Archive for the ‘Illinois’ category

Weekly Update for 3/9: Arizona Rejects Amazon Legislation, While New Jersey Considers Implementing Amazon Law; Missouri Considers Amnesty Legislation; Pennsylvania Considers Closing the “Delaware Loophole”…and more.

March 12, 2012

 by Jennifer Weidler

ARIZONA

Arizona Senate Rejects Proposed Amazon Legislation

The Arizona Senate rejected proposed Amazon legislation, SB 1338, which would have broadened Arizona’s definition of retailer to include any company with a warehouse in the state.

CALIFORNIA

California Revises Publication on Internet Sales, Incorporating eBooks and Apps

The California State Board of Equalization revised Publication 109 regarding Internet Sales, in order to provide guidance on the tax treatment of eBooks and apps.  According to the Publication, the transfer of a downloadable file such as an eBook or app is not a taxable transaction, without purchasing any physical storage medium.

GEORGIA

Georgia House Approves Legislation to Establish Tax Tribunal

The Georgia House of Representatives approved legislation, HB 100, which would establish a state Tax Tribunal in the state’s judicial branch.

ILLINOIS

Illinois Releases Information Letter of “Deal-of-the-Day” Transactions

The Illinois Department of Revenue issued an Information Letter providing guidance on the treatment of “Deal-of-the-Day” transactions.  For more detailed information, see the Information Letter.

IOWA

Iowa Court Grants Refund Relief for Illegal Taxation

The Iowa District Court ordered a refund of franchise fees that were collected in excess of the amount determined to be allowable for which the City of Des Moines could impose.  The court found that the refund was a constitutional remedy for the illegal taxation of the city’s residents.  The fact that the funds gathered from the illegal taxation were used wisely, legally and with the best intentions was not a defense.

MISSOURI

Missouri House Approves Amnesty Legislation

The Missouri House has approved legislation, HB 1030, which would offer a tax amnesty period, slated to run from August 1 to October 31, 2012.  The amnesty program would cover all taxes administered by the Department of Revenue and would waive penalties.  The amnesty program is projected to raise $75 million for the state.

NEW JERSEY

New Jersey Finds Nexus Based on Telecommuting Employee

The New Jersey Superior Court upheld a Tax Court ruling, which found that a foreign corporation was subject to the New Jersey Corporate Income Tax because it regularly and consistently permitted one of its employees to telecommute from her New Jersey residence.  Her full-time telecommuting was viewed as doing business in the state, thereby requiring the payment of the tax as well as the filing of corporate income tax returns in New Jersey.

New Jersey Introduces Amazon Legislation

Legislation, S 1762, has been introduced in New Jersey that would grant Amazon.com a temporary state sales tax collection exemption if it builds warehouses within the state.   Pursuant to the bill, distribution facilities built in the state after January 1, 2012 would not create nexus with the state until July 1, 2013, provided that Amazon.com creates at least 1,500 full-time jobs in the state and makes a capital investment exceeding $130 million.

New Jersey Court Affirms Value of Residential Property Where Owner’s Evidence was Insufficient

The New Jersey Tax Court affirmed the value of a residential property established by the assessment after finding that the owner’s evidence regarding comparable sales was insufficient to establish the true market value of the property.  Although the owner overcame the presumption of validity attached to the assessment of his property, he was unable meet his burden of proof with regard to establishing the true market value of the property.

NEW MEXICO

New Mexico Governor Vetoes Combined Reporting Legislation

New Mexico’s Governor vetoed legislation, SB 9, which would have established combined reporting in the state.  The bill would have required combined reporting for multistate retailers with a 30,000 square feet or large facility in New Mexico.  Additionally, it would have lowered the top corporate income tax rate from 7.6 percent to 7.5 percent.

PENNSYLVANIA

Pennsylvania Considers Legislation to Allow Counties to Institute Local Taxes to Reduce or Eliminate Property Tax

The Pennsylvania legislature is considering legislation, HB 2230, which would allow counties in the state to institute a local sales or income tax in order to reduce or eliminate the property tax.  Pursuant to the bill, county governments could ask voters to approve a sales or income tax, which would ultimately provide property tax relief.

Pennsylvania Considers Competing Legislation to Close “Delaware Loophole”

During January, legislation, HB 2150, was introduced that suggested a close to the “Delaware loophole.” For previous coverage of that bill, please click here.  Competing legislation is currently being drafted that will seek to create a broader add-back provision than that contained in HB 2150.

VIRGINIA

Virginia Governor Approves Legislation Phasing in Single-Sales-Factor

Virginia’s Governor has approved legislation, HB 154, which creates a phase-in of single-sales-factor apportionment for retailers.  The bill requires retailers to begin utilizing a triple-weighted sales factor beginning July 1, 2012 and a quadruple-weighted sales factor beginning July 1, 2012.  Finally, a single-sales-factor would be implemented beginning July 1, 2015.

WISCONSIN

Wisconsin Rules that Individual is Responsible for Portion of Company’s Tax Liabilities

The Wisconsin Tax Appeals Commission held that an individual was responsible for a portion of a company’s sales tax and withholding tax liabilities.  The Commission reasoned that the evidence established that the individual maintained the title of president of the company, retained check-writing authority and participated on the board of directors.  As such the Commission found the individual to be a “responsible” person.

2011 Year-End SALT Update

January 6, 2012

 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.

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Weekly SALT Update Nov. 7, 2011

November 7, 2011

 By Paul Masters with contributions by Jennifer Weidler in Chamberlain’s Philadelphia office.

State Regulations and Public Notices

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.

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

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.

And then there were seven: 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.

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. (more…)

Weekly SALT Update – Nov. 3, 2011

November 3, 2011

 By Paul Masters with contributions by Jennifer Weidler in Chamberlain’s Philadelphia office.

State DOR Letters and Policy Rulings

But where’s your paper … New Mexico hearings officer rules that a taxpayer does not qualify for a gross receipts tax deduction merely because the taxpayer did not possess any nontaxable transaction certificates as required by NMSA 1978, Section 7-9-43 (2001). Other states have similar requirements for certificates, but merely because they are “required” does not necessarily mean the courts agree.

Virginia Tax Commissioner rules that an egg tray washer was not “processing” as defined by Virginia Code § 58.1-609.3(2)(iii) as it was used between the processing to maintain cleanliness. Even though the equipment was necessary to operate the actual processing, the equipment itself was not involved in the processing of the eggs for sale. Similarly, a “honey wagon” that was used to collect the bird droppings and then spray the droppings as fertilizer on fields was not part of the processing, even though the droppings came from the waste resulting from the cleaning of the eggs. Finally, the Commissioner rules that pit fans used to dry bird droppings that are then sold to farmers as fertilizer are not processing, but do qualify for the agricultural exemption at Virginia Code § 58.1-609.2(1). Different result should apply in Texas, as drying an item is a physical change, thus processing.

State Regulations and Public Notices

North Carolina updates its taxability matrix for the SSUTA.

The New Jersey Division of Taxation has published answers to frequently asked questions relating to the NJ-1040 e-filing mandate. For the 2011 taxable year forward, tax preparers expecting to prepare eleven (11) or more New Jersey individual income tax returns must electronically file those returns for which an electronic filing option is available.  Those returns not included in the e-filing mandate are New Jersey nonresident, part-year resident, amended and prior year returns.

The Connecticut Department of Revenue issued an Informational Publication (IP 2011(15)) answering frequently asked questions regarding the Connecticut individual use tax.  The Informational Publication addresses changes in legislation affecting Connecticut use tax filing and payment obligations, which occurred during 2011.

Starting January 1, 2011, those tax preparers filing more than five (5) returns per year with New York are now required to e-file.  The New York Department of Taxation may impose a penalty on both the preparer and the taxpayer for a failure to electronically file returns.  Additionally, beginning with the return due on March 20, 2012, sales tax returns for annual filers must be filed electronically.

State Legislative Affairs

Economic nexus comes into play again. Michigan signs into law SB 650 which defines nexus for a financial institution as any of the following: (i) physical presence, (ii) Michigan source receipts of at least $350,000 or (iii) has an ownership interest in a flow through entity.

Judicial and Administrative Decisions and Pleadings

A coalition of public school districts in Texas files suit against the State of Texas on constitutional grounds, arguing that the state tax system funding public schools is unfair, and does not provide the schools with sufficient funding to provide a free education to students.

In another school funding case, a federal district court rules against Lynch, who argued that Alabama’s property tax rates, among the lowest in the country, violate the Civil Rights Act of 1964 and the Equal Protection Clause of the Fourteenth Amendment. How? The tax scheme limits the ability of rural counties to tax wealthy white landowners. The opinion is looooong – really long. In the end, the court focused on its view that the tax structure was based on economics, not race, and therefore passed muster under the rational basis standard.

On further thought … Washington Court of Appeals reverses its decision on remand and finds that a hospital was not entitled to an exemption for amounts collected and paid to a third-party service provider. In its initial decision, the Court of Appeals determined that the payments did not qualify as gross income subject to business and occupation (B&O) tax. But the Supreme Court reversed the Court of Appeals’ ruling in Washington Imaging Services, LLC v. Wash. Dept. of Rev., 252 P3d 885 (Wash. 2011). Because there was no independent obligation for its patients to pay the third-party service provider for services rendered, the hospital did not make payments on behalf of its patients as their agent, the payments made constituted gross income. The exemption under Wash. Admin. Code § 458-20-111 did not apply as they payments were not customary reimbursements or advances made in the ordinary course of business.

NY Division of Tax Appeals rules against the estimated assessment made by an auditor for sales tax. While the taxpayer lacked the records necessary to avoid an estimated audit, the auditor made assumptions not based on reality, used information limited to only one quarter and extrapolated over a multi-year period. Thus the assessment was arbitrary.

Illinois Court of Appeals affirms decision to use income valuation approach because the sales comparison method provided unreliable. The government had used comparisons that included sales resulting from Department of Justice divestiture orders. Such sales necessarily are not defined as arm’s length transactions.

The Texas Court of Appeals for the 14th District (Houston) rules that Hotels.com and other similar online companies need not remit occupancy tax on the full amount received by online customers for the purchase of hotel space through the web site. Rather, the hotel occupancy tax is levied solely on the amount received by the hotel.

Other Documents

None noted.