Chrysler’s slogan, “Imported from Detroit,” means to take on its Japanese and German competition head on, both on quality and reputation. But as the web of state tax laws becomes more and more intricate, that slogan can also serve as a warning to business owners.
For those companies conducting business in several states, the tax picture is getting ever more complex. Nearly all states have been stuck in a world where most purchases were made in-state, at brick-and-mortar stores which collect sales tax. With more and more business being conducted on-line, sales tax revenues have dwindled. (The ultimate consumer is supposed to pay a use tax, but that rarely happens, if ever.) Now states are scrambling to adapt, even as businesses and consumers rebel.
Just this term, the U.S. Supreme Court let a lawsuit go forward against the state of Colorado. The suit seeks to block a new law that would require businesses nationwide to report use tax related information to the state. But while the suit was allowed to proceed, several justices expressed sympathy for the state’s attempt to shore up its finances in a 21st-century economy.
The State of Ohio enacted different kind of law, one which imposes a new tax (termed a Commercial Activity Tax) on all business selling in excess of $500,000 in Ohio, regardless of whether they have any physical presence in that state. The State’s courts have enforced it. We are not aware of whether it has been challenged in federal court.
Other examples surely abound. If it were not enough that the federal tax code contains some 4 million words, state codes are becoming increasingly complex in an effort to keep up with a fast-moving world. Businesses will certainly benefit from working closely with their CPAs and attorneys.