How fair is Wayfair?
It depends on who you ask.
To some, the U.S. Supreme Court’s decision to strike down a 1992 ruling that established a physical presence threshold for when states could tax remote sales is a way of leveling the sales-tax playing field for retailers.
Others see it as a threat to small businesses.
Still others see implications that reach far beyond the sales tax realm.
Regardless, one thing is certain: CPAs must be vigilant — sometimes cautious, sometimes less so — in how they provide tax services and advise clients.
That’s according to the folks at Aon, which partners with the AICPA to provide insurance to meet the personal and business needs of today’s CPAs.
Aon has released a new report that warns CPAs to “understand the professional liability implications of this decision” — and there are many.
I’m quoting here from the Aon report:
“Physical presence is no longer the nexus standard when evaluating whether or not a client should collect and remit sales tax to a specific state, and clients should understand this important concept.
“A client who is not timely informed of the change in nexus standard may assert that they did not have sufficient time to understand and prepare for additional filing and reporting responsibilities in a cost-effective manner. This may result in claims against the CPA firm, seeking to recover the additional costs incurred by the client to quickly implement the required changes.
“If a CPA fails to inform a client about its responsibility to collect and remit sales tax in a particular state and this is uncovered by the state, the client may contend that the CPA firm failed to advise them of the change, and should be responsible for not only the penalties and interest assessed by the state, but also for the uncollected taxes. Notably, taxes are not typically part of recoverable damages in a professional liability claim.
“From an income tax perspective, clients who fail to file tax returns in economic nexus states may claim that their CPAs failed to advise them of their filing obligations or failed to update them regarding the impact of the Wayfair decision, seeking to recover their costs for penalties and interest. If the client is subject to double taxation due to the inability to amend returns in their home state, they may also seek recovery of the additional taxes.”
So what should CPAs do?
According to Aon, to mitigate the risk of a claim related to the Wayfair decision, CPA firms should:
Read Aon’s report in its entirety. Study it … and make sure you’re not placing yourself at risk as you advise your clients in regard to this important ruling.
Learn more here