SOURCE: Marks Paneth & Shron LLP

Marks Paneth & Shron LLP

June 18, 2013 10:00 ET

Businesses Beware: Hidden Sales Tax Implications for Companies Operating Online

States Are Aggressively Developing, Interpreting and Enforcing New Sales Tax Laws Covering Online Businesses, Warns Marks Paneth & Shron Advisor

NEW YORK, NY--(Marketwired - Jun 18, 2013) - There are new, hidden sales tax implications for businesses operating on the Internet. Many states are now classifying data that's being sold through the "cloud" as personal property and are out to collect sales and use tax from businesses and individuals on these services.

That's according to a video from New York accounting firm Marks Paneth & Shron (MP&S). Narrated by Steven Bryde, Principal in MP&S's State and Local Tax Practice, it explains the ways many states are aggressively developing, interpreting and enforcing new sales tax laws involving cloud computing and software as a service ("SaaS").

New York and other states have always charged sales tax on canned software that is purchased and downloaded -- classifying it as tangible personal property. However, New York State now says if a New York-based customer purchases data through the cloud from a company located elsewhere, that customer now has purchased the equivalent of canned software and owes NY use tax. In addition, if a California seller, for example, has a "physical presence" in NY, the seller will be required to register as a NY vendor and collect the NY sales tax on such sales.

There's also a wrinkle for companies that provide customers with the information through the cloud, such as a taxable information service. For example, if an Arizona-based company has a presence in New York, it must register as a vendor and must collect sales tax if it sells such a service to its NY-based customers.

Mr. Bryde warns that many states are ravenous for sales tax and are zeroing in on places -- like the cloud -- where previously they haven't gotten sales tax revenue. This can be a nuisance for big companies and detrimental to small or new businesses that aren't aware of the fast-changing state and local tax laws.

The video is available at http://www.markspaneth.com/publications/doing-business-in-the-cloud-is-great-except-for-tax-traps.

For more information, please contact Katarina Wenk-Bodenmiller of Sommerfield Communications, Inc. at (212) 255-8386 or katarina@sommerfield.com.

About Marks Paneth & Shron LLP

Marks Paneth & Shron LLP is an accounting firm with over 500 people, of whom nearly 65 are partners and principals. The firm provides public and private businesses with a full range of auditing, accounting, tax, consulting, bankruptcy and restructuring services as well as litigation and corporate financial advisory services to domestic and international clients. The firm also specializes in providing tax advisory and consulting for high-net-worth individuals and their families, as well as a wide range of services for international, real estate, media, entertainment, nonprofit, professional and financial services, and energy clients. The firm has a strong track record supporting emerging growth companies, entrepreneurs, business owners and investors as they navigate the business life cycle.

The firm's subsidiary, Tailored Technologies, LLC, provides information technology consulting services. In addition, its membership in Morison International, a leading international association for independent business advisers, financial consulting and accounting firms, facilitates service delivery to clients throughout the United States and around the world. Marks Paneth & Shron LLP, whose origins date back to 1907, is the 32nd largest accounting firm in the nation and the 16th largest in the New York area. In addition, readers of the New York Law Journal rank MP&S as one of the area's top forensic accounting firms for the third year in a row.

Its headquarters are in Manhattan. Additional offices are in Westchester, Long Island and the Cayman Islands. For more information, please visit www.markspaneth.com

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