Posted tagged ‘taxable services’

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.

Weekly SALT News Update

August 29, 2011

Texas Supreme Court Rules “Pole Tax” Does Not Violate First Amendment

In a unanimous decision Texas Supreme Court rules stripper “pole tax” does not violate First Amendment. The decision reverses a 2-1 Third Court of Appeals decision, which had held the tax violated the First Amendment in upholding the trial court’s ruling. The decision remands the case to the trial court, where three arguments remain, all based on challenges to the tax under the Texas Constitution.

New Jersey Appeals Court Upholds Tax Court Finding No Unitary Nature of Limited Partnership

New Jersey Appellate Division holds limited partner of limited partnership was not subject to Corporation Business Tax because limited partner was not unitary with limited partnership and limited partner had no independent nexus with NJ. The decision upholds the lower court’s decision. The decision is discussed in greater detail at this blog post.

Missouri Denies Sale for Resale Exemption for Guest Houses

Worlds of Fun  (“WOF”) operated cabins and cottages that it rented to guests on a nightly basis. It claimed a sale for resale exemption on tangible personal property that it provided to the guests in the quarters, such as benches, beds and mattresses. The Administrative Hearing Commission denied the exemption on the basis that insufficient control was transferred to the guests. A similar case regarding toiletries is currently pending before the Texas Third Court of Appeals, for which the trial court denied the sale for resale exemption.

California Governor Asks Legislature for Mandatory Single-Factor Formula

The California governor asks the Legislature for a mandatory single-factor formula for state income tax based on sales in California. The hope is that such a change would incentivize business to maintain corporate headquarters in the state.

Pennsylvania Reissues Ruling on Computer “Help” Services

The Pennsylvania Department of Revenue has reissued SUT-6-014, which clarified those “help” services that are subject to sales tax. Where the taxpayer’s employees are not under the control of the customer, the services rendered are not taxable as a “help supply” service.  61 Pa. Code § 60.4.

Arizona Appeals Rules No Need to Exhaust Administrative Remedies

The Arizona Court of Appeals reversed a lower court decision, and ruled that a direct appeal to the tax court is permitted in connection with a tangible personal property valuation.

New Mexico Accepts CPA’s Negligence to Waive Penalty

A taxpayer who had not filed for the New Mexico gross receipts tax was granted a waiver from the payment of penalty based on the representation that such non-filing was the result of advice provided by a CPA.

Allcat Replies to Texas Attorney General in Challenge to Texas Franchise Tax

Allcat has filed its reply to the Texas Attorney General in connection with its challenge that the Texas Franchise Tax (also known as the “margin tax”) is unconstitutional. Allcat argued that limited discovery was appropriate at the Supreme Court level, that the Uniform Declaratory Judgment Act does apply, and requested more time to brief the case.

New York Rules Estimated Audit Proper with Partial Records

The New York Division of Tax Appeals has ruled that due to only partial records being provided in a protracted audit of a taxpayer, that it was appropriate to estimate the sales tax due.

Texas Supreme Court Requests Briefing of Sale for Resale Case 

The Texas Supreme Court has requested briefing in connection with a claim for the sale for resale exemption for prizes sold in “claw” machines.

New York Rules Not Able to Estimate Tax Refund

The New York Division of Tax Appeals has ruled that a taxpayer cannot use estimate to calculate refund or credit amount for sales and use tax.

Indiana Tax Court Rules for Miller Brewing on Apportionment

Miller Brewing avoids income tax on Indiana sales if third party picks up at plant. Court says irrelevant that tax avoided in all states as a result of decision.

Georgia Considers Tax Court

A Georgia legislative subcommittee considered the creation of a tax court on August 24, 2011.