Qualifying purchases. The sales tax exemption applies to sales of tangible personal property for personal use only. Purchases exempt from sales tax are also exempt from use tax. Therefore, eligible items of tangible personal property purchased on the Massachusetts sales tax holiday from out-of-state retailers for use in Massachusetts are exempt from Massachusetts use tax.

Nonexempt sales. The sales tax holiday does not apply to sales of motor vehicles, motorboats, meals, telecommunications services, gas, steam, electricity, tobacco products, and any single item costing in excess of $2,500.

“Motor vehicle” means a motorized, self-propelled vehicle which is constructed and designed for transportation or travel over a land surface, including low-speed vehicles and limited use vehicles, but not including motorized bicycles. It also means snow vehicle and recreation vehicle. Rentals of motor vehicles are also not eligible for the holiday.

Motorboats, including jet skis, are not exempt under the sales tax holiday. Generally, the sales tax holiday will apply to purchases of canoes, kayaks, rowboats, and other types of watercraft with no mechanical propulsion, provided that the sales price is $2,500 or less.

“Meals” are any food or beverage, or both, prepared for human consumption and provided by a restaurant, where the food or beverages is intended for consumption on or off the restaurant premises, and includes food or beverages sold on a “take out” or “to go” basis, whether or not they are packaged or wrapped and whether or not they are taken from the premises of the restaurant.

Gas for purposes of the holiday refers to natural gas. Sales of gasoline are not subject to the sales tax.

“Telecommunications services” are any transmission of messages or information by electronic or similar means, between or among points by wire, cable, fiber optics, laser, microwave, radio, satellite or similar facilities but not including cable television. Sales of prepaid calling arrangements and cards are not eligible for the sales tax holiday. Telecommunications equipment, such as a telephone or cell phone purchased for nonbusiness use, is eligible for the sales tax holiday

Tobacco products include cigarettes, cigars and smoking and smokeless tobacco. Layaway sales do not qualify for the exemption even if the last required payment or payments necessary to complete the transaction are made on August 13 or 14, 2011. Sales of the excluded items remain taxable.

Specific rules. The Department provided specific rules to be applied by retailers in administering the Massachusetts sales tax holiday exemption.

Threshold: Generally, sales or use tax is due on the entire sales price of a single item worth more than $2,500. The sales price is not reduced by the threshold amount. However, since there is no sales tax on any article of clothing worth less than $175, only the increment of the sales price of the article of clothing over $175 is subject to tax.

Multiple items on one invoice: Separate invoices do not have to be prepared when a customer purchases multiple items during the sales tax holiday. As long as each item is priced $2,500 or less, there is no upper limit on the tax-free amount each customer may purchase.

Bundled transactions: When several items are offered for sale at a single price, the entire package is exempt if the sales price of the package is $2,500 or less. Items that are priced separately and are to be sold separately qualify for the sales tax holiday exemption if the price of each item is $2,500 or less.

Coupons and discounts: If a store coupon or discount reduces the sales price of an article, the discounted sales price determines whether the sales price is within the sales tax holiday threshold. If the purchaser bought both an eligible property and a taxable property and the coupon or discount applies to the total amount paid by the purchaser, the seller allocates the discount on a pro rata basis to each article sold.

Exchanges: In case of an even exchange of an eligible item purchased during the sales tax holiday no tax is due even if the exchange is made after the sales tax holiday.

Special orders: Special order items are eligible for the sales tax holiday exemption provided they are ordered and paid in full on the sales tax holiday weekend and the cost of each item is $2,500 or less even if the items are delivered at a later date. A prior special order purchase with a deposit made before August 13, 2011 will not qualify for the sales tax holiday exemption even if the customer pays the entire remaining balance due on August 13 or 14, 2011.

Rain checks: Eligible property bought with the use of a rain check during the sales tax holiday weekend qualifies for the exemption regardless of when the rain check was issued. Issuance of a rain check during the sales tax holiday weekend will not qualify otherwise eligible property for the sales tax holiday exemption if the property is actually purchased after the sales tax holiday.

Rentals: Generally, rentals for 30 days or less of eligible tangible personal property are eligible for the sales tax holiday even if the rental period covers days before or after the holiday provided payment in full is made during the sales tax holiday weekend.

Rebates: A rebate is generally treated as a cash discount and is excluded from the sales price. So, the discounted sales price determines whether the sales price is within the sales tax holiday threshold. If the customer receives a rebate after the sale by mailing a coupon to the manufacturer, the full purchase price of the property determines whether the sales price is within the sales tax holiday price threshold and tax must be charged on the full purchase price if it is over $2,500. If the customer receives a cash discount from the vendor upon the purchase of tangible property and a manufacturer’s rebate after the sale, only the cash discount given by the vendor is excluded from the sales price for purposes of the sales tax holiday exemption.

Internet sales: An eligible property ordered over the Internet is exempt if it is ordered and paid for on August 13 or 14, 2011, Eastern Daylight Time, even if the property is delivered after the sales tax holiday period.

Splitting items normally sold together: Articles normally sold as a single unit cannot be priced separately and sold as individual items in order to qualify for the sales tax holiday exemption.

Returns: Under the law, sales tax may only be refunded if returns are made within 90 days of the sale. During the 90-day period after August 13 or 14, 2011, a retailer may not credit a retail customer who returns an item that could have qualified for the sales tax holiday exemption, unless the customer provides a receipt or invoice showing the tax was paid or the seller’s records show that tax was paid.

Erroneously collected taxes: Customers who were erroneously charged sales tax for an exempt purchase may obtain a tax refund from the vendor. The vendor that has remitted erroneously collected tax to the Department may file an abatement application within three years with satisfactory evidence that the vendor credited or refunded the tax to the purchaser.

Retailers’ responsibilities. All Massachusetts businesses normally making taxable sales of tangible personal property on August 13 and 14, 2011 and out-of-state retailers registered to collect Massachusetts sales and use taxes must participate in the sales tax holiday. Any sales or use tax erroneously collected by a retailer during the sales tax holiday must be remitted to the Department. Retailers must keep normal business records showing the date of sale, items purchased and selling price. Purchasers paying for tangible personal property with business credit cards or checks must be charged tax on the items purchased. Normal business records showing the date of sale, items purchased, and selling price must be kept by the retailer/vendor. However, a separate certification from the purchaser on transactions of $1,000 or more will not be required for the 2011 sales tax holiday.

Penalties. Retailers that back-date sales occurring after August 14, 2011 or that forward-date sales that occurred before August 13, 2011 in order to make them appear to qualify for the sales tax holiday may be subject to the tax evasion penalties of Mass. Gen. L. § 73 , including a felony conviction, a fine of not more than $100,000 or $500,000 in the case of a corporation, or by imprisonment for not more than five years, or both, and may also be required to pay the costs of prosecution.

Income tax. Life sciences tax incentive program: Effective as of January 1, 2009, a life sciences tax incentive program is established. The Life Sciences Center, in consultation with the Department of Revenue may authorize incentives not exceeding $25 million annually. Effective for tax years beginning on or after January 1, 2012, a taxpayer who commits to the creation of a minimum of 50 net new permanent full-time positions in Massachusetts is allowed, to the extent authorized by the life sciences tax incentive program, a refundable jobs credit against personal and corporate income taxes.

FAS 109 deduction: The implementation of the deduction allowed to limit the impact of combined reporting on the financial statements of some publicly traded corporation is delayed to 2013. The deduction was to be prorated over the 7-year period beginning with the combined group’s taxable year that begins 2012.

Organ donation related expenses: Effective for taxable years beginning on or after January 1, 2012, a resident individual who donates an organ to another person for human organ transplantation may claim a deduction in an amount equal to the travel expenses, lodging expenses and lost wages not to exceed $10,000 that the individual incurred in donating his or her organ. Human organ means all or part of human bone marrow, liver, pancreas, kidney, intestine or lung.

Daily farmer tax credit program: Effective July 1, 2011, the law requires that the regulations for the implementation, administration, and enforcement of the daily farmer tax credit program must provide that when the board of food and agriculture determines that an error has been made in calculating the trigger price or in reporting or collecting data used in the calculation of the trigger price or the tax credit, the Commissioner must recalculate said trigger price or tax credit.

Sales tax. Effective July 1, 2011, a sales tax exemption is provided for sales of physician-prescribed, medically necessary breast pumps.

Property tax. A person required to file a true list of taxable personal property may not be prevented from inspecting or receiving a copy of his or her submission.

Cigarette tax. Applicable to stamps purchased on or after January 1, 2012, a higher amount that a stamper may withhold as compensation in case of encrypted stamps purchased is provided. A stamper who has complied with cigarette tax law may withhold from each payment to be made by that stamper for such stamps as compensation the following amounts: (1) for encrypted stamps purchased and not returned for an abatement, $12 per roll of 1,200 stamps; and (2) in each fiscal year, $600 per roll of 30,000 encrypted stamps for the first 50 rolls purchased and $200 per each additional roll of 30,000 encrypted stamps purchased. Current law only provides for non-encrypted stamps purchases, which is $1.85 for each 600 stamps purchased.

Administrative provisions. Interests on deficiency assessments: Applicable to interest accruing on deficiency assessments where the audit resulting in the deficiency assessment commences after July 1, 2011, the tax audit cycle is shortened by reducing some interest penalties charged businesses if the Department takes more than 18 months to perform an audit provided the taxpayer meets certain conditions.

Abatement and assessment periods: Applicable to requests for refund or applications for abatement filed with the Commissioner on or after July 1, 2011, the statutes of limitations for assessment and abatements are revised. However, the change will not apply with respect to tax periods where the statute of limitations for refund or abatement, as applicable, had expired prior to July 1, 2011.

A request for a refund or credit of an overpayment of any tax where a required return has not been timely filed must be made by filing the overdue return within three years from the due date of the return, taking into account any extension of time for filing the return, or within two years of the date that the tax was paid, whichever is later. A request for a refund or credit of an overpayment of any tax where no return is required must be made by the taxpayer within two years from the time the tax was paid. A request for a refund or credit of an overpayment of tax where the required return was timely filed must be made within the period permitted for abatement for that return. Where a refund or credit results from an abatement, the amount of the refund or credit must be limited to the amount paid or deemed paid within three years of the date that the application for abatement is filed, taking into account any extension of time for filing the return. Previously, a request for a refund or credit of an overpayment of any tax where a required return has not been timely filed must be made by filing the overdue return within three years from the due date of the return, without regard to extension of time for filing the return, or within two years of the date that the tax was paid, whichever is later.

Any person aggrieved by the assessment of a tax, other than taxes assessed under the laws on taxation of legacies and successions or on taxation or transfers of certain estates, may apply in writing to the Commissioner for an abatement at any time within three years from the date of filing the return, within two years from the date the tax was assessed or deemed to be assessed or within one year from the date that the tax was paid, whichever is later.

Income taxes. Combined reporting study: As part of its tax return for a taxable year beginning after December 31, 2010 but before January 1, 2013, each corporation which is part of a unitary business must file a report, in a manner prescribed by the Tax Administrator, for the combined group containing the combined net income of the combined group. The use of a combined report does not disregard the separate identities for the members of the combined group. The combined report must include, at minimum, for each taxable year the following: the difference in tax owed as a result of filing a combined report compared to the tax owed under the current filing requirement; the difference in tax owed as a result of using the single sale factor apportionment method as compared to the tax owed using the current 3-factor apportionment method; volume of sales in the state and worldwide; and taxable income in the state and worldwide. Any corporation that fails to file a timely report or files a false report will be assessed a penalty not exceeding $10,000. The penalty may be waived for good cause shown for failure to timely file. Based on the information provided in the income tax returns and the data submitted, the Tax Administrator must submit a report on or before March 15, 2014, to the chairpersons of the house finance committee and senate finance committee, and the house fiscal advisor and the senate fiscal advisor analyzing the policy and fiscal ramifications of changing the business corporation tax statute to a combined method of reporting.

Taxpayer accountability: On or before September 1, 2011, and every September 1 thereafter, the project lessee of the following tax incentives must file an annual report with the Tax Administrator containing the name, Social Security number, date of hire, and hourly wage of each full-time equivalent, part-time or seasonal employee: project status through the Rhode Island Economic Development Corporation; the incentives for innovation and growth credit; enterprise zone tax credits; and motion picture production tax credits.

Lottery setoff for unpaid taxes: Effective June 30, 2011, if a taxpayer wins a lottery prize valued at more than $600 and is delinquent on state taxes owed to the Tax Administrator, the Lottery Director is authorized to setoff against the amount due to that person, after state and federal tax withholding, an amount up to the balance of the unpaid taxes owed. The Lottery Director will make payment of such amount directly to the Tax Administrator. Offsets are made based on a schedule of priorities.

Letter of good standing fee. Effective June 30, 2011, the fee for obtaining a letter of good standing from the Division of Taxation is increased from $25 to $50.

LLC annual charge. Effective June 30, 2011, any LLC that is not taxed as a corporation for federal tax purposes must pay a fee equal to the corporate minimum tax, which is currently $500; and the due date is the 15th day of the fourth month following the close of the fiscal year. Previously, a LLC that was not treated as a partnership for federal tax purposes had to pay a fee equal to the corporate minimum tax.

LLP annual charge. For tax years beginning on or after January 1, 2012, LLPs must pay an annual charge equal to the corporate minimum tax, which is currently $500. The charge is due upon the filing of the LLP’s return: on or before the April 15 for calendar year filers or the 15th day of the fourth month following the close of the fiscal year for fiscal year filers. If the annual charge is not paid by the due date, a delinquency charge of $100 is added to the annual charge.

Sales tax. Rate and base: If federal law is enacted that requires remote sellers to collect and remit taxes, the sales tax rate is decreased from 7% to 6.5%, the 1% local meals and beverage tax would increase to 1.5%, and the 1% local hotel tax would increase to 1.5%. Such rate changes would be effective the first day of the first state fiscal quarter following the change. In addition, effective October 1, 2011, the 7% sales and use tax is broadened to include the following: nonprescription drugs, also known as over-the-counter drugs; prewritten computer software delivered electronically or by “load and leave,” including applications for smartphones and similar devices; furnishing package tour and scenic and sightseeing transportation services as set forth in the 2007 North American Industrial Classification System (NAICS) codes 56120 and 487; and marijuana for medical use.

Rhode Island Economic Development Corporation: The sales tax exemption applicable to firms that use bond financing programs offered through the Rhode Island Economic Development Corporation or which are given project status by the Rhode Island Economic Development Corporation will no longer be allowed after June 30, 2011. The incentives will only apply to projects approved before July 1, 2011.

Rhode Island Industrial Facilities Corporation. Sales tax incentives related to projects involving the Rhode Island Industrial Facilities Corporation will no longer be allowed after June 30, 2011. The incentives will only apply to projects approved prior to July 1, 2011.

Hospital licensing fee. Applicable to hospitals that are duly licensed on July 1, 2011, the amount of the hospital licensing fee imposed on the net patient services revenue of every hospital for the hospital’s first fiscal year ending on or after January 1, 2010 is 5.43%. Every hospital must file a return and pay the licensing fee by electronic transfer to the Tax Administrator on or before July 16, 2012. Each hospital must file a return with the Tax Administrator on or before June 18, 2012, containing the correct computation of net patient services revenue for the hospital fiscal year ending September 30, 2010, and the licensing fee due on that amount.

Compassion Center Surcharge. Effective June 30, 2011, a 4% monthly surcharge is imposed on the net patient revenue received each month by every compassion center. Each center must file a return to the Tax Administrator and make payment by electronic transfer to the General Treasurer no later than the 20th day of the month following the month that the net patient revenue was received. Such surcharge is in addition to any other authorized fees that have been assessed on a compassion center. A “compassion center” means a registered not-for-profit entity that acquires, possesses, cultivates, manufactures, delivers, transfers, transports, supplies, or dispenses marijuana, or related supplies and educational materials, to registered qualifying patients and their registered primary caregivers who have designated it as one of their primary caregivers.

Estate tax filing fees. Effective June 30, 2011, the estate filing fee is increased from $25 to $50. The filing fee applies to the statement that executors, administrators and heirs-at-law must file with the Tax Administrator within nine months of a decedent’s death showing the value of the decedent’s estate and certain other items.

McLaughlin & Quinn, LLC has published “9 Secrets to Success When You Owe the IRS”  This list has been developed by the attorneys at McLaughlin & Quinn, LLC over the course of dozens of years in private practice and dozens more working for the IRS. Avoiding these landmines will significantly increase the odds of getting one’s tax life in order and moving on. Failure to know these secrets, and use them to your advantage can turn a potentially minor problem into a federal case.

This is the most straight-forward guide you will find anywhere on resolving taxes. In it you will learn:

• 9 Different Ways to Keep the IRS from Taking Action Against You
• How not to be afraid of the IRS
• How to avoid common mistakes
• Simple steps to keep you out of trouble

Downloading this guide is absolutely free.

Click here to download this Free guide.

McLaughlin & Quinn, LLC Partners Moore McLaughlin and Tom Quinn represent Massachusetts taxpayers, both individuals and businesses, on a regular basis in tax planning matters as well as audits, appeals and in court.  Feel free to contact either Moore McLaughlin at 401-421-5115 ext. 212 or by e-mail at mmclaughlin@mclaughlinquinn.com or Tom Quinn at 401-421-5115 ext. 218 or by e-mail at tquinn@mclaughlinquinn.com.

Qualifying purchases. The sales tax exemption applies to sales of tangible personal property for personal use only. Purchases exempt from sales tax are also exempt from use tax. Therefore, eligible items of tangible personal property purchased on the Massachusetts sales tax holiday from out-of-state retailers for use in Massachusetts are exempt from Massachusetts use tax. Alcoholic beverages sold for off-premises consumption by liquor or package stores qualify for the 2010 sales tax holiday.

Nonexempt sales. The sales tax holiday does not apply to sales of motorboats, meals, telecommunications services, gas, steam, electricity, tobacco products, any single item costing in excess of $2,500, and all sales of motor vehicles. Layaway sales do not qualify for the exemption even if the last required payment or payments necessary to complete the transaction are made on August 14 or 15, 2010. Sales of the excluded items remain taxable.

Specific rules. The Department provided specific rules to be applied by retailers in administering the Massachusetts sales tax holiday exemption.

Threshold: Generally, sales or use tax is due on the entire sales price of a single item worth more than $2,500. The sales price is not reduced by the threshold amount. However, since there is no sales tax on any article of clothing worth less than $175, only the increment of the sales price of the article of clothing over $175 is subject to tax.

Multiple items on one invoice: Separate invoices do not have to be prepared when a customer purchases multiple items during the sales tax holiday. As long as each item is priced $2,500 or less, there is no upper limit on the tax-free amount each customer may purchase.

Bundled transactions: When several items are offered for sale at a single price, the entire package is exempt if the sales price of the package is $2,500 or less. Items that are priced separately and are to be sold separately qualify for the sales tax holiday exemption if the price of each item is $2,500 or less.

Coupons and discounts: If a store coupon or discount reduces the sales price of an article, the discounted sales price determines whether the sales price is within the sales tax holiday threshold. If the purchaser bought both an eligible property and a taxable property and the coupon or discount applies to the total amount paid by the purchaser, the seller allocates the discount on a pro rata basis to each article sold.

Exchanges: In case of an even exchange, no tax is due even if the exchange is made after the sales tax holiday.

Special orders: Special order items are eligible for the sales tax holiday exemption provided they are ordered and paid in full on the sales tax holiday weekend and the cost of each item is $2,500 or less even if the items are delivered at a later date. A prior special order purchase with a deposit made before August 14, 2010 will not qualify for the sales tax holiday exemption even if the customer pays the entire remaining balance due on August 14 or 15, 2010.

Rain checks: Eligible property bought with the use of a rain check during the sales tax holiday weekend qualifies for the exemption regardless of when the rain check was issued. Issuance of a rain check during the sales tax holiday weekend will not qualify otherwise eligible property for the sales tax holiday exemption if the property is actually purchased after the sales tax holiday.

Rentals: Generally, rentals for 30 days or less of eligible tangible personal property are eligible for the sales tax holiday even if the rental period covers days before or after the holiday provided payment in full is made during the sales tax holiday weekend.

Rebates: A rebate is generally treated as a cash discount and is excluded from the sales price. So, the discounted sales price determines whether the sales price is within the sales tax holiday threshold, and tax must be charged on the full purchase price if it is over $2,500. If the customer receives a rebate after the sale by mailing a coupon to the manufacturer, the full purchase price of the property determines whether the sales price is within the sales tax holiday price threshold and tax must be charged on the full purchase price if it is over $2,500. If the customer receives a cash discount from the vendor upon the purchase of tangible property and a manufacturer’s rebate after the sale, only the cash discount given by the vendor is excluded from the sales price for purposes of the sales tax holiday exemption.

Internet sales: An eligible property ordered over the Internet is exempt if it is ordered and paid for on August 14 or 15, 2010, Eastern Daylight Time, even if the property is delivered after the sales tax holiday period.

Splitting items normally sold together: Articles normally sold as a single unit cannot be priced separately and sold as individual items in order to qualify for the sales tax holiday exemption.

Returns: Under the law, sales tax may only be refunded if returns are made within 90 days of the sale. During the 90-day period after August 14 or 15, 2010, a retailer may not credit a retail customer who returns an item that could have qualified for the sales tax holiday exemption, unless the customer provides a receipt or invoice showing the tax was paid or the seller’s records show that tax was paid.

Erroneously collected taxes: Customers who were erroneously charged sales tax for an exempt purchase may obtain a tax refund from the vendor. The vendor that has remitted erroneously collected tax to the Department may file an abatement application within three years with satisfactory evidence that the vendor credited or refunded the tax to the purchaser.

Responsibilities of retailers. All Massachusetts businesses normally making taxable sales of tangible personal property on August 14 and 15, 2010 and out-of-state retailers registered to collect Massachusetts sales and use taxes must participate in the sales tax holiday. Any sales or use tax erroneously collected by a retailer during the sales tax holiday must be remitted to the Department. Retailers must keep normal business records showing the date of sale, items purchased and selling price. Purchasers paying for tangible personal property with business credit cards or checks must be charged tax on the items purchased. Normal business records showing the date of sale, items purchased, and selling price must be kept by the retailer/vendor. However, a separate certification of nonbusiness use from the purchaser will not be required for the 2010 Sales Tax Holiday regardless of the amount of the otherwise qualifying purchase.

Penalties. Retailers that back-date sales occurring after August 15, 2010 or that forward-date sales that occurred before August 14, 2010 in order to make them appear to qualify for the sales tax holiday may be subject to the tax evasion penalties of Mass. Gen. L. § 73 , including a felony conviction, a fine of not more than $100,000 or $500,000 in the case of a corporation, or by imprisonment for not more than five years, or both, and may also be required to pay the costs of prosecution.

For example, in Minnesota the tax authorities found a tax evader after he announced on his MySpace page that he was returning to his home town to work and mentioned his new employer.  Genius!

Agents in Nebraska caught a DJ after announcing one of his gigs.  Brilliant!

California caught wind of a rigger of sails through an on-line thread to collect a 4-figure sum.  Outstanding!

Personally, I love these stories.  Can’t get enough of them.  Of course, I also watch all of the “Caught in the Act” and “World’s Dumbest Criminals” episodes I can.

Back in the real world, Tom Quinn and I help people with their IRS, Rhode Island and Massachusetts tax problems on a daily basis.  If you owe the IRS, Rhode Island or Massachusetts taxes, contact us at 401-421-5115 or by e-mail at mmclaughlin@mclaughlinquinn.com or tquinn@mclaughlinquinn.com for more information on how we can help you.

According to the Wall Street Journal, the Democrats in the Rhode Island legislature increased spending this year by 12% while requiring the Governor to cut spending by around $68 million.  The Governor is utilizing these furloughs as part of his plan to cut spending.  Naturally, the state employees unions have vowed to fight this furlough, and they may win.  Click here for the full Wall Street Journal article.

Whether or not the unions prevail, tax experts are concerned about the impact on taxes in the Ocean State.  The Governor and the Legislature already raised the tax rate on long-term capital gains from 1.67% to 9.9%.  Given their reluctance to actually cut spending or to take any sort of business-friendly measures which would increase the base upon which the state income tax is calculated, the Legislature may see no other option than to increase the tax rate (directly or indirectly) on income.  They could, of course, increase other tax rates, such as the sales and use tax, or broaden the sales and use tax base (e.g. to include services).  The Legislature and the Governor already imposed a new tax on Amazon.com and other on-line retailers.  We are still waiting to see how much additional tax revenue the state will receive after several on-line retailers withdrew from Rhode Island.

The tax attorneys at McLaughlin & Quinn, LLC are keeping an eye open and an ear to the ground monitoring any rumors or discussions of changes to the Rhode Island tax laws.  As soon as we hear anything, we will post an entry to the M&Q Blog or send out an e-mail alert.  If you are interested in receiving our e-mail newsletters and alerts, please contact Michaela Costa by e-mail at mcosta@mclaughlinquinn.com and ask to be added to our list.

In the meantime, business owners, investors and everyone else in Rhode Island will just keep operating under the current rules, while wondering who’s running Rhode Island.

What I’m referring to is the recent passage of a law that requires Amazon.com to collect Rhode Island sales tax on sales made through Rhode Island-based associates.  Click here for the entire article from the Providence Business News.  Not surprisingly, Amazon.com immediately severed all relationships with Rhode Island-based associates.

Since book buyers can go directly to Amazon.com to buy their books, with no Rhode Island intermediary, Amazon does not have an obligation to collect the Rhode Island sales tax.  So, now the state will still not receive any sales tax, and no income taxes, property taxes, employment taxes, etc., from the Rhode Island-based associate that may now go out of business, or move to another state.  Absolutely brilliant!

UPDATE

Overstock.com has joined Amazon.com is severing ties with Rhode Island associates as a direct result of actions taken by the Rhode Island legislature.  Click here for the full article from Providence Business News.

ANOTHER UPDATE

Blue Nile, Inc. has joined Amazon.com and Overstock.com in severing its ties to Rhode Island associates.  Click here for the full article from the Providence Journal.  And, click here for the full article in the Providence Business News.  Have the Rhode Island legislators heard about any of this?  Was this their goal?  Where will it end?  Is this good for Rhode Island?

ANOTHER UPDATE

The Rhode Island Division of Taxation has mailed a letter to over 100 on-line retailers informing them of Rhode Island’s new law.  Click here to view the letter that was mailed last week.

ANOTHER UPDATE

According to Steven Roll, Senior State Tax Law Editor at BNA Tax & Accounting, “Overstock.com reinstated its affiliate advertisers in California July 1 and in Hawaii July 2 after governors in both states vetoed bills that would have required the online retailer to collect tax on sales in those states.

“The company reinstated the affiliates in those two states within a day of notifying them that they would be dropped because lawmakers were poised to enact laws imposing a sales tax nexus on Overstock.com based on its affiliate relationships.

“California Gov. Arnold Schwarzenegger (R) vetoed a bill (S.B. 17xxx) with the nexus provisions late June 30, and Hawaii Gov. Linda Lingle (R) vetoed her state’s bill (H.B. 1405) July 1.

“Overstock.com also cancelled affiliate agreements in North Carolina based on out-of-state retailer nexus provisions that may be included in the state’s budget.

“The North Carolina House of Representatives approved budget legislation (S.B. 202) June 13 that included the requirement that retailers are obligated to collect sales taxes on remote sales. The state Senate passed its version of the bill April 9, but did not include that provision.

“Conferees currently are meeting to hammer out the differences in their versions of the two-year budget bill. North Carolina’s fiscal year began July 1, but lawmakers are working under a continuing budget authority and now have until July 15 to come to an agreement on S.B. 202.”

As more states struggle with budgetary and other fiscal constraints, expect to see more efforts to audit and collect taxes under the current system.  Our attorneys at McLaughlin & Quinn, LLC have already felt this renewed effort in both Massachusetts and Rhode Island.  The numbers of new cases is at an all-time high.  These state efforts are focused not just on personal and corporate income taxes, but sales and use taxes, payroll taxes, and excise taxes, such as the cigarette tax, fuels taxes and others.

Ms. Van Der Pool’s article correctly points out that everyone should pay their taxes according to the law.  But, as a tax attorney I can attest that there can certainly be differing opinions as to the proper interpretation of the law.  However, merely not paying any taxes, or not filing tax returns, is not the appropriate method to challenge an interpretation of the tax law.

If you have been selected for audit, if you know you owe taxes, or if you have not filed all required tax returns, and if you want to get these matters settled and behind you, you need to seek competant tax advice immediately.