30 THE QUEENS COURIER • JULY 19, 2018 FOR BREAKING NEWS VISIT WWW.QNS.COM
State and Local Taxes
BY JOHN SAVIGNANO, CPA
More web purchases will be hit
with sales tax, not that the Court has
overturned a decades-old ruling that
shielded sellers with no physical presence
in the buyer’s home state from
collecting sales tax.
The Court blessed S.D.’s internet sales
tax. Sellers that have no physical presence
in S.D. and make over $100,000 in
sales or 200 transactions in the state in
a year are required to collect sales tax
from S.D. buyers. The Court found the
law reasonable, in part because it has a
substantial in-state sales threshold and
it isn’t retroactive.
Look for states to enact laws similar
to that in S.D. Some already have,
although sales tax collection was put
on hold pending the Supreme Court’s
ruling. It’s anticipated most others will
revise their sales tax laws within the
next year or so.
Don’t expect Congress to help virtual
retailers navigate state sales tax laws.
At least not in the near term. It will first
give states time to act on their own.
Keep in mind that legislative proposals
addressing state sales taxes on online
purchases, as well as other multistate
tax issues, have languished on Capitol
Hill for years. In these fractious times,
Congress is divided on most things.
Sales tax is no exception.
Let’s turn to 529 college savings plans
to help pay for K-12 education. The
new tax law allows for tax-free distributions
of up to $10,000 per student
per year to pay tuition for elementary
and secondary private and parochial
schools. Note that the $10,000 cap
doesn’t apply to 529 plan withdrawals
to pay for college. The state tax implications
of payouts for K-12 education
aren’t as settled. More than 30 states so
far have clarified that they will follow
federal law and treat 529 distributions
for K-12 schooling as qualified education
expenses.
However, California and several
other states say they will tax the distributions.
Oregon not only will tax the
payouts but will also recapture a portion
of deductions previously taken on
your Oregon tax return when you contributed
funds to the 529 plan. Other
nonconforming states at the present
time are Michigan, Montana, New
Jersey and Vermont. Some states such
as New York are still mulling the tax
treatment of K-12 payouts.
Finally, Seattle’s tax on big employers
is here and gone in the blink of an eye.
In May, Seattle enacted a $275-per-employee
tax on large firms located in the
city. Revenues were to be used to fund
services for the homeless and affordable
housing. The city repealed the
so-called head tax this month after
Amazon and other companies cried
foul and joined in efforts to put the tax
before voters in the midterm elections.
This isn’t the first controversial
Seattle tax that has come under fire.
Last summer, the city enacted a 2.25%
income tax on high-earning individuals,
even though Washington state
doesn’t have an individual income
tax. A few months later, a local court
ruled the tax unconstitutional. Seattle
appealed, and the case is ongoing.
John Savignano is a partner with
Savignano Accountants & Advisors
located at 47-46 Vernon Blvd., Second
Floor, in Long Island City. If you have
any questions or require additional
information, please call John at 718-
707-0955.
TAX TIPS
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Co-Author of the
best selling book
“Breaking the Tax Code”
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Salvatore P. Candela, EA, ATA, ABA
Enrolled Agent - Tax Advisor
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