SALT Report: September 2017

September 7, 2017

Each month, our State and Local Tax team will provide highlights of recent state tax law changes that may affect you. Updates are sorted by state so that you can easily view the changes that impact the state(s) in which you are doing business.

Contact any member of our State and Local Tax team for specific guidance.

Voluntary disclosure initiative for online marketplace sellers 

The Multistate Tax Commission (MTC) is offering a voluntary disclosure initiative for online marketplace sellers in participating states during the period beginning August 17, 2017, through October 17, 2017. The program allows a full reprieve from tax, interest and penalties in a number of states. Read the article→

Illinois

  • Effective August 11, 2017, the Illinois Department of Revenue (DOR) is authorized to exchange personal income tax return information with the State Treasurer’s office for the purpose of administering the Uniform Disposition of Unclaimed Property Act.
  • Withholding responsibility eliminated for calendar year flow-through entities starting in tax year 2017. Among the changes made to certain sales factor and alternative apportionment provisions are:
    • Double throwback rule is eliminated for tax years ending on or after December 31, 2008. Refund claims are available for years that are still open under the statute of limitations, which is generally three years from the due date in Illinois.
    • For tax years ending after July 15, 2009, electricity sales are sourced in the same manner as tangible personal property.

Indiana

  • The Indiana Department of Revenue updated Information Bulletin #9 guidance on agricultural production exemptions from sales tax. The exemption applies to purchases of agricultural machinery or equipment if they are purchased to apply fertilizers, pesticides, fungicides, seeds, and other tangible personal property. Purchasers must meet several requirements to take the exemptions.

Maine

Michigan

New York

  • The New York Department of Taxation and Finance issued a memorandum explaining recently enacted legislation applicable to sales made and uses occurring on or after April 10, 2017:
    • Amends how sales tax applies to transactions between certain related entities
    • Narrows the exclusion from use tax for purchases made out of state by nonresident businesses
  • With certain exceptions, recently amended legislation narrows the exclusion from use tax for the use of property and services purchased by the user while a nonresident of New York. Use tax is now imposed when a nonresident business brings tangible personal property or a taxable service into New York for use in New York unless the nonresident business has been doing business outside of New York for at least six months prior to the date that the property or service is brought into the state.
  • The sale of a cloud collaboration service product is subject to New York state and local sales taxes because it constitutes prewritten software; however, the taxpayer’s purchase of hardware used to provide the product will not be subject to sales or use tax if it is not delivered or used in New York. In addition, the taxpayer’s start-up charges are separate from the charges for the license to use its software.

North Carolina

  • Notices of filing frequency changes are being mailed to taxpayers who file sales and use tax returns. A number of taxpayers who previously filed quarterly sales and use tax returns are being notified that they will be required to file on a monthly basis for filing periods beginning on or after October 1, 2017, while some taxpayers will be notified that they are to file quarterly sales and use tax returns beginning on or after October 1, 2017, in lieu of filing monthly returns.
  • Effective retroactively to January 1, 2017, sales and purchases made on or after that date involving services to real property is a retail sale, for sales and use tax purposes, unless the person substantiates that a transaction is a real property contract by records or by receipt of an affidavit of capital improvement.
  • Effective for taxable years beginning on or after January 1, 2017, the definition of "apportionable income" for purposes of computing North Carolina corporate income tax liability is all income that is apportionable under the U.S. Constitution.

Ohio

  • A temporary tax amnesty program will be administered beginning January 1, 2018, and ending February 15, 2018. Ohio taxpayers that voluntarily come forward and pay all taxes and half of the interest due will have penalties and the remaining half of the interest waived. Any tax delinquencies as of May 1, 2017, including unfiled tax returns and underreported and unpaid taxes, are eligible. A few tax types are excluded, such as municipal or township lodging tax and resort area tax.
  • An out-of-state corporate income taxpayer was properly subject to the Ohio commercial activity tax (CAT) on gross receipts from forward contracts to its Ohio-based customers since the forward contracts involved the delivery of tangible personal property. The taxpayer recognized revenue only upon shipment of the agricultural commodities to its Ohio-based customers. Only the gross receipts from the taxpayer’s forward contracts were sourced to Ohio and that receipts from its futures contracts were properly not factored into the CAT assessment.

Oregon

Texas

  • A managing member of a limited liability company (LLC) was personally liable for the LLC’s unpaid Texas franchise tax for the 2012 report year. The LLC failed to timely remit its franchise tax for the 2011 report year, which led to forfeiture of its privileges and revocation of its charter. That meant each member of the LLC was liable for each debt of the company created or incurred in Texas after the date on which the report, tax or penalty is due and before the company privileges are revived.

Wisconsin

  • Tax Bulletin 198 covers a variety of personal income and corporation franchise and income tax topics, including: 
    • Certain corporations cannot be included in combined returns and must file separate returns.
    • The military pay income subtraction does not apply to pay that members of the Reserves and National Guard receive for weekend or two-week annual training, and it also does not apply to a member of a reserve component of the U.S. armed forces serving on active duty or full-time duty in the active guard reserve program.
    • The 2016 Wisconsin income/franchise tax return is the third return on which the required five-year basis modification must be reported.
  • The Wisconsin Department of Revenue (WDOR) issued a letter certifying that the state is in substantial compliance with the requirements of the Streamlined Sales and Use Tax (SST) Agreement as of August 1, 2017. The taxability matrix and certificate of compliance are available on the SST Governing Board website.
  • Effective January 1, 2018, the motor vehicle dealers’ measure of use tax will be increased from $154 to $157 per plate per month.
  • Statistical sampling can be used in WDOR sales and use tax audits to define the sample population, including prescreening, considering possible refund items, and evaluating alternative review methods. Regarding possible refund items, the auditor, computer audit specialist (CAS) and taxpayer should discuss possible refund items as early as possible in the audit process. If a refund claim is filed late in the audit, the auditor may not be able to include the refund claim in the audit and the taxpayer would need to appeal the audit determination.
  • A nonprofit organization must charge Wisconsin sales tax unless an exemption, such as the occasional sale exemption for nonprofit organizations, applies. A nonprofit that sells taxable products or services is required to obtain a seller’s permit and must collect and remit sales tax on those sales.