Weekly SALT News Update

State DOR Letters and Administrative Rulings

The Tennessee Department of Revenue rules that software configuration services are not subject to sales tax. The industrial equipment exemption does not apply as to sales tax in connection with the sale of compressed air with compressors on site. The assembly of leased equipment is subject to sales tax as services necessary to complete a sale.

In a shift, the Indiana Department of Revenue issues a statement that it will no longer impose sales tax on digital goods unless specific circumstances exist, citing the Streamlined Sales and Use Tax Agreement.

The Louisiana Department of Revenue issues guidance on the new exemption from sales tax for breastfeeding equipment.

The Missouri Administrative Hearing Commission upholds a retaliatory insurance tax against a Kansas insurance company.
The Montana Revenue Tax Appeal Board rules on property tax assessments based on comparables, and lays out how not to fight a property tax dispute.

New Jersey issues guidance on the sales tax treatment of manufacturer and seller coupons. It states that the coupons should be treated “like cash” since the seller gets the coupon value from the manufacturer. Thus sales tax is charged on the face value of the coupon. However, coupons issued by sellers are treated as discounts, and not as cash. Sales tax is imposed on the discounted value of the sale. Note that the sales tax treatment for coupons varies from state to state. For example, the Texas Comptroller seems to treat Groupon discounts as cash , while other coupons are reductions in price for sales tax. See also New York’s policy here.

The Kansas Department of Revenue clarifies that layaway charges are not subject to sales tax.

 

State Regulations and Public Notices

Arkansas and Kentucky revise their taxability matrix for the streamlined sales and use tax agreement.

The California Franchise Tax Board lays out the state franchise tax treatment of series LLCs. While California law does not provide for series limited liability companies, it does accommodate them for tax purposes.

The Mississippi Attorney General opines that property manufactured in Mississippi does not qualify for the free port warehouse exemption as it goes beyond the purpose of the exemption and does not comply with a strict reading of the statute.

 

State Legislative Affairs

None noted.


Judicial and Administrative Decisions

New York Tax Appeals Tribunal rules that a taxpayer must consolidate its returns. Presumption for consolidation when wholly owned and combined group engages in unitary business. Ernst & Young LLP was engaged to provide multistate tax planning ideas and strategies. No business purpose as transactions entered into had no potential for profit and unnecessary for credit and collection functions. E&Y report showing met Section 482 principles irrelevant as no proof that transaction “merits tax respect.”

The 9th Circuit rules in Confederated Tribes and Bands of the Yakama Indian Nation that a state requirement imposed by Washington for tribal members to collect sales tax does not violate the U.S. treaty with the tribe. The requirement imparts a minimal interference into the business of the tribe, and is constitutional.

The United States Supreme Court denied petition to both the KFC and the Lamtec cases. The two cases used an expansive interpretation of nexus to that has been hotly contested. The Court, without comment, declined the opportunity to clarify Quill.

The Maryland Court of Appeals in Timothy A. Frey, et al v. Comptroller holds that the nonresident tax on in-state income is constitutional. It is a compensatory tax, and should be upheld pursuant to Oregon Waste Systems, Inc. v. Department of Environmental Quality,511 U.S. 93 (1994).

The Commonwealth Court of Pennsylvania in Kurbatov v. Department of Labor elevated its decision to a published ruling, laying out the line on whether a person is an employee or an independent contractor.

 

Other Documents

Rutgers issues a study showing New Jersey lost up to $171 million in sales and use tax as a result of uncaptured Internet sales.

The Texas Taxpayers and Research Association sides with the Texas Comptroller and the Attorney General in the Allcat case, opining that the Texas franchise tax cannot be viewed as a net income tax, but is a tax on an entity not the natural partner. TTARA also pointed to the U.S. Bureau of the Census as declaring the Texas franchise tax to be a fee for doing business, and not a net income tax. The Texas Attorney General filed its brief on the merits. A detailed analysis is here.

Explore posts in the same categories: Franchise Tax, Income Tax, Property Tax, Sales and Use Tax

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