State & Local Tax Law Issues

State Tax Disputes with Other States or Cities

Richard Litwin represents businesses in disputes with taxing agencies in other states, during audits and protests. [read more=”Read More” less=”Read Less”]If the matter cannot be resolved at the administrative level (with the state or city taxing agency), then Richard represents the business in court and typically by securing local counsel in the state in which the case is filed. Richard has represented businesses in specific matters at the taxing agency or in court in several states and before state taxing agencies and local (city or county) taxing agencies.[/read]

Multistate Taxation

Now, more than ever, businesses operate in many states. Businesses have representatives working in or visiting other states, to meet with customers, deliver product, solicit sales, or performing services. Some businesses have employees living in other states. Some businesses send employees to the other states. Some businesses use independent contractors to provide services for clients or customers. [read more=”Read More” less=”Read Less”]Businesses that operate in other states must understand whether the level of contact with the another state creates sufficient nexus to obligate the business to collect the other state’s sales and use tax and/or pay net worth taxes, franchise taxes or income taxes to the other states. Once “nexus” is established, the business must determine whether its product sales or sales of services are subject to the states sales and use tax. Further the business must determine whether it must pay income tax to the other state or whether the business is protected by Federal bars to imposition of tax on the net income of the business (commonly known as Public Law 86-272). Finally, the business must determine the applicable apportionment formula, which, too, can create a web of confusion, especially in light of the single-factor (sales) apportionment formula adopted by almost many states. Moreover, where the business provides services, the sourcing of the sales can create confusion based on whether the state uses cost of performance sourcing (sales receipts are sourced to state where the service that generated the revenues is performed) or market-based sourcing (sales revenues are sourced to state in which customer benefits). At Litwin SALT Law, we draw from our experience in working exclusively in state and local taxation to help Georgia businesses and businesses throughout the country determine and understand the business’s tax Now, more than ever, businesses operate in many states. Businesses have representatives working in or visiting other states, to meet with customers, deliver product, solicit sales, or performing services. Some businesses have employees living in other states. Some businesses send employees to the other states. Some businesses use independent contractors to provide services for clients or customers.   Businesses that operate in other states must understand whether the level of contact with the another state creates sufficient nexus to obligate the business to collect the other state’s sales and use tax and/or pay net worth taxes, franchise taxes or income taxes to the other states. Once “nexus” is established, the business must determine whether its product sales or sales of services are subject to the states sales and use tax. Further the business must determine whether it must pay income tax to the other state or whether the business is protected by Federal bars to imposition of tax on the net income of the business (commonly known as Public Law 86-272). Finally, the business must determine the applicable apportionment formula, which, too, can create a web of confusion, especially in light of the single-factor (sales) apportionment formula adopted by almost many states. Moreover, where the business provides services, the sourcing of the sales can create confusion based on whether the state uses cost of performance sourcing (sales receipts are sourced to state where the service that generated the revenues is performed) or market-based sourcing (sales revenues are sourced to state in which customer benefits). At Litwin SALT Law, we draw from our experience in working exclusively in state and local taxation to help Georgia businesses and businesses throughout the country determine and understand the business’s tax .

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Georgia’s Title Ad Valorem Tax Fee (TAVT)

Since 2013, purchases of cars are exempt from Georgia sales and use tax and are not subject to county ad valorem tax. Now, when buying a car, the purchaser must pay a 7% tax (that can be increased each year with a maximum rate of 9%).[read more=”Read More” less=”Read Less”]Further, persons who bring a car from another state and title the car in Georgia must pay the TAVT. Georgia law provides for many exceptions and exemptions to the TAVT. Georgia law also provides for reduced rates under some circumstances. Richard Litwin advises businesses on the TAVT and represents businesses in disputes regarding computation of the TAVT and the application of exemptions from the TAVT.[/read]

Voluntary Disclosures to the Georgia Department of Revenue

Many businesses have nexus with Georgia and operate in Georgia for many years without collecting Georgia’s state sales and use tax from Georgia customers, without remitting employer withholding taxes and/or without paying income and net worth taxes. [read more=”Read More” less=”Read Less”]Richard Litwin helps businesses (1) determine whether the business is liable for Georgia taxes, and, if so, (2) determine whether the business qualifies for the Georgia Department of Revenue’s voluntary disclosure program. With the protection of the attorney-client privilege and without disclosing the identity of the business, Richard Litwin contacts the Georgia Department of Revenue to seek voluntary disclosure relief, which includes (1) limited look-back periods, depending upon the type of tax and (2) waiver of civil and criminal penalties. Richard also represents businesses that have collected taxes but are have not remitted the taxes. Such taxes include taxes that a business has collected from customers or withheld from employees but not remitted to the Georgia Department of Revenue. The taxes include sale taxes and employer withholding or payroll taxes.[/read]

Georgia Department of Revenue State Tax Executions

Like most state taxing agencies, the Georgia Department of Revenue is different from other creditors, in that the Georgia Department of Revenue does not have to file a lawsuit to collect on a tax debt. If a taxpayer fails to respond to Georgia Department of Revenue notices, then the Georgia Department of Revenue can issue a State Tax Execution. [read more=”Read More” less=”Read Less”] The State Tax Execution Modernization Act, which became effective on January 1, 2018, has changed the manner by which the Georgia Department of Revenue prepares, files, records and enforces state tax executions (commonly known as tax liens). Unlike the past rules, the Georgia Department of Revenue no longer has to physically send the state tax execution to the clerk of superior court of the taxpayer’s county of residence. As of January 1, 2018, the Georgia Department of Revenue sends the state tax execution to the Georgia Superior Court Clerks’ Cooperative Authority (the “GSCCCA”), and the GSCCCA forwards the state tax execution to the clerk of superior court for recording. But the state tax execution is deemed recorded and enforceable at the time that the GSCCCA receives the state execution from the Georgia Department of Revenue. Also effective as of January 1, 2018, state tax executions have a 10-year life. As a result, the Georgia Department of Revenue now has 10 years to enforce a state tax execution. In the past, the Georgia Department of Revenue had the right to rerecord a state tax execution every seven years. Taxpayers must recognize that the Georgia Department of Revenue will increase its collection efforts and not sit idly by waiting for the individual to sell his home or investment property. Individuals should expect the Georgia Department of Revenue to use all tools available to enforce state taxes, including levying on bank accounts, wage garnishment, setoffs from refunds due from other government agencies. In issuing a state tax execution, the Georgia Department of Revenue must follow to specific procedures. If the Georgia Department of Revenue fails to adhere to the statutory guidelines for issuing and recording a state tax execution, then, although eventually recorded, the state tax execution may not be enforceable. Litwin Law leverages nearly three decades of experience in helping individuals resolve state tax executions issued by the Georgia Department of Revenue. Depending on the circumstances, the result can vary from a withdrawal of the state tax execution by the Georgia Department of Revenue to a reduced payment through an Offer in Compromise or monthly installment payment agreement.[/read]

Nonresident Withholding Taxes (Pass-through Obligations to Pay)

States are very aggressive in seeking out and assessing nonresident individuals that earn money in the state but fail to pay income taxes on such earnings.[read more=”Read More” less=”Read Less”]Entertainers, athletes and celebrities, in particular, may make a one-day appearance at an event in a state and earn substantial monies from the time spent in the other state. Litwin Law helps individuals arrange their affairs to comply with nonresident requirements imposed by other states. Litwin Law also helps individuals who have received assessment notices from states.

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Personal Liability for a Business’s Trust Fund Taxes

An individual who holds a position of responsibility at a business can be held personally liable for any trust fund taxes that the business fails to pay over to the government, including the Georgia Department of Revenue. [read more=”Read More” less=”Read Less”]A trust fund tax includes employer withholding taxes, payroll taxes (the portion withheld from employee wages). For state tax purposes, a trust fund tax also includes any amounts required to be collected from customers, including sales taxes. The individual officer or employee in the position of authority within the business can be held personally liable if the business collected or did not collect (and should have collected) sales taxes or withheld or should have withheld payroll taxes. Litwin Law helps individuals who have been targeted by state taxing agencies, including the Georgia Department of Revenue, as a liable responsible person. As with other taxes, the state taxing agency can only collect from persons who are (1) responsible persons (2) that acted willfully (which means paying other creditors over the taxing agency). Moreover, many state taxing agencies, including the Georgia Department of Revenue, are restricted or limited by a statute of limitations. Litwin Law advices individuals targeted by the Georgia Department of Revenue and other state taxing agencies for the unpaid trust fund taxes. We also represents individuals in the Georgia Tax Tribunal and Superior Court in litigating responsible person trust fund liability assessments. We also represent individuals who have not been contacted by the Georgia Department of Revenue but who want to come forward voluntarily (without having been contacted) under the Georgia Department of Revenue’s voluntary disclosure program, to limit look-back period and penalties. Mr. Litwin draws from over 28 years of handling such matters, as both an Assistant Attorney General for the Georgia Department of Law (representing the Georgia Department of Revenue) and in private practice devoted exclusively to state and local tax.[/read]

Airplanes, Exotic Cars and other Large Asset Purchases

A purchaser of an airplane must pay Georgia sales and use taxes and county ad valorem taxes every year based on the county in which the airplane is principally hangared. Effective March 2013, a purchaser of a car does not have to pay sales and use tax. [read more=”Read More” less=”Read Less”]But, the purchaser must pay Georgia’s title ad valorem tax (TAVT). The tax rate for 2015, 2017 and 2018 is 7%. By law, the rate cannot exceed 9%, but the Georgia Department of Revenue can increase the 7% rate for purchases after December 31, 2018. The TAVT is imposed on the fair market value of the car. Some cars are not subject to the TAVT, and some transactions are taxed at a reduced rate, such as transfers of title between certain relatives or transfers of cars to a charitable non-profit organization. Further, in some situations, no tax is due. A purchaser who buys a car for immediate transport outside Georgia and with the intent to register the car in another state does not have to pay the TAVT. Litwin Law deals exclusively in state and local tax matters. Richard Litwin has over 28 years of experience, as both an Assistant Attorney General for the Georgia Department of Law (representing the Georgia Department of Revenue) and in private practice devoted exclusively to state and local tax (SALT). Litwin Law represents clients in disputes with the Georgia Department of Revenue relating to the imposition of sales and use tax on airplane purchases. Litwin Law represents clients in disputes with county taxing agencies in ad valorem property tax matters tied to airplanes. We also advise clients on title ad valorem tax matters, at both the state and county level.[/read]

Repaying Delinquent Taxes and Collections

The Georgia Department of Revenue offers several options for repaying delinquent taxes, interest and penalties. If the Georgia Department of Revenue has not contacted the individual, the taxpayer can pursue the voluntary disclosure program. [read more=”Read More” less=”Read Less”]The voluntary disclosure agreement provides a limited look-back period (typically four years for individual income taxes), waiver of civil penalties and waiver of criminal penalties. If the Georgia Department of Revenue has contacted the taxpayer, other options are available, including an offer in compromise and installment payment agreement. Drawing from over 28 years of experience in practicing exclusively in state and local tax, Litwin Law represents individuals in determining the best payment option and in negotiating the terms of the payment plan, under voluntary disclosure agreements, installment payment agreements and offers in compromise.[/read]

Georgia Department of Labor Unemployment Insurance (UI) Taxes 

For businesses of any size, the first indication of a state employment tax issue can come from a State of Georgia, Department of Labor inquiry on worker classification. Such contact is often triggered by an independent contractor’s attempt to collect unemployment benefits under the belief that he/she was an employee. [read more=”Read More” less=”Read Less”]Depending on the results of the Georgia Department of Labor inquiry, an employer could face obligations as to the respective contractor as well as any other workers who are treated similarly by the business. The business could be required to pay back taxes and be required to treat future workers as employees and not independent contractors, because the state considers the independent contractors to be employees. If you have a Georgia Department of Labor employment tax issue, or if you have received a Georgia Department of Labor Wage & Liability Inquiry or questionnaire from the Georgia Department of Labor, do not try to complete the form without the help of an attorney who specializes in this area. The issue will not likely go away without legal guidance and counsel from an experienced tax attorney. Richard Litwin helps businesses navigate the bureaucracy of Georgia Department of Labor unemployment insurance taxes arising from worker classification.

If the business has not obtained an SS-8, then determining whether the wages are paid for employment and thus require the business to remit Georgia Department of Labor employment taxes hinges on two key factors in Georgia that determine a worker’s status:

• Is the worker subject to substantial control in terms of direction of performance? Richard has extensive experience in helping businesses understand how to maintain independent contractor status so that the business does not have substantial control over the performance of the workers’ services.
• Is the worker engaged in an established trade?Richard has extensive experience in helping businesses maintain the necessary formalities with the worker, so that the worker remains engaged in an independently-established trade or profession. Eligible trades include electrician, filing clerk, bricklayer, secretary, paraprofessional and others.[/read]

Georgia State Tax Litigation in the Georgia Tax Tribunal

Some state tax disputes with the Georgia Department of Revenue cannot be resolved at the administrative (Department of Revenue) level. Effective January 1, 2013, Georgia has a tax tribunal that is specifically charged with hearing tax disputes with the Georgia Department of Revenue.[read more=”Read More” less=”Read Less”]The judge is a tax attorney who has experience with tax issues. The rules and guidelines for litigating a case in the Georgia Tax Tribunal are unique and designed to streamline the process with an eye toward a speedy resolution. A taxpayer who has received an Official Assessment and Demand for Payment can file a petition with the Georgia Tax Tribunal. A taxpayer can also challenge a State Tax Execution in the Tax Tribunal. At Litwin Law, we represent individuals and businesses before the Georgia Tax Tribunal and have seasoned experience in litigating cases in the Tribunal. For more information about the Tribunal and its role in resolving state tax disputes, read more in Richard Litwin’s co-authored article “The Georgia Tax Tribunal of 2012”, State Bar of Georgia Journal (December 2012).[/read]

Other Issues

Do you have a state and local tax matter that we did not itemize? We have noted the most common state and local tax issues our clients face, but this list is not exhaustive. Contact us to discuss your specific situation and learn how we can help you effectively and efficiently resolve your state and local tax matter whether that matter is in Georgia, any other state or across multiple states.