The Expansion and Application of State Gross Receipts Taxes Steven Jensen, CPA, Director Marcus Mims, CPA, Principal Theresa Mullen, MT, Manager

WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING couldthe affectcontained herein. information in tax anyinform theuser changes lawsof other thator factors information. CliftonLarsonAllen to LLPassumes obligation no to prior takingthisprofessional any action upon based contact her hisor CliftonLarsonAllen LLPor tax other factorsaction if anyisto contemplated.be user Theshould - andmayrequire ofnon needs, consideration applicable to, or suitable for,the circumstances specificor user’s user. iscautioned Thealso that user this material maynot be to the LLPCliftonLarsonAllen by provided opinion or tax advice notbe intended, should construed, aslegal,accounting,or and information containedin herein Theis general andisnot nature Disclaimers WEALTH ADVISORY ADVISORY WEALTH | OUTSOURCING | AUDIT,CONSULTING AND TAX, tax and other tax tax andother 2 ©2017 CliftonLarsonAllen LLP • • Housekeeping • • • WEALTH ADVISORY ADVISORY WEALTH will be sent to you within the next 10 business days. business 10 next the within you to sent be will 800-4223623. dial: technical please experiencing difficulties, are you If Please complete our online survey. online our complete Please CLAconnect.com/subscribe. at subscribe invitations, webinar future For The presentation. the of end the at held be will session Q&A – any time during the presentation. during time any the via submitted be can questions Your as well as the as well as presentation, PowerPoint | OUTSOURCING | AUDIT,CONSULTING AND TAX, Questions Function at Function Questions webinar recording, recording, webinar 3 ©2017 CliftonLarsonAllen LLP • • • CPE Requirements watching the recording will not qualify for CPE credit. credit. CPE for qualify not will recording the watching Therefore, course. study a self into developed been not has recorded, once webinar, This * • WEALTH ADVISORY ADVISORY WEALTH Remain Remain logged in for at least 50 minutes Answer pollingquestions the to you via email youto via Allow of certificate; for your receipt four weeks will sent it be two return and within days sheet business If you are participating in agroup, complete the CPE sign – Contact Contact | OUTSOURCING [email protected] | AUDIT,CONSULTING AND TAX, - in in 4 ©2017 CliftonLarsonAllen LLP • About CliftonLarsonAllen Investment advisoryoffered are through services CliftonLarsonAllen Wealth Advisors, LLC. • • WEALTH ADVISORY ADVISORY WEALTH business lines business distinct three with firm services professional A Offices coast to coast to Offices coast employees More than 5,000 – – – Audit, Audit, Consulting and Tax, Outsourcing Wealth Advisory | OUTSOURCING | AUDIT,CONSULTING AND TAX, 5 ©2017 CliftonLarsonAllen LLP Speaker Introductions WEALTH ADVISORY ADVISORY WEALTH • • • resourceof these issues. Theresa also has multi commerce,transportation, manufacturing,biotech, healthcareand clients. analysis,nexus controversy refunds, and services to technology,retailing,e the delivery taxof innovative solutionslocal state and leads CLA’sHeaccounting. publicindustry and Steve is astatetax local and (SALT) expert Steven Jensen, CPA, Director experience. She has extensive has She experience.state Ohio Theresa MT, ManagerMullen,Theresa years of public privateand experience. region, whichArizona,includes Colorado, Newand Mexico. He has more than 25 Marcus is a principalin charge of the Marcus Mims, CPA, Principal issues. | OUTSOURCING is a SALT a manager is with more than 17 years of tax accountingand | AUDIT,CONSULTING AND TAX, SALT services forfirm’s the southwest and and with 20 years of experience inwith20 both years of experience local tax experience and Pacific Northwest Northwest Pacific - state tax experiencevariousin , statute, regulation, and SALT practice practice is a firm firm a is - in in 6 ©2017 CliftonLarsonAllen LLP • Learning Objectives WEALTH ADVISORY ADVISORY WEALTH At the end of this session, you will be able to: able be will you session, this of end the At – – – – gross receipts tax issues tax receipts gross of resolution the in to assist recommendations Express activities business state multi on tax receipts grossstate of application the Review income,tax franchise,sales/use and gross receipts, between Distinguish important differences business activities gross Identify receipts apply totaxes how and they | OUTSOURCING | AUDIT,CONSULTING AND TAX, - 7 ©2017 CliftonLarsonAllen LLP What are Gross Receipts Taxes? Receipts What Gross are Steve Jensen Jensen Steve – Seattle

©2017 CliftonLarsonAllen LLP • Tax?GrossIs Receipts a What WEALTH ADVISORY ADVISORY WEALTH business income. business A – – GRT is a tax on business receipts rather than than rather receipts business a tax is on GRT Generally simpleimplement. to or nofew deductions. Usually imposed | OUTSOURCING | AUDIT,CONSULTING AND TAX, on all businesssales/activitieson all and allows

©2017 CliftonLarsonAllen LLP • • AdvantagesGRT’s of • WEALTH ADVISORY ADVISORY WEALTH than income. than less varies typically sales because tax a stable as Seen of the broad base. broad the of because taxes most at lower rate a than Applicable understand. and to implement Simple | OUTSOURCING | AUDIT,CONSULTING AND TAX,

©2017 CliftonLarsonAllen LLP DisadvantagesGRT’s of • • • • • WEALTH ADVISORY ADVISORY WEALTH used. No relation to of the amountgovernment services counteract different effective tax rates. effective tax different counteract to Often to complex becomes duemodifications businesses. new for disincentive that Taxes have no income – companies tax. of Pyramiding Different effective betweenrates industries. | OUTSOURCING | AUDIT,CONSULTING AND TAX, 11 ©2017 CliftonLarsonAllen LLP Brief Historyof the GRT • • • • WEALTH ADVISORY ADVISORY WEALTH decreased during the Great Depression thedecreased during state revenues 1930s as early the in popularity Gained Are we seeing a rebirth?seeing a Are we earlyThe 2000s saw several GRT’snew or were repealed unconstitutional be to found were many GRT’s War II, By World – – – – WA doubles down with expanded nexus and application and nexus doubles downWA with expanded Relatively new GRT’s in NV,OH, and TX repealed GRT’s IN,MI, the in KY,However, NJwere quickly and IN,their DE, GRT’s WV,retained 1980’s WA into and the | OUTSOURCING | AUDIT,CONSULTING AND TAX, 12 ©2017 CliftonLarsonAllen LLP How AreDifferent? GRT’sHow • WEALTH ADVISORY ADVISORY WEALTH A GRT is not a sales asales not tax is GRT A – – – of intangibles of sales activities, and Ato all including GRT applies services almost business GRT to the subject potentially is sale Each to transaction final the entity A the at GRT applies level opposed as ◊ ◊ ◊ ◊ | Sales tax only applies to the final consumer final the to applies only tax Sales liability the of a pyramiding create all retailer to wholesaler to manufacturer the from on of sales a GRT application The buyer the to on passed not is GRT The retail services certain and property personal tangible of sale retail to limited generally is tax Sales OUTSOURCING | AUDIT,CONSULTING AND TAX, 13 ©2017 CliftonLarsonAllen LLP How AreDifferent? GRT’s(cont.)How • • • • WEALTH ADVISORY ADVISORY WEALTH Entity No provisions for entities operating at a loss a at operating entities for provisions No tax income federal to No conformity standards Different nexus – – – – No P.L. 86 P.L. No the in state to doing business be is a whether considered company that determine standards factor presence OHadopted WA have and requirement (see presence physical a notis tax, there sales a notis GRT a Since corporations S and - pass to apply GRT’s tax, income Unlike an - | level taxes OUTSOURCING - 272 protection because a a GRT is 272 protectionnot income tax because an | AUDIT,CONSULTING AND TAX, Quill ) Quill Dakota Corp North v. through entities, including LLC’s LLC’s including entities, through 14 ©2017 CliftonLarsonAllen LLP Gross Receipts Tax Jurisdictions Jurisdictions Tax ReceiptsGross Theresa Mullen Mullen Theresa – Akron/Canton offices in Ohio in offices Akron/Canton

©2017 CliftonLarsonAllen LLP • Gross Receipts Tax Jurisdictions • WEALTH ADVISORY ADVISORY WEALTH Delaware, Nevada, Ohio, Ohio, Nevada, Delaware, a gross receipts tax. tax. receipts a gross with jurisdictions local numerous are there However, varied tax rates. tax varied have Washington – – – – Seattle Virginia cities (BusinessTax) License Los Angeles VirginiaWest cities | OUTSOURCING | AUDIT,CONSULTING AND TAX, statewide gross receipts gross statewide with tax Tennessee, Texas , and and ,

©2017 CliftonLarsonAllen LLP • Gross Receipts Tax Jurisdictions • WEALTH ADVISORY ADVISORY WEALTH their source. source. their of regardless of a revenues business, gross total the Delaware taxes. costs delivery paid, discounts expense, interest the for deductions no are There activity. activity. on the businessdepending to .7543%, from .1006% | OUTSOURCING - | Delaware's Gross Receipts Tax is a tax on tax a is Tax Receipts Gross Delaware's AUDIT,CONSULTING AND TAX, Gross Gross receipts tax rates currently range currently rates tax receipts COGS, product product COGS, , or , or costs, costs,

©2017 CliftonLarsonAllen LLP • • Gross Receipts Tax Jurisdictions • WEALTH ADVISORY ADVISORY WEALTH receipts tax. 86 Law Public Nexus rules Nexus provisions. different have can state each few but exclusions…however receipts most Include | OUTSOURCING | AUDIT,CONSULTING AND TAX, - 272 protection does not apply to gross gross to apply not does protection 272

©2017 CliftonLarsonAllen LLP • Gross Receipts Tax Jurisdictions WEALTH ADVISORY ADVISORY WEALTH receipts tax gross for legislation had states additional In 2017, – – could look at gross receipts tax to fill these gaps. these fill to tax grosslook receipts at could State budget Horizon? shortfalls (potentially 40 states) Louisiana, Oregon, West Virginia | OUTSOURCING | AUDIT,CONSULTING AND TAX,

©2017 CliftonLarsonAllen LLP • • Gross Receipts Tax Jurisdictions • WEALTH ADVISORY ADVISORY WEALTH overlooked. easily be can a tax is that and tax income an Not may may jurisdictions tax what and rules nexus the are what business, doing are you where Know triggered. Easily filing the tax. and monitoring is who over confusion cause may and form same the on reported be can tax receipts gross and tax Sales apply. | OUTSOURCING | AUDIT,CONSULTING AND TAX,

©2017 CliftonLarsonAllen LLP • Ohio Commercial ActivityTax (“CAT”) WEALTH ADVISORY ADVISORY WEALTH calendar year must register for theyear mustcalendar or Ohio more taxable per of receiptsgross $150,000 with Businesses Ohio. in activities business from receipts gross by measured Ohio, in business doing The The – – – Annual Fee tax minimum annual Groups/one Entity Related forms types/business business All CAT CAT | OUTSOURCING is an annual tax imposed on the privilege of of privilege the on tax imposed annual an is | AUDIT,CONSULTING AND TAX, CAT.

©2017 CliftonLarsonAllen LLP • Ohio Commercial ActivityTax (“CAT”) WEALTH ADVISORY ADVISORY WEALTH Combined Taxpayer Group Group Taxpayer Combined – those members that have nexus with Ohio.with nexus have that members those group the in include only groups such however, need group; the of members between receipts exclude not lower the the possessownership, rights voting to to control able be its through effectively, and chain vertical the of level each own The | OUTSOURCING “control test” is that the higher the that “control is test” more more 50than percent | - AUDIT,CONSULTING AND TAX, tiered entity. entity. tiered Combined taxpayer groups may may groupstaxpayer Combined of lower the - tiered entity must entity tiered - tiered entity at at entity tiered

©2017 CliftonLarsonAllen LLP • Ohio Commercial ActivityTax (“CAT”) WEALTH ADVISORY ADVISORY WEALTH Consolidated Consolidated – entities are part of the group even if nexus not nexus exist. if does part of group entities are the even making electionthis mustcommonly agree that all owned group.the of gross receipts taxable members the from the ofgroup excluded between may be making of is benefit this election receipts that received rights to to able be control lower the through its the possessownership, votingeffectively, lower own The | OUTSOURCING “control test” is that the higher the that “control is test” at least 50 percent or at least 80 percent 80 least at or percent 50 least at - tiered entity at each level of the vertical chain and and chain vertical the of level each at entity tiered | AUDIT,CONSULTING AND TAX, Elected Taxpayer Group Group Taxpayer - However, taxpayers tiered entity must entity tiered - tiered entity. A entity. tiered of the major

©2017 CliftonLarsonAllen LLP • Ohio Commercial ActivityTax (“CAT”) WEALTH ADVISORY ADVISORY WEALTH Bright – following applies during the calendar year: a brighthas A person ◊ ◊ ◊ ◊ ◊ | Taxable gross receipts sitused to Ohio Taxableto Ohio grosssitused$500,000; receipts are atleast or or $50,000; least at is state this in Payroll Property in Ohio isat least $50,000; or The person is domiciled in Ohio. in domiciled is person The or Ohio; within 25% of total property or total payroll or total grossis receipts OUTSOURCING - Line Nexus Line | AUDIT,CONSULTING AND TAX, - line presence if any one of the the of one any if presence line

©2017 CliftonLarsonAllen LLP • Ohio Commercial ActivityTax (“CAT”) • WEALTH ADVISORY ADVISORY WEALTH Bright Foreign Foreign – – – – Audit issue issue Audit considerations Nexus Diversified Ingredients, Inc.v. Testa Crutchfield, v.Testa Corp. | OUTSOURCING - Line Nexus Line c ompanies selling into Ohio into selling ompanies | AUDIT,CONSULTING AND TAX,

©2017 CliftonLarsonAllen LLP • Ohio Commercial ActivityTax (“CAT”) WEALTH ADVISORY ADVISORY WEALTH Sourcing Sourcing – – – Greenscapes Home Products, Home Garden and Inc.Greenscapes v. Testa services ofSale tangible personalproperty ofSale ◊ | CAT Information Release 2005 CAT Information Release OUTSOURCING | AUDIT,CONSULTING AND TAX, - 06 (54 services addressed)services06 (54

©2017 CliftonLarsonAllen LLP • Ohio Commercial ActivityTax (“CAT”) • WEALTH ADVISORY ADVISORY WEALTH Amnesty Voluntary Disclosure Disclosure Voluntary – – – – No penalty but interest applies applies interest but penalty No abated interest ½ and penalty No . issued been which notice a of notice assessment, ofor bill audit has notas of and taxes paid 5/1/17.due delinquent January 1, 2018 to February 15, 2018 filing period for A qualifying delinquent tax tax does not tax a include for delinquent A qualifying | OUTSOURCING | AUDIT,CONSULTING AND TAX,

©2017 CliftonLarsonAllen LLP • • • New Mexico Gross Receipts Tax • WEALTH ADVISORY ADVISORY WEALTH Very similar to other states sales tax states otherVeryto similar Mexico New in business of doing the privilege For New (similarMexico a to tax) use in property of using privilege the for tax receipts Compensating tax receipts gross seller’s on Tax based is | OUTSOURCING | AUDIT,CONSULTING AND TAX, – companion tax to the gross gross the to tax companion

©2017 CliftonLarsonAllen LLP • • Gross receipts includesreceipts from: New Mexico • • • WEALTH ADVISORY ADVISORY WEALTH Sales of property in New Mexico New in property of Sales which is initially used in New Mexico. New in Mexico. is used initially which of performedNewoutside Mexico, the product services development and research Selling construction) (includes Mexico New in a service Performing Mexico New in employed a franchise use to a right Granting Mexico New in property licensing or Leasing | OUTSOURCING | AUDIT,CONSULTING AND TAX,

©2017 CliftonLarsonAllen LLP • • be: to are presumed receipts gross seller’s A New Mexico • WEALTH ADVISORY ADVISORY WEALTH Taxable return to be reportedon the receiptsgross taxpayer’s tax Exempt be reported on a taxpayer’s tax receipts gross return Deductible | OUTSOURCING – nontaxable receipts that are not required required not are that receipts nontaxable | – AUDIT,CONSULTING AND TAX, nontaxable receipts are nontaxable that to required

©2017 CliftonLarsonAllen LLP • • Excludes: Tax Receipts Gross New Mexico • • WEALTH ADVISORY ADVISORY WEALTH Tax billed to the buyer the to billed Tax disclosed agency capacity agency disclosed a in another of behalf on solely received Amounts time of type Any taken and allowed discounts Cash | OUTSOURCING | AUDIT,CONSULTING AND TAX, - price differential price

©2017 CliftonLarsonAllen LLP Compensating tax rate is 5.125% 5.125% is rate tax Compensating • business the of location Rate New Mexico WEALTH ADVISORY ADVISORY WEALTH location of the buyer or lessee. lessee. or buyer the of location lessor, or seller the of location business Generally, the tax receiptsgross rate on theis based ranges from 5.125 ranges | OUTSOURCING | AUDIT,CONSULTING AND TAX, % to to % depending8.6875% on the NOT on the the on NOT

©2017 CliftonLarsonAllen LLP • Exemption Certificates New Mexico WEALTH ADVISORY ADVISORY WEALTH performing construction) performing TransactionCertificate (NTTC). (i.e.Sales for resale or Nontaxable a seller the issue to buyer the requires Mexico New deductions, certain support To • • different form for each exemption formfor each different from normaldiffer certificatesisNTTCs that a there in states,other acceptable NTTC’sare only from certificates exemption accept not does Mexico New | OUTSOURCING | AUDIT,CONSULTING AND TAX,

©2017 CliftonLarsonAllen LLP • • • Nevada • • WEALTH ADVISORY ADVISORY WEALTH business in Nevada in business doing privilege ofentities forImposed the on business Became effective revenue but no deduction but nocost deduction for of goodssoldrevenue There sourcesin Nevadaexceeds $ entity whoseImposed gross on each business income from associations trusts, professional and jointventures sole proprietorships, business LLCs, corps,partnerships, C includes entity Business | are a number of exclusions and deductions from gross deductions and exclusions of number a are OUTSOURCING Commerce | AUDIT,CONSULTING AND TAX, July 1, 1, Tax 2015 4M

©2017 CliftonLarsonAllen LLP • • • Nevada • • • WEALTH ADVISORY ADVISORY WEALTH industry in which the business entity is primarily engaged isprimarily entity business the which in industry Tax the purchaser received benefit in Nevada Nevada in benefit received purchaser the Receipts from the sale servicesof sourcedare to Nevadaif a 30can requestTaxpayers end. year tax ofdays 45within due are Reports Taxable year is July 1 to June 30 Tax is imposed on a separate entity basis rates rates from.051%vary to .331%on the depending | OUTSOURCING Commerce | AUDIT,CONSULTING AND TAX, Tax - day extension

©2017 CliftonLarsonAllen LLP • Nevada WEALTH ADVISORY ADVISORY WEALTH previous year to tax based equal 50%the ofCommerce the tax in paid An employer a credit againstallowedispayroll Nevada’s | OUTSOURCING Commerce | AUDIT,CONSULTING AND TAX, Tax

©2017 CliftonLarsonAllen LLP • B&O Basics • • • WEALTH ADVISORY ADVISORY WEALTH business. of the income of gross sale, or proceeds gross The B&O The materials, taxes, or other costs of doing business. doing of costs other or taxes, materials, for labor,tax B&O from the deductionsThere no are the on calculated tax is B&O Washington’s tax. incomean have not does states, other many unlike Washington, gross | OUTSOURCING tax is tax income from activities. | AUDIT,CONSULTING AND TAX, measured on the value of products, products, of value the on measured 41 ©2017 CliftonLarsonAllen LLP • WhatDo You Do? • • WEALTH ADVISORY ADVISORY WEALTH Most common rate rate Most common classifications Tax is imposed on each separate legal entity legal separate each on imposed is Tax rates tax B&O multiple on pay and report must it activities of types multiple performs business a If – – – – Services and Other Activities 1.5% .484%Manufacturing .484% Wholesaling Retailing | OUTSOURCING . | 471% AUDIT,CONSULTING AND TAX, 42 ©2017 CliftonLarsonAllen LLP • Cities the Forget Don’t • WEALTH ADVISORY ADVISORY WEALTH 40 cities impose a local B&Otax local a cities impose 40 completely differentthan the state rules oftenare the rules all are rates differentThe and – – – Bellevue Tacoma Seattle | OUTSOURCING | AUDIT,CONSULTING AND TAX, 43 ©2017 CliftonLarsonAllen LLP • • Nexus and Tax B&O WEALTH ADVISORY ADVISORY WEALTH Services, royalty, wholesaling and retailing nexus Priorto June 1, 2010, physical presencecreated – – – – – EffectiveJulyRetailing 2017for EffectiveSeptember 2015for Wholesaling Royalties and Servicesfor 2010June Effective standardnexus Bright line physicalrequiredNo presence ◊ ◊ ◊ ◊ | At least percent of total 25property, payroll, Washington in income or property of $53,000 payroll of $53,000 of $267,000 gross Wholesaling) for (or income receipts OUTSOURCING | AUDIT,CONSULTING AND TAX, 44 ©2017 CliftonLarsonAllen LLP • • Attributionof Sales WEALTH ADVISORY ADVISORY WEALTH delivery occurs in the state the in occurs delivery if Washington to sourced are property personal tangible of Sales the serviceWashingtonreceived is inthe services Sales attributable of of are benefit to Washington the if – – Cascading method Cascading available.” generallybeproportionally attributingwill receipts" ”…thetaxpayer knowwill where the benefit is actually receivedor a "reasonable method of ◊ ◊ ◊ ◊ ◊ | Etc. State customer from which payment sends statements are sent billing to which State State customer from which the serviceordered Reasonable method OUTSOURCING | AUDIT,CONSULTING AND TAX, 45 ©2017 CliftonLarsonAllen LLP Texas Franchise Tax Texas Franchise Steve Jensen Jensen Steve - Seattle

©2017 CliftonLarsonAllen LLP • • • TexasFranchiseaka MarginTax Tax, • WEALTH ADVISORY ADVISORY WEALTH business in Texas in business The tax is typically assessed in return forthe “privilege” ofdoing The Franchise Franchise The Tax is hybridan income a between a and GRT tax unitary business an of part are that entities Taxable entities business all nearly to Applies | OUTSOURCING | AUDIT,CONSULTING AND TAX, must file a combined group report. group combined a file must affiliateda group in engaged 47 ©2017 CliftonLarsonAllen LLP • BasicThe Calculation • • WEALTH ADVISORY ADVISORY WEALTH Start with total revenues and then subtract then and revenuestotal withStart does in the state. company a business of percent the on based Texas, to “apportioned” then is difference resulting The “margin” taxable lowest the against applied than is rate tax The – – – Compensation or sold, goods of Cost 30% of total or revenue, | OUTSOURCING | AUDIT,CONSULTING AND TAX, 48 ©2017 CliftonLarsonAllen LLP • Rate Tax • WEALTH ADVISORY ADVISORY WEALTH Tax Rate is due is If no payment the tax calculated is less than $1,000, – – 0.375 for qualifying wholesalers and retailers entities most for 0.75% ◊ ◊ ◊ | products over50% manufacture of the can’t entity affiliatedTaxpayer or Over or retailerwholesalerfor a Code SIC be must OUTSOURCING 50% of revenue must be from wholesale or or retail wholesale from be must revenue 50% of | AUDIT,CONSULTING AND TAX, 49 ©2017 CliftonLarsonAllen LLP • Public InformationReport • WEALTH ADVISORY ADVISORY WEALTH Information Report. Public a file must responsibility, tax franchise a has that Institution Financial Association, Professional Partnership, Limited LLC, Corporation, Each Report Information Ownership an file must responsibility tax franchise a have that above described not Entities | OUTSOURCING | AUDIT,CONSULTING AND TAX, 50 ©2017 CliftonLarsonAllen LLP WEALTH ADVISORY ADVISORY WEALTH | OUTSOURCING | AUDIT,CONSULTING AND TAX, Questions? 51 ©2017 CliftonLarsonAllen LLP Thank you!

Marcus Mims, CPA, Principal [email protected] | 505-222-3508

Theresa Mullen, MT, Manager [email protected] | 330-266-4129

To receive future webinar invitations, subscribe at CLAconnect.com/subscribe.

CLAconnect.com

linkedin.com/company/ facebook.com/ twitter.com/CLAconnect cliftonlarsonallen cliftonlarsonallen 52