Security Business

MAY 2019

Find news and information for the executive corporate security director, CSO, facility manager and assets protection manager on issues of policy, products, incidents, risk management, threat assessments and preparedness.

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Page 44 of 83

May 2019 / / Security Business 45 The operators of many security businesses fail to appreciate the middleman duty and legal obligations they face as a trustee or collector of sales and use taxes. Since the business merely acts as a trustee in collecting and remitting the proper amount, it is clear the sales and use taxes do not belong to the business. Before any security business can collect and remit tax in a state where it has developed economic nexus, it must first obtain a sales tax permit (i.e., a seller’s permit). Finding what each state requires and properly setting up shop in a state often takes a significant amount of time. Some businesses have the resources to handle the task from start to finish, others have fuller plates. Fortunately, some may find help under the Streamlined Sales and Use Tax Agreement (SSUTA). Streamlined Sales Tax As mentioned, sales tax laws are extremely complex. Products and services taxed can vary from state to state, as can sales tax rates, rules and regulations. Further complicating matters, there are more than 12,000 U.S. tax jurisdictions. Few security professionals with growing businesses are satisfied staying within the confines of state borders, and efforts by the states to require out-of-state sellers to collect and remit sales tax have long been contentious. The so-called Streamlined Sales Tax emerged thanks to state efforts to tax remote sales, as well as the complex nature of sales taxes and the emergence of e-commerce. Unfortunately, the 23-state SSUTA – launched in 2000 to simplify sales tax administration and minimize the burden of complying – has failed to attract a single new member in the seven-month period following the Wayfair ruling; in fact, not a single state has joined since 2014. That said, a security business can still register to collect and remit sales tax in those 23 states that are currently members of the SSUTA – significantly reducing time and effort. There is no cost for sellers collecting only in Streamlined Sales Tax (SST) states, while there are reduced costs for sellers collecting in both SST and non-SST states. Use Taxes Every security business owner is – or should be – aware of long-standing state laws that already compel buyers who make tax-free purchases to self-remit the taxes due. These self-remit rules are often referred to as “consumer’s use tax.” Although the consumer use tax rules focus on the purchaser’s duty to self-remit use taxes, in some states, a seller may be obligated to collect “seller’s use taxes” on behalf of their purchasers. Seller’s use taxes are charged to the purchaser on the sales invoice as with sales tax transactions and are required to be collected by sellers in some states. Each state has its own complexities, which can cause occasional confusion for sellers. As economic nexus rules take hold, sellers of all types will be required to collect sales or seller’s use taxes on sales made all over the country. One result will be a reduced consumer’s use tax compliance burden for some buyers. The Penalty for Non-Compliance There are 45 states that have sales tax laws; and every state will, in all likelihood, want to increase revenue by following the precedent set by the Wayfair ruling. The bad news is that every security business is now – or soon will be – responsible for keeping track of the ever-changing sales tax laws in every state where they have “economic nexus” in order to ensure compliance. Obviously, professional assistance will be needed, because non-compliance comes with a high price. Failing to collect or misappropriating collected sales and use taxes can put everyone – owners, officers, directors, shareholders and employees – at risk. Each of these individuals, if considered a “responsible party,” can be held personally liable for the failure of the security business to properly collect and remit sales and use taxes. A responsible party can include not only the individual whose duties involve managing and paying taxes, but often also includes any other person who has the authority or ability to control the payments of the business or to make business decisions. This liability extends to each individual’s personal assets, which could be claimed to satisfy the tax liability. ■ » Mark E. Battersby is a freelance writer who specializes in tax-related issues. Email him at Failing to collect or misappropriating collected sales and use taxes can put owners, officers, directors, shareholders and employees at risk. Each of these individuals, if considered a "responsible party," can be held personally liable.

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