Posted tagged ‘amazon’

Weekly Update for 3/16

March 19, 2012

 by Jennifer Weidler

ARIZONA

Arizona Court Holds that Cooperative Direct Mail Advertising is Not Subject to Use Tax

The Arizona Appeals Court held that cooperative direct mail advertising was not subject to the state’s use tax, since the dominant purpose of the taxpayer’s business was to obtain nontaxable design, mailing and printing services, and not tangible personal property.

INDIANA

Indiana Legislature Passes Bill to Phase Out Inheritance Tax

The Indiana General Assembly has passed legislation, SB 293, which will phase out the state’s inheritance tax, gradually reducing the rate until it hits zero during 2022.   The phase out would be retroactive to January 1st.

KANSAS

Kansas House Approves Bill to Alter State Income Tax Structure

The Kansas House approved legislation, SB 177, which would make several modifications to the state’s income tax structure.  The legislation includes changes to the state’s sales tax exemption and business income exemption provisions, formulaic individual income tax rate reductions, Rural Opportunity Zone expansions, tax credits and more.

MARYLAND

Maryland Senate Approves “Amazon” Law

The Maryland Senate has approved legislation, SB 523, which includes an “Amazon” law and an income tax increase.  The bill would add three additional tax brackets and rates and would impose a flat tax on those filers making more than $500,000.  The bill also contains affiliate nexus/”Amazon” language.

MICHIGAN

Michigan Court of Appeals Finds Taxpayer Could Not Collaterally Attack Underlying Assessment

The Michigan Court of Appeals held that a taxpayer could not appeal a use tax assessment, as the sole shareholder and responsible corporate officer of a retailer, where the taxpayer’s appeal was untimely and where he was statutorily precluded from collaterally attacking the underlying assessment.

NEW JERSEY

New Jersey Legislature Passes “Amazon” Law

The New Jersey Assembly has passed legislation, A 2608, which would give Amazon.com a temporary sales tax collection exemption in exchange for job creation.  Pursuant to the bill, those retailers that make capital investments of at least $130 million and create at least 1,500 full-time jobs in the state would not have nexus until July 1, 2013.

New Jersey Legislature Passes Bill Expanding State’s Nexus Rules

The New Jersey Assembly passed legislation, A 2608, which would expand the state’s nexus rules by creating nexus for sellers that use in-state affiliates to perform activities to aid in business development or to maintain a New Jersey business market.  Moreover, the bill would create nexus for out-of-state businesses with distribution centers or subsidiaries in the state.

PENNSYLVANIA

Philadelphia DOR Releases 2012 KOZ Booklet

The Philadelphia Department of Revenue has released its 2012 Philadelphia Keystone Opportunity Zone Programs Booklet, which provides guidance on calculations, credits, two-factor apportionment formula, and more.

TENNESSEE

Tennessee General Assembly Approves Bill to Exempt Amazon from Tax

The Tennessee General Assembly passed legislation, HB 2370, which would temporarily exempt Amazon.com from collecting state sales tax.  Pursuant to the legislation, Amazon.com will build new facilities in the state and create thousands of jobs, in exchange for sales tax exemption through January 1, 2014.  The bill is now awaiting the Governor’s signature.

TEXAS

Texas Announces Amnesty Program Slated for June 2012

Texas has announced that it will offer a tax amnesty program for businesses, during which it will waive all interest and penalties for taxpayers that file or amend delinquent tax reports and pay all taxes due.  Reports originally due prior to April 1, 2012 are eligible, and the amnesty program will run from June 12 through August 17, 2012.

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.

Weekly Update for 3/2: Georgia Considers “Amazon” Law; Verizon Challenges Statute of Limitations in Florida Assessment; Maryland Rules on Statute of Limitations for Refund…and more.

March 5, 2012

 by Jennifer Weidler

COLORADO

Colorado DOR Issues Letter Ruling Discussing Tax Exempt Status of Photovoltaic Energy Systems

The Colorado Department of Revenue issued a letter ruling explaining the sales exempt status of photovoltaic energy systems.  The letter ruling clarified that a company or customer who purchases photovoltaic energy systems is exempt from sales tax because all sales and uses of qualifying renewable energy components are entitled to the renewable component exemption.

FLORIDA

Verizon Business Purchasing, LLC Challenges Florida Sales and Use Tax Assessment

Verizon Business Purchasing, LLC has filed a complaint challenging a $3 million Florida sales and use tax assessment, claiming that the statute of limitations expired prior to the proposed assessment becoming final.  The complaint alleges that the final assessment was invalid because although the parties agreed to extend that statute of limitations until March 31, 2011, the notice of proposed assessment was issued with less than sixty days left in the statute of limitations period. Therefore, the complaint contends, it did not become a final assessment until the expiration of the sixty days, on April 11, 2011, which was after the statute of limitations had lapsed.

GEORGIA

Georgia House Considers “Amazon” Law

The Georgia House of Representatives is considering legislation, HB 993, which would implement click-through nexus and similar provisions, aimed at requiring out-of-state online retailers to collect state sales tax.  The legislation contains a threshold that must be met: an out-of-state online retailer must have at least $10,000 in annual sales through in-state affiliates receiving a commission in order to be subject to collecting the tax.


HAWAII

Hawaii Senate Committee Passes Streamlined Sales and Use Tax Legislation

The Hawaii Senate Ways and Means Committee passed legislation, SB 2226, which would bring the state into conformity with the Streamlined Sales and Use Tax Agreement.

INDIANA

U.S. Supreme Court Hears Oral Arguments in Armour v. Indianapolis

The United States Supreme Court heard oral arguments in Armour v. Indianapolis, which tackles an equal protection challenge.  During 2001, Indianapolis gave taxpayers the option of paying upfront or in monthly installments for special assessments related to the connection of their properties to city sewers.  The case challenges the city’s decision not to provide refunds to taxpayers who paid a sewer special assessment in lump sum, while forgiving outstanding balances for those taxpayers who entered into installment plans.  The Indiana Supreme Court held that the Board had a rational basis for its decision to deny refunds while eliminating outstanding balances.

Indiana House Approves Legislation to Phase-Out Inheritance Tax

The Indiana House approved legislation, SB 293, which would phase-out Indiana’s inheritance tax by increasing the exemption for children and grandchildren from $100,000 to $250,000.  The increase would apply to decedents dying after July 1, 2012.


MARYLAND

Maryland Rules on Statute of Limitations for Refund

The Maryland Court of Appeals ruled that the one-year statute of limitations for the filing of a limited partner’s state income tax refund claim pursuant to a federal adjustment of the partnership return began to run on the date that the Internal Revenue Service issued its final adjustment report to the limited partner.  Since the taxpayer filed its claim for refund more than one year after the date that the Internal Revenue Service issued its final adjustment report, the taxpayer’s refund was denied.

MINNESOTA

Minnesota Considers Legislation to Classify Jurisdictions as Tax Havens

Two separate bills, HF 2480 and SF 2029, currently under consideration by the Minnesota legislature would classify 34 foreign jurisdictions as tax havens, thereby terminating the ability of corporations to shelter their earnings in those areas. The legislation would also repeal the state’s foreign royalty exclusion, eliminate the state’s preferences for foreign-source income, and eliminate the state’s transition to single-sales-factor, instead re-implementing the three-factor formula.

NEVADA

Nevada Supreme Court Reverses Dismissal of Property Tax Petition for Board’s Failure to Conduct Public Hearings

The Nevada Supreme Court reversed the dismissal of property taxpayers’ petition for writ of mandamus directing the State Board of Equalization to equalize property valuations throughout the state, because the Board failed to conduct public hearings thereby denying the taxpayers an adequate remedy at law.

NEW YORK

New York Issues Guidance on Application of Sales Tax to Gratuities and Service Charges

The New York Department of Taxation and Finance issued guidance explaining how sales tax applies to gratuities and service charges.  The guidance clarifies that mandatory gratuities and service charges are exempt if: (1) the charges are shown separately on a bill; (2) identified as gratuities; and (3) the entire gratuity amount is given to the employees.

OKLAHOMA

Federal Court Rules Against Oklahoma Indian Tribe’s Tobacco Tax Claims

A Federal Court held that an Indian tribe located in Oklahoma had failed to state a claim upon which relief could be granted in its complaint.  The complaint alleged that Oklahoma’s tobacco tax laws violated various constitutional rights and federal laws.  However, the court found that the claims were not valid either on grounds of preemption or on infringement of the tribe’s right to self-government.

WASHINGTON

Washington Legislation Would Abolish Sales and Use Tax Exemption for Some Out-of-State Shoppers

Legislation, HB 2791, currently under review by Washington’s House would abolish the sales and use tax exemption for certain out-of-state shoppers.  The exemption would no longer be available for residents of the U.S. and Canada whose province or state assesses consumption taxes of less than three percent.

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.

(more…)

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 News Update

October 18, 2011

State DOR Letters and Administrative Rulings

Illinois Office of Administrative Hearings respects the entity, and rules Department of Revenue cannot go after owner of corporation for use tax liability on vessel use in Illinois. Use tax is not a trust tax. It also rules that the foreign corporate owner of a vessel used in Illinois for 30 days/year has sufficient nexus to allow Illinois to impose use tax on value of vessel. Taxpayer allowed credit for tax paid outside the state. Correct tax base for assessment of use tax is the purchase price reduced by depreciation prior to first use in Illinois.

Virginia Tax Commissioner rules that a taxpayer cannot include a foreign corporation that did not have nexus with Virginia into its combined Virginia corporate income tax return. Further, the taxpayer failed to follow proper procedure to claim a valid business purpose to exclude factoring fees required to be added back. In another ruling, it finds that a corporate officer who had no responsibility for financial reporting matters was not personally liable for unpaid use tax pursuant to Va. Code § 58.1-1813. The occasional sale exemption applies for a school that engages in sales of surplus items once per year (or every other year). In fact, as long as no more than three such sales occur each year, the sales are exempt. A manufacturer who leases a vending machine used to dispense exempt safety equipment used in the manufacturing process are subject to sales tax. The dispensing of exempt safety equipment is not an exempt activity, and the activity is not used directly in the manufacturing process.

 

State Regulations and Public Notices

The California Franchise Tax Board issues Cal. Admin. Code tit. 18, § 25128.5 that clarifies the single sales factor filing election now available to multistate taxpayers that must apportion their business income derived from sources in California. It applies to tax years beginning on or after January 1, 2011. It issues a 15-day notice for comment for proposed § 25136 relating to sales of other than tangible personal property. It arguably broadens the scope, but is offered as an attempt to capture the original intent of the original regulation. It further defines the meaning of “mixed intangible,” looks to the location of the benefit of the service for approximating sales.

Indiana Department of Revenue revises Directive No. 5 as to the proper tax treatment for income paid to entertainers in the state. It classifies the treatment based on (i) employees of a promoter, (ii) independent contractors, and (iii) employees of a production company. It also revised Information Bulletin No. 88 regarding the tax treatment of non-resident professional athletes playing in Indiana. It revises Information Bulletin No. 39 to reflect the new single-factor sales apportionment for non-resident individuals. And Information Bulletin No. 11 for sales tax is revised to further lay out the proper taxation of purchases (and exemption for consumables), as well as clarifying when an exemption certificate for the purchase of food from a restaurant is proper.

Utah State Tax Commission issues rule effective October 1, 2011 regarding proper allocation of gross receipts attributable to Utah. If the corporation does not have an office in Utah from which the sales are negotiated or effected, then the receipts allocable to Utah are (i) those resulting from performance of services with greater benefit in Utah than any other state, and (ii) sale of goods for delivery in state regardless of title terms. Utah State Tax Commission has promulgated final rule 884-24P-033 that modifies guidance on the assessment of personal property tax for business property and motor vehicles.

Wisconsin Department of Revenue revised Tax Publication 207, which provide guidance for contractors as to the payment of sales tax. Notable changes are relating to equipment being provided by an operator, and conformity with Chula Vista case.

Ohio Department of Revenue has began a push to let the public know about a new use tax amnesty program that began in October. This is a key opportunity for businesses to come into compliance in connection with use tax in Ohio.

New York State Department of Taxation and Finance releases a summary of 2011 legislative changes to the sales tax.

 

State Legislative Affairs

California modifies existing law to require not only the reimbursement of sales tax paid by a manufacturer to replace a vehicle under the state’s “Lemon Law,” but to also reimburse any payment of use tax by the manufacturer. AB 1069 has extended the California film tax credit, an amount based on a percentage of expenditures for the production of a qualified motion picture in California, or, where the qualified motion picture has relocated to California or is an independent film, to July 1, 2015. AB 291 extended the additional $0.006 per gallon tax for storage of petroleum in underground tanks through January 1, 2014.

Tennessee’s governor announced an agreement with Amazon to bring in more jobs and $350 million in capital investment as Amazon agrees to begin collecting Tennessee sales tax effective January 1, 2014 unless a national “solution” first arises. The Legislature would have to approve the agreement, with a bill to be introduced in January.

Reps. Womack (R) and Speier (D) announced that they are cosponsoring Amazon legislation in the U.S. House. It would empower states to require online retailers to collect sales and use tax even if the retailer lacks a physical presence. The bill will be known as the Marketplace Equity Act.

 

Judicial and Administrative Decisions

New Jersey Superior Court Appellate Division affirms the decision of the Tax Court, published at 25 N.J. Tax 398 (Tax 2010), granting the Director,

Division of Taxation, summary judgment dismissing the Estate’s complaint with prejudice and denying an inheritance tax refund.  The court rules that the three-year limitation on requesting inheritance tax overpayment refunds, set by N.J.S.A. 54:35-10, is enforceable; and the Square Corners Doctrine does not apply to the facts of this case so as to preclude application of N.J.S.A. 54:35-10.

The Kentucky Court of Appeals, in Department of Revenue v. St. Joseph Health Sys., Inc., et al, reversed a decision in which the lower court found that a gas broker was not a utility, and thus not subject to the utility gross receipts tax. KRS 160.613(1). The hospital had argued as an exempt entity it was not subject to the tax. This was a matter of statutory interpretation by the court, and the court undertook the review to interpret the statute “liberally.” Bob Hook Chevrolet Isuzu, Inc. v. Commonwealth Transportation Cabinet, 983 S.W.2d 488, 490 (Ky. 1998).  (Note: Texas narrowly construes tax statutes against the taxing authority – so quite possibly a different result in Texas.) Because the statute did not state the tax is imposed on a “public utility,” but instead it is imposed on “utility services,” it found that the gas broker was liable.

A three-member panel of the Vermont Supreme Court (not precedential) holds that a comparable provided by taxpayer to dispute assessed value sufficient to rebut presumption of validity of tax appraisal. The government appraiser must provide some evidence to support valuation.

The Washington Board of Tax Appeals rules that a prescription provider whose customers were enrollees of Washington’s Uniform Medical Plan did not qualify for the lower business and occupation tax rate for persons engaged in warehousing and reselling drugs for human use. The BDA focused on the definition requiring drugs to be resold to hospitals and health care providers. UMP is in the insurance business, and insurance companies are not included.

Illinois Department of Revenue Office of Administrative Hearings rules that food given away is subject to use tax.

Michigan Tax Tribunal rules that estimated audit was flawed because of auditor went to purchases to determine sales, as opposed to relying on Z tapes. Auditor’s judgment of inherent unreliability of Z tapes is not sufficient to disregard those records. Taxpayer’s documented close supervision of all sales, understanding of how to transact sales in conformance with tax code by the employees, as well as reconciliation of Z tapes to cash and credit card receipts. Internal controls are sufficient to ensure tax is property collected and reported. Michigan Tax Tribunal rules that former shareholder who sold interest in corporation and continued as president and employee was not a responsible corporate officer under MCL 205.27a(5).

New York Supreme Court rules in New York Mills Redevelopment Co. LLC, et al. v. Town of Whitestown et al. that a taxpayer must have actual notice of withdrawal of exemption, and that upon such date of actual notice the statute of limitations beings to run.

Pennsylvania Commonwealth Court rules in Procter & Gamble Paper Products Co. v. Commw. that pallet used to transport and hold products constitutes exempt packaging for sales and use tax purposes. This is a tax opportunity across the various states.

Ford Motor Co. sues the Florida Department of Revenue to overturn a decision that mandates Ford to pay use tax on parts provided by Ford to complete warranty repairs by repair shops.

Washington Department of Revenue issues a decision regarding agents for growers, warehousing and separate business, and fruit bin rentals. A fruit packing house asserts that its fruit sorting and packing income is exempt from the service and other activities B&O tax, alleging that its income was compensation for the “receiving, washing, sorting, and packing” of fruit from a grower.  It also protests the warehousing B&O tax assessed on amounts derived from its storage of fruit claiming that this activity was not a separate business activity from its fruit sorting and packing business. Taxpayer also protests the deferred sales tax/use tax assessed on fruit bin rentals. While income from performing the fruit sorting and packing services would be exempt if performed for a grower, the customer was a packing house, so no exemption. As to the separate business issue, the DOR pointed to Yakima Fruit Growers Ass’n v. Henneford, 187 Wash. 252, 60 P.2d 62 (1936), which analyzed the separate business issue as to growers, and rejected the taxpayer’s argument. Regarding the argument that sales and use tax did not apply, the DOR pointed to a lack of documentation to prove up that sales tax had already been paid, or to show that the bins belonged to the customers and rejected the claim. In another released decision, the Washington Department of Revenue rules that a grocery store does not qualify for the lower B&O rate slaughter houses due to processing of meat products in the store delis. Finally, it lays out in another ruling the proper tax treatment for certain amusement and recreation sales, and how that fits into the resale exemption for purchased items necessary to provide those services, all in the context of the B&O tax. It is a detailed ruling, and instructive for bifurcating sales of TPP from services, and how the resale exemption fits into that box.

 

Other Documents

It was a flyer for a New York school hockey team that gave the New York State Department of Taxation and Finance the motivation to enact the controversial Amazon law based on affiliate contact. Robert Plattner, Commissioner, stated that an employee of the Department received a flyer from his son’s hockey team, and the flyer touted that the hockey team would receive 6 percent of all sales purchased through Amazon. That appeared to be more like a commission, the active solicitation of sales in New York by Amazon, and along the lines of Scripto as opposed to Quill. The rest is history. Thanks to Amy Hamilton for her report.

Weekly SALT News Update

October 3, 2011

State DOR Letters and Administrative Rulings

The Indiana Department of Revenue provided guidance on what constitutes tangible personal property. That guidance includes the specific view that electricity is tangible personal property. It also discusses the taxation of intangibles in the state. It also ruled that medical devices are not exempt if there is not a prescription. So a sale of a medical device to a doctor or a hospital is not exempt as a device being prescribed. It may qualify for the sale for resale exemption, as the doctor resells the device to a patient, but the requirements to claim a sale for resale exemption must be followed.

The Connecticut Department of Revenue offered guidance on new sales tax changes for the sale of vehicles and extended warranties as a result of 2011 legislation. New taxable services include motor vehicle towing and road services, and motor vehicle storage services.

The Maine Department of Revenue revised guidance regarding warranty agreements, service contracts, and maintenance agreements.

Tennessee’s Department of Revenue ruled that an out-of state provider of telecommunication services is not subject to sales tax, but that the services are taxed where the services are actually performed. In another ruling, it found that a person who delivers rented tangible personal property to provide services must charges sales tax on those delivery charges. And over the counter sales of fuel are not exempt from sales tax, strictly construing the exemption for sales of fuel for residential use against the taxpayer. Last, software configuration services are not subject to sales tax.

 

State Regulations and Public Notices

Prior to the publication of Indiana Commissioner’s Directive #41, Indiana Department of Revenue imposed sales and use tax on products transferred electronically based on whether the products were taxable in their tangible forms. Citing compliance with the Streamlined Sales and Use Tax Agreement, the Department will impose sales and use tax on products transferred electronically only if the products meet the definition of specified digital products, prewritten computer software, or telecommunication services.

 

State Legislative Affairs

The bill in Michigan to institute a New York style Amazon tax has been introduced and numbered.

California adds olive trees to those items taxed at the 1% gross sales tax rate for deciduous pome and stone fruit trees, nut trees, and grapevines.

Massachusetts Senate pushed forward S.2015 that would authorize casinos and one slot parlors in the state. It levies a 25 percent gross gaming revenue tax, and a 40 percent daily tax on gross gaming revenue from a single slot parlor.

The National Conference of State Legislatures met in San Antonio, and reportedly ended with the Multistate Tax Commission (“MTC”) and Chainbridge Software, LLC playing defense. The MTC came under attack for not being quite up front and public in the decision making process, while Chainbridge was attacked for using unreliable data to calculate potential audit candidates for government authorities.

 

Judicial and Administrative Decisions

Texas Third Court of Appeals hears oral argument of DTWC Corp. v. Combs. The case involves a potential expansion of the sale for resale exemption to include any transfer of tangible personal property in connection with services, regardless of whether the services have been subject to sales tax. Also, potentially it loosens the requirement of consideration to be paid with a sale for resale. Oral argument appeared to go better for the taxpayer, the appellant, than the Texas Attorney General.

In Ivory Homes, Ltd. v. Utah State Tax Comm’n, No. 20090679, (Utah 2011), the Utah Supreme Court ruled against the taxpayer’s argument that charges for shipping that were not separately stated should be excluded from the imposition of sales tax. Utah does not impose sales tax on shipping charges so long as they are separately stated. Because there was no written evidence of an intent by the parties to separately charge sales tax, and the amount charged was presented as one amount (including shipping), sales tax was appropriate on the entire amount.

New York Tax Appeals Tribunal required a company to file a consolidated return with wholly-owned subsidiaries as taxpayer failed to rebut the presumption of distortion under 20 NYCRR 6-2-3.

The Ninth Circuit, in Confederated Tribes and Bands of the Yakama Indian Nation v. Gregoire, Dkt. No. 10-35776 (9th Cir. Sept. 23, 2011), ruled in favor of the State of Washington, finding that the requirement for retailers of an Indian tribe to collect tax was not a tax imposed on the tribe, but a pass through tax. Further, collection of the tax is a minimal burden imposed on the tribe and permitted pursuant to Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134 (1980).

 

Other News

Good article regarding the current status of the Amazon legislation across the country, including Amazon’s current “play nice” strategy with California.

Study by Rutgers University for the New Jersey Retail Merchants Association shows New Jersey lost between $52 million and $171 million due to non-payment by New Jersey residents of sales use taxes on Internet purchases.