Archive for the ‘Internet Sales Tax’ Category

Stockbrokers to Start Reporting Clients’ Tax Basis

Monday, January 10th, 2011

Taxpayers will be receiving a little more assistance from their stock brokers when it comes to the preparation of the annual Schedule D in their tax returns — the Energy Improvement and Extension Act of 2008 has mandated that every broker required to file a return with the IRS reporting sales proceeds must also report a customer’s adjusted basis in the security, and whether any gain or loss on the sale is long or short term in nature.

A “covered security” is stock in a corporation acquired on or after January 1, 2011, or shares in a mutual fund, or shares acquired in a dividend reinvestment plan (DRP) acquired after January 1, 2012.

If a customer sells less than his or her entire position of a security in an account, a broker must report the customer’s basis (other than mutual fund or DRP shares) generally using the first-in, first-out (FIFO) method unless the customer provides the broker an adequate and timely identification of the shares or units the customer wants to sell. A broker must report the adjusted basis of mutual fund or DRP stock (for which the customer may average the basis of the stock) in accordance with the broker’s “default” method unless the customer notifies the broker that the customer elects a different permitted method.

The new rules change the way taxpayers determine the average basis of mutual fund stock and permit them to average stock held in a DRP. Starting in 2012, taxpayers who elect to average the basis of mutual fund shares will compute separate averages for fund shares held in different accounts. Taxpayers will also be permitted to average the basis of mutual fund shares in one account but not average them in another account.

The due date for brokers to so report will be February 15 after the end of the tax year in question. And when a taxpayer changes brokers, the rules will require the transferring broker to furnish to the receiving broker a written statement with all necessary information required for the receiving broker to comply with the Act’s basis reporting requirements. Statements required by this rule are generally due no later than 15 days following the transfer of the covered securities.

 

Internet Sales Tax — Coming Sooner Than You May Think

Monday, December 20th, 2010

If something called the “Main Street Fairness Act” clears Congress, the days of sales tax-free Internet commerce may be numbered.

U.S. Senator Dick Durbin (D-Illinois) plans to introduce the bill, we hear, shortly after the Easter recess.

“Why should out-of-state companies that sell their products online have an unfair advantage over Main Street bricks-and-mortar businesses?” queried Durbin recently in a speech. “Out-of-state compaines that aren’t paying their fair share of taxes are sticking Illinois residents and businesses with the tab.”

But we hear that the Direct Marketing Association (DMA), not surprisingly, takes a dim view of Durbin’s idea. “You’re just giving the states a blank check to make changes without any congressional oversight,” says Jerry Cerasale, DMA’s senior vice president for government affairs. “We oppose that…..We think that’s abrogating the authority of Congress.”

So far, nobody has been able to quite figure out just what to do with the Internet from a sales and use tax standpoint. (Check out Nolo’s article Sales Tax and the Internet for more info.) And that’s just the way the NetChoice Colalition likes it. The Coalition says, “Internet access — and its concomitant ability to communicate, educate, and telework — should not be taxed. At a time when most people agree that the U.S. needs more broadband, Internet access taxes will slow broadband deployment, particularly in rural and low-density areas. Fewer consumers will buy a higher-priced taxed product. A smaller pool of potential customers means providers can’t justify investment in new broadband infrastructure build-out……NetChoice endorses a permanent tax moratorium to encourage continued innovation on the ‘Net’.”

The big boys of retailing, however, would likely support Durbin’s proposal. Why wouldn’t they — their bricks-and-mortar presence is increasingly ubiquitous.

But as NetChoice points out, “The ‘Internet’ is not a specific place or thing, but a network of networks that transcend geographic and political borders.” A virtual entity. And who’s in charge of taxing that?