The tax research memo assignment has 2 different fact patterns. We must make a 2 pages tax memo per fact pattern (4 pages total, however, Im requesting 5 pages just in case), the tax memorandum must advise the client, state the issues to be resolved, and make sure to identify the specific authorities (code, statutes, case law, etc.)
PLEASE USE PRIMARY SOURCES & SECONDARY SOURCES!!!
Fact Pattern #1
The legislature in the State of Red enacted a new law requiring out-of-state sellers to collect and remit sales tax on the retail sales of goods and services in the State. Sellers are required to collect and remit the tax to the State, but if they do not then in-state consumers are responsible for paying a use tax at the same rate. The Act covers only sellers that, on an annual basis, deliver more than $150,000 of goods or services into the State or engage in 200 or more separate transactions for the delivery of goods or services into the State. Your client is a B-etsy online retailer with no employees or offices in the State of Red and, therefore, has not collected any sales tax under the new Act. Your client has received a notice from the State of Red requiring your client to register for a license to collect and remit the sales tax. A refusal to do so will result in your client being prohibited from online sales of any goods or services in the State. Your client wants to know if the business must comply with the sales tax requirements of the State of Red. Also, what implications might this have in other states where your client does business online?
Prepare a tax memorandum for use in advising your client. State the issue(s) to be resolved and make sure to identify the specific authorities (code, statutes, case law etc.) that address your client’s tax issues. Make sure to weigh authorities both for and against your client’s position.
The memo should be 2 pages, double spaced, one-inch margins, 12pt.
Hint: search engine words “online seller” “sales tax” “court decision”
Fact Pattern #2
Your client, Smartbucks, a U.S. corporation conducts a major part of its coffee business through its wholly owned international subsidiary, Trader Jobs, located on the Turks and Caicos Island. As Smartbuck’s accountants, your firm does the tax planning for these two related companies to minimize or avoid the payment of taxes by Smartbucks in the US which is a higher tax jurisdiction than Turks and Caicos jurisdiction.
In the past Smartbucks sold industrial coffee equipment to Trader Jobs. Trader Jobs then sold the same equipment for profit. The profits from those sales were reported and taxed in the Turks and Caicos, which resulted in significant tax savings for Smartbucks. Your firm explained to your client that this transaction, known as “transfer pricing,” allows Smartbucks to shift profits
that would otherwise be subject to U.S. tax offshore to avoid tax. Your firm wants to use the same method to identify and shift costs between Smartbucks and Trader Jobs.
Specifically, Smartbucks has formulated a new latte coffee recipe with Trader Jobs and both companies would benefit taxwise if the research and development costs could be shared between them. To document the transaction, Smartbucks and Trader Jobs entered into a research and development (“R&D”) cost-sharing agreement which allows Trader Jobs the authority to license the new recipe internationally. You previously advised your client that the interplay of cost and income allocation between the two companies in this transaction will result in significantly reduced taxes for Smartbucks.