Tax Planning & Compliance Flashcards
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Read the first 7 Tax Planning & Compliance flashcards as text
A purchasing department buys software delivered electronically to employees in multiple states. What is the biggest tax compliance challenge this creates?
Answer: Managing varying state rules on taxability of electronically delivered software
States differ significantly on whether electronically delivered software is taxable, exempt, or taxable only in certain circumstances, requiring jurisdiction-by-jurisdiction analysis.
What is the 'economic nexus' standard established by the Supreme Court's South Dakota v. Wayfair (2018) decision?
Answer: States can require sales tax collection based solely on a seller's sales volume or transaction count in the state
Wayfair established that states can require out-of-state sellers to collect sales tax based on economic activity (e.g., $100,000 in sales or 200 transactions) without requiring physical presence.
Which tax benefit allows a company to immediately deduct the full cost of qualifying equipment in the year of purchase rather than depreciating it over time?
Answer: Section 179 expensing
Section 179 of the IRS tax code allows businesses to immediately expense (deduct) the full purchase price of qualifying equipment and software in the year it is placed in service.
A purchasing manager is sourcing goods from a country with a US Free Trade Agreement (FTA). What documentation is needed to claim preferential tariff rates?
Answer: A Certificate of Origin proving the goods meet the FTA's rules of origin
To claim preferential (reduced or zero) tariff rates under a US FTA, importers must obtain a Certificate of Origin or equivalent documentation proving the goods meet the agreement's rules of origin.
What is the purpose of an Importer Security Filing (ISF), commonly called '10+2', in US import compliance?
Answer: To provide advance cargo information to US CBP before goods are loaded onto a vessel bound for the US
ISF (10+2) requires importers to electronically submit specific shipment data to US Customs and Border Protection at least 24 hours before cargo is loaded onto a US-bound vessel.
In the context of purchasing and tax compliance, what is 'self-assessment' of use tax?
Answer: The buyer voluntarily calculating and remitting use tax on untaxed purchases directly to the state
Use tax self-assessment is the process where a buyer who was not charged sales tax by a vendor independently calculates the applicable use tax and remits it directly to the state taxing authority.
Which purchasing action best demonstrates proactive tax compliance when onboarding a new foreign vendor?
Answer: Collecting Form W-8BEN or W-8BEN-E and determining withholding requirements before the first payment
Collecting the appropriate W-8 form before initial payment establishes the vendor's foreign status and treaty benefits, allowing the company to correctly apply withholding at the source.