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Tax Developments
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December 27, 2011
On November 4, 2011, the Alabama Court of Civil Appeals (“Court”) denied Home Depot’s petition for refund of sales tax paid on uncollectible debts. Similar to the facts in cases heard in Oklahoma, Ohio, and Washington, Home Depot entered into contracts with finance companies to extend credit to its customers through the use of private-label credit cards. When a customer made a purchase, the finance company paid Home Depot the amount of the purchase, including any applicable taxes, less a service fee.
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December 27, 2011
In Combs v. Chapal Zenray, Inc., No. 03-10-00646-CV (Tex. App. – Austin, November 18, 2011, no writ history), the Third Court of Appeals in Austin (“Court”) determined that certain packaging materials were subject to use tax in Texas.
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December 22, 2011
Since January 1, 2008, Michigan taxpayers have been able to claim credits against the Michigan Business Tax (MBT) for certain personal property taxes, including the industrial facilities tax, the obsolete property tax, and the tax on certain public utilities.
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December 16, 2011
A complaint recently filed in a California trial court spotlights a potential franchise tax refund opportunity for multistate corporate taxpayers who file combined franchise tax reports in California. Harley-Davidson, Inc. & Subsidiaries v. California Franchise Tax Board, No. 37-2011-00100846-CU-MC-CTL (Superior Court, San Diego County) (November 9, 2011).
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December 16, 2011
In a 7-2 vote, the Texas Supreme Court (“Court”) rejected a constitutional challenge to the revised Texas franchise tax (also known as the “Margins Tax”). In the closely watched case In Re: Allcat Claims Service, L.P. et al. (“Allcat”), No. 11-0589 (Tex. – November 28, 2011), the Court overruled the taxpayers’ contention that the Margins Tax, in effect since 2006, constitutes a tax on the income of natural persons. Such a tax would violate the “Bullock Amendment” to the Texas Constitution, which provides that the state may not impose a net income tax on natural persons without the approval of a majority of registered voters.
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December 01, 2011
The New York State Department of Taxation and Finance (“Department”) issued an advisory opinion providing that tenant-installed niche walls, wall fittings, and paneling are capital improvements, not subject to sales and use tax. TSB-A-11(24)S.
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December 01, 2011
The Washington Department of Revenue (“Department”) recently announced that it was changing its policy regarding a Business and Occupation (“B&O”) tax exemption for fruit or vegetable processors. The law provides a B&O tax exemption for the value of fresh fruits or vegetables processed by a manufacturer by canning, preserving, freezing, processing, or dehydrating in Washington and sold at wholesale to customers outside of Washington.
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November 21, 2011
Michigan Governor Rick Snyder recently signed into law Senate Bill 669 (“SB 669”), which statutorily defines the term “actively solicits” for purposes of determining nexus under the state’s corporate income tax laws. The amendment, provided by SB 669, repeals the authority previously granted to the Michigan Department of Treasury (“Department”) to define the term through guidance. Effective January 1, 2012, amended Section 621 (MCL 206.621) will define “actively solicits” to mean either of the following:
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November 14, 2011
Effective October 1, 2011, Rhode Island sales and use tax is due on non-prescription drugs, electronically delivered computer software, and certain package tours and scenic tours (e.g., boat, bus, trolley, train, helicopter, and airplane tours). The Rhode Island Division of Taxation also issued the following new or revised regulations describing the application of sales and use tax to the following newly taxed goods and services:
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November 09, 2011
The California Franchise Tax Board has adopted Regulation 25128.5, which provides the procedures to use a single-sales factor formula to apportion taxable income to California. Previously, most businesses were required to apportion income using property, payroll, and double-weighted sales factors. Effective for tax years beginning after December 31, 2010, corporations may elect to apportion income using the single-sales factor method. Please note, however, that a corporation that derives more than 50% of its gross business receipts from agricultural, extractive, savings and loan, banking, or financial activities may not use this apportionment method.
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October 31, 2011
In an action filed in New York State court by Morrison & Foerster LLP, tax services firm Ryan, LLC (“Ryan”) challenged the constitutionality of New York State’s fixed dollar minimum tax (FDMT), a computational method for determining the minimum tax payable by S corporations, which was in effect from 2003 through 20071. During those years, the FDMT was based on the S corporation’s gross payroll (wages, salaries, and other personal compensation), regardless of whether any such related services were performed by employees located in New York.
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October 31, 2011
Recently, the Commonwealth Court of Pennsylvania (“Court”) reversed the Pennsylvania Board of Finance and Revenue’s (“Board”) decision and held that pallets are not “containers” for sales tax purposes. If the Court’s decision in Proctor & Gamble Paper Products Co. v. Commonwealth of Pennsylvania (No. 786 F.R. 2009, decided October 13, 2011) is not overturned on appeal, returnable pallets may qualify for Pennsylvania’s sales tax exemption for wrapping supplies purchased or used by the seller.
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October 19, 2011
The Texas Comptroller of Public Accounts (“Comptroller”) mailed letters to the reporting entities of combined groups, requesting information about temporary credits for business loss carryforwards that were taken on the combined group’s 2008 Texas franchise tax report. The information is due by October 31, 2011.
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October 19, 2011
Illinois’ Cook County Department of Revenue (“Department”) has implemented a Voluntary Disclosure Program (“Program”) to provide unregistered businesses within the county an opportunity to register and remit any taxes owed to the Department without being subject to certain penalties. Taxpayers that self-assess and pay all outstanding tax liabilities and interest owed for the four-year period immediately prior to the date of registration will be relieved of paying any penalties associated with the tax liabilities for that period. >More
October 13, 2011
The Supreme Court of Illinois (“Supreme Court”) reversed Wirtz v. Quinn (“Wirtz”), an Illinois First District Appellate Court (“Appellate Court”) decision, and upheld the state’s increased tax rate on alcohol, candy, soft drinks, and grooming and hygiene products. The decision should not change the amount of tax Illinois retailers collect on sales of candy, soft drinks, etc., as the Illinois Department of Revenue (“Department”) instructed sellers to collect the increased tax while waiting for a Supreme Court decision.
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October 07, 2011
Effective October 1, 2011, King County restaurants, bars, and taverns will no longer be required to collect the additional .5% tax on food and beverage sales. In addition, rental car companies should not collect the extra 2% King County special car rental tax on rentals after September 30, 2011. Seattle and SeaTac, home of the Seattle-Tacoma International Airport, are in King County.
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October 07, 2011
The California State Board of Equalization (BOE) has adopted Sales and Use Tax Regulation 1685.5, which provides procedures for reporting “estimated use tax.” Beginning with the 2011 tax year, individuals may pay an estimated use tax.
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October 03, 2011
In a recent issue of the Texas Comptroller’s Tax Policy News, the Comptroller announced that a coupon or certificate that is sold for a discounted price will be “treated like cash” when redeemed. The Comptroller’s new policy provides that retailers must collect sales tax on the full face value of coupons and certificates when used to purchase goods or taxable services, even when the certificates are sold at deeply discounted prices.
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September 26, 2011
As the Texas Supreme Court considers whether the Texas franchise tax violates the Texas Constitution’s prohibition on taxing the income of individuals in Allcat Claims Service, L.P. v Combs, the Comptroller published revisions of its policy on franchise tax reporting methods.
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September 26, 2011
The New Jersey Division of Taxation (“Department”) is currently offering a Voluntary Disclosure Program (“Program”) for media and media content companies (“Media Companies”) for the payment of New Jersey’s Corporation Business Tax (CBT). The Program ends November 15, 2011.
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August 29, 2011
Puerto Rico’s Property Tax Amnesty Program (“Program”), which began in July and will end October 11, 2011, allows qualifying taxpayers to receive a waiver of property tax penalty and interest. In addition, qualifying taxpayers may be allowed to deduct 50% of the principal amount due on personal property for 2000 and before.
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August 29, 2011
Minnesota’s House File 20 (“Tax Bill”), passed during the state’s 2011 Special Session and amends Minnesota’s income tax, estate tax, property tax, and sales and use tax laws. The Tax Bill conforms the state’s income tax with the Internal Revenue Code by adopting the most recent federal tax changes, including those contained in the Small Business Jobs Act of 2010; the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010; and the Comprehensive 1000 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011.
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July 22, 2011
Governor John Kasich signed into law Ohio’s 2012-2013 budget bill, House Bill 153 (“HB 153”), which amends Ohio’s estate, corporate franchise, personal income, and sales and use taxes.
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July 22, 2011
Governor Scott Walker signed Assembly Bill 40, Wisconsin’s 2011-2013 budget bill (“Budget Bill”), into law. The Budget Bill implements changes to current sales and use, personal income, and corporate franchise and income taxes.
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July 01, 2011
Governor John Hickenlooper of Colorado signed into law Senate Bill 184 establishing a tax amnesty program (“Program”) under which the Colorado Department of Revenue (“Department”) may waive penalties and abate interest on eligible delinquent taxes. >More
July 01, 2011
As part of New York’s 2011-2012 budget, tax refunds in the form of state-issued debit cards will have a one-year life before New York considers the refund “abandoned property.” If a taxpayer does not activate the tax refund debit card within one year of the date it was issued, the tax refund will be treated as abandoned property and paid to the New York State Comptroller (“Comptroller”).
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July 01, 2011
Connecticut’s budget bill (Senate Bill 1239 - Public Act No. 11-6) increases tax rates, repeals certain sales tax exemptions, and makes several services taxable services. The following tax rate increases are applicable to sales occurring after June 30, 2011 and to services beginning with the first billing period that includes July 1, 2011.
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June 29, 2011
Michigan’s 2011 Tax Amnesty Program (“Program”), which expires June 30, 2011, was established to give taxpayers an opportunity to pay delinquent taxes and receive a waiver of any associated penalties. In addition, the Program allows qualifying, participating taxpayers to avoid criminal prosecution by the Michigan Department of Treasury (“Department”).
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June 29, 2011
The 1% increase to California’s sales tax, which has been in place since 2009, expires June 30, 2011. California Governor Jerry Brown’s May 2011 revisions to his proposed budget sought to extend the 1% increase for an additional five years.
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June 29, 2011
In TGS-NOPEC Geophysical Company v. Susan Combs, the Supreme Court of Texas (“Court”) decided that fees for licenses to access proprietary seismic data were receipts from the sale of intangibles (data) rather than receipts from the use of a license.
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June 11, 2011
June 30, 2011 is an important date for Ryan clients who may be eligible to recover Value-Added Tax (VAT) paid to many European Union (EU) member countries. In many cases, VAT paid in 2010 may not be recoverable if the required documentation is not filed with the respective EU authority by this date.
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June 07, 2011
Kansas Governor Sam Brownback recently signed into law Senate Bill 10 (“SB 10”), which reestablishes a three-year statute of limitations for sales and use tax refund claims. The new legislation takes effect July 1, 2011.
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June 07, 2011
On May 25, 2011, Michigan Governor Rick Snyder signed into law sweeping changes to the state’s current corporate tax structure. Effective January 1, 2012, House Bill 4361 (“HB 4361”) and House Bill 4362 (“HB 4362”) mandate the repeal of the Michigan Business Tax (MBT) and replace it with a corporate income tax.
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June 02, 2011
North Dakota’s House Bill 1047 (“HB 1047”), signed by Governor Dalrymple, will reduce North Dakota’s corporate income tax by 20% and property taxes by an estimated 15 to 19%.
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June 02, 2011
The Florida Department of Revenue (“Department”) has proposed rules that would amend and clarify Florida sales and use tax rules regarding discounts and trade-ins. The Department’s decision to amend the rules follows a decision from the Florida Court of Appeals (“Court”) in Department of Revenue v. GameStop, Inc., where the Court held that language contained within Fla. Admin. Code Ann. §§ 12A-1.074 and 12A-1.018 contradicts and modifies the law governing trade-ins.
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May 27, 2011
Louisiana’s annual hurricane preparedness sales tax holiday begins 12:01 a.m. on May 28, 2011 and ends 11:59 p.m. on May 29, 2011. During this period, the first $1,500 paid for any eligible item will be exempt from Louisiana’s sales tax. The following are eligible for the exemption:
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May 23, 2011
Arizona’s Governor Jan Brewer recently signed Senate Bill 1616 (SB 1616), which directs the Arizona Department of Revenue (“Department”) to establish an amnesty program or Arizona’s Tax Recovery Program (“Program”).
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May 23, 2011
In J-W Power Co. v. Louisiana, the Supreme Court of Louisiana (“Court”) held that a seller may act as a purchaser’s agent in connection with a refund claim for taxes paid under protest.
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May 06, 2011
On April 13, 2011, Washington Governor Gregoire signed into law Senate Bill 5501, which creates exemptions from the state’s sales and use taxes, as well as the Business and Occupation tax for meals provided free of charge to restaurant employees.
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May 06, 2011
On April 26, 2011, Missouri Governor Jay Nixon signed Senate Bill 19 (SB 19), enacting legislation that will phase out Missouri’s corporate franchise tax over a five-year period, commencing in 2012. In addition, during the phase-in period, SB 19 caps a corporation’s franchise tax liabilities at the amount of the corporation’s 2010 franchise tax liability.
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May 02, 2011
The Missouri Department of Revenue (“Department”) recently issued a Letter Ruling (LR 6631), explaining that sales tax is not due on an optional fee paid for a loss damage waiver purchased by a vehicle lessee. In the Letter Ruling, motor vehicle lessees had the option of purchasing a loss damage waiver in lieu of obtaining collision and comprehensive auto insurance.
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May 02, 2011
The New Mexico Taxation and Revenue Department ("Department") recently released its decision in re of the Protest of Chevron USA, Inc., holding that oil and gas royalty payments are “annual rents” for purposes of calculating the New Mexico corporate income tax apportionment property factor.
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April 18, 2011
The Massachusetts Department of Revenue (“the Department”) recently issued a Letter Ruling (LR 11-2), which provides that Massachusetts sales tax is due on charges for the use of software hosted on the seller’s server.
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April 18, 2011
The Streamlined Sales Tax Audit Committee recently issued guidelines for the acceptance of exemption certificates in Streamlined Sales Tax (“Streamlined”) states. The guidelines discuss good-faith acceptance and the timeframe for obtaining certificates.
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April 06, 2011
Effective April 1, 2011, clothing and footwear sold for less than $55 will be exempt from New York’s state sales and use tax (4%) and the state-imposed Metropolitan Commuter Transportation District (MCTD) sales tax (0.375%).
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March 30, 2011
The Texas Court of Appeals, Third Circuit ("Court") recently upheld a refund of sales taxes on items resold to the United States government. In Combs v. Health Care Services Corporation, No. 03-09-00617-CV (Tex. App. – Austin, March 16, 2011, no pet. h.), the Court considered whether Health Care Services Corporation (HCSC), successor to Blue Cross and Blue Shield of Texas, Inc., could claim a sale-for-resale exemption on goods and services purchased to fulfill contracts with the federal government to administer Medicare Part A, Medicare Part B, and the Federal Employees Health Benefit Program (“FEP”).
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March 03, 2011
The Louisiana Department of Revenue (“Department”) has issued Revenue Information Bulletin No. 11-005 (“11-005”) to answer frequently asked questions regarding access fees charged for use of a website or canned software and to address tax on pay-per-view and on-demand programs.
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March 03, 2011
In CSX Transportation, Inc. v. Alabama Department of Revenue, the U.S. Supreme Court (“Court”) held that railroads may challenge state sales and use taxes under the Railroad Revitalization and Regulatory Reform Act of 1976 (“4-R Act”).
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February 24, 2011
In Direct Marketing Association v. Huber, the U.S. District Court for the District of Colorado (“District Court”) issued a preliminary injunction prohibiting the Colorado Department of Revenue (DOR) from enforcing notification and reporting requirements imposed on out-of-state retailers under Colorado’s sales and use tax law.
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February 24, 2011
Oklahoma’s Senate Bill 950 (“SB 950”), if enacted, would narrow the state’s definition of nexus for sales and use tax purposes. Under SB 950, the definition of a “retailer” required to collect Oklahoma use tax will no longer include an out-of-state retailer that holds an ownership interest in an Oklahoma retailer.
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February 22, 2011
On January 26, 2011, the Texas Court of Appeals for the Third District (“Court of Appeals”) filed its decision in the case of Roark Amusement & Vending, L.P. v. Combs. At issue in the case was whether Roark Amusement & Vending, L.P. (“Roark”) was eligible to claim a resale exemption on purchases of plush toys used in Roark’s coin-operated amusement services.
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February 21, 2011
The North Carolina Department of Revenue (“Department”) issued a Final Agency Decision holding that a retailer cannot take a sales tax bad debt deduction on private label credit card sales that become worthless. At issue was whether a retailer who contracted with third-party banks to administer a private label card program qualified for a sales tax bad debt deduction under Section 105-164.13(15) of the North Carolina General Statutes.
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February 18, 2011
The Ohio Department of Taxation (“Department”) recently introduced a use tax compliance outreach program through which the Department will help businesses understand when they owe use tax. The program, entitled Use Tax Education Program (UTEP), also provides for a limited use tax amnesty program, which includes a four-year look-back period and penalty waiver for participating businesses.
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February 16, 2011
On February 1, 2011, the Supreme Court of Illinois (“Supreme Court”) granted the state’s motion for a stay of enforcement of the January 26, 2011 decision in Wirtz v. Quinn.
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February 08, 2011
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“Act”), which was signed by the President in December, renews and retroactively reinstates the Federal Alternative Fuel Credit (“Alternative Fuel Credit”) under Internal Revenue Code Section 6426(d), which expired December 31, 2009.
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February 03, 2011
On January 18, 2011, the Second District Court of Appeals of California (“Court of Appeals”) filed its decision in the case of Nortel Networks Inc. v. Board of Equalization. At issue in this case was the taxability of certain “switch-specific programs” and process function software licensed by Nortel Networks Inc. (“Nortel”) to Pacific Bell Telephone Company (“Pacific Bell”) for use in its telecommunications business.
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January 26, 2011
Commencing on February 1, 2011, eligible taxpayers will be able to file under Washington’s recently enacted Amnesty Program (“Program”) for the waiver of penalties and interest otherwise due on outstanding, unreported business and occupation, public utility, and sales and use taxes. Taxpayers wishing to take advantage of the Program must file for penalty and interest waiver no later than April 18, 2011.
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January 25, 2011
In perhaps a cautionary tale for public companies, the U.S. Securities and Exchange Commission (SEC) has recently levied a $200,000 fine against a professional staffing firm for failing to maintain appropriate controls relating to its sales tax responsibilities. Matter of Hudson Highland Group, Inc., U.S. Securities and Exchange Commission, Admin. Proceeding File No. 3-14182 (January 10, 2011). The company accepted the fine as part of a settlement agreement.
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January 07, 2011
On December 17, 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“Act”). Among other provisions, the Act renews and retroactively reinstates the federal Research and Development (R&D) tax credit under Internal Revenue Code Section 41, which expired December 31, 2009. The Act provides that the reinstated R&D tax credit will continue through December 31, 2011.
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Ohio Amnesty Ends June 15, 2012.
June 15, 2012 is the last day taxpayers can take advantage of Ohio’s Tax Amnesty Program (“Program”). The Program allows taxpayers to obtain penalty and...
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