How States are Responding to COVID-19 and Sales Tax with Scott Peterson
Scott Peterson is the Vice President of U.S. Tax Policy and Government Relations for Avalara. Before that, he was the first executive director of the Streamlined Sales Tax Governing Board and director of the South Dakota Sales Tax Division. Accounting Today named Scott as one of the “Top 100 Most Influential People in Accounting” in 2018 and 2019.
Avalara is a leading provider of cloud-based tax compliance solutions. The company helps businesses of all sizes achieve compliance with transaction taxes and are constantly adding new tax types and services. Their solutions are designed to be very fast, accurate, and easy to use, and their vision is to touch every transaction in the world. Avalara has been publicly trading since 2018 and has almost doubled since then.
In this episode…
The coronavirus (COVID-19) outbreak has affected many taxpayers and countries all over the world. Some United States have decided to encourage their employees to work from home, and others are not allowing people into their offices. All this is done in a bid to control the spread of the disease.
What everyone needs to understand is that things in life and business change, and sometimes things don't happen as we had imagined they would. In such cases, people have to make hard decisions based on the current state of affairs. This is the advice Scott Peterson gives to help in tackling the current disease outbreak.
This week Scott Peterson joins Michael Fleming to talk about some steps different states have taken to contain the disease, tax reliefs some states are providing, and the effects of the new stimulus bill set to get money into the hands of people.
Here’s a glimpse of what you’ll learn:
Scott compares the current coronavirus crisis with the 911 tragedy, the anthrax scare, and the recession
Examples of tax reliefs some states are providing to their employees and public
States that have authority to waive interest or tax penalty
Reasons why firms should not use tax money for other purposes
Will states decide to reduce or drop sales tax?
How some states are getting ready to pursue people by hiring more auditors
How states are collecting sales tax and the benefits of the Wayfair decision
Scott talks about the effects of the new money bill and stimulating the economy
How businesses and accounting professionals can stay on top of what is currently happening in the economy
Where to learn more about Avalara and how to contact Scott Peterson
Resources Mentioned in This Episode
Scott's email: scott.peterson@avalara.com
Connect with Michael
Sponsor for This Episode
Sales Tax and More assists companies and their trusted advisors like CPAs with sales tax needs. They offer consulting and research, registrations, returns, and so much more. Over the years they have assisted thousands of sellers both foreign and domestic with their tax issues in the United States and in Canada.
Episode Transcript - Audio Version
[0:10] Intro: Welcome to Sales Tax and More, your go-to resource for all things state tax-related. Now, here's your host, Michael Fleming.
[0:26] Mike: Hi everyone. Mike Fleming, founder of Sales Tax and More and today's host of the Sales Tax and More Podcast where we talk about everybody's favorite topic, which is of course sales tax. We've got a repeat guest today, great guest Scott Peterson. Counting today, named one of the top 100 Most Influential People 2018, 2019. And we're going to discuss some of the impacts of the coronavirus and how state and federal governments are responding. Before we introduce Scott, I want to introduce you to his employer, Avalara, very little information here. Some of you know a lot about Avalara, but they're a leading provider of cloud-based tax compliance solutions who help businesses of all sizes achieve compliance with transaction taxes, including sales and use, bad excise communications, and they're constantly adding tax types. Scott is their Vice President of US tax policy and government relations. Prior to working with Avalara, Scott was the first executive director of the Streamlined Sales Tax governing board and was the director of the South Dakota sales tax division. So, welcome back, Scott.
[1:40] Scott: Thank you, Mike. Glad to be back.
[1:41] Mike: I think times are certainly interesting. I mean, it's unprecedented. Some of the steps that are being required by states or being suggested by the federal government in you know, shutdowns and working from home. Have you ever seen anything like this before?
[2:03] Scott: Ah, no. I mean, there's been some, I mean, obviously, the recession had a kind of a, is gonna end up in the same spot as we are, I think we're going to be in this session, but from an entirely different perspective. That was more from the bottom up and not the top down. 911 was similar in the way that the government's reacted to, you know, to the attack, but it was a very short-lived kind of reaction, which, you know, ultimately then resulted in loss of, you know, restrictions on how we fly and how we travel and things like that. But, um, you know, otherwise no. I mean, I was talking to a friend the other day, who lives in DC, and she said, she was talking to a bunch of young congressional staff people and they said, - Well you don't seem very nervous about this. And she said - Well, you didn't live through 911. You didn't live through the anthrax scare, where no one in Washington DC could open their mail for months. And frankly, I'm not sure they still can't. I think it all still goes on and gets irradiated. And she said - You know, and then the recession, you know, this stuff happens sometimes that just doesn't go the way you think it's gonna go or even imagine it could ever go that way.
[3:26] Mike: Yeah, absolutely. And some things never go back to being the same. But some things go back to being the same relatively quickly.
[3:35] Scott: Yeah. So yeah, we will start going to bars and restaurants very quickly once that changes.
[3:41] Mike: Absolutely. All right. So I know that Avalara has put together a number of resources, outlining the different announcements from the states, and we're going to post some links to those materials along with this podcast, but can you share what some of the states have, what type of tax relief are they providing? How are they providing it? You know, what are some examples or what are you know?
[4:10] Scott: They're, in many ways doing this very randomly. It's certainly not particularly coordinated. The, you know, there's a lot of states that have said nothing, or what they've said, it’s, you know, we're not gonna let people into our offices, and we encourage you to use our online services. South Dakota, all South Dakota department of employees are working from home.
[4:35] Mike: Pretty much the same thing with Texas too.
[4:37] Scott: Yeah, yeah. Same thing with Texas. And just I just noticed before this, we started taping that Kansas did the same thing. The, so you've got that group of people who've, you know, said - We're for business and we hope you are too. You've got the others that said - We know this is going to be hard, and we're going to provide some filing and payment relief to you. And some of them are doing pretty broadly. Some are very, very specific. They’re, I mean, what I'm trying to think of is, I can't remember the state right offhand, but one state has applied the automatic relief to bars and restaurants only. And then only to bars and restaurants above or below a certain level of sales.
[5:25] Mike: Was that Minnesota, I think they had some sort of language like that.
[5:30] Scott: Yeah, and there's a couple. I think they're up to three states now that have done very specifically for bars and restaurants. And they're all doing something below, you know, a certain number of sales, sales or sales tax collected in 2019. We've got some that have just simply said, if for some reason now that you can't pay or file, call us. And so it's very, it's one-off, it's very individual, you're going to have to prove them, which is more of the traditional disaster recovery kind of a thing, you know, every state in the country has had some sort of natural disaster before. And every one of them have, you know, something that allows them to provide relief to people. What is interesting is we're learning from this, at least I'm learning from this, which State Department of Revenue, or which governors, have the authority to waive interest. The state of Alabama came out with a nice little measure, you know, delaying the payment of taxes, and, but all they've said is that, you know, you can delay the payment of your taxes, and we will waive the penalty. We're not allowed to waive the interest.
[6:46] Mike: Yeah
[6:47] Scott: So folks that do that, you know, they know that when the bill comes due, the bill is going to be plus interest, and that, it's interesting. So now, you know, we've had to train ourselves to look very carefully at the announcements that the states are making, because if it says they're gonna wait penalty, that means they're not waiving interest. So if it doesn't say interest, you should assume there's going to be interest.
[7:07] Mike: Yeah, the devil is always in the details.
[7:09] Scott: Oh, boy. Yeah.
[7:12] Mike: You know, that's a chore in and of itself, is reading all of these announcements because, you know, the devil is in the details. And some of them, like you mentioned earlier, are automatic. Everyone gets it.
[7:25] Scott: Yep, everybody.
[7:26] Mike: Others, you have to apply for the exemption there. So, sometimes there's more work in the application for the, to be, to get the delay in filing, than if you just went out and filed, or had someone like have Avalara or us file for you.
[7:45] Scott: Yeah, you know, it's, in some cases, that's gonna be the exact output. So there isn't, there isn't any, you know, if you if you've got the data and you've got the money, you know, definitely if it's a case where all we're going to do is weigh the penalties, people should file and pay. And some of, like Alabama, filing is required. They won't waive the penalty in, I think it's June 1, I think it's June 1, they won't waive that penalty on June 1, unless you’ve filed those returns. So you can't just stop doing business with Alabama, you got to continue to the business of Alabama, and know, you get to keep the money that you collect from your customers, but when you pay that back, you have to do it with interest, and you had better have filed those returns, otherwise you get nothing.
[8:33] Mike: Yeah, and that's some great points to make, Scott. A lot of our clients, a lot of questions, when they see these announcements, right away they think that - Oh, I get to keep the sales tax that I collected. And that's never going to be the case. I don't think so.
[8:52] Scott: I don't think so. Yeah, that's, I mean, if folks get money from the government, in which is what that would be, it’s more likely to become from grants and loans, and not this particular source.
[9:07] Mike: Yeah, absolutely. In most instances, that sales tax is either the customer’s money or the, or the state's money, and you can't use it for your own purposes. States generally take a very negative view of that. So all this is pushing, you know, when you're gonna pay that money down down the road. It still needs to be paid. I mean, it's that obligation is not going away.
[9:34] Scott: Not that we've seen so far. Everything we’ve seen so far is - We’ll give you some extra time, but it's still going to be due.
[9:42] Mike: Yeah. So with most of our clients are saying - Oh, I didn't realize that, once they realized that they say - Well, you guys filing the return, same thing with with your customers there, then let's just go ahead and follow what's the sense of delaying it like in the case of Alabama, you're still, you got to pay interest
[10:03] Scott: You pay interest. Yeah.
[10:04] Mike: So if the money's there, you know, you collected it, you put it aside, then we're recommending that companies just go ahead and file now. Don't be tempted to use that money, that starts getting into a whole nother area, that collected not remitted taxes. You don't want to be in that position. So don't be tempted to use that tax money to make payroll, or whatever else.
[10:34] Scott: You know, and most of these are being done under the auspices of the laws in every state that grants emergency powers to governors. Well, there's very few of those that are just completely wide open. I mean, I'm sure no governor has the emergency powers to waive criminal penalties. And, you know, so there's things that they can say you do that are, you know, granted to them under these emergency powers that they normally wouldn't be able to do. But there's a limit on them. Every, no legislature has ever given a governor carte blanche under their Emergency Powers Act.
[11:15] Mike: Yeah. And when we start talking about, you know, spending tax money for other purposes, if you don't have it when it's ultimately due, that's when we start talking about these criminal penalties. And, so, what about reducing the tax or dropping the tax? You think the states are going to come through with anything like that?
[11:39] Scott: You know, I'm, I, no. And so, this is the problem with what's, well, one of the thousand problems with what we're going through right now is that you know, state and local governments that are providing the majority of the relief that's happening today, I mean, it's, you know, it's the states that are in the cities and counties that are, you know, operating in the health department's and doing the testing, and they're the ones it's their money that's being spent on these things. What I've seen so far is every state that was, every state legislature that was still in session, most of them are gone. They've all, you know, they're taking a temporary recess. And those that were able to, you know, recess recently, are able to get their budget done, radically reduce the amount of money they think they're going to collect in taxes in 2020, and reduce their spending accordingly. And I've seen many governors who said - We want to, we want to stop, we're not going to give money to this group of people like we told them we were going to. We're not going to cut these taxes like we said we were going to. We're going to take that revenue that we've got right now that we're going to use for that. We're going to put it in a rainy day fund, because it's raining
[12:57] Mike: Absolutely. And you know, one thing that we've been talking about internally here is in times of recession, you sometimes see states increasing the number of auditors and increasing the number of people in their discovery units, because they do have such a need for revenue. And, you know, they may be having everyone work from home and everything, and I don't think any of the states are going to step up enforcement or collection activities while we're worried about the virus. But at some point, it's going to move to the recession being the bigger issue than the virus being the bigger issue. And like just today, we saw that Texas is out there looking to hire. While they're letting people go in some areas, they are actually hiring more auditors. So we think that at least some states are gearing up to pursue people. And generally, you know, you don't want to pursue the people in your own state. So people who are located outside the states, these remote sellers, you know, I think that they are going to be in a much more vulnerable position. So it's just, you know, although there's so many things on your mind right now, they can get a lot worse if we're pushing sales tax to the back-burner.
[14:22] Scott: Yeah, you know, because I mean, it is the one thing that comes in, you know, day in day out, because, you know, at some point in time we have to spend money on something. Maybe the last dollar we have, but we're going to spend it on something. You know, and I've been thinking about the folks that, I'm thinking, I've been thinking about what states tax here in the last couple days, and how they get that tax collected. You know, online sales are the way a lot of sales are being made these days. And if this, if there hadn't been a Wayfair decision, and the states were not able to force these auto state retailers to collect the tax, there would be a much deeper hole in state budgets than I think it's going to, that we're actually going to have, especially in the states that don't tax groceries.
[15:17] Mike: Absolutely.
[15:21] Scott: I mean, you know, a lot of when we go to the grocery store, you know, those shelves are empty in a lot of places. They're literally, you know, they're empty of a lot of stuff. Um, and, you know, for the states that don't tax those things, obviously that money, all that money that’s being, that was spent on restaurant meals, which is usually taxed at a much higher level, is being spent on something that's exempt.
[15:44] Mike: You know, that's a great point. I haven't even been thinking of that, but it's something to be thankful for. Not too many people are thankful for Wayfair unless you're in our business, but the states would be in a lot worse off position if we hadn't start to see the results of the Wayfair being implemented, this economic nexus. So, great thoughts there.
[16:10] Scott: Yeah, it's frustrating, you know, to have to, you know, think about something that creates such a burden on people as a positive thing for states. But frankly, that was the whole point behind it in the first place was, it's supposed to be a positive thing for the states. You know, why you've got all these local retailers that aren't collecting sales tax, not because they aren't wanting to it’s because they're not open.
[16:31] Mike: Yeah.
[16:32] Scott: There's all the these remote sellers, you know, somebody is open somewhere, because I'm, you know, I'm getting ads all the time for.
[16:40] Mike: Excuse me. Yeah, absolutely. Um, what do you think, can Congress help out here? I mean, this new bill, we're hearing about, you know, 1200 or 2400 dollars per couple. What do you think about any of these ideas, being can Congress help out?
[17:02] Scott: Well, those are, you know, that type of a stimulus does increase spending from, you know, when the, for the folks that need to spend money. So, to the extent that that goes, that money goes to somebody who's lost their job, that money is going to have extreme value and will, you know, help stimulate the economy, for those of us that have a job? You know, 1200, I mean, I don't, I'm not sure what they're going to use for income levels, but I'm pretty sure that my wife and I are above them. And so we're not going to get this money. But if we did, you know, I like to think that I would take that check and we turn it into cash and we'd walk around to our favorite restaurants, and give whoever's working in our favorite restaurants the money because we want them to be. . .
[17:56] Mike: But the restaurants are closed, so
[17:57] Scott: Closed, I know, but, you know. So, yes, yes, this will have a, this will have an effect. And if they pick the right group of people to receive the money, it has a much greater effect, which is one of the problems with any kind of economic stimulus. When you when you give relief broadly, a good share of it doesn't produce the outcome that you want, because it goes to people who don't need the money. Right? So if your goal is to give money to people need the money, I would match this to the unemployment records. I'd send this money to the state and I'd say - Everybody that applies for unemployment your state, we want you to give them this. I wouldn't send checks. I know what, what the hell do I know about economics, but I would say there's the people who really need it, and not the people like you know, like me and you.
[18:50] Mike: Yeah. I've been hearing that some of these people go into the unemployment offices are even having a hard time because some companies are not laying people off, but they're furloughing them, which makes them not eligible.
[19:02] Scott: They’re not eligible, right
[19:04] Mike: For the unemployment. So people like that would probably be great recipients of this thousand dollars, at least, you know, they don't have to dip into savings if there are savings, in order to just keep food on the table. Um, how do businesses and accounting professionals stay on top of all of this? I mean, we're seeing changes daily. I mean, just look at the federal returns. I mean, first they come out and say - Hey, you still got to file your federal return by April 15. We'll give you three months to pay. And, you know, there's complaints about that. So they come back out, was it yesterday?
[19:41] Scott: I think it was this morning. It was this morning.
[19:45] Mike: Yeah. So now the returns have to be filed by July 15. So how does someone stay on top of, you know, not just the federal stuff, but all of the different states stuff out there?
[19:58] Scott: Yeah, so I'm using every resource I can get my hands on. I mean, we're, you know, and for us, this isn't a, you know, a US state issue, this is an international issue. We have customers all over the world. And so we have a whole group of people in, right in England who are doing nothing but tracking what the rest of the world is doing. And every government out there is doing something, and they're all doing something different. I mean, we see a lot of return in payment delays, which is similar to what we're seeing in the US states and, you know, in Congress, but we're also seeing some that are, you know, lowering the rates, you know, and of course government can do that. And then that's what Congress, Congress is gonna think about that as well. I mean, the Senate bill that, the, you know, Senator McConnell rolled out includes reducing tax rates. So that's kind of what we're seeing around the world. Um, so we have a website where we have all the stuff with everything we can find. I'm trying to get information. I mean, on Monday, I went through all 50 state websites, and I'm going to do so again over the weekend. There's a really good, so the AICPA, it's got a really good website, they're keeping track of all stuff that they hear. Ah, who else? I know all the big accounting firms are, I'm sure you guys are as well. But, you know, I'm in the National Association of Computerized Tax Processors, NACTP. You know, it's an organization created by the income tax people. But the states, they've done such a really good job over the years of, of convincing states that this listserv that they operate, does the states more value than it does anybody else. So I get emails four or five times a day from states on that listserv telling us - Okay, we're gonna you know, we're gonna we're gonna get whatever Ferragamo does, we're going to do, right? Well, we're doing this. I got three yesterday from Massachusetts, saying that they have, you know, they've delayed the payment and return for their sales tax, or their lodging tax for their meals and beverage tax. So, it's, frankly, hard and we've got probably 1, 2, 3, 5 people who were basically that's, you know, 40% of their day. Now, in a couple of weeks, you know, every state will have said something, and we'll have a, you know, it'll slow down, but
[22:30] Mike: And it's not just sales tax that we have to be looking out for. The state income taxes and in other types of taxes.
[22:37] Scott: Well, it's one of our problems, you know, because we're, you know, I don't want to, you know, brag about us, but, you know, we're the leading provider of lodging tax compliance services, and a lot of those are locally imposed. I mean, so going back to an earlier question, Vail, Colorado, the city council has so much money in reserve, they're gonna let retailers plea to keep the money. But we're seeing a number of in their heart, it's hard to find these. There isn't a, a central repository for local tax notices. So somehow you have to, and I honestly, we're struggling, it's one of the areas where we're at. So we know that there are going to be cities and counties that delay the return and payment for their local beverage taxes or their local lodging taxes. And we're not going to find out about it until one of our customers calls us and says - Hey, what are you doing filing my return, I don’t have to file that till June.
[23:46] Mike: It's amazing how we find out about some things.
[23:49] Scott: Our customers are, you know, customers are a great thing. You know, obviously they you know, they keep food on our table, but they're also great sources of intelligence.
[23:58] Mike: Absolutely. Keep us at the forefront.
[24:00] Scott: Yes they do. They really do.
[24:03] Mike: So we really like it when we get calls like that.
[24:05] Scott: Yeah, we do too.
[24:06] Mike: Then we got to go out and investigate it and you know, make sure that it's correct. And that's how we learn and update it for everyone else. So those are some of the best types of clients.
[24:16] Scott: Yeah, we agree.
[24:18] Mike: Well, one of the things we're going to do, Scott is, I've got some links to the resources that you're talking about, and we're going to put them out there with this podcast so that people can go and link through all of the Avalara resources, some of the independent resources you talked about, and then some of our resources that we're using here. I greatly appreciate you coming back on. Always, always great to talk to you. Any parting words?
[24:48] Scott: So everybody that we had planned on coming to our crush 2020, our big user conference, we have moved it to the end of October, same old town, Same city. It’s going to be in St. Louis. And we apologize for that, but we're going to make it bigger and better. Now that we have some more time and you know, just give everybody a better, a better opportunity to than some. Other than that, everyone needs to stay safe. And you know? Absolutely. I'll do the best again,
[25:24] Mike: I'll give you a little bit of plug for, for crush here. I don't know how you can make them bigger and better every year. It just seems to get bigger and better. There's lots of learning that gets done there. Great for CPE credit, great for social networking. And I don't know of anybody who throws a better party than everywhere.
[25:44] Scott: Thank you. Thank you. We, you know, this is tax it's, it doesn't have to be boring.
[25:50] Mike: Not at all.
[25:51] Scott: It's fun.
[25:52] Mike: Absolutely. Absolutely. So Scott, how can people reach out and get more information about Avalara or you know, if they want to follow up with you? What's the best way for them to do this?
[26:03] Scott: So our website avalara.com is, you know, it's a great place. Look under Resources, you know, at the top there should be a button or a tab there for resources, and with that, includes all the Wayfair information, all the marketplace facilitator laws, all that kind of stuff. And it also includes, you know, the updates that we're getting from governments on how they're responding to the virus. You know, most of us are working from home, but we're all working. And so there isn't, you know, there shouldn't be anybody who has a delay in getting a response back from us. You know, we're filing returns, everything, the tax engines working perfectly. So all that part's good. Get ahold of me, you know, I'm, you know, I'm easy to get ahold of anybody. You know, scott.peterson@avalara, happy to chat with people.
[26:53] Mike: Okay, well, we greatly appreciate you coming on, sharing your knowledge, experience, and the resources Avalara is putting out there. If anyone needs to talk to us about sales tax, you know our website is www.salestaxandmore.com. Or you can reach out to me directly it is mfleming@salestaxandmore.com And we hope to see you on the next podcast. Thanks, everyone.
[27:25] Outro: Thanks for listening. Be sure to click subscribe and check out all of the resources we have out on the web.