Episode Transcript
[00:00:08] Speaker A: Welcome to Taxing poetic. I am one of your hosts, Tim Howe. And along with my distinguished co host.
[00:00:16] Speaker B: I am Jenny Carter. And this is brought to you by Synexus Tax Solutions.
[00:00:20] Speaker A: Awesome. And as always, we're joined with our wonderful producer, JB.
[00:00:24] Speaker C: How's it going?
[00:00:25] Speaker A: Good, JB, how are you doing today?
[00:00:26] Speaker C: Taking some pictures at the same time? If you hear something, that's what it is.
[00:00:29] Speaker B: I'm used to being photographed all the time.
[00:00:30] Speaker A: So, no Jenny's? Yeah. No shortage of the paparazzi following her around.
[00:00:35] Speaker B: Of course. Especially how I'm dressed today.
[00:00:36] Speaker A: You know what I'm saying?
[00:00:37] Speaker B: I know.
[00:00:38] Speaker A: In your subtle GMC Yukon.
[00:00:39] Speaker B: Exactly. I know. Yes. We are in full New Year's mode.
[00:00:45] Speaker A: Congratulations.
[00:00:46] Speaker B: I know. So, Tim. Well, first I have a haiku.
[00:00:49] Speaker A: Okay.
[00:00:49] Speaker B: And then we have some New Year's things to discuss.
[00:00:52] Speaker A: Technically not the new year, because we haven't gotten there yet, but by the time that you're going to be listening to this, it will absolutely be the new year. So, happy new year, everyone.
[00:01:00] Speaker B: Happy New year.
[00:01:01] Speaker A: Yes.
[00:01:01] Speaker B: Close enough.
[00:01:02] Speaker A: Exactly. Can we pop some bubbly?
[00:01:04] Speaker B: Yes. We got some Synexis champagne.
[00:01:07] Speaker A: I don't think we're allowed to drink, though.
[00:01:08] Speaker B: We've opened our own synexis champagne distributorships.
[00:01:12] Speaker A: Our marketing team may have a problem with that.
[00:01:13] Speaker B: I know. Oh, darn it. Well, we need it on the 21st of every month.
[00:01:16] Speaker A: Absolutely.
[00:01:17] Speaker B: Okay.
[00:01:18] Speaker A: Post compliance collapse.
[00:01:19] Speaker B: All right, you ready for me to haiku you?
[00:01:20] Speaker A: Please haiku me.
[00:01:21] Speaker B: Last haiku of the year. Let's do this.
[00:01:23] Speaker A: Riveting.
[00:01:25] Speaker B: 2023 was a weird year for sales tax and for spy balloons.
You guys remember that?
How weird was that? That was weird.
[00:01:39] Speaker A: Way to loop in current events. But, yes, kind of. Or non current, but it was kind.
[00:01:43] Speaker B: Of a top story of 2023.
[00:01:45] Speaker A: I think the most fantastic thing was some of my fellow Americans shooting at it. I know, thinking that you could take it down with a 357 from ground level up to 60,000ft. But hey.
[00:01:58] Speaker B: But what a national pastime. It was like the total eclipse where we were all just like, wow. Like watching the spy balloon.
[00:02:04] Speaker A: Everybody was running outside to see if they could catch.
[00:02:06] Speaker B: I know. Yeah, that was weird. Okay, so on that note, Tim, for those of you listening and not watching on YouTube, I am dressed in my full new year's regalia, including dealy bobbers on my head. Happy new year. My purple sequin dress.
[00:02:22] Speaker A: If you pass those things this way, I'm going to toss them back.
[00:02:25] Speaker B: I brought one for you. So what you're saying is.
[00:02:26] Speaker A: No, no, I think that's a big negative.
[00:02:28] Speaker B: You also left me in the lurch because you said you were going to dress as baby new year today.
[00:02:34] Speaker A: I don't know who admitted to that did not happen. Yeah, I would have never agreed to that, but that's fine.
[00:02:39] Speaker B: Synexus marketing said that was the case.
[00:02:41] Speaker A: We have to be like one of those progressive commercials. Can we rewind that? We take that back. I'm going to throw a challenge flag.
[00:02:47] Speaker B: But that's fine. I'll bring the sparkle for both of us.
[00:02:49] Speaker A: Okay. You did.
[00:02:50] Speaker B: Yes.
[00:02:51] Speaker A: Very bedazzled today.
[00:02:52] Speaker B: I know. I got to celebrate.
[00:02:54] Speaker A: I love it.
[00:02:54] Speaker B: Yes. Because we are celebrating again, 2023. A year in sales tax taking us into 2024. So we have compiled a list of the top ten. A lot of them are weird. A lot of them weird things we think happened in 2000.
[00:03:07] Speaker A: And interesting factoids, I think is what you said.
[00:03:10] Speaker B: And then some other just interesting and a couple of cool things. There you go. Yeah. So why don't we get started.
[00:03:15] Speaker A: Cool.
[00:03:15] Speaker B: Let's start with number ten. So number ten for Tim for chat. GP. Tim, let's text poetic a little about RDF fees, retail delivery fees in general. So this was our top ten weirdest or most interesting thing about Minnesota and Colorado enacting these laws.
[00:03:35] Speaker A: You just got to get me fired up. Coming right out of the gate. Right. And you have to make some apologies to Minnesota and Colorado because I'm going to pick on them.
[00:03:40] Speaker B: Well, here's some champagne.
[00:03:41] Speaker A: Okay. Yeah.
[00:03:42] Speaker B: If that helps.
[00:03:42] Speaker A: Take a sip and calm down. Yeah.
Awfully OD scenario. Just two states that decided to start taxing delivery fees. So basically enacting a delivery fee in a state for anyone who is using a motorized form of transportation to deliver a good to someone in the state. So basically it was like a flat rate Colorado I think was what? $0.27 is that right?
[00:04:10] Speaker B: It was 27 then raised to 28.
[00:04:12] Speaker A: That's right.
[00:04:13] Speaker B: July 1 maybe.
[00:04:14] Speaker A: There you go. So if you're using anything, like we said, any kind of motorized vehicle to deliver a good within the state, it would be applied to the transaction. And obviously we probably need to see a prevalence of horses and hay carts coming back in to actually deliver goods, which would be awesome.
[00:04:30] Speaker B: Yes. But yeah, we talked about that on a previous episode about if it's drone apparently is taxable.
[00:04:35] Speaker A: That's right.
[00:04:35] Speaker B: But not horse and buggy.
[00:04:37] Speaker A: Not horse and buggy. Not dog.
[00:04:38] Speaker B: Yeah, not dog. Not pigs.
[00:04:42] Speaker A: Could you train a pig to do that?
[00:04:43] Speaker B: I mean pigs are apparently very trainable. Don't you agree, JB?
[00:04:46] Speaker C: Oh, yeah, for sure.
So is ten delivery fees in general or delivery fees for Minnesota and Colorado?
[00:04:53] Speaker A: Delivery fees for Minnesota and Colorado.
[00:04:55] Speaker C: It's them specific.
[00:04:56] Speaker A: Yeah, it's them specific.
[00:04:57] Speaker B: They're the only two states that enacted this so far. Well, Colorado did it and we talked on our podcast in a previous episode about how we thought it would be repealed and then Minnesota passed one, so then we felt kind of stupid.
So that's why we're saying it's weird.
[00:05:11] Speaker C: Plus, we have to talk about Colorado. It's in the Geneva convention. Of course, we have to.
[00:05:15] Speaker A: The Geneva tax component of the convention.
[00:05:17] Speaker B: Yes, correct. Yes.
[00:05:18] Speaker A: Always have to pick on Colorado.
[00:05:20] Speaker B: All right, so number ten. There you go. Delivery fees. Weird. We don't like it. All right, I'm going to move on to number nine. So I'm going to try to use the most. What?
[00:05:28] Speaker A: Politically correct.
[00:05:29] Speaker B: Yeah. Pc way to say this. So number nine is Kentucky. Body modifications are now considered TPP. And if you're confused as to what body modifications are, I believe they include breast augmentations, perhaps Botox.
[00:05:47] Speaker A: Oh, yeah. Yeah.
[00:05:48] Speaker B: So apparently that's piercings. Well, we're considering, I don't know, is the actual piercing like the stud or the hoop considered TPP?
[00:05:57] Speaker A: No. Yeah. I mean, I'd have to go and look at it inside of Kentucky's law to see, but I definitely understood that the cosmetic surgeries, like elective cosmetic surgeries in Kentucky are now considered to be taxable. So if you're thinking about it, in exchange of tangible personal property in a breast augmentation, congratulations, it's now going to be considered to be a taxable transaction.
[00:06:16] Speaker C: Elective is a very important word for me there because I was like, if I get gangrene and you got to cut off my fingers, it's like, that's body augmentation. We're also going to tax you.
[00:06:24] Speaker A: That's exactly. No, that's a really tough day for if you're, if you're losing a limb to hypothermia, know some other reason?
[00:06:32] Speaker B: What about skin grafts? What if I have to get my gums done and you have to get donor tissue?
[00:06:38] Speaker A: Hey, Jenny, it sounds like you've just come up with a research project for Donna. So that sounds awesome. What are all the different types of.
[00:06:44] Speaker C: Congrats, Donna.
[00:06:45] Speaker A: Congrats, Donna. You now have homework. You can thank Jenny for that.
[00:06:49] Speaker B: So I love mean inquiring minds want to. So, yes. So there you go, number nine, in summary, in Kentucky.
[00:06:55] Speaker A: So I guess my question is, yes.
[00:06:57] Speaker B: We'Re not done with.
[00:06:57] Speaker A: If you actually did a breast augmentation surgery in California and you flew those puppies back into Kentucky, would you owe use tax on. Oh, if your home state was Kentucky? That's pretty interesting.
[00:07:11] Speaker B: What if the auditors sat at the airport of every flight coming back from LAX and they were, like, had before and after pictures?
[00:07:19] Speaker A: Well, and actually, you'd probably have to be looking at international flights, too, because I know a lot of that stuff happens in Costa Rica and a lot of those Central Americans and Brazil. Yeah.
[00:07:26] Speaker B: I mean, that might be a fun job for some males. I don't know. Yeah.
[00:07:30] Speaker A: Now we're getting a little dark.
[00:07:31] Speaker B: Okay. So moving on.
[00:07:33] Speaker A: Moving on.
[00:07:34] Speaker C: That was better than I thought it was going to be when we came up with that one for number know.
[00:07:38] Speaker A: I do remember flying home from Costa Rica, and I thought it was amazing to see how many dudes on the flight had their heads wrapped in surgical gauze because they had gotten hair plugs and stuff like that and were coming home with hair. Oh, yeah. Because it's, like, ridiculously cheap to have elective cosmetic surgeries in Costa Rica, and apparently they're really good at it.
[00:07:57] Speaker B: Life lesson. If you live in Kentucky, fly to.
[00:07:59] Speaker A: Costa Rica, but you might owe use tax.
[00:08:01] Speaker B: Well, I know. See if you can dodge the auditors.
[00:08:04] Speaker A: Call Synexus, and we'll do the research for you to see if there's a way out of it.
[00:08:08] Speaker B: There you go. We'll file a restraining order against the auditors in.
[00:08:12] Speaker C: Yeah, we won't do that.
[00:08:13] Speaker A: We will not do that.
[00:08:14] Speaker B: We won't.
[00:08:15] Speaker A: Oh, JB, go ahead and cut that out.
[00:08:18] Speaker B: No, leave that in. Okay. All right. On to number eight. So, Georgia digital work.
[00:08:23] Speaker A: It's an interesting one from our great home state.
[00:08:25] Speaker B: Oh, Donna is so mad about this one. I know Donna hates this one. So please explain why Donna hates this.
[00:08:31] Speaker A: Well, it's basically Georgia. Georgia forever. I won't say that it's been a haven, but it's just been a known thing that Georgia does not tax software and does not tax any digital product because it doesn't truly fit the definition of tangible personal property within the state. Right. And so now Georgia has decided to start taxing digital works.
January 1, 2024 is a great one. So any audio visual work, any digital books, digital codes, other digital goods, like artwork, photographs, magazines, video and audio greeting cards. So, like those animated greeting cards that you get from, like, jibjab, you know, the fun, cool ones that you do when your family's like.
Exactly. All that stuff. Video games, it's all now going to be taxable in the state of Georgia, which is pretty interesting because it's literally going against Georgia's decades long interpretation of the definition of tangible personal property. And yes, Donna is quite worked up. I know there's a number of people who are worked up to be honest with you.
[00:09:32] Speaker B: Both Donna and mean have like hundreds of ebooks. So I mean now we got to start paying tax on that.
[00:09:37] Speaker A: Well, and the thing is that it doesn't talk about software, it's specifically talking about digital products. So we're talking like iTunes downloads and those types of things and digital books from Amazon and what have you. I would not be surprised to see Georgia maybe augment and start going after software in the future. I don't know. Given the fact of the sheer amount of software companies and other companies that have their headquarters here and the downloads of software that would ultimately become taxable, it'd be quite interesting to see the pushback and the blowback that Georgia would get on that. But the digital goods thing, hey man, they went ahead and did it. So riling some people up.
[00:10:11] Speaker B: Well it riled up the nexus tax know personally on a personal level.
[00:10:16] Speaker A: Yeah. Well, and also we can provide assistance to people on that. So if you have some concerns or questions on it, feel free to give us a shout.
[00:10:22] Speaker B: Yeah, you can borrow some books for me and not pay tax, so just let me know. Okay.
[00:10:27] Speaker A: Jenny, talking about circumventing tax law. I love it.
[00:10:30] Speaker C: I'll try to cut that one. It was pretty quick.
That one might be coming up.
[00:10:35] Speaker B: I'm offering to lend books to on.
[00:10:38] Speaker A: Well set up a little library outside your know like one of those little mailbox thingies.
[00:10:43] Speaker B: Hey, if I sent you my paperback of Jessica Simpson's biography, you wouldn't have to pay tax on that, right?
[00:10:49] Speaker A: I wouldn't be asking for it. Yes.
[00:10:51] Speaker B: I mean you asked me for it last week, so don't pretend know.
[00:10:54] Speaker A: Why are you outing me?
[00:10:54] Speaker B: I know, sorry. Okay, I meant Benjamin Franklin's autobiography.
[00:10:59] Speaker A: There you go. Now we're talking.
[00:11:00] Speaker B: Okay, so on to number seven. And this is not weird. You know me, it's like me personally for this.
[00:11:06] Speaker A: I think you just like the word regressive.
[00:11:10] Speaker B: I like the words progressive. And I don't love regressive because many states in the union this past year are saying goodbye to what I consider, and I think most of us consider regressive taxes, which are taxes on groceries, taxes on feminine products, diapers, wipes. What am I missing JB? We got other just toiletries mostly just.
[00:11:35] Speaker A: Feminine products and diapers and food things that qualify for grocery. By the way, when we talk about food, we got to be very careful, right, because food's broken into multiple categories.
[00:11:44] Speaker B: True.
[00:11:45] Speaker A: Sorry, Tim. GPT coming out. But yeah, we got to be careful how we say the word food. But when we're talking grocery qualified items, a number of states have started dropping their rates. So like Kansas, right, has dropped theirs. Alabama is looking to do a full phase.
You know, it's, you know, coming up and realizing that these taxes are impacting.
[00:12:06] Speaker B: Impact lower income families and folks and don't really need to be, I believe, implemented just because we have so many other payroll taxes, income taxes, and we pay taxes and all sorts of other items that we purchase in our everyday lives. So things like groceries, feminine products we feel like are a little unfair. There we go. That was pretty exciting.
[00:12:27] Speaker C: That's a positive one we have on the list.
[00:12:29] Speaker A: That's a very positive one.
[00:12:30] Speaker B: So it's an interesting, yes, an interesting and positive one. We hope to see that move forward in the next couple of years where all states hopefully repeal those taxes.
[00:12:39] Speaker A: I completely agree.
[00:12:40] Speaker B: Yeah. Okay, so let's move on to number six and Florida commercial rent is now taxed.
[00:12:48] Speaker A: Actually, Florida commercial rent has been taxed historically. It's not that it's now taxed, it's always been taxed. The thing is that Florida is just dropping, it's reducing its commercial rent rate down to four and a half percent. Got it from the standard state rate of what, 6%?
[00:13:06] Speaker B: That's right, yes.
[00:13:07] Speaker A: So it's going to drop from six to four and a half percent. But then you're going to have to tack on the local tax. Local tax is still going to be imposed, but it's just very interesting because Florida is a state that taxes commercial rent and almost no other state does it. There's some goofy laws in Arizona where certain components could be subject to sales tax, but Florida and Arizona, that's really the only ones that actually talk about commercial rent. And you have to be very careful as to what qualifies as commercial rent. Right. So when you're looking at a lease and what's set up in a lease, there are certain components of that lease that are considered to be mandatory. And as a mandatory portion of that lease, it will be subject to the commercial rent tax or the sales tax. So, like cam, you hear that term? Cam, it's common area maintenance.
[00:13:51] Speaker B: I have not heard that term, but yeah, Cam.
[00:13:53] Speaker A: Yep, it's common area maintenance.
So you've got groundskeeper and you got street sweepers and other folks that come in and keep the grounds and everything clean and nice and pretty and stuff like that. Well, they charge you a component of that each month inside of your rent. It's considered to be a mandatory component of your rent, just like insurance is also in there. There's other components that were considered to be mandatory that would be subject to the sales tax. So got to be very careful when you structure your lease and you're looking at a lease, making sure that someone is actually collecting the tax from you. If they're not collecting the tax from you and you're not paying that tax, you would be subject to that as a use tax in Florida. And we've had to help a number of people around that because there's certain retailers, I won't pick on them, but there's certain retailers that own out parcels out in front of their store, locations that they may rent out to a fast food restaurant or to some other business.
[00:14:50] Speaker B: You can pick on them. We'll just apologize later.
[00:14:52] Speaker A: No, we can't do that. Okay. But they've just taken the position that they won't collect the tax. They're like, it's too complicated. We're not going to do it. We're not going to collect the tax. We're going to just say that it's a use tax that's imposed on the consumer. They need to turn around and actually accrue that use tax in Florida, and it's their responsibility. So we can help you look at your lease. We can understand what would be subject to the use tax and make sure that you're clean under audit or also if you're a less. Or in Florida, we can help you kind of figure out how to calculate the necessary components of that tax.
[00:15:22] Speaker B: I'm just going to claim my own taxes are too complicated to figure out. So that's cool. I can just say that.
[00:15:27] Speaker A: No, you can totally say that.
[00:15:28] Speaker B: Okay. And everyone's fine with that?
[00:15:30] Speaker A: Yeah, absolutely.
[00:15:30] Speaker B: Okay, good.
[00:15:31] Speaker A: Yes.
[00:15:31] Speaker B: Good.
[00:15:32] Speaker C: Still seems like a tax on tax.
[00:15:34] Speaker B: It does seem like a tax on tax.
[00:15:35] Speaker C: Isn't it a tax on tax?
[00:15:37] Speaker A: No, not really.
[00:15:39] Speaker B: You're already.
[00:15:40] Speaker C: All the other things you're already doing that.
[00:15:42] Speaker A: I know.
You know what? The big problem that people have with the commercial rent tax is that it's a tax on real property, and a lot of states don't tax real property.
[00:15:54] Speaker B: Big almost sales tax 101. No, no.
[00:15:56] Speaker A: Right. Because the fact is, like, when you buy a house or when you buy a piece of real estate or whatever, you don't pay any sales tax on it because it's real property. It's not tangible personal property. It's not subject to tax.
[00:16:06] Speaker B: Right.
[00:16:06] Speaker A: So that is why people fundamentally have this problem. But what Florida has said is Florida historically has looked at it and said, no, it's a lease. And as a lease, especially in their code, when it specifies that commercial rentals are subject to tax, you're going to have to collect and remit the tax or pay the taxes for use tax.
[00:16:24] Speaker B: What I love most of all about that question is that over the year 2023, JB has become a sales tax expert. Look at him. He's all like, I don't agree with that. That's a tax on tax.
[00:16:33] Speaker C: I don't agree with.
[00:16:34] Speaker B: No, I object. Yes. So I love it. Way to go, JB. You're hired.
[00:16:39] Speaker C: Great.
[00:16:40] Speaker B: Okay, so. Oh, Tim, this is one of your absolute favorites. Number five on our list level the playing field, Illinois. And please try to keep this to under half an hour of complaints.
[00:16:52] Speaker A: I'm doing some yoga, breathing quietly, calming myself.
[00:16:56] Speaker B: Is it some kind of like thanking.
[00:16:57] Speaker A: My counselor on anger management?
[00:17:01] Speaker B: Shout her out. What's up, Tim's counselor? Thank you very.
It's valets. The constitution or something you said?
[00:17:09] Speaker A: Basically, yeah.
So when you talk about taxes, right. And we first talk about the imposition of a sales tax, you have to go back and look at Supreme Court cases as they interpret the constitution and basically enforce and help support tax laws. So when we look at complete auto transit and we look at the four prong test, right. And we won't go through all four prongs, but one of those prongs specifically is that a tax cannot be discriminatory. Right. And it also needs to be fairly apportioned. Okay, well, the problem that we have with the level, the playing field law in Illinois is that people who have physical locations in Illinois are getting a benefit to this law. So if you have an office in Illinois, but your goods are outside of Illinois and you're shipping them into Illinois, you only have to collect the six and a quarter percent state sales tax. You don't have to collect on the locals because what they say is since you have a physical location inside the state, you get to use origin based sourcing. Everybody else that does not have an office in Illinois and all their goods are located outside of Illinois, that ship into Illinois have to use destination based sourcing and they have to collect at all the local taxes, which could be upwards of 10% in some jurisdictions, even higher. If we're talking city of Chicago. That is a fundamental problem. That is a discriminatory tax. You're discriminating against people who live in the state versus out of the state. You can't do that. Right. So we have multiple clients that have asked us to challenge this on their behalf under audit, and we are, and we're working with the Illinois Department of Revenue and some other folks to actually weed through this and figure out what the correct approach is going to be to enforcing this law. But on its surface, it's unconstitutional. And it also, frankly, violates complete auto transit.
[00:18:57] Speaker B: Yes, it does.
[00:18:58] Speaker A: Yes.
[00:18:59] Speaker B: And we tax poetic about this, I think, a lot in our Illinois episode. Yes. In our regional.
[00:19:05] Speaker A: We did.
[00:19:06] Speaker B: And, yeah. Oh, and going back to the food and regressive taxes, you can listen to our food and beverage episode two that talks a lot about food taxation.
[00:19:15] Speaker A: There you go.
[00:19:15] Speaker B: Which is also interesting.
[00:19:16] Speaker A: Yeah. This Illinois one is going to be very interesting to see how it plays out in 2024. If we're talking about moving forward and looking at things in 2024, this is something that we're very interested to see, how we can either a get the state to agree or come up to some reduction or modification to the reg regarding the level of playing field law that was enacted in January of 2021. Or you know what? There may be some interesting ways to get around this law, too, where you may open up a PO box or have a registered agent in the state, and we could say, hey, that's our physical presence in the state. I don't know. There's some interesting things that we're kicking around and trying to figure out how we can potentially address this issue, but it's going to be an interesting one to follow for 2020.
[00:20:03] Speaker B: That sounds fun. And sneaky.
[00:20:05] Speaker A: Let's not use the word sneaky.
[00:20:06] Speaker C: It's not you, sneaky, but sneaky is fine. Actually, I'm going to allow it.
[00:20:10] Speaker A: Yeah, you overriding me.
Okay.
[00:20:14] Speaker B: Sneaky is not technically illegal.
[00:20:16] Speaker C: I like that. Violating the constitution. And it's just number five.
[00:20:20] Speaker A: We're already there.
[00:20:21] Speaker C: Still got four more.
[00:20:22] Speaker A: Still got four more to go. And this one is, like, already violating the constitution as a state. And you wonder, how do these guys come up with these laws?
Somebody has to be reading this legislation and apparently not talking to a tax person and going, oh, yeah, that just violates the cornerstone of everything that we've looked at from a sales and use tax perspective. But, hey, let's go ahead and pass it anyways.
[00:20:47] Speaker B: Why does Illinois not have a red phone to your office?
[00:20:49] Speaker A: Not even to my office. How about a red phone to somebody who passed sales tax school one?
[00:20:54] Speaker B: That's me.
[00:20:55] Speaker A: All right. There you go. There you go. Call Jenny.
[00:20:58] Speaker B: No, I'm just going to forward it to you.
[00:21:00] Speaker C: I would say most of the laws that get created are by people that have no idea.
[00:21:03] Speaker A: Colorado, I mean, I hate to pick on them. We got some interesting ones in that state that we can talk about. Hey, even in California, too, there's a bunch of just. You can pick on any state, any state legislators try to do the right thing. I understand it. And they're trying to generate money for their constituents and do the right thing by the constituents within the state. But you know what? Some of this stuff, it's got to get vetted out. We got to do better. Come on, guys, be better.
[00:21:25] Speaker B: It's basically a theme of this podcast. It's just states. Be better.
[00:21:28] Speaker A: Honestly, that's my next t shirt. Us nexus t shirt is going to be states, period. Be better.
[00:21:33] Speaker B: Yes. We need to sell our straight out of compliance t shirts, too.
[00:21:38] Speaker A: Oh, absolutely.
[00:21:38] Speaker B: Yes. I know. I love so, okay.
All right, Tim, why don't you talk about, this is number four, and this could be like a Star wars title. Missouri Wayfair, five years later.
[00:21:50] Speaker A: Yeah, Missouri decided to take their sweet time, but they finally passed their remote seller. Know, everybody else was just kind of hanging out and partying and doing the whole, hey, let's watch how much money we can collect. I don't know why, but Missouri took forever to pass their remote seller legislation, but they finally got it done. I think we talked to Donna about this, and a lot of it was regarding, I think they originally came out and they wanted to make it one.
Yeah.
[00:22:17] Speaker B: $1 per transaction.
[00:22:19] Speaker A: Yeah. Basically their requirement was going to be, if you sold a dollar worth of goods inside of Missouri, you're going to have to collect sales and use. And then people. No, we actually got to bump that up.
[00:22:28] Speaker B: You mean their economic threshold was $1, not like a retail delivery.
[00:22:32] Speaker A: Well, they were talking about it. Yes, that's what the word on the street was, that they were trying to set their economic nexus threshold to a dollar.
[00:22:39] Speaker B: But the fact that even existed was an idea and was set out.
[00:22:43] Speaker A: I'm not going to beat up on any other states, but there were a couple of them that came out of the gate shooting with that as well, believe it or not.
[00:22:48] Speaker B: Really?
[00:22:49] Speaker A: Oh, yeah. Well, you've seen a lot of states have already upped their thresholds. Right. Oklahoma had a $10,000 threshold and they bumped it up. And then I think Minnesota had a really low threshold as well, and they ended up bumping it up. There's a number of states that have made adjustments. I mean, New York, New York's adjusted their threshold up a number of times. So is just. And it's not that they started so low. I mean, they weren't doing the prices right move and coming in at a buck, but they were coming in rather low. And then what happened is that the departments got, I believe, so inundated. And this is speculation, folks. This isn't me having boots on the ground knowledge. But I'm guessing that the departments got so inundated with registrations and other things that they just said, man, we got to bump this threshold up. Dude, this is crazy.
[00:23:30] Speaker B: Duh.
[00:23:30] Speaker A: Yeah.
[00:23:31] Speaker B: What about my poor guy who sells me my Elvis Christmas ornaments off Etsy? Like he's going to have to register for sales tax in Missouri.
[00:23:37] Speaker A: I guess so, dude.
[00:23:39] Speaker B: Oh, I'm so glad they didn't do.
[00:23:40] Speaker A: Yep.
[00:23:40] Speaker B: Yeah. Oh, my goodness. All right, so number three, the bracket system. And we're not talking about March Madness.
[00:23:47] Speaker A: No.
Yeah. This is quite interesting. And this is going to get really geeky for a lot of folks. There's still two states, believe it or not, that actually have a bracket system for sales and use tax that's employed.
[00:24:01] Speaker B: So explain first just what a bracket system is.
[00:24:04] Speaker A: It's for rounding. So think back in the day when you had cash registers and you would turn around and you were trying to calculate and add up a bunch of things. And I'm one of those manual, old school, big, gigantic cash registers. Right. And you came up to a transaction, let's say, that ended in $14.68. You would look to a sales tax bracket and you would say, okay, my transaction ended in between 64 and need to use this amount of tax. And it would allow you to round up and it would basically cause the states to get more money because you would typically.
[00:24:40] Speaker B: That's sneaky.
[00:24:40] Speaker A: It is sneaky. That is sneaky.
[00:24:42] Speaker B: Yeah.
[00:24:42] Speaker A: It's not illegal, but it is sneaky.
[00:24:45] Speaker B: Again, my point. Sneaky does not mean illegal.
[00:24:47] Speaker A: That's right. So it's a rounding thing. Right. The states basically force you into a bracket system to understand what the correct rounding would be on a Transaction.
[00:24:58] Speaker B: So you had like a paper card next to your cash register is what you're saying.
[00:25:01] Speaker A: Yeah, basically.
Well, I don't know. Honestly, I didn't do sales taxes back in the day when we had manual.
[00:25:06] Speaker B: Tax with an abacus.
[00:25:08] Speaker A: Yeah, exactly. Or an old cash register. But I could tell you in those states, if you came under audit, you would have to probably have some form of card that would tell you what to round the tax up to.
[00:25:18] Speaker B: Wow.
[00:25:19] Speaker A: Because it would come out to multiple decimal points and you wouldn't know. But now we have to put those brackets inside of PoS systems. So the modern accounting system, so that when you're actually calculating it out, it uses, in accordance with the state law, the correct amount of cents so that you can remit it appropriately to the state.
[00:25:37] Speaker B: Got it.
[00:25:38] Speaker A: Very interesting, very confusing, kind of stupid. So, hey, Maryland and Pennsylvania, can we go ahead and toss those brackets, please?
[00:25:45] Speaker B: Yeah, be better. States be better. We're sending you a t shirt.
[00:25:48] Speaker A: States be 21st century.
[00:25:49] Speaker B: Yeah. Okay.
[00:25:51] Speaker C: Government math. That's what we call.
[00:25:53] Speaker B: Oh, yeah. Government math. Sorry. Governments. We love you. Don't audit us, please.
[00:25:57] Speaker A: There you go.
[00:25:58] Speaker B: Okay.
[00:25:59] Speaker A: This next one's a fun one, I know.
[00:26:00] Speaker B: Oh, yeah. This is one of my favorites.
[00:26:01] Speaker C: What number is it?
[00:26:02] Speaker A: Number two.
[00:26:03] Speaker B: Oh, number two. Yeah, we're getting close here. Okay. Number two, Tennessee liquor. Buy the drink amounts to what percent? Tim, at the end of the day, when you buy your. What do you drink? A mai tai, pina colada, something super fruity?
[00:26:19] Speaker A: Not that way. In Tennessee, I'm usually drinking bourbon. If I'm in Tennessee, I'm technically. Well, excuse me, I'm drinking whiskey. I'm not drinking bourbon, but, yes, I'll be drinking Tennessee whiskey. So Jack Daniels? If I'm crushing some Jack Daniels, yes.
[00:26:32] Speaker B: So how much tax are you paying?
[00:26:33] Speaker A: Upwards of 25%.
[00:26:35] Speaker B: I know.
[00:26:35] Speaker A: On a drink itself. So if I got a bunch of people out and we're partying and having a good night out, celebrating, let's say, the new year or whatever, or you're.
[00:26:45] Speaker B: At the Taylor Swift concert, I guess.
[00:26:47] Speaker A: If we're going to go there, that's fine.
[00:26:49] Speaker B: Or the new year.
[00:26:50] Speaker A: Yeah, or the new year, I'm probably going to hire an Uber to take me somewhere across state lines and drink if I'm very close to Kentucky.
[00:26:58] Speaker B: Seriously?
[00:26:58] Speaker A: Because it would be a lot cheaper to drink in Kentucky than it would be to drink in Tennessee.
[00:27:02] Speaker B: And we have a entire episode about alcohol tax, if you're interested to go.
[00:27:06] Speaker A: Listen to, which, apparently, I knew nothing about.
[00:27:08] Speaker B: Well, I know which you and I, neither one of us did. We learned a lot that episode, so thank you, Kelsey. But, yes, I was very surprised that Tennessee is really the state. I mean, with. I think. Didn't we say the highest alcohol tax?
[00:27:22] Speaker A: Single highest alcohol tax.
[00:27:23] Speaker C: I would hope so.
[00:27:24] Speaker B: Yeah. I know. You think it'd be somewhere like Utah, but it wasn't.
[00:27:28] Speaker A: There you go.
[00:27:28] Speaker B: So Tennessee also be better and don't you want people to have fun in your. You know, that was one of our weirdest things we discovered. I feel like this year.
[00:27:37] Speaker A: Absolutely.
[00:27:38] Speaker B: From our alcohol episode.
[00:27:40] Speaker C: I got it.
[00:27:43] Speaker A: Number one, the number one oddity.
[00:27:46] Speaker B: Oddity. Are you ready? Tennessee again?
[00:27:49] Speaker A: Yes.
[00:27:49] Speaker B: They are now taxing, apparently outside of state services when property is delivered back into the state. Is delivered back into the state.
[00:28:01] Speaker A: Yeah. So basically, please explain this. Yeah, it's quite interesting. So this is effective July 1.
Not going to be surprised if somebody challenges this before it even gets passed, or should I say enacted in July. But what they're basically saying is if you do repairs to tangible personal property or software, or better yet, if you're doing laundry and dry cleaning outside of Tennessee or installing tangible personal property that remains tangible personal property after installation. Right.
And it's done outside of the state of Tennessee, but then you bring it back into the state of Tennessee where it's going to be used. You basically owe use tax on all of the services and the charges for the installation or that tangible personal property. So think about it this way. So I'm in Memphis, right? Memphis is right on the border of what two States, Mississippi and Oregon.
Jenny, did not Alabama geography?
Well, Memphis isn't that close to Alabama, but the big ones that we're looking at are Mississippi and Arkansas.
[00:29:10] Speaker B: Oh, Arkansas, of course, right across the river. I got an a in geography.
[00:29:15] Speaker A: So if you turn around and you have a dry cleaning service that's right across the border of Mississippi, and you send all your dry cleaning stuff over there for work. Right. You have a big factory in Memphis and you're like, hey, I'm going to go send all this stuff to my little facility over in Mississippi and boom, you bring it back, guess what Tennessee is now saying? Well, you now owe use tax on all that dry cleaning that you sent over to Mississippi, even though the service was performed in Mississippi. And the benefit of the service, what Tennessee is trying to argue here is the benefit of the service is being received and obtained inside of Tennessee. So you need to pay that tax in Tennessee, which I don't really agree with.
[00:29:51] Speaker B: Yeah, JB and I have gotten very upset about this because how are they going to monitor this? It's like we talked about in our regional series with New Hampshire and Massachusetts and the snow tires and buying the snow tires over the state line and they put cars out. Right, Tim?
[00:30:10] Speaker A: It was actually the state patrol turn around and stop people for buying snow tires.
[00:30:15] Speaker B: Right.
[00:30:17] Speaker C: It seems like it's just an auditing tool. They're just going to do it after. It's like the seatbelt law. You don't get pulled over for not wearing a seatbelt.
[00:30:25] Speaker B: You get a ticket for bringing your dry cleaning.
[00:30:27] Speaker C: You also notice that they're not wearing a seatbelt. It's like you just notice at the end you're like, hey, where have you been sending your dry cleaning?
[00:30:34] Speaker A: You have to go know, Tennessee's tried doing some of this stuff historically for years, which I found kind of interesting. Like, they have a business tax, right, which is a gross receipts tax. It's a little known tax component inside of their tax regime. They have the franchise excise tax. They have the sales and use. They also have this thing, which is a business tax, which is a tax on gross receipts, very limited deductions. But I've seen auditors try to enforce gross receipts that are generated outside of Tennessee and been delivered outside of Tennessee. And they've. No, no, your company's headquartered in Tennessee. All those gross receipts that were generated outside of Tennessee, all that stuff's got to come back into Tennessee. I'm like, well, hey there, Jackson. That's, again, constitutional violation. You're impeding and imposing attacks on interstate commerce. You can't do that. And we've won on multiple occasions. I'm fighting this with Tennessee. But it's still, it's very interesting to see how aggressive and, frankly, crazy that some of these states are doing.
[00:31:34] Speaker B: Well, the rate of return on it just seems really silly. I mean, your tax dollars are going towards whatever the state troopers, the auditors, to even monitor this for how much sales tax.
[00:31:44] Speaker A: Well, let's think about this. Here's an interesting case. Right? And I remember looking at this for one of my clients way back in the day, a very large power and utility company that's headquartered here in the state of Georgia, which I'm sure a lot of people can guess who that was. What they do is they have gas turbines, right? What are gas turbine engines? Gas turbine engines are like jet engines that they, you know, these big engines that sit there and spin and generate.
Know, it's what they use to actually do in combined cycle facilities and also just natural gas turbine facilities. These gas turbine engines have the ability to generate massive amounts of power. They also have these things on them and are called turbine blades. Right. You see that on jet engines, these turbine blades. So what you do is there's special facilities that will rework those turbine blades for you. They'll smooth them out. They'll hone them, they'll balance them. It's very precise type process that it has to go through. Well, a lot of that occurs outside the state. And so you'll go and you'll ship all these goods outside the state, and the work is conducted outside the state, and you pay tax potentially outside the state to have that work done. But then they ship them back in the state, and you don't obviously owe any tax on the services that were performed. But what Tennessee is trying to say is, okay, so you're going to now have all these turbine blades and you're going to ship them out somewhere very high dollar, very expensive thing to happen. Ship it back in the state of Tennessee. We're going to charge you tax on all those repairs and everything that was.
[00:33:05] Speaker B: Because you're enjoying it in the state. That's exactly which I can get to a point for corporations, big dollar, you know, giant turbine blades, everything.
[00:33:15] Speaker A: But still, it's a violation of tax law.
[00:33:17] Speaker B: Well, no, I get it. I get what you're saying for tax law, but as far as, just like, the actual policing of it, I get that because that's probably easily trackable as far as shipping out giant turbine.
[00:33:29] Speaker A: But also, Tennessee auditors aren't going to be coming and hitting the average consumer. They're not going to come and hit you.
[00:33:33] Speaker B: Well, that's what I think JB and I were kind of laughing about earlier, like, with the dry cleaning, but maybe with dry cleaning, it means more like the big commercial dry cleaning services.
[00:33:42] Speaker A: It's not us individuals is what it is, 100%. This is not anything that is going to be enforced on an individual unless you're some huge multi, if you've got tens of millions of dollars in Tennessee and you're under a Tennessee audit, they may look at this. This is all corporate tax law. This is what they're going to try to do. They're going to enforce this all at the corporate level, and that's what their whole impetus behind this ruling is.
[00:34:04] Speaker B: Gotcha. Okay. All right. Well, that was our number one. It wasn't the constitutional violations. It was the dry cleaning.
[00:34:11] Speaker A: There you go. Did it for us, the dry cleaning and the turbine blade repairs. Congratulations.
[00:34:15] Speaker B: Well, again, you can go back with all these top ten weird, interesting, and some nice things that happened in 2023. We tax poetic about a lot of them in our other episodes. So there you go. If you want to dig in deeper, please oblige and enjoy. And I think now, big drum roll, too. We're turning it over to JB.
[00:34:34] Speaker C: I think we're just going to take a break.
[00:34:36] Speaker B: Okay.
[00:34:37] Speaker A: Break.
[00:34:40] Speaker B: Hey, everybody. We're back from our break, and apparently we have breaking news, big news that JB is going to reveal we have the results of our year long quiz competition between Tim and I. Yeah.
[00:34:53] Speaker C: And it's not really important. The numbers aren't important here. Tim did win.
It doesn't matter by how much.
That's embarrassing. We're doing a pass fail situation here.
[00:35:04] Speaker B: Well, hold on, hold on. It really isn't about who wins or loses. It's about the friends we made along the way.
[00:35:09] Speaker A: No, Jenny, it is completely about who wins and loses.
[00:35:12] Speaker B: I just hope both teams had fun.
[00:35:13] Speaker A: You know what? It is all about the w.
Both teams had fun.
[00:35:18] Speaker C: But in case you're unfamiliar, the winner of the quiz contest at the end of the year has to read a letter about the winner that the winner has written about.
[00:35:31] Speaker B: So what you're saying is since Tim won by an undisclosed amount of points, I have to read a letter he wrote about himself?
[00:35:42] Speaker C: Yes.
[00:35:42] Speaker B: Correct. I have to read that.
[00:35:43] Speaker C: But it will know out of context. We're going to have your voice recorded saying all of these.
[00:35:51] Speaker B: Lordy.
[00:35:51] Speaker C: We just edit it.
[00:35:53] Speaker A: Here we go, folks.
[00:35:54] Speaker B: Passing it to me now.
[00:35:55] Speaker C: Okay, so, Tim, congratulations.
[00:35:58] Speaker A: Thank you, JB. I appreciate it.
[00:35:59] Speaker B: Okay. Congratulations, Tim. And in honor of your win, I have some nice things to say about you. Just to talk about how much fun I've had along the way.
[00:36:09] Speaker A: I love it.
[00:36:10] Speaker B: Podcast. Okay. I'm so scared.
When you see the term innovative and groundbreaking critical thinkers, individual, God, individuals who come to mind are Albert Einstein, Isaac Newton, even Elon Musk. If you try to think of revolutionary thought leaders, some may conjure the words, oh, my goodness. Of Abraham Lincoln, Martin Luther King, Jr. Oh, my gosh. Or even Gandhi. If you were to channel the best of each of the individuals, it might come faintly close to the incredibleness that is Tim Howe.
Wow. Such a mind, such a philosopher, such a Seattle sports fan. All redeeming qualities. And what makes me proud to call him a colleague. Thank you, Tim, for including me in your presence each day. It has been truly gratifying.
[00:37:15] Speaker A: You're so welcome, Jenny. Thank you. That was awesome, man.
[00:37:19] Speaker C: Really good.
If you don't want to have to do that again next year, I know.
[00:37:24] Speaker B: I need to study.
Donna, I'm putting you on speed dial. I have got to win next year.
[00:37:30] Speaker A: 100%.
[00:37:31] Speaker B: Wow. Lincoln and MLK Jr.
That's decent company to keep.
[00:37:37] Speaker C: All right, before we wrap up, we've got a couple of apologies are we.
[00:37:42] Speaker A: Going to talk about our predictions for 2020?
[00:37:44] Speaker C: We're going to do predictions after the apologies. I'm just getting my stuff out of the way and honestly not a bad list. Minnesota just know. I feel like we picked on them right away. We didn't really even say what they did wrong necessarily. It was like, obviously it's delivery fees. I don't know.
[00:37:58] Speaker A: Sorry the vikings aren't going to make the playoffs.
[00:38:00] Speaker B: And you're not sorry about that?
[00:38:02] Speaker A: No, sorry. Not sorry because the Seahawks took your playoffs.
[00:38:05] Speaker C: Donna. Because we gave her some homework on Kentucky.
[00:38:09] Speaker A: Woo.
[00:38:09] Speaker C: Donna augmentation. Jessica Simpson wrote a good book and Tim Poo pooed it.
[00:38:15] Speaker B: He did. I read it and I loved.
[00:38:17] Speaker C: Yeah, Colorado probably is what I wrote down because probably we always pick on Colorado. Always pick on them and kind of Tennessee, but really be better. I know you got the top two.
[00:38:27] Speaker B: Spots and just general state governments.
[00:38:30] Speaker A: I feel like, I mean, you're Georgia's hat. Be better.
[00:38:33] Speaker B: Yeah, exactly.
We'll send you t shirts. Everyone. All state legislatures.
[00:38:38] Speaker A: I think that's what Tennessee's new border sign should be. Welcome to Tennessee. Georgia's hat.
[00:38:43] Speaker B: Georgia's hat. And your drinks will be charged 25%.
[00:38:46] Speaker A: Welcome to Florida. Georgia's boot.
[00:38:49] Speaker C: Now we're going to do some 2024 predictions. What do you guys think our listeners are going to hear?
[00:38:54] Speaker B: Well, we touched on a couple kind of when we were going through our top ten, you actually said, tim, you predicted that the leveling the playing field for Illinois would probably be repealed.
[00:39:04] Speaker A: I don't know if it's going to be repealed, but they're going to have to do some significant modifications to mean haven't seen something that is this just bold faced flying like just completely anti Supreme Court, previous cases, precedent, constitutional violations. You just couldn't talk about it for hours. It's not a good look, somebody's going to have to do something there, right?
[00:39:30] Speaker B: I'm going to make a bold prediction that I think by the end of 2024 all states will have repealed their regressive taxes.
[00:39:37] Speaker C: All 50.
[00:39:38] Speaker B: All 50 or 45.
[00:39:40] Speaker A: 45 tax 45.
[00:39:41] Speaker C: Do you know why?
[00:39:42] Speaker B: I do know why. Do you know why, JB? I know because you're a sales tax expert now.
[00:39:46] Speaker C: Nomads.
[00:39:47] Speaker B: Yes, because of the nomads. Because you listen to this podcast. So you're an expert now.
[00:39:52] Speaker A: So when you're talking about regressive taxes, are you just talking at the state level? Because we do have local level taxes on groceries.
[00:39:58] Speaker B: I'm just going to say at the state level. There you go.
[00:40:02] Speaker A: I can promise you that Georgia for eons will continue to tax groceries at the county level. Yeah, that will never go away, right? Yeah, but I think it's at the state level. I agree. I would agree with you.
[00:40:13] Speaker B: Okay, so that's my prediction.
[00:40:15] Speaker C: Last one of the year. Is she going to do it in one?
[00:40:17] Speaker A: Oh, well, actually, I'm going to give you one last bold prediction. I think you're going to see a significant, a continued shift in the taxation of digital products, even by states that currently don't have or that have laws and regulations that basically don't support the taxation of digital products. Basically saying that we only tax tangible personal property. I think they're going to modify their definitions much like Georgia did. And I think you're going to see a ton of states going after this.
[00:40:42] Speaker C: First of many.
[00:40:43] Speaker A: First of many. Right. We already had a lot that decided to tax digital products, but you're going to see many more states come after it, I think.
[00:40:50] Speaker B: All right, well, we're going to listen to this episode at the end of 2024 and see if our predictions came true.
[00:40:55] Speaker A: There you go.
[00:40:55] Speaker B: Yeah.
[00:40:56] Speaker A: Like a little time capsule.
[00:40:57] Speaker B: As we wrap this up, we just want to thank you so much, all of our listeners, for hanging out with us in 2023, our first season of taxing poetic. It has been so fun.
[00:41:05] Speaker A: Awesome.
[00:41:06] Speaker B: If you haven't listened to all of our episodes, we invite you to. You don't have to listen to them in order. You can listen to them on Apple, Spotify, Stitcher, and you can watch us on YouTube. And we appreciate you so much and hope to see you in 2024.
[00:41:20] Speaker A: Take care, y'all. Happy New Year. Go dogs.
