collect tax only on their residents’ dividends and interest earnings. Tennessee, however, is in the process of phasing out its investment income tax.

There also are five — states Alaska, Delaware, Montana, New Hampshire and Oregon — that don’t collect a state-wide sales tax.

You also might find these items of interest:

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Source: http://www.dontmesswithtaxes.com/2017/08/downtown-seattle-seen-from-queen-anne-hill-with-the-space-needle-on-the-left-and-mount-rainier-on-the-right-photo-by-rat.html

Americans offer a counter-intuitive tax reform plan

Tax reform, or at least tax cuts, will top Congress’ agenda when it gets back from August recess. But will Representatives and Senators actually rewrite the tax code the way most Americans want?

Today’s Shout Out Saturday piece says maybe not.

Tax-Reform-buttons

Donald J. Trump reportedly is now backing a corporate tax rate of 20 percent to 25 percent, up from the 15 percent rate included in his April tax overhaul outline. That slightly higher business tax rate jibes with what corporate executives and business lobbyists say is attainable.

That, however, is not what American taxpayers want, according to a recent study.

Spreading around the tax burden: When it comes to taxes, the long-held assumption is that Americans demand the smallest financial burden for the largest amount of government services.

But today’s Shout Out Saturday goes to a study from The University of Maryland’s Program for Public Consultation at the School of Public Policy that discovered that’s not the case.

“The results were staggering,” writes Steve Mendelsohn, senior vice president of Thomson-Reuters’ global tax and accounting market development, in a column published in June in Inc. magazine.

If you put Americans in the shoes of a policy maker, which is what the UM study did, where they see the same kind of information a policy maker has and see how the tradeoffs work, then people act in a way that is very different than what you see in traditional surveys.

In this case, American taxpayers would raise taxes on corporations, the very wealthy and even themselves to balance the budget, writes Mendelsohn. Their proposed changes produced an average national revenue increase of $112.2 billion per year.

Mendelsohn talked to one of the study’s authors about the findings, how it was conducted differently from standard polling and how the participants “really put on their problem solver hats rather than working in their own self-interest.”

Now if we only could get these folks to run for Congress!

First Shout Out Saturday update: The first of my new blog feature aimed at sharing some of the internet’s wealth of tax info (and freeing up at least one of my weekend days!) on Aug. 2 was about taxes on big lottery jackpots.

Meg White vintage megaphones via GiphyMeg White via Giphy

It took a while, but we finally got a Mega Millions winner. The ticket worth $393 million was sold in Illinois, which will join the Internal Revenue Service in getting a cut of the new millionaire’s windfall.

Don’t despair if your lottery slip came up empty. Tonight’s competing/companion Powerball drawing could pay out $356 million.

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Source: http://www.dontmesswithtaxes.com/2017/08/americans-offer-counter-intuitive-tax-reform-plan.html