Posted tagged ‘Groupon’

Weekly SALT News Update

October 11, 2011

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.

Weekly SALT News Update

September 28, 2011

State DOR Letters and Administrative Rulings

The Wisconsin Appeals Commission ruled services are not presumed to be subject to sales tax. In looking to whether barge fleeting services are “taxable services,” the plain language of the statutes does not impose the sales tax and thus the state cannot interpret into the taxation of services those services that are not clearly included. Same rule follows inTexas.

Illinoispublished a ruling on the applicability of the manufacturing exemption in connection with a meat processing facility, and what parts of the plant equipment would qualify for the sales tax exemption.

The Missouri State Tax Commission set aside an assessor’s appraisal for property tax in favor of the income approach used by taxpayer as the taxpayer’s report was substantial and persuasive, recognizing actual economic conditions affecting the subject property.

The Missouri Department of Revenue ruled on the application of sales tax for cabinet manufacturing, finding that the transactions by a cabinet manufacturer would be exempt where title to the cabinets transferred to the customers passed after installation. It also ruled that devices used merely to improve appearance, but not required for medical purposes, is not exempt from sales tax as a medical device. Also, an online ticket broker with no nexus to Missouri is not required to collect sales tax Missouri for tickets sold to Missouri customers or for events in Missouri. It ruled on the concept of integrated manufacturing, and looked to prior decisions that greatly expanded the term such as the “manufacture” of telephone calls. Finally, information services are not subject to sales tax.

New Yorkoffered guidance in dealing with sales tax on transactions in which a person purchases a coupon for a reduced price for goods or services via the Internet. Think Groupon. It also offered guidance for sales tax liability of members of limited liability companies and partners of limited liability partnerships.

 

State Regulations and Public Notices

Rhode Islandhas published the final version of its regulations on the sales taxation of computer programs  There are no significant changes to the final version from that originally proposed.

The North Carolina Department of Revenue advised on “major” sales tax changes by the state legislature for both persons who are registered before the department and other taxpayers.

 

State Legislative Affairs

Michigan State Representatives Kowall and Ananich introduced HB 5004 that would introduce a New York-style Amazon law to require Internet retailers to collect use tax inMichigan.

There is a rumor circulating in the Beltway that the Main Street Fairness Act may be combined with other legislation in an effort to secure GOP support. The Main Street Fairness Act would use federal legislation to allow states to require persons selling taxable items but who are currently beyond the reach of the states to actually collect relevant state use taxes. Currently the bill lacks significant support (including any GOP legislators).

California law, in connection with its unclaimed property statutes, has extended “no apparent commercial value” property to be held for seven years, which is an increase from the prior rule that a holder must retain such property for 18 months.


Judicial and Administrative Decisions

In a case of first impression, the Colorado Court of Appeals has ruled that electricity is tangible personal property, and thus machinery used in the generation of electricity qualifies for the manufacturing exemption from sales and use tax. Other states have also treated electricity as tangible personal property, including Texas (Tex. Tax Code § 151.317) and Indiana.

The New Jersey Superior Court ruled against a taxpayer on an appeal of a property tax dispute. In the instant case, the taxpayer, who was without legal counsel, ignored previous court rulings requesting filings and appropriate responses. The court recognized the taxpayer’s apparent indifference to court orders and ruled against the taxpayer on the second run through the appellate court system, having already given the taxpayer a chance once before to amend his responses.

In the PRA Government Services case, in which anAlabamacourt is asked to rule on the legality of a class action against contingent fee  auditors for a state agency, the taxpayers have amended the complaint to add hundreds of local jurisdictions as defendants. This could be a key case dealing with class actions and the proper use of contingent fee auditors by state agencies.

The Alaska Superior Court ruled that the property tax exemption granted to married couples is discriminatory as applied to same-sex couples.

 

Other Documents

The handout used at the last Houston Bar Association tax luncheon is provided, which outlines the latestTexas legislative updates to the Tax Code, and recent judicial updates involving theTexas franchise tax, including the current constitutional challenge to the revisedTexas franchise tax at the Texas Supreme Court.