Posts tagged Tax Law
Sales Tax Exemption Change for Nonresidents: Effective July 1, 2019

In May of 2019, Governor Jay Inslee signed Senate Bill 5997 into effect, which changes the way Washington businesses handle and collect retail sales tax for nonresidents.

Beginning July 1, 2019, businesses who make retail sales of tangible personal property, digital goods, and digital codes must collect sales tax from all consumers at the point of sale, regardless of residency. Under the prior law, nonresidents were exempt from the sales tax on such items and businesses were not required to collect sales tax from these consumers. Under the new law, the exemption is eliminated and nonresident consumers must pay sales tax at the point of sale, but instead may request a refund from the Department of Revenue once a year for the state portion of the sales tax they paid in the prior year.

Note: Purchases of items and services that are substantially used or consumed within Washington are ineligible for the refund. Additionally, sales tax exemptions on sales of vehicles and trailers, watercraft, and farm machinery or implements have different requirements.

What You Need To Know:

  • Sellers: Beginning July 1, 2019, retailers must collect retail sales tax from nonresidents when the nonresident takes delivery of the merchandise at a Washington location.

  • Buyers: Qualified nonresident consumers must pay retail sales tax at the point of sale in Washington. Retain your receipts and submit an annual refund request with the Department of Revenue beginning January 1, 2020 for a refund of taxes paid on qualifying purchases in the prior year. The refund request must be at least $25.00.

For additional information, refer to the Washington Department of Revenue (DOR) Special Notice or the DOR website.

Tax Rules and Alimony – Changes Impacting Spousal Support

For over 75 years, payers of alimony (a.k.a. spousal support or spousal maintenance) were allowed to take a tax deduction for the amount of alimony paid to their ex-spouse.  This shifted the income tax burden to the receiver of alimony, which in any instances increased the amount of income available to spouses transitioning to two households.

Under the new Tax Cuts and Job Act (TCJA), alimony will be treated differently for divorce or separation documents put into effect after December 31, 2018. 

What Does This Mean?

In brief, the new tax rule eliminates the payer’s ability to deduct alimony from their federal taxes.  However, this all depends on when you execute, or executed, your alimony agreement or court order.  For instance: 

Current Payers of Alimony or Receivers of Alimony

  • For those who already pay or receive alimony, the TCJA changes will not affect you.   

    • Payers – you may continue to deduct alimony from your federal income taxes

    • Recipients of alimony – you will continue to report alimony payments as taxable income
       

  • This tax treatment will continue to apply even if your alimony agreement or court order is subsequently changed – unless the modification specifically states that the TCJA treatment of alimony payments now applies

Payers of Alimony or Receivers of Alimony  documents executed before
January 1, 2019

  • Similarly, for those who execute alimony documents before January 1, 2019, the TCJA changes will not affect you.   

    • Payers may deduct alimony from federal income taxes

    • Recipients of alimony will report alimony payments as taxable income
       

  • This tax treatment will continue to apply even if your alimony agreement or court order is subsequently changed – unless the modification specifically states that the TCJA treatment of alimony payments now applies

Payers of Alimony or Receivers of Alimony – documents executed after
January 1, 2019

  • Payers of alimony – you cannot deduct alimony from your federal income taxes; you will have to pay tax on the income transferred to the alimony recipient

  • Recipients of alimony – you will not include monies received from alimony in your taxable income

  • For tax purposes, alimony will be treated the same as child support, which is not taxable income to the recipient

What Happens Next?

It is still unclear exactly how the new alimony tax rules will impact divorces. 

Historically, spouses who were required to pay alimony, did so knowing they could deduct those payments from their taxable income which was an incentive instead of battling the subject in court.  Without this tax incentive, spouses may argue over the alimony payment amount which in turn could turn out to be less alimony for the receiving spouse.  Additionally, the change in the law may impact how child support is calculated in cases involving minor children. 

JDSA Law is committed to staying well-informed on how these tax changes will impact you. Listen to our recent podcast for more on this topic – or connect with us, Jordan Miller (Family Law) and Lindsey Weidenbach (Tax Changes), for assistance. 

Online Retailers: Be Ready to Collect Sales Tax

In a recent U.S. Supreme Court decision, States will now be able to collect sales tax from internet retailers who sell their products online.  This change appears to be a big victory for the States, and is expected to increase revenue that individual States argued they have been missing out on for decades.

Prior to this ruling, the law did not require businesses to collect sales tax on customer’s purchases if the business was shipping the purchase to a State where the business did not have a physical presence. In these situations, customers who resided in a State with sales tax were required to report and pay ‘use tax’ for their online purchase directly to their home State.  This tax reporting requirement was not widely known, and the home States seldom received the use tax.  This is all about to change as a result of this recent U.S. Supreme Court decision.

What Does This Means for Businesses?

Under the U.S. Supreme Court’s decision, States can now pass laws requiring sellers – without a physical presence in the State to which they are shipping – to collect that State’s sales tax from customers and send the collected sales taxes to that State.  What is not yet clear is whether Federal legislation will provide details on how sales tax collection will take place, or if each State will be responsible for carrying out their own specific sales tax collection program.

JDSA is also following the question of whether the ruling requires all Internet companies to collect sales tax.

Could this only apply to larger companies? 

For example, what about the smaller retailer who sells on eBay or Etsy?  Will they also face the same sales tax collection requirement?  This ruling, though favorable to State revenue, could create an undue burden on small, online retailers.  Tax planning and a full understanding of the collection process will be key to compliance.

Attorneys at JDSA Law are monitoring this developing legislation closely.  Stay close, by reading our blog for how this change could impact you.