Berdon Blogs

SALT TALK: Counting Days - The Sun May Actually Rise in the West

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Oct 16, 2017 10:15:21 AM

While most of us think of a day as the interval of light between two successive nights, taxing jurisdictions that look to the statutory residency test certainly had something much shorter in mind.  While the New York statutes don’t bother to define what constitutes a day for purposes of the count, the regulations clearly state that “presence within New York State for any part of a calendar day constitutes a day spent within New York. . .”

Despite the broad reach of the regulations, two very limited exceptions are carved out. 

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SALT TALK: Life Coaching, GPS or Tax Planning

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Oct 9, 2017 11:36:44 AM

What do these three items have in common?  Depending on whom you ask, they can all help you find your way.  Not knowing much about life coaching, and as a male being devoid of the gene to ask directions (even from an inanimate object), I tend to be most helpful providing direction in the form of tax planning.

In an earlier blog, I discussed the trend towards single factor apportionment formulas.  Today, we will address its first cousin, market-based or customer-based sourcing.  In the old-world manufacturing economy, it was easy to “find your way.” You sent thingamajigs[1] to your customer in Ohio and (very) generally speaking, receipts would be sourced to the thingamajigs’ destination, Ohio. So a New York- based manufacturer would get the benefit of apportioning a percentage of his or her tax base outside of New York and either to Ohio (if there was nexus in Ohio, a topic for at least another 100 posts) or possibly to nowhere. 

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SALT TALK: Guitars and the Ever-Increasing Burden of Proof

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Oct 2, 2017 11:44:52 AM

I can guarantee any taxpayer that has gone through an audit, whether as an individual or a business entity, “was feelin ‘bout half past dead” at some point through the process. As goes the audit process, the traveler in The Band’s song, The Weight, kept being asked for more and more as he went further along in his journey through Nazareth (Pennsylvania, home to C.F. Martin & Company, maker of the world renowned Martin guitar.)

When facing an audit, in almost all circumstances the taxpayer bears the burden of proof [1]. This means the taxpayer bears the weight of proving by clear and convincing evidence, the validity of items represented on the tax return as filed. Whether a deduction or a day spent outside of the jurisdiction, the taxpayer must be “clear” and “convince” the taxing authorities.

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SALT TALK: Sales Tax Planning Allows Building Boxes More Efficiently

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Sep 25, 2017 11:40:00 AM

Ask any accountant and they will tell you how tired they are of the stereotype that we are math geniuses. You don’t need to be a geometry expert to help a client make his/her idea a reality.   You do need the ability to listen carefully to the plan and use your knowledge and experience to implement it in the most efficient way.

Case in point: a client came to us looking to achieve the maximum benefit from the sales tax exemption that virtually all states grant to the construction of a capital improvement.

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SALT TALK: Sticks, Stones and Why Did the Accountant Cross the Road?

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Sep 18, 2017 11:40:00 AM

Because that's what she did last year. Yes lawyers, accountants get insulted too, and the worst insult that can ever be hurled at us is to be called a business historian. Or at least that's what I used to think. Cutting edge ideas are great. But who is going to help you decide when you've gone over the edge? That's right, it's us.

Based on my historical observations, tax cases often end up in court for one of two reasons: Either someone had a cutting edge idea the taxing authorities didn't like, or someone took a bleeding edge position (knowingly or not) and is now backed into a corner. Sometimes the taxpayer is lucky enough to get out of the corner, but as most lawyers know (I'm one as well so I get twice the insults), bad facts make bad law, sometimes overturned on appeal, but always making headlines (not of the NY Times variety but more along the lines of State Tax Notes).

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SALT TALK: Online Marketplace Seller Voluntary Disclosure Initiative – Here Today, Gone Tomorrow

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Sep 11, 2017 11:40:00 AM

In my August 28, 2017 blog, I discuss the Online Marketplace Seller Voluntary Disclosure Initiative (“Initiative”) and explain how the Multistate Tax Commission Initiative (“MTC”) is unique in that not only will penalties be waived, but in many cases so will any back tax liability. The program is extremely generous and an excellent opportunity for the right business. However, who is the right business?  That is a difficult decision requiring careful analysis.

The initiative is available only through October 17, 2017.  In the words of the MTC:

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SALT TALK: Counting Days: The Tax Consequences of Getting Sick

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Sep 5, 2017 10:33:04 AM

For those of you familiar with the comic strip Dilbert, my favorite strip ever involves Dilbert pointing out to his boss that they did an extensive research study and determined that forty percent of sick days are taken on Monday and Friday. (For those of you who don’t have similarly warped senses of humor, Monday and Friday are forty percent of the five day work week.)  While New York doesn’t care what day of the week you are sick, getting ill in New York can have serious consequences for your day count and the statutory residency test.

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SALT TALK: Online Marketplace Sellers Highly Incentivized to Say Sorry

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Aug 28, 2017 9:18:00 AM

In the 1970 film “Love Story”, actress Ali McGraw may have immortalized the line “Love means never having to say you’re sorry.”  Many opinions exist whether this is good relationship advice, but I can state with certainty it is bad advice for online marketplace sellers as approximately 28 states have joined with the Multistate Tax Commission (MTC) to offer an extremely generous amnesty program.  The program is in place through October 17, 2017.

Online marketplace sellers are those sellers of merchandise who don’t have their own website or even warehousing infrastructure, but use the likes of Amazon or a similar marketplace to distribute and sell their merchandise.  So while the seller may not have any contacts or nexus in a taxing jurisdiction, the marketplace provider may very well.  States have been successful in attributing the nexus of the marketplace to the seller himself and accordingly attaching all of the sales tax collection obligations and even income franchise tax liability created by the marketplace to the seller.

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SALT TALK: Substance or Forlorn; or How I Stopped Worrying and Learned to Love Tax Planning

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Aug 21, 2017 9:21:00 AM

[Readers Note: In conjunction with my firm’s centennial, 1917-2017, this happens to be my 100th blog. Where does the time go?]

Following in the spirit of the 1964 film “Dr. Strangelove” the New York State Department of Taxation and Finance has recognized that perceived anti-abuse legislation is only a deterrent if everyone knows about it. Just this week the Department has issued a Technical Memorandum[1] explaining how legislation effective April 10, 2017 purports to eliminate certain sales and use tax planning techniques perceived to be abusive.

While most other taxing schemes look to interpret the underlying law and regulations so as to put substance over form, sales tax has notoriously been recognized for taking the opposite approach. The simplest example being of two separate businesses having 100% common ownership and one sells taxable services to the other as a valid business reason (liability issues, perhaps) exists to have the employees of the selling entity separate from the recipient of the services. Had the employees of the seller been instead employees of the purchaser, no tax would result for essentially the identical transaction.

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SALT TALK: Mayor Proposes Outlaw Motorcycle Gangs Pay for Subway Improvements

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Aug 14, 2017 1:30:57 PM

The August 7, 2017 edition of the New York Magazine blog states “Bill de Blasio is asking one-percenters to save the subways.”  It’s well known that if you see a motorcycle club member wearing a patch that says 1%, you should certainly walk the other way as this is a reference to the statement often made that 99% of all motorcycle club members and riders are law abiding citizens. 

We all know I’m not referring to motorcycle gangs, but once again, New York City is going to the well of one-percenters to resolve its woes.  Just this year, the so called “millionaires tax” which was set to expire, was extended through the end of 2020 leaving New Yorkers with a top rate (not including the almost 4% New York City resident tax) of 8.82%.  The latest proposal seeks to place an additional burden on single taxpayers earning more than $500,000 and couples making over $1 million, by raising the top City rate to 4.4%

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