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Federal and Louisiana Taxes

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LDR disagrees with welding company: fuel is not excluded from sales tax, despite the written law saying as much.

 

The “sale or purchase by a person of any fuel or gas” has been excluded from sales taxes since July 1, 2008.  Nevertheless, LDR claims the written law is mistaken and takes the position that the spirit of the Act was only to exclude purchases of butane and propane.  The Department’s position is untenable; it is not free to ignore the letter of the law. The Louisiana Board of Tax Appeals is considering the matter for welding fuel purchases in Metals USA Plates & Shapes Southeast, Inc. v. Robinson (BTA 9342D) consolidated with O’Neal Steel Louisiana, LLC v. Robinson, (BTA 9250).

Consumers of fuel used anywhere but on the highway should consider making a refund claim for sales taxes paid as far back as January 2014.  Additionally, those consumers should consider making its next sales tax payments under protest followed by suit for refund.  Aviation or marine businesses in transit or shipping stand to benefit the most. The exclusion, however, was fully suspended and subject to the full 5 cents from April 1 to June 30, 2016 and is partially suspended and subject to 3 cents thereafter until June 30, 2018.

“Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.” – Learned Hand

The Last La. Tax Amnesty for Awhile

shackleThe 30 day application period begins on November 16, 2015 to qualify for a 33% and 17% discount on penalties and interest.  Do you qualify?  You can check out the La. 2015 Amnesty Facts and download an application from LDR.  If you don’t have the cash now, credit card payments and installment plans are an option to unshackle taxpayers from past tax liabilities.

How to handle your tax audit.

How should you handle your tax audit?

BR Business Reports weighs in.

Filing A Sales Tax Refund Does Not Interrupt Prescription For Unpaid Taxes

The right to collect unpaid taxes prescribes on December 31, three years from the year the tax was due. La. Const. art. VII, sec. 16. Likewise a taxpayer’s right to claim a refund for taxes paid expires on December 31 three years from the year the taxes were remitted. R.S. 47:337.79. For example, both the right to collect, or obtain a refund of, 2009 sales taxes would prescribe December 31, 2012.

 

The filing of a refund claim before the December 31 prescriptive date, interrupts the running of prescription as to the refund. The Louisiana Third Circuit held the filing of the claim did not, however, interrupt or suspend prescription for the purposes of collecting unpaid taxes. Cajun Industries, LLC v. Vermilion Parish School Board, Court of Appeal of Louisiana, Third Circuit, No. 14-22, May 14, 2014.

 

In Cajun, the taxpayer filed a refund claim for sales taxes in December 2010 for the tax periods 2007, 2009 and 2010. It filed second refund claim in 2011 for the tax periods 2010 – 2011. The collector denied most of the refund claim and the taxpayer appealed the denial in district court in May 2013.

 

In response to the taxpayer’s suit, the collector asserted that it had the right to offset any unpaid taxes against the refund and asked that it be allowed to audit the taxpayer to see if, in fact, there were any unpaid taxes for the years 2007 – 2011. The Third Circuit affirmed the trial court’s ruling that the taxpayer’s refund claim did not interrupt the running of prescription as to the collector’s right to collect taxes. The filing of a suit did, however, interrupt the running of such prescription pursuant to R.S.47:337.67. Accordingly at the time the suit was filed May 2013, any right to collect unpaid taxes for the years 2007, 2008 and 2009 had already prescribed while the 2010 and 2011 tax periods were still open.

 

While this holding will affect taxpayers with pending refund claims, its effect may be short lived since there is a bill pending in the Legislature, which would amend the law such that the filing of a refund claim would suspend the running of prescription. See H.B. 863, pg. 11. H.B. 863 is scheduled for floor debate on May 21, 2014.

New York Rules on Amazon and Overstock – presence through resident websites

A nice commentary on the case can be found at this blog.

Obama, Boehner, Reid Pass Budget Blame While Taxpayers Wonder: Who’s On First?

Time to Make a Move: New Law Allows for LLCs to Change their State of Organization

 Jacob_Roussel_10252012

Jacob E. Roussel

Associate—                                                                Baton Rouge Phone: 225.381.3172 Fax: 225.387.5397 jacob.roussel@bswllp.com

A new law in Louisiana will allow a limited liability company (LLC) to change its state of organization from Louisiana to any other state as well as allow for LLCs formed in another state to convert into a Louisiana LLC. The new law (R.S. 12:1308.3) was passed in the 2012 regular legislative session (Act 476) and will become effective on January 1, 2013. The process of transferring an LLC to a different state is called conversion in Louisiana. Some states use the term domestication to refer to this process.

Currently, LLCs organized in another state can obtain a certificate to transact business in Louisiana. However, internal governance of the LLC and the liability of its managers and members that arise solely out of their positions as managers and members are still governed by the laws of the state of organization. Other states have similar laws which allow LLCs to transact business in their state. One current method by which LLC members may elect to change the laws under which an LLC is governed is through the use of mergers or consolidations. This new law allows for either an LLC formed in another state to continue its existence in and under the laws of Louisiana, or allows for an LLC formed in another state to continue its existence under the laws of Louisiana. The new process allows for mobility and continued existence without the necessity for mergers or consolidations.

LLCs will be afforded this new flexibility provided that the conversion is not prohibited by the laws of the other state involved. The change must be authorized by a majority of the members of the LLC (or a greater vote if required by the LLCs own articles of organization or operating agreement). Finally, certain filing requirements with the Secretary of State must be accomplished to effectuate the change.

Members of an LLC benefit from having broad flexibility in determining the internal affairs of their company and set up their operational framework in an operating agreement. Issues not addressed in the operating agreement are governed by the default rules determined by the laws of the state of organization. Therefore, it is important for a company considering taking advantage of this law to be aware of the default rules in the new state which will govern the company. One should consult with an attorney familiar with the laws of the state to which the LLC is transferring and determine if it is necessary to amend the operating agreement. One should also consult with a tax professional to ensure that all requirements are met, which may vary depending on the new state of organization.

Whether you are a large regional company with subsidiary LLCs taking on projects in a market that is shifting locations or a smaller business looking to relocate, Act 476 provides new and important foundation for determining if it’s time to make a move.

Employee or Independent Contractor? Why Does It Matter?

Jerry L. Stovall, Jr.
jls@bswllp.com

Outline of Presentation Made to Lake Charles CPA Society In October 2012

PURPOSE     To provide an overview of the criteria for determining whether an individual should be classified and treated as an employee or independent contractor and to review the risks that may arise from improper classification.

●          ENFORCEMENT      Department of Labor and Internal Revenue Service have recently announced that they plan to step up enforcement of correct categorization of employee v. independent contractor.

●          WHY SHOULD YOU CARE?         Costs, including taxes; Legal implications, Liability

●          EMPLOYEE OR INDEPENDENT CONTRACTOR?

1)      Behavioral – Right to Control – Manner in which the job is done
2)      Financial Economic Realities – Does employer control business aspects of worker’s job (expense reimbursement, provide tools/supplies/insurance…)?
3)      Type of Relationship – Are there written contracts or employee type benefits (pension, insurance vacation)?  Will relationship continue?  Is the work performed integral to employer’s business?  Worker opportunity for profit/loss and ability to take other jobs.
4)      “Right to Control” – Typically used by IRS for purposes of wage withholdings.
5)      “Economic Realities” – Usually used for FLSA, Title VII, Age Discrimination in Employment Act, ADA and FMLA.

●          IRS 20 FACTOR TEST         This test helps analyze the degree of control over manner and method of work

1)      Instructions
2)      Training
3)      Integration
4)      Services rendered personally
5)      Hiring, supervising and paying assistants
6)      Continuing relationship
7)      Set hours of work
8)      Full-time required
9)      Working on employer premises
10)  Order or sequence set
11)  Oral or written reports
12)  Payment by hour, week, month
13)  Payment of business and/or traveling expenses
14)  Furnishing tools and materials
15)  Significant investment by the worker
16)  Opportunity to realize profit or loss
17)  Opportunity to work for more than one business at a time
18)  Making services available to the general public
19)  The business’ right to discharge
20)  Workers’ right to terminate

●          THESE WILL NOT PROTECT YOU IF YOU MISCLASSIFY:

1)      Employee wanted to be treated as an independent contractor
2)      Employee signed a written contract
3)      Paid only in commission
4)      Has little supervision

●          SECTION 530 SAFE HARBOR

1)      Relief from retroactive assessment of federal tax liabilities
2)      Elements:  a)      Taxpayer did not treat individual as an employee for any period, and  b)      Taxpayer is consistent with treatment of individual as not being an employee, then  c)      Individual will not be an employee unless taxpayer did not have a reasonable basis for not treating individual as an employee.
3)      Reliance upon the following is a “reasonable basis”:  a)      Judicial precedent, published rulings, technical advice to taxpayer or a letter ruling to taxpayer;  b)      Past IRS audit of taxpayer and no assessment attributable to treatment of individuals holding substantially similar positions; or  c)      Long-standing recognized practice of a significant segment of the industry.

●          VOLUNTARY CLASSIFICATION SETTLEMENT PROGRAM

1)      September 2011
2)      Provides partial relief from retroactive federal employment tax assessments for eligible employers.
3)      Eligible = taxpayer consistently treated workers as non employees and filed 1099 forms for previous three (3) years.
4)      Tax payer must apply for program.
5)      Tax payer cannot be under audit regarding worker classification at time of audit.
6)      If accepted, tax payer must pay 10% of employment tax liability on compensation paid during most recent tax year.

●          COMMON WAYS EMPLOYERS ARE CAUGHT

1)      Unemployment benefit claim
2)      Unpaid wage claim
3)      LA “Payday” Statute (La. R.S. 23:631)
4)      State/Federal Charge of Discrimination/Harassment
5)      State/Federal wage audit
6)      Workers’ compensation claim
7)      Retirement
8)      DOL Audit
9)      Employee complaint/suit
10)  Union “drops a dime”

●          CONSEQUENCES OF IMPROPER CLASSIFICATION

1)      Unpaid wages (including overtime) and benefits
2)      Attorney’s fees
3)      Back taxes, plus interest and penalties
4)      Civil fines/criminal penalties
5)      Provide employee benefits, including health insurance and retirement
6)      Pay any misclassified injured employees workers’ compensation benefits
7)      Notice to workers (in some states)
8)      Employee claims:   a)        Overtime   b)       Pay Day Statute   c)       Employee benefit plans   d)      Retirement plans   e)       Unemployment   f)        Workers’ compensation

●          CASES

i)         Talbert v. American Risk Inc. Co., Inc. (C.A. 5 Tex. 2010)
ii)       Lindsley v. BellSouth Telecommunications, Inc. (C.A. 5 La. 2010)
iii)     Hopkins v. Cornerstone America (C.A. 5 Tex. 2008)
iv)     Lorentz v. Coblentz, (La. App. 1 Cir. 1992)
v)       Agencies that will come knocking:   (a)     IRS (withholding)   (b)    US D.O.L. (minimum wage and overtime)   (c)     NLRB (employee’s right to organize)  (d)    EEOC (anti-discrimination laws)  (e)     OSHA (workplace safety)  (f)     State agencies

●          BEST PRACTICES

1)       Enter into a written agreement with independent contractor before work begins:   i)         Identify individual as an independent contractor   ii)       Set complete list of tasks to be performed  iii)     Specify results to be obtained   iv)     Do NOT require daily or weekly reports  v)       Do NOT specify work hours or work schedule
2)       Ensure that there are differences between the way you handle employees vs. the way you handle independent contractors
3)       Ensure that there is consistency between similarly-situated employees
4)       Compliance check =         review contracts:   i)         review policies   ii)       review jobs
5)       Document agreements and duties
6)       Collect documents:  employer identification number, business licenses, professional licenses, insurance certificates, business cards, advertisements by contractor (yellow pages, news paper) and invoices.

●          IMPORTANT LESSONS

1)       “Independent Contractor” agreements do not save the day.
2)       Issuance of a Form 1099 rather than a W-2 is not dispositive.
3)       Don’t assume your classification is proper.  Carefully consider statutes, applicable jurisdiction, and all facts underlying the relationship.

Proposed Changes to State Income Tax Credits for Wind or Solar Energy Systems

Nicole Gould

The Louisiana Department of Revenue (LDR) has noticed its intent to revise the regulations affecting the state income tax credits for wind and solar energy systems (Wind/Solar Credits). The Wind/Solar Credits can be generally taken by the owner of a Louisiana residence or residential rental apartment for 50% of the first $25,000 for the purchase and installation costs of the wind or solar energy systems. The changes are not yet effective, but for those people in the planning stages of large projects, this could be critical information. The biggest change in the Wind/Solar Credit is to no longer qualify multiple systems per residence or residential apartment dwelling for the credit. The existing regulation permits the Wind/Solar Credits for each complete system upon a residence or apartment, and industry custom has used this to construct multiple complete systems in order to stack the credit for total construction costs in excess of $25,000. The proposed revision makes clear that only one wind or solar system will qualify for the credit. The other reductions to the credit include:

  1. The deletion of the ability to include uncapitalized finance costs as qualified system costs.
  2. Any replacement items added to an existing system cannot qualify for the credit. The credit will only apply to the purchase and installation of complete system.
  3. Tree trimming and removal costs are also being excluded from qualified system costs.
  4. Shared inverters are no longer a stated exception to having a complete system. Arguably, a system is incomplete and does not qualify if it shares an inverter with another system, a likely scenario with apartments.
  5. Solar energy systems will have additional construction and certification requirements before qualifying.

But where something is taken away, something is given. The credit currently permits “mounting systems” as part of eligible costs for the solar energy system credit. The regulation revision will specifically allow costs for a free-standing, ground-mounted solar energy system, which is a separate structure from the residence. The revision permits costs for the structure and its foundation that are necessary to mount the solar energy system to the specified height. The allowed structure costs do not include additional walls, interior finishes, foundations, roofing structures not directly related to the solar energy system, or any other any other addition not directly related to the solar energy system. If you’re thinking of gazebos, car/boat ports, and the like, then you see the added benefit to the revision. The LDR will hold a hearng on the proposed changes on September 27, 2012, and if there are no objections or changes, the revisions will eventually take effect.

UPDATE: These changes were promulgated at LAC 61.I.1907

Louisiana Taxpayers Get Deadline Relief Due to Hurricane Isaac

Revenue Information Bulletin No. 12-029

September 12, 2012

Tax Relief to Individuals and Businesses Affected by Hurricane Isaac Return Filing and Tax Payment Deadlines Extended