The Supreme Court ruled in June that states have the authority to require businesses to collect online sales tax on purchases even if the business does not have a physical presence in the state. Previously, businesses were only required to collect sales tax in states where they operate physically. Though some major online retailers like Amazon were already collecting sales tax nationwide, the decision has implications for small to midsized businesses that must adapt to remain compliant.
It’s not all bad news for business owners. While small businesses with an e-commerce presence may now be looking at a significant incremental compliance obligation, smaller brick-and-mortar operations who have always been required to collect sales tax are hailing the decision as providing long-overdue competitive equity. There are also some upsides for online retailers:
• You have some time. It takes time for states to react to such rulings and make the necessary changes to enable the collection of a new tax. While some states have been readying their processes in anticipation of the ruling, most will have work to do before enacting any major changes. In the meantime, it’s wise to get in front of this by locating the tools you need going forward.
• Some states already have enacted, or will likely enact, thresholds above which the tax will be triggered. Thus, if your activity in a particular locale is below an ordained dollar or transaction level, you may be exempt.
• The Streamlined Sales and Use Tax Agreement. Twenty-four states currently participate in this agreement, which in addition to standardizing some of the supporting tax calculation and submission protocols also provides for free sales tax compliance software for retailers under certain circumstances.Though the Supreme Court’s decision has been made, there are areas that small online retailers will still need to keep an eye on:
• Retroactivity: Some states may be tempted to look to collect these taxes not only going forward, but retroactively.
• Federal standardization: Policy makers grasp how challenging it will be to stay on top of the multitude of state and local sales tax rules. As such, the Supreme Court ruling may prompt Congress to finally enact a standardized federal policy — though this may be politically unlikely for now.
• Potential impact on general business taxes: Some states don’t levy income taxes on businesses without a brick-and-mortar location within their borders. This decision may spur these states to reconsider that stance given the opportunity for incremental revenue.
Though some effects of this ruling are unknown at this time, business owners can take steps to prepare. Assess the impact, evaluating where your main out-of-state sales come from. This will give you a sense of where you may want to focus your compliance attention.
Source, www.accountingtoday.com Written by: M. Trabold
Accounting professionals, as the stewards of financial information, have a unique opportunity to take the lead in adopting the new lease guidance and implementing lease accounting software. Approaching the adoption methodically, which includes collecting data, making policy decisions, and applying operational realities, accountants play a distinct role in developing the processes and implementing the systems that guide an organization into the future. In doing so, accountants can help companies capture the benefits of enhanced, centralized processes, improved lease management and increased data visibility that ultimately lead to cost savings and more accurate financial data and disclosures.
One of the keys to realizing these benefits is for accountants to embrace technology as part of the implementation process. Unlike cumbersome and error-prone spreadsheets, lease accounting software that is effectively implemented will allow accountants to efficiently analyze vast amounts of asset data and make informed decisions. Empowered by the centralized data from the lease accounting software, accounting professionals are positioned to add valuable insights on lease spend, advise on both operational and financial decisions and provide more in-depth and accurate financial analysis.
Selecting and implementing lease accounting software
Lease accounting software, when judiciously selected, enables accountants to help their organizations capitalize on streamlined data. At the highest level, the most appropriate solution will come from a financially stable vendor with lease experience and be SOC 1 compliant. When evaluating software options, understanding your company’s business requirements is critical. Specific items to consider include the lease portfolio characteristics, international reporting requirements and foreign currency translation needs. To cement the selection process, users need to be able to easily input data, navigate the modules, and produce disclosure reporting.
Beyond ensuring that a solution meets your company’s requirements, a system should be easy to implement. Employing a lease accounting system requires organizations, specifically accountants, to coordinate cross-departmental teams that will assess the current state and inform the development of future state processes around procurement, month-end close journal entries and asset management. Leading the implementation presents a strong opportunity for accountants to move beyond the numbers and partner with upstream functions that often do not understand how their processes impact financial information.
Enhanced, centralized processes
Creating more efficient, centralized processes to not only collect information but to accurately input data into a system will pay dividends. On the front end, by working with procurement and operations, accounting can implement processes that ensure compliance with the new standard. This approach paves the way for accountants to be the Center of Excellence and subject matter experts for advising both operational and financial decisions. For example, as part of a monthly or quarterly process, accountants can utilize a lease system to provide more timely and accurate analysis of lease spend, ultimately leading to cost savings and an improved bottom line.
Additionally, the new guidance has a significant impact to the financial statements and disclosures, requiring accountants to thoughtfully strengthen internal controls and improve reporting processes. For instance, lease information that previously resided only in the footnotes is now presented as a liability that will be subject to increased scrutiny from internal and external stakeholders. Through heightened attention and robust processes around lease terms and details of lease transactions, accountants can make certain the financial statements under the new guidance are accurate.
Improved lease management
Lease accounting software and centralized lease management allows accountants to monitor and make educated decisions on lease events. Typical events include amendments to add or remove assets, altering length of term and middle- or end-of-term options such as terminations or renewals. Specifically, with lease accounting software, companies can produce standardized and customized reports to assist in presenting actionable information. A common benefit to these operational reports are their assistance to inform decisions on whether to renew or end a lease agreement prior to the lease end date, ultimately reducing unwanted month-to-month lease expenses which may have previously gone unnoticed.
More complete and accessible lease data will position accountants to assist their companies with proactively managing assets. To illustrate, lease versus buy decisions may oftentimes be uninformed because of the lack of data and decentralized lease management, resulting in inefficiencies and overspending. The centralized monitoring of lease events will help inform lease versus buy strategies that produce efficiencies and cost savings related to common challenges like evergreen leases, vendor management for similar leases and end-of-term options such as lease extensions.
Increased data visibility
Cross-departmental collaboration and an effective lease accounting software implementation will lead to a more cohesive and efficient data flow. This improved workflow creates on-demand access into lease data and knowledge sharing between previously disconnected areas of an organization like purchasing, real estate, IT and accounting. Currently, accountants are often delayed in receiving information that could impact timely journal entries. In the case of leases, communication about a new contract may not occur until after the month closes, resulting in catch-up entries and the risk of misstatements in financial reporting. With a new lease accounting solution and efficient workflow, accounting groups will have visibility into upcoming and recently transacted agreements to influence management with concrete financial analysis on lease spend.
As accountants take leadership roles in the adoption of the new guidance and the system selection and implementation processes, companies will realize value from enhanced, centralized processes, more robust management of leases and more in-depth visibility to lease data. These improvements provide accountants with the opportunity to provide their companies with analysis and insights on critical capital-asset procurement and spending. Ultimately, successful adoption of the lease guidance will yield cross-departmental collaboration and efficiencies, more cost-effective lease decisions, and increased accuracy in financial reporting.
Source: accountingtoday.com Written by: Bill Maloney
Blockchain might be the most buzzworthy word in accounting today, if its prominence at the Accounting and Finance Show L.A. last week is any indication.
Multiple sessions covered the emerging technology, with one keynote speaker, Robert Massey, a partner at Deloitte, giving a primer on the hot topic.
“Blockchain is one of the most significant evolutions we’ve seen,” said Massey, who leads the Big Four firm’s cryptocurrency and blockchain practice globally. “Blockchain is to value as the internet is to information. It’s an exponential change, to share information between decentralized parties, in real time. It decentralizes the ability to record information, and enable transactions. It’s the next step in the evolution of commerce.”
Massey finds it helpful to think of blockchain as a “big shared ledger” -- more specifically, “a distributed ledger which allows digital assets to be transacted in real time, in an immutable manner.”
Members of another panel on blockchain focused more on how accountants should plan to harness the technology within their practices.
Practitioners should start with educating themselves on the blockchain, all panelists agreed. David Cieslak, chief cloud officer and executive vice president at business consulting firm RKL eSolutions, suggested that firms add a blockchain leader, while Ron Quaranta, chairman of the Wall Street Blockchain Alliance, recommended seeking resources on the topic from the American Institute of CPAs.
“Technology has disrupted the profession previously — this is not a new conversation,” said Danetha Doe, founder of financial mentorship program Money and Mimosas. “It’s the speed of the change. The next generation is adopting quickly, and you’re going to start to see a shift in the profession … how blockchain can be applied to different use cases outside the box.”
“All of us need to be thinking a lot more about value, and a lot less about tasks, [which] are often much more transactional,” said Cieslak. “Blockchain is really going to accelerate that. How can we leverage the technology to bring that greater value?”
It was a question asked frequently throughout the two days of the Accounting and Finance Show, with speakers attempting to provide guidance on a bold, and still mysterious, new frontier. But the technology’s novelty and unrealized potential only energized both panelists and attendees.
The conference’s thought leaders were most enthusiastic about blockchain as it related to new ways of conducting business, such as its use in smart contracts.
Smart contracts take “key terms in a legal agreement, and embed [them] in software, creating link dependencies in the agreements,” Massey explained in his keynote session. He offered the example of a farmer buying crop insurance, which will pay him if it doesn’t rain for 100 days.
Smart contracts utilize blockchain to connect to outside, trusted “sources of truth” to facilitate, enforce and verify terms of an agreement, thus removing the need for third parties or middlemen. In Massey’s farmer example, one of those sources of truth would be regional weather data.
“Blockchain is very effective connective tissue,” Massey explained. “We see, in all industries, the use of smart contracts enabling better relationships.”
Smart contracts “are happening organically anyway,” he continued. “It’s not just the systems, but the organizations that are decentralized. It’s likely now that transactions are validated somewhere other than where management is sitting.”
“There’s a real variety of use cases, and those are what are super-exciting,” said Cieslak during the panel discussion. “Some of what is going to be done with blockchain, has never been done before.”
The implications are especially exciting for certain industries, like the recording industry, an example many speakers cited when describing how intellectual property, like songwriting credits, can be coded into blockchain-enabled smart contracts. Speakers and panelists urged attendees to educate themselves on the technology and assess how it can apply to their clients and industry verticals.
“Every company innovation in this space is putting forth solutions,” said Massey. “In L.A., in entertainment, in media, [you can] lock down intangibles like the rights of a song or movie. What if you lock that down in a blockchain solution, before you had to pay for it? It’s a significant evolution in song and movie rights. It’s hitting every industry. It’s relevant to every single one of them. Think about your clients, and what’s relevant to them.”
Many people are familiar with blockchain as the technology behind cryptocurrencies like bitcoin and ethereum, and Deloitte's Massey dedicated a portion of his session to addressing those virtual currencies, as did other panelists at the conference.
All panelists stressed the status of cryptocurrency as property, based on guidance issued by the Internal Revenue Service in 2014.
Stephen Turanchik, an attorney in the tax practice at law firm Paul Hastings, spoke about the perplexing nature of cryptocurrency taxation during another conference session. He explained that virtual-currency exchanges are not required to report to the IRS, so “a lack of detection, and the ability to hide it, still exists.” But, he continued, “if you think that gives you the license to commit tax fraud, think again.”
On July 2 of this year, the IRS announced its virtual currency compliance campaign, and it will be conducting more audits on virtual currencies, Turanchik warned the audience.
The IRS is also stepping up outreach and education efforts, and soliciting taxpayer and practitioner feedback for these campaigns. The service is urging taxpayers with unreported virtual currency transactions to “correct their returns as soon as practical,” Turanchik reported, though the IRS is not contemplating voluntary disclosure programs.
“The IRS simply doesn’t have the technical expertise to give guidance in this area,” Turanchik said. He cited a “John Doe” summons the IRS served to virtual-currency exchange Coinbase in November 2016, seeking customer data. Before the petition was granted, the IRS had to narrow the scope of the summons, to Coinbase users with accounts of at least $20,000 in any one transaction type, in any single year between 2013-15.
Overall, Turanchik explained, there is a “significant lack of transparency” in the cryptocurrency space, which he said keeps him busy, and provides big opportunities for tax preparers.
Source: accountingtoday.com Written by: Danielle Lee