Taxation

Tuesday, February 28, 2017

Employee vs. Independent Contractor - Beware the IRS Audit


One of the most important questions for any business owner is whether to classify a worker as an employee and an independent contractor.

The United States Department of Labor says that the misclassification of employees and independent contractors is one of the “most serious problems facing affected workers, employers and the entire economy.” This is one problem that an experienced labor and employment lawyer can help you avoid.


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Thursday, May 5, 2016

You’re more likely to get audited as IRS adds 700 employees to chase tax cheats


The Internal Revenue Service is hiring up to 700 new employees to do audits and go after delinquent taxpayers in an effort to turn around years of what the agency has acknowledged is lax enforcement.

“When you look at the IRS overall, every dollar invested in us returns at least $4 to the Treasury,” Commissioner John Koskinen told his employees in a memo Tuesday. “The numbers are even higher when it involves enforcement.”

See full article here: https://www.washingtonpost.


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Thursday, July 30, 2015

South Carolina Judge Rules Subscription Charges ‘Count’ as Taxable Income Against Cable Conglomerate

If an out-of-state business collects subscription proceeds from a South Carolina resident, must it pay South Carolina tax on that income? 

With subscription-based services all the rage nowadays, the concept begs the question: What about taxes? Based on a recent case holding, it is clear that cable provider DirectTV had hoped to circumvent this minor detail – but was instead slapped with an $8.5 million income tax bill for failing to pay taxes on revenues from consumer subscriptions in the state of South Carolina. The case, which was decided by a state administrative judge within the Department of Revenue – hinged on the concept of “income-producing activity,” and whether the cable company actually engaged in taxable activity within the state of South Carolina. The case also serves as a glaring reminder of a foundational principle that, in life, only two things are inevitable: death and (federal and state) taxes. 

Basis of DirectTV’s claims: It never actually made money in South Carolina

DirectTV asserted throughout the course of the litigation that the monthly subscriptions maintained by South Carolina residents did not “count” as the source of its income. Rather, its income is derived from “national marketing, content development, broadcast operations and customer service — business activities that are conducted outside of South Carolina.” By that reasoning, the company shouldn’t have to pay income tax in any state outside its state of incorporation, right? 

Not really. Invoking a much more thorough level of reasoning, the administrative law judge concluded that the actual revenue-producing activity conducted by DirectTV involved its “delivery of the signal into the homes and onto the television sets of customers….[and] all of those income-producing activities related to South Carolina customers occurred entirely within South Carolina. 

Thankfully, the judge also took a moment to rebuke the respondent for its argument, stating that it was of “no practical value.” Between 2006 and 2011, DirectTV has generated over $2 billion in subscriber fees from South Carolina homes and businesses, including $136 million in revenue from cable equipment and boxes. 

If you are struggling with a state taxation issue or would like to discuss a general business matter, please do not hesitate to contact the Florence and Myrtle Beach business law attorneys at Willcox, Buyck & Williams today: 843-536-8050. 

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