Digital goods and advertising taxes with Carolynn Kranz
In this episode of the SALTovation podcast, we speak with Carolynn Kranz, founder and managing member of Kranz & Associates, PLLC, and our own Judy Vorndran. Kranz & Associates is a Washington D.C. law firm that specializes in state and local tax. Carolynn shares her knowledge and perspective from her more than 20 years of experience in SALT to discuss digital taxation. She helps us understand what these taxes are and the impact they have on businesses. Questions asked and answered in this Episode:How has the taxation of digital goods evolved and where are the states headed?What is the history of this using Microsoft as an example?How do we handle the advertising taxes? Why now? Why was Maryland first? Why is it being challenged?How did she get into software and digital goods?What piece of advice does she offer to businesses in this space? What You Will Discover:[00:49] The evolution of digital goods taxation[03:18] The history behind this with Microsoft as an example[10:37] Two things to keep in mind with Washington’s digital space[13:11] Why the advertising taxes are being challenged[21:19] Other things she comes across in situs space[30:19] Reactivity vs proactivity[35:17] How Carolynn got involved in software and digital goods[44:10] The piece of advice Carolynn offers to businesses Quotables:“I think in this instance, the issue is that for years, all of these items really did have a form of a tangible equivalent, and therefore, they were part of a tax base. So we’re seeing an eroded tax base… Things that were historically taxed are no longer being taxed, and so the states still want that piece.” - Carolynn Kranz [03:30]“The question is is how do you do that situs for that, right? Because Washington does want to look through the transactions. So if you’re selling a service to somebody and the benefit is derived, not necessarily by the customer, but the customer’s customer, right? They’re going to look through that and that gets tricky, because how much information you have or maintain as a seller gets tricky.” - Carolynn Kranz [11:34]“It’s a slippery slope, right? It really is, which is why when I’m working with sellers, whatever method you’re going to use, use it consistently.” - Carolynn Kranz [27:08]“In this space, what’s tricky is if you’re selling to consumers, right? You got to be careful, because there is still this risk of class action in the sales tax space. and unless you have some binding guidance from the state, and even if you have that binding guidance, it doesn’t mean that somebody’s not going to bring a challenge against you, so you need to do what you can to protect yourself, especially if you’re selling to end users to consumers that might have more of an appetite to click that button to participate in a class action.” - Carolynn Kranz [42:07]“You really, like you say, have to understand how business gets done from the sales all the way down to the booking of it, and the invoicing process, the delivering mechanism.” - Judy Vorndran [43:34]“It is never as bad as it seems, and so in mind, it sounds like a big task, but it really isn’t at the end of the day. It’s all about baby steps....
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