Automatic Data Processing, Inc. · NASDAQ:ADP
Automatic Data Processing — Sales Tax Compliance Challenges in Today's eCommerce World (ADP Webcast) (December 2010)
38 slides from Automatic Data Processing's conference presentation, Dec 16, 2010
Slide 1: Sales Tax Compliance Challenges in Today's eCommerce World
Sales Tax Compliance Challenges in Today’s eCommerce World An ADP Webcast December 16, 2010 1 ©2010 Automatic Data Processing, Inc. Proprietary and Confidential Information.
Slide 2: Housekeeping Items
Housekeeping Items This is one of a number of complimentary webinars that ADP offers to tax and finance professionals each year. Today’s webinar will last for 60 minutes, ending at 1pm Eastern time. The last 10 minutes of today’s program have been reserved for Q&A. You can download a PDF cop
Slide 3: About ADP
About ADP Experts in automating corporate business processes Listed on NASDAQ: ADP Fortune 300 company Experts in automating business processes such as payroll, benefits administration, procure-to-pay, sales tax automation and tax credits so that organizations can stay focused on the core busi
Slide 4: CPE Credit
CPE Credit Are you planning to apply for CPE credit for attending today’s webinar? A. Yes B. No C. Not Applicable NASBA (National Association of State Boards of Accountancy) requirements for receiving CPE Credit: •Log in from same e-mail address that you used to register •Stay for the full hour •A
Slide 5: Today's Panel
Today’s Panel Charles Collins Matthew Walsh VP of Government Affairs Director of Tax Research ADP, Inc. ADP, Inc. 5 ©2010 Automatic Data Processing, Inc. Proprietary and Confidential Information.
Slide 6: Agenda
Agenda State and Local Environment Growth of eCommerce Current Taxation of eCommerce Trends in Taxation of eCommerce eCommerce Challenges for Compliance Compliance Solutions for eCommerce 6 ©2010 Automatic Data Processing, Inc. Proprietary and Confidential Information.
Slide 7: Polling Question #1
Polling Question #1 What percentage of your sales are remote or eCommerce transactions? A. 0 - 25% B. 26% - 50% C. 51% - 75% D. 76% - 100% E. Don’t Know NASBA (National Association of State Boards of Accountancy) requirements for receiving CPE Credit: •Log in from same e-mail address that you used
Slide 8: State and Local Environment
State and Local Environment Budget Problems • Shortfall for fiscal year beginning July 1, 2011 is $72B • Shortfall closed in FY 2010 $173B • Shortfall closed in FY 2011 $89B New State Policy Makers • Twenty eight new governors • Hundreds of new legislators • Many new governors and legislators to
Slide 9: Growth of eCommerce
Growth of e Commerce Figure 1 Forecast: US Online Retail Sales, 2009 To 2014 1-1 US online retail sales will reach $248.7 billion by 2014 US online retail sales* ($billions) $248.7 $229.8 $210.0 $191.7 $172.9 $155.2 2009 2010 2011 2012 2013 2014 % of total 6% 7% 7% 7% 8% 8% US retail sales Online
Slide 10: Initiatives Impacting Sales Tax Compliance (eCommerce)
Initiatives Impacting Sales Tax Compliance (eCommerce) Efforts to improve overall compliance • More auditors and collectors – greater penalties Elimination of exemptions Taxation of selected products and services Efforts to increase tax collections on remote sales (eCommerce) • Laws ascertai
Slide 11: Current Laws/Nexus
Current Laws/Nexus Quill and the Physical Presence Standard What is Nexus? • Physical presence in a jurisdiction • Sufficient to give rise to an obligation to collect and remit tax – Quill • Without nexus a vendor can not be compelled to collect and remit transaction taxes to a jurisdiction 11 ©
Slide 12: Current Laws/Nexus
Current Laws/Nexus Rules Vary by Jurisdiction… Nexus can be: • Physical location in jurisdiction • Property in a jurisdiction • Sales presence in the jurisdiction • Trade shows • Providing services in a jurisdiction • Deliveries in company owned vehicles • Affiliated nexus — Agents 12 ©2010 Automa
Slide 13: Current Laws/Nexus
Current Laws/Nexus State Level Nexus vs. Local Level Nexus Voluntary Nexus Complexities • Agents • Services • Mergers/Acquisitions • Related Parties — Borders/Barnes and Noble.com 13 ©2010 Automatic Data Processing, Inc. Proprietary and Confidential Information.
Slide 14: Polling Question #2
Polling Question #2 Do you use a third party compliance system for your sales tax compliance? A. Yes B. No C. Don’t know NASBA (National Association of State Boards of Accountancy) requirements for receiving CPE Credit: •Log in from same e-mail address that you used to register •Stay for the full
Slide 15: eCommerce Compliance Trends
eCommerce Compliance Trends New York Amazon Law • Remote seller is deemed a vendor if: — Has an agreement with a NY resident for consideration; — The NY resident link’s to the E-Comm vendor’s webpage; and — The cumulative gross receipts from sales through the links to customers in NY exceeds $10,0
Slide 16: eCommerce Compliance Trends
eCommerce Compliance Trends Other states followed suit: • North Carolina: — A retailer is presumed to be soliciting or transacting business; — Has an agreement with a resident of this state under which the resident, for a commission or other consideration, — Directly or indirectly refers potential
Slide 17: eCommerce Compliance Trends
eCommerce Compliance Trends Affiliate Nexus: Trend to expand the definition of “doing business” in a jurisdiction to affiliates: Colorado: • Retailers that do not collect Colorado sales tax and are part of a controlled group of corporations, a member of which is a retailer with physical presence
Slide 18: eCommerce Compliance Trends
eCommerce Compliance Trends Oklahoma: • If the retailer holds a substantial ownership interest and the retailer sells the same or a substantially similar line of products… under the same or a substantially similar business name, or • The Oklahoma facilities or Oklahoma employees of the related Okl
Slide 19: eCommerce Compliance Trends
eCommerce Compliance Trends Colorado: • Related Party Affiliate Nexus • Information Reporting — Remote vendors are not required to collect the sales tax but must comply with information reporting requirements Customer Transactional Notice: » Notice that the purchase is not exempt from sales tax
Slide 20: eCommerce Compliance Trends
eCommerce Compliance Trends • Annual Purchase Summary ($500 or more of purchases in a year) — Summary of purchases including descriptions and prices — State that Colorado requires purchasers to pay tax on all purchases where the vendor didn’t — Indicate the retailer is required to provide Colorado a
Slide 21: eCommerce Compliance Trends
eCommerce Compliance Trends Oklahoma: • Related Party Affiliate Nexus • Information Reporting — Seller’s with $100,000 in sales into Oklahoma must provide notice on their retail Internet websites, in their retail catalogs, and on their invoices provided to customers, the notice must state: The p
Slide 22: Polling Question #3
Polling Question #3 Has your company been following the affiliate Nexus and special reporting requirements for remote sales in Colorado and Oklahoma? A. Yes B. No C. Don’t know NASBA (National Association of State Boards of Accountancy) requirements for receiving CPE Credit: •Log in from same e-ma
Slide 23: Polling Question #4
Polling Question #4 Have you had to make any adjustments in your system or processing to account for the reporting requirements? A. Yes B. No C. Don’t know NASBA (National Association of State Boards of Accountancy) requirements for receiving CPE Credit: •Log in from same e-mail address that you u
Slide 24: eCommerce Compliance Trends: SST
eCommerce Compliance Trends: SST Streamlined Sales Tax (SST) Nationwide, multi-state effort to improve sales and use tax compliance Objectives: uniform definitions, rate simplifications & technology standards Encourage voluntary collection of tax and pave way for Congressional action Establi
Slide 25: eCommerce Compliance Trends: SST
eCommerce Compliance Trends: SST Certified Service Providers (CSP) • Tax compliance outsourced solution (hosted) • Service includes product mapping, taxability, rates, calculation, returns & payments. Also audits for transactions processed • Original CSP contracts signed in 2007 • States compensat
Slide 26: Streamlined Sales Tax Status
Streamlined Sales Tax Status Twenty four states in compliance with SST and are full or associate members (GA effective date is 1-1-2011) Twenty other states participate in effort (Colorado does not participate) Additional states to consider Blue states are in compliance with SST SST legislatio
Slide 27: eCommerce Legislation Considered by Congress
eCommerce Legislation Considered by Congress Main Street Fairness Act (HR 5660) • Grants collection authority to states for remote transactions • Authority would not require physical presence • Simplification and uniform sales tax laws would be required • Simplifications are contained in the Strea
Slide 28: Complexity in Sales Tax Compliance
Complexity in Sales Tax Compliance Managing Rates • Over 7,500 jurisdictions • Over 12,000 rate combinations • Constantly changing — 2009 – 1200 + Rate Changes — 2010 – 900 + Rate Changes Product Taxability: • Varying product taxability rules • Varying product definitions • Changing tax rules
Slide 29: Complexity in Sales Tax Compliance
Complexity in Sales Tax Compliance Current System with Limited Scope or Limited Jurisdictions Existing System Issues • Tax calculations • Product maintenance • Expanding Nexus/growth • Exemption certificate handling 29 ©2010 Automatic Data Processing, Inc. Proprietary and Confidential Informatio
Slide 30: System Setup Issues
System Setup Issues New Systems/New Ventures: • What type of system? • Who will maintain? • How often is it updated? • Hosted or premise based? • Domestic or global? 30 ©2010 Automatic Data Processing, Inc. Proprietary and Confidential Information.
Slide 31: eCommerce Compliance Solutions
eCommerce Compliance Solutions Hosted Tax Compliance Solutions • ADP Sales Tax Service Premises Tax Compliance Solutions • ADP Taxware Enterprise Solution Returns and Payment Service Only Certified Service Providers (CSP) • Tax compliance outsourced solution (hosted) • States compensate CSP
Slide 32: eCommerce Compliance Readiness
eCommerce Compliance Readiness Review nexus obligations Determine affect of reporting requirements and federal legislation Determine consequences of collecting/not collecting in states with no nexus or questionable nexus Consider compliance options for e commerce transactions (third party op
Slide 33: Polling Question #5
Polling Question #5 Have you considered using a hosted sales tax compliance solution for your e commerce transactions? A. Yes B. No C. Don’t know NASBA (National Association of State Boards of Accountancy) requirements for receiving CPE Credit: •Log in from same e-mail address that you used to reg
Slide 34: Polling Question #6
Polling Question #6 Do you use one of the following third party shopping cart systems for e commerce transactions? A. Demandware B. 1Shopping Cart C. X Cart D. Kona Kart E. Do not know NASBA (National Association of State Boards of Accountancy) requirements for receiving CPE Credit: •Log in from s
Slide 35: Questions & Answers
Questions & Answers Charles Collins Matthew Walsh VP of Government Affairs Director of Tax Research ADP, Inc. ADP, Inc. 35 ©2010 Automatic Data Processing, Inc. Proprietary and Confidential Information.
Slide 36: Thank You for Joining Us Today
Thank You for Joining Us Today… For information on any of the ADP products or services referenced during today’s webinar: Phone 800-CALL-ADP or visit www.adp.com For a complete listing of ADP webinars and webinar recordings – go to: adp.com | tools & resources | events | webinars 36 ©2010 Au
Slide 37: NRF (National Retail Federation)
NRF (National Retail Federation) What: ADP will be exhibiting at NRF (National Retail Federation) showcasing Sales and Use Tax Solutions for POS When: January 10th and 11th, 2011 Where: New York’s Jacob Javits Center @ Booth #3103 Question: Twix® …..is it candy or is it food? Answer: Stop by ADP’s b
Slide 38: Webinar Program Survey
Webinar Program Survey How are we doing? We appreciate your feedback on our webinar which will be used as we plan future webinars. You will be entered into a drawing to win a gift card. 38 ©2010 Automatic Data Processing, Inc. Proprietary and Confidential Information.