2011 Year-End SALT Update

 by Jennifer Weidler

ARIZONA

Arizona DOR Finds Nexus for Sales Representatives Providing Customer Support and Training

Of course it had nexus: Arizona DOR rules that corporation has substantial nexus due to presence of sales representatives who provide customer support and training.

CALIFORNIA

California Issues Proposal to Amend Definition of “Retailers Engaged in Business in this State”

California Board of Equalization issues a proposal to amend the definition of “retailers engaged in business in this state,” in conformance with AB 155. It will take effect either September 15, 2012 or January 2013. The effect of this change would be to expand the requirement for retailers to register with the Board and remit California use taxes, or to be subject to payment of these use taxes on such failure to remit.

COLORADO

Colorado Issues Revisions to Sales Tax

Colorado DOR revises FYI detailing responsibility of taxpayer to pay sales tax on vending machine receipts. Colorado DOR revises FYI 62 regarding rules on collecting local sales tax to be remitted to the state.

DELAWARE

Delaware Court Rules Race Track Operator Need Not Include Money in Trust Fund in Calculating Indiana Tax

Delaware bankruptcy court rules that a race track operator need not include money in trust fund in calculating Indiana tax as the money in the trust fund is not its income.

FLORIDA

Florida Releases Publication Concerning Taxability of Hotel Rewards Points Programs

The Florida Department of Revenue has issued a Publication addressing the taxability of hotel rewards points programs.  Generally, members of a rewards points program are not required to pay tax on the points redeemed in exchange for a room or a room upgrade.  Instead, the members are only required to pay tax on charges which are not covered by the redemption of points.

ILLINOIS

Illinois Representative Introduces Bill to Repeal Amazon Law

An about face on the Amazon law in Illinois, as Rep. Winters introduces HB 3869 to repeal the affiliate provision of the law that allows Illinois to require Amazon-type entities to collect Illinois use tax. It is currently in the Rules Committee.

Chicago DOR Issues Revised Letter to Parking Lot Operators and Hotels Announcing Changes to Chicago 2012 Taxes

The Chicago Department of Revenue issued a revised letter to parking lot operators and hotels announcing changes affecting Chicago 2012 taxes.  The changes include a “congestion fee” increase in the daily, weekly and monthly parking tax rates, effective January 1, 2012.  Additionally, the parking tax and hotel accommodations tax were increased.

Illinois Enacts Legislation Changing Various Credits, Exclusions, Implementing an Independent Tax Tribunal and Amending Other Tax Laws

Illinois enacted legislation that implements numerous changes.  For instance, it extends the research and development credit and the investment tax credit, extends the sales and use tax exemption for certain food and medical equipment, increases estate tax exclusion amounts and establishes an Independent Tax Tribunal Board to hear protests of notices of tax liabilities or deficiencies.

INDIANA

Indiana to Offer Free Online Filing for Qualified Taxpayers

Indiana will begin to offer free online tax filing services during January 2012.  The free service is available to those who qualify through the new Indiana freefile program.  Generally, in order to qualify, a taxpayer must have an Adjusted Gross Income of less than $57,000.  The program offers qualifying taxpayers the opportunity to file both their 2011 federal and state taxes using professional tax software provided by four major online tax preparers at no cost to the taxpayer.

Indiana Retailer Sues State to Require Amazon to Collect Taxes

On November 3rd, Simon Property Group, a retail real estate management company, filed suit against the state of Indiana in an attempt to force it to require Amazon.com to collect sales tax.  The suit is an attempt to address an issue that brick-and-mortar stores continue to raise in the context of the Amazon debate: that remote retailers have an unfair advantage in that they sell products into Indiana, but do not charge sales tax.  Meanwhile, brick-and-mortar stores must collect taxes on in-state purchases.  The suit is an attempt by the retailer to, in its view, level the playing field.

Indiana Department of Revenue Issues Information Bulletin on Sales Tax

Indiana Department of Revenue issues information bulletin on application of sales tax to restaurants, and a dealer must pay sales tax on the value of cars not used by sales staff, services to setup rented property are included as taxable as part of the rental receipts, cleaning agents do not qualify for manufacturing exemption, and no public transportation exemption for company that did not document sale of trucking services for hire – listed wrong on invoice. And in an expanded discussion, the DOR rules a manufacturer must pay use tax on HVAC equipment essential for manufacturing operations.

Indiana Announces Super Bowl Exemptions

Indiana has announced that the NFL and its affiliates will be exempt from paying Indiana state taxes related to the Super Bowl.  Notably, these exemptions only apply to the NFL and a specifically enumerated list of affiliates.  The exemption covers the adjusted gross income tax, and withholding taxes on the salaries and wages of employees of the NFL or an affiliate, with the exception of those employees who are residents of Indiana.

MAINE

Maine Issues Revised Guidance Relating to Determination of Residency Status

The Maine Revenue Services issued revised guidance regarding how residency status is determined in the state.  In General, the guidance explains the tax obligations of Maine residents, nonresidents, and part-year residents.

MARYLAND

Maryland Comptroller Advises Against Pursuing Remote Sales Tax Collection Until Congressional Authorization

In a letter written to the Governor, Maryland Comptroller Peter Franchot advised that state leaders not pursue the issue of remote sales tax collection until authorized by Congress.  Franchot rationalized that the state should not expect to be able to collect the estimated millions lost each year due to the uncollected sales tax.  Furthermore, he noted that enactment of legislation would result in the “virtual assurance of litigation.”  Additionally, as we have reported previously, Franchot touched on the fact that states that enact legislation requiring remote sales tax collection have prompted remote sellers to terminate affiliate relationships in those states in order to minimize their tax burdens. Previous Posts 1, 2.

MICHIGAN

General Motors Files Petition for Writ of Certiorari Over Retroactivity Issue

Recently, General Motors Co. filed a petition for writ of certiorari with the United States Supreme Court to address the issue of whether Michigan’s attempt to retroactively deny the taxpayer’s refund claim through the application of an eleven (11) year retroactive use tax amendment was unconstitutional.  We have addressed this issue in a previous blog post, touching on other cases in which taxpayers have attempted to challenge a state’s attempt to enact legislation to retroactively deny refund claims. The state’s reply in General Motors is due by November 28th.

MISSOURI

Missouri Sets Sales and Use Tax Rates for First Quarter 2012

Missouri announced its local sales and use tax rate changes, which are effective as of January 1, 2012. For detailed information, please see the above link.

NEW JERSEY

New Jersey Division of Taxation issues Memorandum Relating to International Affiliate Transactions

The New Jersey Division of Taxation has issued a technical advisory memorandum regarding transactions between affiliate corporations involving charges and deductions for intangible costs and expenses where the recipient or payee affiliate is not a U.S. income taxpayer.  For more detailed information, please see the memorandum.

New Jersey Department of Treasury Issues Summary of Important Tax Changes

The New Jersey Department of Treasury has issued a summary of important tax changes for tax year 2011.  One notable change is that the filing deadline for income tax is April 17, 2012.  Additionally, for purposes of a credit for taxes paid in other taxing jurisdictions, the Philadelphia nonresident wage tax rate for tax year 2011 is 0.034985%.  For more detailed changes, please see the summary.

NEW MEXICO

New Mexico to Halt Practice of Automatically Mailing Personal Income Tax Packages

The New Mexico Taxation and Revenue Department has announced its decision to no longer automatically mail personal income tax packages to individual taxpayers.  The change is expected to result in approximately $70,000 in savings for the state.  The Department’s practice will now be to mail tax packages only if requested.  However, it will mail postcards to all taxpayers who were previously sent tax packages urging them to file electronically.  Furthermore, the state is switching to digital processing of personal checks, which is estimated to save the state an additional $18,000 and enable faster deposits into state accounts.

NEW YORK

New York City Hotel Occupancy Tax Rate Extended Through December 1, 2013

During 2009, the hotel occupancy tax rate in New York City was increased from 5% to 5.875%.  It was set to expire on December 1^st of this year.  However, Mayor Bloomberg signed Introductory Number 704-A onDecember 14, 2011, retroactively maintaining the additional 0.875% tax on the occupancy of hotel rooms throughout the City untilDecember 1, 2013.

New York Discontinues Form IT-150; Residents to Utilize Form IT-201

Effective tax years 2011 and thereafter, Form IT-150 has been discontinued.  All full-year New York state residents must now use Form IT-201 to file and pay their state taxes.  Furthermore, regarding amended returns, Form IT-150-X has been discontinued for tax year 2011 and thereafter.  However, taxpayers may still use Form IT-150-X in order to amend a return for tax years before 2011.

New York Department of Taxation and Finance Issues Advisory Opinion on Taxability of Sale of Laser Surgery Equipment

The New York Department of Taxation and Finance issued an Advisory Opinion regarding whether bills issued in conjunction with the sale of laser surgery equipment are subject to that state’s sales tax.  The taxpayer, a medical laser surgery equipment and software retailer, initially bills an up-front charge for the sale of the equipment.  However, it also bills two other fees to its clients: a $10 fee for a plastic treatment card, (inserted into the laser surgery equipment in order to operate the equipment) and a $100 per-procedure fee.  The taxpayer claimed the fee represented a royalty for the licensing to the customer of patented surgical procedures.  However, the DOR found that the taxpayer failed to meet its burden to establish that the license fee in question was for a patent that was not incorporated in whole or in part into the laser.

New York Issues Bulletin Addressing New York South Income of Nonresidents

New York’s Department of Taxation and Finance issued a bulletin addressing state source income of nonresidents. The bulletin provides a list of those items that are included in New York source income and those that are not.

New York Issues Bulletin Addressing New York South Income of Sole Proprietorships and Partnerships

New York’s Department of Taxation and Finance issued a bulletin addressing source income of sole proprietorships and partnerships.  The bulletin provides a list of those items that are included in New York source income and those that are not.

New York Issues Bulletin Explaining “Personal Place of Abode”

New York’s Department of Taxation and Finance issued a bulletin addressing the term “permanent place of abode.”  The bulletin addresses what it means to maintain a permanent place of abode in New York, as well as special rules related to military personnel, college students and corporate apartments.

New York Issues New Withholding Tables for 2012

New York issued new withholding tax tables for the state and the City of Yonkers.  The changes go into effect for payrolls made on or after January 1, 2012.

New York Issues Technical Memorandum Summarizing 2011 Personal Income Tax Legislation

The New York Department of Taxation and Finance issued a Technical Memorandum providing a summary of 2011 legislation affecting the personal income tax.  For details, refer to the link for the Technical Memorandum.

New York Issues Technical Memorandum Summarizing 2011 Franchise Tax Legislation

The New York Department of Taxation and Finance issued a Technical Memorandum providing a summary of 2011 legislation affecting the franchise tax.  For details, refer to the link for the Technical Memorandum.

New York Court of Appeals Invalidates Rule Prohibiting Taxicab Owners from Collecting Sales Tax

The New York Court of Appeals invalidated a New York City Taxi & Limousine Commission regulation, which prohibited taxicab owners from collecting sales tax.  The Court of Appeals held that the commission failed to show any rational basis for the regulation.

OHIO

Ohio Revises Requirement for In-State Car Dealers’ Collection of Sales Tax

Ohio revises its requirement for Ohio car dealers to collect Ohio sales tax on non-resident purchases of cars to be taken out of state, with collection required for seven states.

Ohio Supreme Court Rules No Property Tax Exemption Available for Dorms Where Leased Space Income Did Not Support University Purpose

The Ohio Supreme Court reversed a decision, and ruled that OSU cannot receive a property exemption for dorms used to house veterinary medicine students. It also leased out space to a McDonald’s and later a credit union. The Court ruled that this income did not support the university purpose, as there was no operational relationship between the income and OSU.

OKLAHOMA

Oklahoma Announces New Local Sales and Use Tax Rates

The Oklahoma Tax Commission announced new local sales and use tax rates, effective January 1, 2012.  For more details, see the attached link.

Oklahoma Issues New 2012 Withholding Tables

Oklahoma has issued new withholding tables for 2012.  For information, see the attached link.

PENNSYLVANIA

Philadelphia Business Privilege Tax Amended

Recently, the Philadelphia Department of Revenue amended § 302 of the City of Philadelphia’s Business Privilege Tax (“BPT”) Regulations to provide that, for purposes of the Philadelphia business privilege tax, receipts of businesses will not include any interest or fees received on loans made under the federal New Market Tax Credit program.  The change is effective for tax years 2011 forward.  Additionally, Philadelphia City Council passed bills number 110554 and 110548-A, which both relate to additional amendments to the BPT.  Bill number 110554 amends the BPT to allow for certain exclusions, modify certain definitions and revise certain tax rates.  Meanwhile, bill number 110548-A provides for certain BPT and license fee relief to new businesses in Philadelphia.

RHODE ISLAND

Rhode Island Issues Advisory Regarding Mailing of Tax Booklets for Filing of 2011 Returns

The Rhode Island Division of Taxation (“Division”) issued an advisory regarding its changed policy with regard to the mailing of tax booklets for 2011 personal income tax return filings.  The Division mailed 15,000 postcards to taxpayers who used the agency’s forms last filing season in order to notify them that the Division eliminated the automatic bulk mailing of tax booklets.  Instead, forms, instructions and booklets will be available to taxpayers via the Division’s website, by emailing a request to the Division, by visiting the Division’s office, or by calling the Division form request line.  On January 18, 2012, the Division will begin accepting e-filed returns.

SOUTH CAROLINA

South Carolina to Offer Tax Refunds Through Prepaid Debit Cards

The South Carolina Department of Revenue announced its intention to use prepaid debit cards in place of paper checks for 2012 income tax refunds.  The cards are intended to replace the printing and mailing of paper checks.  The change is projected to save the state significant amounts of time and money.  Notably, South Carolina taxpayers will still have the option to designate direct deposit or to receive a paper check if they do no prefer a debit card.  With the debit card, recipients may either transfer the refund amount into their personal bank account or utilize the card to conduct transactions anywhere Visa debit cards are accepted.  For more detailed information on the debit cards, click here.

UTAH

Utah Issues Notification of Proposed Rule Change Implementing Three-Factor Formula for Apportionment

Utah State Tax Commission notifies public of proposed rule change implementing three-factor formula for apportionment It also requires services to be “in Utah” if the benefit in Utah exceeds that received in any other state, and sets forth rules for the apportionment of income from intangible property.

Utah Issues Private Letter Ruling Finding Sales of Authentication and Resolution Services Using Digital Certificates to be Nontaxable

The Utah State Tax Commission issued a private letter ruling relating to the taxability of the sales of authentication and resolution services using digital certificates.  The letter stated that such sales are not subject to Utah sales and use tax. It found that digital certificates are not distinct or separate from the authentication and resolution services since the certificates cannot be provided separately. As such, it reasoned that digital certificates are part of nontaxable authentication services.

Utah Issues Private Letter Ruling Finding PowerPoint Presentations Subject to Utah Sales Tax

The Utah State Tax Commission issued a private letter ruling regarding a taxpayer’s sales of PowerPoint presentations to Utah customers.  The letter stated that the sales are subject to Utah sales tax. The Commission found that the PowerPoint sales were a sale of property and not the sale of a service.

WASHINGTON

Washington Out-of-State Mail Order Retailer has Substantial Nexus with In-State Affiliate

The Washington Department of Revenue found that an out-of state mail order retailer had substantial nexus with Washington where an in-state affiliate sold gift cards to customers that could be used to place catalog orders, distributed catalogs, and assisted the out-of-state retailer’s customers.

Washington Court of Appeals Affirms Taxability of Breathing Aids

Recently, the Washington Court of Appeals affirmed the taxability of breathing aids provided by the taxpayer.  The taxpayer appealed a Superior Court’s dismissal of its appeal of a refund in sales taxes, in which it argued that its devices fell under the exemption for prosthetic devices and/or orthotic devices from January 2001 through June 2004, during which time the legislature had no statutory definitions for the exemptions.  The Court of Appeals affirmed the trial court findings that the respiratory devices did not fall within the ordinary meaning of prosthetic device since they did not replace a missing or damaged body part, and were not entirely “worn on the body,” but instead plugged in.

Washington DOR Issues December 2011 Edition of Tax Facts

The Washington Department of Revenue issued its December 2011 edition of Tax Facts, a publication that discusses the Department’s updates.  The publication discusses the Department’s move towards electronic communication, e-filing requirements, and provides resources for taxpayers for filing returns and paying taxes.

WEST VIRGINIA

West Virginia Revises Publication Regarding Non-Resident Attorneys’ Reporting Obligations

The West Virginia State Tax Department revised Publication TSD-423, which outlines the tax reporting and payment responsibilities for non-resident attorneys and law firms.

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