Act 332 Essay

698 Words Mar 29th, 2015 3 Pages
1
ACC322 Writing Assignment eVade Pays Up eVade, an online retailer, fulfills its online orders by shipping its products directly to customers in all 50 states. eVade does not have a brick-and-mortar store presence in any state, but does operate distribution centers in various states across the country, including
State X. Consistent with its practice in all 50 states, eVade does not collect or remit sales tax to State X.
In recent court rulings, State X has taken the position that operating a distribution center within a state constitutes nexus and thus would subject that company to collect and remit sales tax on all sales within that state.
As of December 31, 2011, eVade has operated its distribution center in State X
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Applicable Professional Pronouncements
1. Paragraph 36 of Statement of Financial Accounting Concepts No. 6: A liability has three essential characteristics: (a) it embodies a present duty or responsibility to one or 2 more other entities that entails settlement by probable future transfer or use of assets at a specified or determinable date, on occurrence of a specified event, or on demand, (b) the duty or responsibility obligates a particular entity, leaving it little or no discretion to avoid the future sacrifice, and (c) the transaction or other event obligating the entity has already happened.
2. Paragraph B18 of the Basis for Conclusions of Interpretation 48: Liabilities are required to be recognized when the obligating event has occurred. For current income tax liabilities, the obligating event is the generation of taxable income. Generally, income tax systems are founded on the principles of compliance, self-assessment, and self-reporting.
That is, a taxpayer computes its taxable income and related tax liability and reports that information to taxing authorities as required by law. The enforcement powers of the taxing authority are secondary to the self-assessment and self-reporting requirements.
Question 2. What effect, if any, does eVade’s decision to participate in the tax amnesty program have on the amount recognized as of March

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