A Taxing State of Mind
Earlier this year, Peter Tribeman contended his company, loudspeaker manufacturer Atlantic Technology, was “the canary in the coal mine” when he protested the state of Washington’s levying of a business and occupations (B&O) tax against the Massachusetts-based vendor.
Atlantic Technology doesn’t have a physical presence in Washington, nor does it have any employees in that state. Yet Washington assessed its B&O tax because Atlantic Technology sold products into its state through TaylorLong & Associates, a Vancouver, Wash.-based manufacturer’s representative.
“If no attention is brought to this issue right now, states might view any company shipping goods to dealers in their state as an excuse to claim they have a legal presence and be subject to a business tax,” Tribeman stated at the time.
Well, it turns out many states already do what Tribeman feared. Atlantic Technology and companies like it aren’t so much canaries in the coal mine as they are flies entangled by the complicated, sticky web of interstate taxation.
Not just a manufacturer problem
One could look at interstate taxation issues as merely a manufacturer problem, but it quickly becomes a dealer problem as well.
A dealer can get drawn into a tax dispute between a vendor and a state government. Early this year, for example, the state of Washington sent Brian Gaskill of Innovative Home Technology in Federal Way, Wash., a “withhold and deliver” letter, requiring him to redirect his payments for products purchased from Atlantic Technology directly to state coffers. Bewildered, Gaskill contacted the state. “They pretty much said that if I don’t pay it, they could come after me,” he said.
If the state’s intention was to play hardball and show Atlantic Technology how far it would go in its efforts to collect its tax, the manufacturer got the message. The state’s interference with his dealer base prompted Tribeman to drop Atlantic’s dispute with Washington and quickly pay the B&O tax. “We have seven or eight other retailers [there], and I don’t want all of them being pulled into this battle through no fault of their own,” said Tribeman.