Pub. 3 2021 Issue 2

13 nebraska society of cpas W W W . N E S C P A . O R G 800-397-0249 www.APS.net Trent Holmes Trent@APS.net IF YOU ARE READInG THIS... So Is Your Buyer! CONNECTING MORE SELLERS AND BUYERS Issue: Bundled Transaction Rules Problem: An improperly structured purchase transaction, in which a purchaser receives multiple goods or services for one, non-itemized price, can cause tax to be imposed on the purchase of otherwise nontaxable goods or services. What to Do: If a company plans its purchase or sale transactions to avoid classification as a bundled transaction, it may avoid unnecessary sales or use tax. On audit or appeal, we can also address whether this is actually one nontaxable transaction, not to be broken into taxable and nontaxable portions. Issue: Classification as Taxable Goods or Nontaxable Services Problem: It is not always clear whether a purchase transaction is for taxable goods or nontaxable services. The answer to this drives whether the transaction is subject to sales and use tax. What to Do: If a company structures its transactions in light of the Nebraska Department of Revenue’s six-factor test for distinguishing nontaxable services from taxable goods, it may reduce its ultimate sales tax cost on the transaction to zero. When this reaches audit or appeal, we usually need to bring both the department’s test as well as applicable “principal object” case law into play. Issue: Qualification for Alternative Apportionment Problem: Within the last few years, Nebraska amended its statutes to add new apportionment rules that, in general, better ref lect the relative economic activity of many companies in Nebraska. However, for some companies, the statutory apportionment rules do not fairly represent its Nebraska activities. What to Do: If a company receives an alternative apportionment ruling, it may apportion its income to Nebraska using a test appropriate for its business model. This now needs to be applied for before the tax year. This is subject to appeal if not granted. Summary This articlehas examined someof thevarious planningopportunities that can occur “Before an Audit.” In our next two articles, we’ll look first at certain best practices “During an Audit” and then “After an Audit” (i.e., the appeal). These are also highlighted in our publication, The Anatomy of Resolving State Tax Matters. t NickNiemannandMattOttemannare partnerswithMcGrathNorthLawFirm.As state and local tax and incentives attorneys, they collaborate with CPAs to help clients and companies evaluate and defend tax and incentive positions with the appropriate state or local agency, including theNebraskaDepartment ofRevenue. Learnmore atwww.NebraskaStateTax.com. For a copy of their complete publication, “The Anatomy of Resolving State Tax Matters,” please visit theirwebsite or contactNiemannorOttemannat (402) 341-3070 or at nniemann@ mcgrathnorth.com or mottemann@mcgrathnorth.com, respectively.