So You Say You’re Getting a Refund

March 18, 2010

            Not so fast–especially if you’re counting on a check from your state!

            Check out USA Today which reported last week that states far and wide across the land, finding their own cash flow a bit lacking, are going to take their sweet time in sending back overpayments graciously loaned by taxpayers.
            “It’s an indicator of how bad it is,” quoth Scott Pattison, executive director of the National Association of State Budget Officers. “You know things are bad when you have to do that.”
            Indeed.
            And at least one governor (Paterson of N.Y.) has actually said that his state will delay $500 million or so in refunds in order to keep the state from running out of dough.
            Which brings us, of course, to our neighboring state to the west. Recall last year’s precursory event when the Golden State issued a bunch of IOUs–a “shameful chapter in the State’s history,” according to Controller John Chiang, who does promise, however, that “Californians should expect to receive their hard-earned tax refunds on time.”
            Don’t hold your breath.
            And speaking of states having hard times, the Tax Foundation notes a trend toward the adoption of “Amazon tax” provisions.   Seems states are adopting laws requiring retailers who have contacts with so-called “affiliates” (independents within the state who link up with out-of-state businesses via Internet) to collect state sales taxes.
            Such laws presently exist in New York, Rhode Island, North Carolina and Colorado. Can California (and even Nevada) be far behind?
            “Not so fast,” say constitutionalists, however, who label this shameless grab of more and more of our dollars as a bit of overreaching–efforts to override the time honored rules which state that physical presence is a prerequisite to force a vendor to collect sales taxes. Now, “virtual” presence seems to be enough for many state
money-grubbers.
            Interesting to note, however, that despite the apparent availability of instant funds via Amazon taxes, some states have encountered just the opposite. Rhode Island, after the first six months of this wonderful new opportunity for the state, collected exactly zero additional revenue–presumably because this anti-business move by the politicians actually resulted in the elimination of affiliate programs. “The affiliate tax has hurt Rhode Island businesses and stifled their growth, as they’ve been shut out of some of the world’s largest marketplaces, and should be repealed immediately,” quoth state Treasurer Frank Caprio.
            So there.
CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation.
            Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He is also a contributor to the recently published 13th edition of Tax Savvy for Small Business, published by Nolo. He can be reached at 831-7288, and welcomes comments below.

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