Archives For Washington

It is the state that recently passed voter-referendums legalizing same-sex marriage and marijuana consumption. President Obama easily cruised to victory in this state during this past presidential election. However, the overwhelming liberal layout of the state of Washington has not led it to have a favorable tax environment for the poor. Continue Reading…

As Washington lawmakers struggle to make any progress on tax reform, North Carolina passed a major overhaul of its tax code – the first in 80 years.

The legislation is based mainly on Republican ideals – a flat tax, simplified code, fewer deductions, and less revenue. It will change the state’s tax system from one that was on par with national averages to one that is “fairly radical in relation to other states.”

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Maybe two wrongs can make a right.

Internal Revenue Service watchdog Russell George said there is new evidence to suggest that Tea Party affiliated groups were not the only ones subject to cherry-picking by IRS employees for extra scrutiny based on their names.

George, a Republican, told a congressional committee on Thursday that the IRS also used “progressives” as a search term to flag organizations for added review in their applications for tax-exempt status. The news is the latest twist in the three-month-old controversy plaguing the IRS.

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According to the Association of American Publishers and the Book Industry Study Group, e-book sales rose 44% to $3.04 billion in 2012. Similarly, digital music sales were up 9.1%, with digital transactions making up a record 37% of all album purchases, according to Nielsen.

As seen in the statistics above, digital transactions are on the rise; and in turn, that $10.99 e-book or $1.29 iTunes song may be more expensive than you think. With Minnesota’s recent provision in its state tax bill, it’s residents will be the latest consumers facing taxes on digital products.

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1 Wall Street, the Bank of New York Buidling (...

BNY Mellon: 1 Wall Street

WASHINGTON, Feb. 11. — The world’s largest custody bank, Bank of New York Mellon Corp. (Marketwatch) lost its bid to keep $900 million in tax benefits after a U.S. Tax Court ruled in the Internal Revenue Services’ favor.

After receiving a $1.5 billion loan in 2001 from Barclays Bank PLC and KPMG LLP, BNY Mellon used intricate foreign tax strategies to lower its tax liability.  The IRS denied BNY Mellon’s tax benefits, finding them liable for $199 million; the bank responded by filing a lawsuit against the agency, which a U.S. Tax Court struck down on Monday.  BNY Mellon had warned shareholders before the court’s decision it may have to set aside a reserve of more than $800 million as a litigation-related reserve; the court’s ruling only affected two years ($199 million), but the total amount of tax benefits or profit on the transaction is more than $850 million over a span of about 6 years.  According to the U.S. Tax Court, the transactions lacked “economic substance.” BNY Mellon has said it will appeal the decision.

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As if the US tax code weren’t complicated enough, the recent surge of pro-marijuana laws adds yet another layer of complexity and confusion.

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Since the dawn of the internet users have enjoyed shopping, for the most part, tax-free. A 1992 Supreme Court Ruling said that states could not collect sales tax from businesses that do not have a physical presence in that state. As such, online retailers have enjoyed a competitive advantage over most local retailers, except in the 4 states (DE, NH, OR, MT) without a sales tax. For example, if a California resident wanted to buy a stereo that cost $100, they could head to their local electronics store and pick one up for a total charge of around $110, factoring in state and local sales taxes. Or, they could search the web for deals, likely find the stereo for a cheaper or discounted price, and purchase it without any sales tax added. Even if they did not find a better deal, they’d still save nearly 10% on their purchase by buying online. Shipping costs might makeup for this difference, but nowadays most online retailers offer free shippping deals for members or for orders over a certain amount. As such, consumers are switching to online shopping as their preferred method of retail purchasing, hurting local stores and state revenues. In California alone, the state loses nearly $1 billion each year from uncollected sales tax on internet purchases. Nationally, the trend has been spiraling upward for years. According to the US Census Bureau, over 76% of American households own a computer, and Americans enjoy nearly universal internet access. Given the above, it’s no wonder that e-commerce sales have nearly quadrupled in the last decade (see infographic below).

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