Through its content-sharing partnership with Thomson Reuters Checkpoint, SC&H Group’s State and Local Tax practice has compiled the following round up of actionable state tax news.
Please note that a subscription will be required to access the links through Thomson Reuters Checkpoint.
Alaska — Cigarette, Alcohol & Miscellaneous Taxes — Business license fee.
L. 2014, H32, effective 10/29/2014, permits the issuance of one business license for multiple lines of business. This provision applies to applications for new business licenses and renewals of existing licenses made after October 28, 2014. The legislation also reduces the business license fee for disabled veterans to $25 from $50. Further, a license holder may request a new license without payment of an additional license fee within 30 days after issuance in order to make a change to the license.
Alabama — Cigarette, Alcohol & Miscellaneous Taxes — Tobacco tax assessment affirmed.
An administrative law judge (ALJ) has ruled that the Alabama Department of Revenue correctly computed the tobacco tax owed by taxpayer, a tobacco wholesaler, for the tax periods at issue. A Department audit had shown that the taxpayer has underreported and underpaid its tax liability during the tax periods in question. The ALJ rejected the taxpayer’s argument that the Department’s methodology to compute the tax due was flawed because it used retail price averages and estimated mark-ups in lieu of the taxpayer’s actual sales records. The ALJ found that the Department properly used the average retail prices for which the various types of cigar products in issue were sold because the average prices constituted the “ordinary, customary, or usual” retail prices for the products required to be used pursuant to Ala. Code § 40-25-2(b) and that the Department also correctly used a mark-up percentage to compute the average retail selling prices. (City Wholesale, Inc. v. Ala. Dept. Rev., Admin. Law Div., Dkt. No. MISC. 12-708, 07/01/2014.)
Alabama — Personal Income Tax — State-sourced income from wages taxable.
An administrative law judge (ALJ) affirmed final assessments of income tax, penalties and interest for tax years 2007, 2008, and 2010. The taxpayer claimed he had the right to work for money without it being taxed, and contended that he was not a natural person domiciled in or residing in Alabama for income tax purposes. There is no statutory or constitutional right to work for money without paying taxes. Under Ala. Constitution of 1901 XI § 211.01 and Ala. Code § 40-18-2(1) , Alabama has the right to impose an income tax on individuals residing in Alabama. The taxpayer is an individual who admittedly resides in Alabama, and the Department of Revenue received W-2 information indicating that he had Alabama-sourced income in the subject tax years. Ala. Code § 1-1-9 does not exempt the taxpayer from the Alabama income tax. The taxpayer’s second application for rehearing was denied. The ALJ rejected the taxpayer’s claim that the only wages includable in gross income are the wages earned by government employees and officials, stating that “Ala. Code § 40-18-14 clearly specifies that all wages are income.” (Patterson v. Ala. Dept. Rev., Admin. Law Div.,Dkt. No. INC. 13-780, 07/01/2014 ; Admin. Law Div., Dkt. No. INC. 13-780, 07/31/2014.)
Alabama — Personal Income Tax — Sole shareholder not return preparer.
The taxpayer was the sole shareholder of a corporation engaged in tax preparation. Because the business failed to provide the Department of Revenue with copies of Form AL8453 for each of the many returns prepared by the business for the period at issue (i.e., 2006 through 2008) as required under Alabama law, the Department assessed the $50 per failure paid tax return penalty under Ala. Code § 40-2A-11.1 . The penalty for 2008 was assessed against the solely owned corporation because those returns were prepared under that corporation’s name, but assessed the taxpayer personally for the penalty for 2006 and 2007. The administrative law judge (ALJ) found that the taxpayer’s corporation was correctly assessed the penalty for 2008. However, the ALJ voided the return preparer penalties assessed against the taxpayer as the sole shareholder of the corporation for 2006 and 2007. The ALJ noted that there was no evidence that the taxpayer has personally prepared returns during the years at issue. The ALJ noted that there was no case law or other authority holding that the individual owner of a corporation that employs or engages individuals that prepares tax returns is also a tax return preparer for purposes of the bad tax preparer penalty statutes. The ALJ also found that the Department had incorrectly assessed the taxpayer, individually, for income from the tax preparation business for the period at issue. The evidence presented clearly showed that the taxpayer’s corporation, not the taxpayer, had received the tax preparation fees. Consequently, the ALJ also voided a fraud penalty assessed that had been assessed against the taxpayer for his failure to report the tax preparation fees on his personal returns. (Thomas & McDuffie Ent., Inc. v. Ala. Dept. Rev., Admin. Law Div., Dkt. Nos. INC. 12-112; INC. 12-113; INC. 10-1038, 07/29/2014 (preliminary order).)
Alabama — Sales And Use Tax — Sales tax based on auditor’s markup upheld.
An administrative law judge has upheld the Alabama Department of Revenue’s (ADOR’s) computation of a taxpayer’s sales tax for the period May 2010 through April 2013, which the ADOR determined by using the cost of goods sold as reported by the taxpayer, plus a markup. The taxpayer operated a retail business at which she sold clothing and beauty supplies. Because the taxpayer did not keep adequate records, the ADOR calculated the markup on her sales by using the IRS markup average for clothing stores and beauty supply stores and applied it to the cost of goods sold as reported by the taxpayer to arrive at her estimated sales during the audit period. Because the taxpayer failed to maintain adequate records, the ADOR is authorized to compute a taxpayer’s tax liability using any reasonable method, and the ADOR routinely uses the average markups used by the IRS, and the Administrative Law Division has affirmed that use in numerous cases in which the taxpayer has failed to keep adequate records. The taxpayer’s arguments that her markup might have been less than the IRS markup average and that she might not have sold all of the merchandise she purchased during the audit period were rejected because she failed to keep adequate records. (Sharon Adams d/b/a Adams New Fashion v. Ala. Dept. of Rev., Admin. Law Div., Dkt. No. S. 14-339, 07/09/2014.)
California — Sales And Use Tax — State High Court action.
The California Supreme Court has agreed to review the decision of the California Court of Appeal in In re Transient Occupancy Tax Cases , which held that amounts charged by online travel companies (OTCs) for their services, service charges, and markups were not subject to the San Diego Transient Occupancy Tax (TOT) because that tax is imposed on the rent charged by a hotel operator and OTCs are not hotel operators. For a discussion of the Court of Appeal decision, see State & Local Taxes Weekly, Vol. 25, No. 14, 04/07/2014. (In re Transient Occupancy Tax Cases, Cal. Ct. App., Dkt. No. B243800, 03/27/2014, petition for review granted, Cal. S. Ct., Dkt. No. S218400, 07/30/2014.)
Colorado — Personal Income Tax — Guidance on filing amended return.
The Department of Revenue (DOR) has issued guidance on how to file an individual amended return. Taxpayers that filed Form 104 (Individual Income Tax Return), but later received additional information, found a mistake, or the IRS (federal returns) changed their federal return, must file a corrected Colorado return using Form 104X (Individual Amended Return). Form 104X can be filed electronically through Revenue Online, which will automatically pre-populate certain fields with information from the taxpayer’s Form 104. Revenue Online is the preferred method for correcting a return. The DOR also recommends that: (1) Taxpayers submit supporting documentation, as every return filed (original or amended) is processed independently, therefore, taxpayers must provide supporting schedules, certifications, or other documentation every time they submit a return – even when there is no change to the amount claimed on the original return. Documents can be submitted electronically using the E-Filer Attachment function on Revenue Online, with Form DR 1778. (2) Taxpayers should refer to Form 104 Booklet and FYI publication for details about credits, subtractions, and general tax return information. (3) Taxpayers should mark the correct box or select the amendment reason on Revenue Online. (4) Taxpayers should download Form 104X and be sure to use the correct form year. Using the form for the wrong year will cause a miscalculation of tax and may result in a bill. (5) Taxpayers should only send Form 104X and should not include a copy of the original Form 104. (6) Filers should place Form 104X on the top of all paperwork in the envelope. The 104CR, 104PN and other supporting documents should be behind Form 104X. (Colorado CDOR TaxInfo Blog: How to amend an individual income tax return, 07/31/2014.)
Delaware — Business Tax Rates — Surplus line insurance—premium tax rate increase.
L. 2014, H213 (c. 373), effective 07/30/2014, increases the insurance premiums tax on surplus line insurance to 3% from 2%. The proceeds from the increase will be set aside as a special fund to provide funding for health insurance premiums for retired county and municipal police and firefighters.
Delaware — Insurance — Surplus line insurance—premium tax rate increase.
L. 2014, H213 (c. 373), effective 07/30/2014, increases the insurance premiums tax on surplus line insurance to 3% from 2%. The proceeds from the increase will be set aside as a special fund to provide funding for health insurance premiums for retired county and municipal police and firefighters.
Indiana — General Administrative Provisions — Legislative update, gasoline use tax and electronic mandate.
The Indiana Department of Revenue’s latest edition of Tax Dispatch is now available. This most recent publication includes: a summary of 2014 legislation affecting the state’s tax laws; an update on the alcohol and tobacco electronic mandate requiring all businesses in Indiana to file and pay alcohol excise taxes, cigarette taxes, and other tobacco product taxes electronically; and guidance on the new gasoline use tax. The issue also includes an update on the out-of-state motor vehicle sales tax, as well as, a listing of new and updated tax bulletins, directives and notices. ( Indiana Tax Dispatch 07/01/2014, 07/01/2014 .)
Kentucky — Sales And Use Tax — SSUTA Taxability Matrix.
The Kentucky Department of Revenue has issued its 2014 Certificate of Compliance and Taxability Matrix, confirming the state’s compliance with the Streamlined Sales and Use Tax Agreement (SSUTA). Since there were only a minimal number of changes made to the sales and use tax statutes during the 2014 legislative session, no sales and use tax legislation impacted any matters within the scope of the SSUTA. (KY SSUTA Recertification Letter, Ky. Dept. of Rev., 07/31/2014; Kentucky 2014 SSUTA Certificate of Compliance, Ky. Dept. of Rev., 08/01/2014; Kentucky 2014 SSUTA Taxability Matrix, Ky. Dept. of Rev., 08/01/2014.)
Massachusetts — Sales Tax Rates — Room occupancy tax for Boston Convention Center Expansion.
L. 2014, H4308, effective 07/30/2014, authorizes the City of Boston to increase its hotel and occupancy tax, not exceeding 14%, to pay debt service on bonds issued.
Massachusetts — Sales And Use Tax — Room occupancy tax for Boston Convention Center Expansion.
L. 2014, H4308, effective 07/30/2014, authorizes the City of Boston to increase its hotel and occupancy tax, not exceeding 14%, to pay debt service on bonds issued.
Michigan — Corporate Income Tax — Non-response to request to Michigan for separate accounting not a denial.
The Tax Tribunal erred in finding that the taxpayer was not entitled to alternative apportionment relief (separate accounting) under former Mich. Comp. Laws Ann. § 208.69 of the Single Business Tax because the Department of Treasury had not responded to the taxpayer’s request for relief, since a non-response from the Department does not constitute a denial. The Tribunal concluded that it could not grant the taxpayer relief under Mich. Comp. Laws Ann. § 208.69(1) , because the Department had not responded to the taxpayer’s request for apportionment relief, which the Tribunal characterized as a failure to approve such relief. In doing so, the Tribunal failed to comply with the appeals court’s earlier order that the Tribunal consider the merits of the taxpayer’s claim that it was entitled to alternative apportionment relief. The plain language of the statute requires the taxpayer to petition the Department for the relief or for the Department to take certain actions in relation to the taxpayer’s business activity to determine whether alternative apportionment relief is appropriate. In order for the alternative method to be effective, it must be approved by the Department, and in this case there was only the Department’s silence on the matter. The Tribunal failed to request further briefing, demand responses, or hold a hearing on remand, and there was no evidence the Department even considered the taxpayer’s request for alternative relief. The Tribunal’s conclusion was in fact an assumption that can just as easily be inferred in the other direction to demonstrate the Department’s acquiescence. Accordingly, the appeals court ordered the Department to respond to the taxpayer’s claim for alternative apportionment relief and remanded the case to the Tribunal for further proceedings following the Department’s response. (Sidney Frank Importing Co., Inc. v. Department of Treasury, Mich. Ct. App., Dkt. Nos. 315610; 315963, 07/31/2014 (unpublished).)
Minnesota — Sales And Use Tax — Petroleum products.
The Minnesota Department of Revenue has revised a release that discusses the taxability of petroleum products. Most fuel used for highway purposes is subject to petroleum tax. This includes motor fuel (gasoline or diesel fuel, also called “special fuel”) used in all licensed motor vehicles. It also includes fuel for motorboats, all-terrain vehicles, aircraft, and most snowmobiles. When a person buys gasoline from a pump at a gas station, the price already includes petroleum tax (both state and federal). State petroleum tax paid on fuel used to operate a power take-off unit or auxiliary engine fueled from the same supply tank as the highway vehicle is partially refundable. If a person pays state petroleum tax on a motor fuel purchase and later receives a refund or credit of that tax, the person must pay use tax on the cost of any fuel used for taxable purposes. The release also discusses various exemptions from sales and use tax. ( Minnesota Sales Tax Fact Sheet 116, 07/01/2014 .)
Nebraska — Sales And Use Tax — Streamlined sales tax certification of compliance.
The Nebraska Department of Revenue has posted its 2014 its Streamlined Sales and Use Tax Certification of Compliance on its website. Changes to the definitions of delivery charges and sales price, as a result of 2014 legislation, are reflected in the Certificate of Compliance. (Nebraska Certificate of Compliance 2014, Neb. Dept. of Rev., 07/28/2014.)
Nebraska — Sales And Use Tax — Streamlined sales tax recertification letter.
Nebraska Tax Commissioner Kim Conroy has recertified to the Governing Board Nebraska’s compliance with the terms of the Streamlined Sales and Use Tax Agreement (SSUTA) pursuant to Section 803 of the SSUTA. Nebraska’s Recertification Letter is posted on the Nebraska Department of Revenue website. (Nebraska Letter of Recertification 2014, Nebraska Department of Revenue, 07/28/2014.)
New Hampshire — Fuels And Minerals — Road toll imposed on alternative fuels.
L. 2014, H1142, effective 01/01/2015, imposes the road toll on alternative fuels sold by alternative fuel dealers (who must be licensed), on the motor fuel equivalent gallon. “Alternative fuel” means any source of fuel, other than motor fuel and electricity, used to propel a motor vehicle over the ways of the state. Alternative fuel includes, but is not limited to, compressed natural gas, liquefied natural gas, and propane. “Motor fuel equivalent gallon” means the volume of alternative fuel it takes to equal the energy content of one gallon of gasoline or special fuel. The alternative fuel road toll will be subject to the exemptions provided for by N.H. Rev. Stat. Ann. § 260:32(I) throughN.H. Rev. Stat. Ann. § 260:32(V) , and the refund provisions provided in N.H. Rev. Stat. Ann. § 260:47 , N.H. Rev. Stat. Ann. § 260:52-b , and N.H. Rev. Stat. Ann. § 260:52-e .
New Hampshire — Real Property — Assessment of renewable generation facility.
L. 2014, H1549, effective 07/28/2014, and applicable beginning with the property tax year ending 03/31/2015, clarifies the assessment of renewable generation facility property, including renewable generation facility property subject to a payment in lieu of taxes agreement under N.H. Rev. Stat. Ann. § 72:74 .
New Jersey — Sales And Use Tax — Certificate of compliance and taxability matrix.
The New Jersey Division of Taxation has updated its taxability matrix and certificate of compliance. (Taxability Matrix, N.J. Division of Taxation, 08/01/2014; Certificate of Compliance, N.J. Division of Taxation, 07/01/2014.)
New York — Fuels And Minerals — Introduction to highway use tax.
The New York Department of Taxation and Finance has issued a tax bulletin, An Introduction to Highway Use Tax. This bulletin discusses: (1) the definition of “motor vehicle,” “gross weight,” and “unloaded weight; ” (2) how to determine highway use tax; (3) certificate of registration and decals; (4) excluded and exempt vehicles; (5) filing and recordkeeping requirements; (6) special requirements for automotive fuel carriers; and (7) penalties. (TB-HU-40, N.Y. Dept. of Taxation and Finance, 08/01/2014.)
New York — Fuels And Minerals — Taxes applicable to motor carriers.
The New York Department of Taxation and Finance has issued a bulletin that provides an overview of various taxes that apply to motor carriers operating on New York State public highways. (TB-HU-860, N.Y. Dept. of Taxation and Finance, 08/01/2014.)
New York — Fuels And Minerals — Highway use tax certificate of registration.
The New York Department of Taxation and Finance has issued a highway use tax bulletin concerning a vehicle’s certificate of registration. Before operating a motor vehicle on the public highways of New York State, taxpayers must obtain a certificate of registration and decal for each motor vehicle subject to the highway use tax. (TB-HU-115, N.Y. Dept. of Taxation and Finance, 08/01/2014.)
New York — Fuels And Minerals — Highway use tax certificate of registration— trip certificate.
The New York Department of Taxation and Finance has issued a highway use tax bulletin concerning a vehicle’s trip certificate of registration. Before operating a motor vehicle on the public highways of New York State, taxpayers must obtain a certificate of registration and decal for each motor vehicle subject to the highway use tax. Taxpayers who only occasionally operate a motor vehicle in New York State, can get a trip certificate of registration instead of registering, obtaining a decal, and filing HUT returns. (TB-HU-116, N.Y. Dept. of Taxation and Finance, 08/01/2014.)
New York — Fuels And Minerals — Highway use tax decals.
The New York Department of Taxation and Finance has issued a bulletin concerning highway use tax decals. The Highway Use Tax Law requires a HUT or AFC decal to be affixed to each motor vehicle. (TB-HU-160, N.Y. Dept. of Taxation and Finance, 08/01/2014..)
New York — Fuels And Minerals — Highway use tax—excluded and exempt vehicles.
The New York Department of Taxation and Finance has issued a highway use tax bulletin concerning excluded and exempt vehicles. Certain vehicles are excluded from the highway use tax registration requirements if they are used for the purpose for which they were designed. Other vehicles may be exempt from registration requirements if used exclusively for an exempt activity. This bulletin explains which vehicles are excluded or exempt from tax. (TB-HU-245, N.Y. Dept. of Taxation and Finance, 08/01/2014.)
New York — Fuels And Minerals — Highway use tax filing requirements.
The New York Department of Taxation and Finance has issued a bulletin concerning highway use tax filing requirements. (TB-HU-260, N.Y. Dept. of Taxation and Finance, 08/01/2014.)
New York — Fuels And Minerals — Calculation of highway use tax.
The New York Department of Taxation and Finance has issued a bulletin concerning how to determine highway use tax. The bulletin discusses the gross weight method, the straight line option, the heaviest weight option, the unloaded weight method, and vehicles eligible for reduced rates. (TB-HU-360, N.Y. Dept. of Taxation and Finance, 08/01/2014.)
New York — Fuels And Minerals — Highway use tax recordkeeping requirements.
The New York Department of Taxation and Finance has issued a bulletin concerning highway use tax recordkeeping requirements. (TB-HU-765, N.Y. Dept. of Taxation and Finance, 08/01/2014.)
New York — Fuels And Minerals — Highway use tax enforcement provisions.
The New York Department of Taxation and Finance has issued a bulletin summarizing highway use tax enforcement provisions. (TB-HU-835, N.Y. Dept. of Taxation and Finance, 08/01/2014.)
Pennsylvania — Real Property — Review granted—valuation.
The Pennsylvania Supreme Court has granted a petition for allowance of appeal with regard to a case in which the Commonwealth Court held that the trial court did not err in relying on the portion of a school district expert’s valuation that determined that the highest and best use of land currently used to manufacture motorcycles was as warehouse and office space, but did err in adopting a final valuation that was based on the expert’s determination of market value without application of the common level ratio, and that included a “stigma” devaluation factor for which there was no available data. Issues to be considered on appeal include: whether the trial court properly considered reasonably foreseeable hypothetical ways in which the property could be used by potential buyers to determine what a willing buyer would pay for the property consistent with the holdings in Craftmaster Mfg., Inc. v. Bradford County Board of Assessment Appeals , 903 A2d 620 (Pa. Commw. 2006) and Air Products and Chemicals, Inc. v. Board of Assessment Appeals of Lehigh County , 720 A2d 790 (Pa. Commw. 1998), and whether the trial court followed Commonwealth Court precedent and properly considered the impact of environmental conditions by reviewing the settlement agreement, interpreting Pennsylvania’s Land Recycling and Remediation Standards Act , accepting the opinion of an expert appraiser, and applying a 5% reduction in value for stigma. (Harley-Davidson Motor Co. v. Springettsbury Township, Pa. S. Ct., Dkt. No. 39 MAL 2014, 07/30/2014.)
Pennsylvania — Real Property — Notice of sheriff’s sale.
The trial court did not err in denying a petition to set aside the judicial sale of tax delinquent property because the lienholder failed to file the petition within the required 6-month period, and because service of the notice of the sale on the lienholder complied with the service provisions of he Real Estate Tax Sale Law. The lienholder claimed that service by certified mail at the out-of-state address listed on the lien documents was improper where the lienholder had branches in Pennsylvania where personal service could have been effectuated. However, Pa. Stat. Ann. 72 § 5860.611 requires that notice be sent to the lienholder’s “last know post office address,” which was provided on the lien documents. There is no requirement that the Tax Claim Bureau search for other addresses, especially where the return receipt was signed and received and the notice was not returned unclaimed. Likewise, there is no requirement that the notice be prepared by the sheriff, but only served by the sheriff. Also, because notice was properly served, the discovery rule did not apply to toll the 6-month statute of limitations, meaning that the lienholder’s petition to set aside the sale was untimely. (In re: Sale of Real Estate by Lackawanna Tax Claim Bureau (HSBC Bank USA, N.A. v. Lackawanna County Tax Claim Bureau), Pa. Commw. Ct., Dkt. No. 2027 C.D. 2013, 08/01/2014 (opinion not reported).)
Pennsylvania — Real Property — Class action to recover retained funds.
The Commonwealth Court has upheld a decision denying class certification to taxpayers seeking recovery of excess proceeds of excess funds from mortgage foreclosures, tax liens, and sales of tax delinquent properties. The trial court was not the appropriate forum to hear the action because the trial court failed to establish that the petitioners lacked an adequate remedy under the Disposition of Abandoned and Unclaimed Property Act (DAUPA), which sets forth when and how funds held by the Sheriff’s Office escheat to the State Treasurer who is then responsible for disbursing them. And while the Commonwealth Court declined to exercise original jurisdiction, the court determined that it did have jurisdiction to hear the appeal. The court then determined that the denial of class status was proper because the plaintiffs failed to satisfy the requirements for numerosity, typicality, representation adequacy and fair and effective adjudication because there were more potential class members than are practicable to join the litigation; the class would also include savvy speculators, mortgage holders and others who are not typical of the class, and would not be representative of the property owners who lost their homes due to an inability to pay. (In re: Sheriff’s Excess Proceeds Litigation (Appeal of Joseph O’Hara and Finn Land Corp.), Pa. Commw. Ct., Dkt. 1246 C.D. 2013, 07/31/2014.)
South Dakota — Real Property — South Dakota unclaimed property holder’s manual revised.
The South Dakota State Treasurer has issued a revised Unclaimed Property Holder’s Manual reflecting several changes for fiscal year 2015. South Dakota has adopted the new National Association of Unclaimed Property Administrators (NAUPA) property and relationship codes. These codes are included in Appendix A of the Holder’s Manual. In addition, paper reporting is no longer allowed, and for reciprocal reporting, South Dakota based holders may report incidental, cash only, properties where the last known address is outside of South Dakota, only if they have 10 or less items and a total less than $1,000. Moreover, the UCP-1 Verification Summary for Unclaimed Property form must now accompany the Unclaimed Property report. A similar form can be used if generated from the reporting software. Finally, an informal Voluntary Disclosure Agreement (VDA) form has been added to the Holder’s Manual. Unclaimed Property reports and remittances are due November 1 for property reportable to the State of South Dakota as of the preceding June 30. Life Insurance Companies reports are due May 1st for property reportable to the State of South Dakota as of the preceding December 31. Holders who have never reported should include all property that has been held for the appropriate dormancy period. Payment should be made payable to the South Dakota State Treasurer. (SD Unclaimed Property Manual, S.D. State Treasurer, 08/01/2014.)
Tennessee — Cigarette, Alcohol & Miscellaneous Taxes — Vascular access therapy and related services.
The Tennessee Department of Revenue has issued a letter ruling to a provider of vascular access therapy and related services. The letter ruling states that vascular access therapy and related services including on-site consultation qualify for the exemption for medical services provided by Tenn. Code Ann. § 67-4-708(3)(C)(i) . Fees for certification classes provided by this firm qualify for the exemption for educational services that is provided by Tenn. Code Ann. § 67-4-708(3)(C)(iii) . ( Tennessee Letter Ruling 14-04, 06/23/2014 (posted 07/31/2014).)
Texas — Franchise Tax — Texas insolvency settlements.
The Texas Comptroller of Public Accounts has adopted new regulations on insolvency settlements (34 Tex. Admin. Code § 1.2, effective 08/10/2014). The regulation only applies to Tex. Tax Code Ann. § 111.102 settlements, which are based on a taxpayer establishing it is insolvent or that full payment will make it insolvent (insolvency settlement). However, the regulation does not apply to other settlements based on inability to pay made during an audit, the audit redetermination process, and after a final determination.
Texas — General Administrative Provisions — Insolvency settlements.
The Texas Comptroller of Public Accounts has adopted new regulations on insolvency settlements (34 Tex. Admin. Code § 1.2, effective 08/10/2014). The regulation only applies to Tex. Tax Code Ann. § 111.102 settlements, which are based on a taxpayer establishing it is insolvent or that full payment will make it insolvent (insolvency settlement). However, the regulation does not apply to other settlements based on inability to pay made during an audit, the audit redetermination process, and after a final determination.
Texas — Sales And Use Tax — Insolvency settlements.
The Texas Comptroller of Public Accounts has adopted new regulations on insolvency settlements (34 Tex. Admin. Code § 1.2, effective 08/10/2014). The regulation only applies to Tex. Tax Code Ann. § 111.102 settlements, which are based on a taxpayer establishing it is insolvent or that full payment will make it insolvent (insolvency settlement). However, the regulation does not apply to other settlements based on inability to pay made during an audit, the audit redetermination process, and after a final determination.
Utah — Sales Tax Rates — Local rate changes.
The Utah State Tax Commission has updated its sales and use tax rate schedules to reflect local rate changes that are effective October 1, 2014. Brigham City will increase its municipal energy tax rate from 2.25% to 6% and Emery City will begin imposing a municipal telecommunications tax at a rate of 3.5%. (Fourth Quarter 2014 Changes, Utah State Tax Comm’n, effective 10/01/2014; Utah Combined Sales and Use Tax Rates, Utah State Tax Comm’n, effective 10/01/2014; Utah Other Sales Tax Rate and Fees, Utah State Tax Comm’n, effective 10/01/2014; Utah Sales and Use Tax Rates Applied to Certain Transactions, Utah State Tax Comm’n, effective 10/01/2014.)
Utah — Sales And Use Tax — Local rate changes.
The Utah State Tax Commission has updated its sales and use tax rate schedules to reflect local rate changes that are effective October 1, 2014. Brigham City will increase its municipal energy tax rate from 2.25% to 6% and Emery City will begin imposing a municipal telecommunications tax at a rate of 3.5%. (Fourth Quarter 2014 Changes, Utah State Tax Comm’n, effective 10/01/2014; Utah Combined Sales and Use Tax Rates, Utah State Tax Comm’n, effective 10/01/2014; Utah Other Sales Tax Rate and Fees, Utah State Tax Comm’n, effective 10/01/2014; Utah Sales and Use Tax Rates Applied to Certain Transactions, Utah State Tax Comm’n, effective 10/01/2014.)
Vermont — Personal Income Tax — Failure to prove domicile change upheld by Supreme Court.
The Vermont Supreme Court upheld a superior court’s decision upholding a determination by the Commissioner of Taxes that the taxpayer failed to prove a change of domicile for purposes of obtaining the homestead property tax adjustment for the years 2007 through 2009. The taxpayer owned and lived in New York City and in 1958 purchased a summer vacation house in Vermont. At a 2011 administrative hearing, the taxpayer testified that he became a permanent resident of Vermont in 1998, but he indicated in a March 2008 letter to the Commissioner that he became a permanent resident in 2000. The taxpayer argued that the Commissioner erroneously considered the issue to be a change of domicile, rather than maintenance of domicile, so that the taxpayer had the burden of proving by clear and convincing evidence that he had changed domicile, even though he had declared—and the Department of Taxes (DOT) had not challenged his Vermont domicile years earlier. The Supreme Court dismissed this argument, finding it was inconsistent with well-settled law that tax authorities are not estopped by virtue of their prior treatment of a taxpayer’s claims. The taxpayer also argued that the evidence was insufficient as most it referred to the tax years of 2007-2009 and not 1998-2000 when he changed domiciles. In determining that the taxpayer was not a resident, the Commissioner relied on the following findings: (1) the taxpayer was often absent from his Vermont home; (2) he had his utility and property tax bills and other important documents mailed to his New York address to be attended to by his personal secretary; (3) he did not explain how his situation had changed in 1998 or 2000, the years he claimed to have moved to Vermont; (4) he had no immediate family living in Vermont; (5) he averaged one to two weeks per month living in New York; (6) he lived on Social Security, he filed no personal state or federal or income tax returns; (7) he did not provide a passport or other document showing Vermont as his permanent home; (8) in a 2007 legal proceeding, the attorney for his Vermont corporation submitted a brief stating the taxpayer was a New York resident; (9) he failed to submit bank or credit card statements; and (10) all of his doctors are in New York. The Commissioner acknowledged evidence in support of the taxpayer’s claim of Vermont domicile including: (1) the taxpayer had a longtime Vermont driver’s license and had his vehicles registered in Vermont; (2) he registered to vote in Vermont beginning in 1992 and voted in Vermont; (3) he testified that his family and other personal belongings were in Vermont; (4) attended a church in Vermont and was not a member of any New York churches or clubs; and (5) had a Vermont bank account where he received his Social Security checks. The Supreme Court found that the Commissioner did not rely heavily upon taxpayer’s recent need to travel to New York more often for medical reasons. Rather, the Commissioner noted the taxpayer’s continued use of his historical New York apartment and other ties outside of the state as the determining factors, and found they were sufficient and affirmed the determination. The dissent disagreed that because a person maintained health care providers or other advisors outside of the state, or travelled outside the state that this sufficient evidence to prove lack of domicile. (Quazzo v. Department of Taxes, Vt. S. Ct., 2013-205, 08/01/2014.)
Vermont — Real Property — Education property tax guidelines for treasurers and collectors.
The Vermont Department of Taxes has issued the Education Property Tax Guidelines for Treasurers and Collectors effective for the 2015 property tax year. The document explains how the education property tax is calculated and how the property tax adjustments are applied. The publication discusses property and education tax rates, including a FAQ on education tax rates, local agreement rates, property tax adjustment credits, penalties, payments and tax bills and compensation to municipalities. (Education Property Tax Guidelines for Treasurers and Collectors, Vt. Dept. of Taxes, 07/01/2014.)
Vermont — Sales And Use Tax — Guidance issued on installation of permanent items into homes.
The Vermont Department of Taxes (DOT) has issued a fact sheet for “Sales Tax for Manufacturers, Retailers & Contractors of Items Permanently Installed in a Home or Business.” The fact sheet is meant to assist manufacturers, sellers, and contractors of items permanently installed in a home or business, such as countertops, cabinets, and other types of permanent fixtures, in understanding how to properly apply sales and use tax to those items. For contractors purchasing the item from the supplier, the contractor must not use a resale exemption certificate and must pay the sales tax on the item to be installed. The contractor may pass the tax on to its customers as a markup, noting on the invoice that “[t]he contractor has paid all applicable Vermont taxes on materials used for this job.” When the manufacturer sells its own product directly to the customer who is the end user (for example, the owner of the home or business), it should collect , tax at the point of sale and remit it to the DOT. If the manufacturer sells the product installed, then it must collect sales tax on the price of the item. Installation charges are not subject to tax if stated separately. For retailers who sell items not installed, they should present a resale exemption certificate when purchasing from a supplier, so that no sales tax is collected for the transaction. The retailer should then collect the sales tax at the point of sale from its customer and remit the tax to the DOT. For retailers that sell an item as installed, the retailer should also present a resale exemption certificate at the time of purchase from the supplier, and collect the sales tax at the point of sale from its customer on the price of the item. Installation charges are not subject to tax if stated separately. (Sales Tax for Manufacturers, Retailers & Contractors of Items Permanently Installed in a Home or Business, Vt. Dept. of Taxes, 07/01/2014.)
Washington — Sales And Use Tax — 2014 SSUTA taxability matrix revised.
The Washington Department of Revenue revised its recently issued 2014 state taxability matrix on July 31, 2014. The newly revised matrix, which is effective August 1, 2014, changes the answer from “Yes” to “No” in the “Best Practices on Credits” under “Credits 2.16,” which states: “The credit provided for in 2.1 and 2.2 includes the “tax paid” by the lessor to another state or local jurisdiction on the acquisition of the product against the “sales or use taxes” due on the balance of the lease/rental payments provided the tax reimbursement is documented and disclosed to the lessee.” In addition, the matrix was revised to address the treatment of marijuana, useable marijuana, and marijuana-infused products. A comment was added to the item “Food and food ingredients excluding alcoholic beverages and tobacco” (Reference number 400030) indicating that food and food ingredients does not include marijuana, useable marijuana, and marijuana-infused products. Similarly, a comment was added to the item “Drugs for human use without a prescription” (Reference number 51010) indicating that drug does not include marijuana, useable marijuana, and marijuana-infused products. The existing comment for the item “Local Service as defined by Washington” (Reference number 61350) was removed. Finally, a comment was added under the Best Practices on Credits, Section 2.2, stating: “There is no statute authorizing a credit against Washington’s sales tax.” (Washington 2014 Taxability Matrix, Wash. Dept. of Rev., 07/31/2014.)
Wyoming — Sales And Use Tax — Guidance issued for direct pay permits.
The Wyoming Department of Revenue (DOR) has issued guidance on direct pay permits. A direct pay permit is not an exemption from sales tax, but instead authorizes the purchaser to accrue and pay Wyoming sales tax directly to the DOR versus paying sales tax to their supplier at the time of purchase. This non-transferable permit is limited to those organizations that make $5 million or more in annual purchases. The direct pay application is available at http://revenue.wyo.gov under the “Forms” link of the “Excise (Sales & Use) Tax Division.” Once a direct pay permit application is approved, the holder becomes eligible to make all purchases without the payment of sales tax, by issuing their suppliers a copy of the Direct Pay Permit or a Streamlined Certificate of Exemption form. These two documents remove the responsibility from the seller to collect the tax and transfer it to the permit holder to pay the tax directly to the DOR. The Direct Pay Permits and completed exemption certificates do not expire and should remain in the seller’s business records for a minimum of three years as protection in the event of an audit. Direct Pay Permit holders must pay the tax by the end of the month following the month the purchases are made. ( 08/01/2014, 08/01/2014 .)