SALT Report: July 2017

July 11, 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.

California

  • Effective July 1, 2017, the California Board of Equalization (BOE) was restructured and stripped of all but its constitutionally mandated tax functions. Two new agencies, the Department of Tax and Fee Administration (DTFA) and the Office of Tax Appeals (OTA), were created to assume all other duties, powers and responsibilities of the BOE. The changes were enacted in response to a number of reported problems at the BOE, including complaints that board members and their staffs attempted to influence audits, investigations and collection activities, as well as significant errors in the allocation of sales and use tax revenue.

    The Department of Tax and Fee Administration began operating July 1, 2017, and all BOE responsibilities were transferred to the new agency, except for the BOE’s residual responsibilities and ability to conduct appeals hearings. Effective January 1, 2018, the Office of Tax Appeals will begin conducting appeals hearings, except as those powers relate to the BOE’s residual responsibilities.

    The new website for the Department of Tax and Fee Administration can be found at www.cdtfa.ca.gov.

Colorado

  • Recently signed legislation would repeal the business personal property tax credit after tax year 2018. In its place, a credit for business personal property taxes would be available beginning in tax year 2019. The credit would be paid on up to $18,000 of the total actual value of the business personal property. The credit would only be applied against locally assessed property tax, while tax paid on state assessed property would not be eligible.

Illinois

  • After going more than two years without a budget, the Illinois General Assembly passed a fiscal plan July 6. The legislation includes a number of corporate and individual tax changes, among them:
    • Effective for tax years beginning on or after July 1, 2017, the corporate tax rate increased to 7%, up from 5.25%. The replacement tax rate remains unchanged.
    • The research and development tax credit was retroactively extended to tax years ending prior to January 1, 2022.
    • Beginning with tax years ending on or after December 31, 2017, the qualified domestic production activities deduction taken on the federal tax return must be added back to income for Illinois.
    • Effective for tax years beginning on or after July 1, 2017, the personal income tax rate increased to 4.95%, up from 3.75%.
    • For taxable years beginning January 1, 2017, taxpayers with $250,000 or more of adjusted gross income ($500,000 if married filing jointly) are no longer eligible for the education expense credit, real estate tax credit or personal income tax exemptions.

Louisiana

  • Taxpayers must obtain tax clearance from the Louisiana Department of Revenue before a sales tax resale certificate will be issued or renewed. This also applies to the approval of certain state contracts, but not for purposes of bidding on or solicitation of a procurement contract. These provisions apply to requests submitted on or after October 1, 2017, and the tax clearance must show that the resale certificate applicant or proposed contractor is current in filing all tax returns and paying all taxes, interest, penalties and fees owed to the state.
  • The Louisiana Uniform Local Sales Tax Board was created to provide for the uniform and efficient imposition, collection and administration of local sales and use taxes, including establishment of uniform standards and forms for refund requests. The board will serve as the central filing agency for refund claims involving two or more Louisiana parishes with similar transactions.
  • The Louisiana Sales and Use Tax Commission for Remote Sellers was created to collect state and local taxes related to remote sales, and to provide a uniform, simple process for compliance.
  • An optional concursus process was enacted to allow for remittance of tax to the Local Tax Division of the Board of Tax Appeals. A taxpayer or dealer with a formal notice of assessment from two or more local collectors having a conflicting claim to sales or use tax on a transaction may file a concursus proceeding and pay the amount of sales tax collected or due, together with penalty and interest, into an escrow account.

Maine

  • Remote sellers will be required to collect and remit sales tax on sales of tangible personal property, products transferred electronically or services that are delivered into Maine. The state will also be allowed to seek a judgment against remote sellers for uncollected tax, effective October 1, 2017. Remote sellers are excepted from this requirement if:
    • The gross revenue from sales into Maine is $100,000 or less; or
    • The seller made fewer than 200 sales into Maine in a year

Michigan

  • Beginning July 1, 2017, dental lab sales of dental prostheses are subject to sales and use tax. Dental labs may claim the industrial processing exemption for property used in the manufacturing of its products, if the property used to make dental products qualifies for the industrial processing exemption.

Oregon

  • Effective for tax years beginning on or after January 1, 2018, the Department of Revenue can consider the role of foreign affiliates when determining whether two or more corporate affiliates included in the same consolidated federal return are engaged in a unitary business.

Rhode Island

  • Effective July 1, 2017, new individualized account identification numbers were assigned to retailers and other sales tax permit holders to provide greater ID protection and more security.

Wisconsin

  • Wisconsin legislation created a sales and use tax exemption for patient health care records that are sold to the patient or to a person authorized by the patient to receive the records.
  • For sales and use tax purposes, lodging providers are considered the consumers of telecommunications, internet access, cable television and video services they purchase for their own use or for the use of their customers. Persons selling or furnishing internet access, telecommunications, cable television and video services to lodging providers are considered retailers.
  • A county sales and use tax provision was amended to provide that, except as provided under a personal liability provision, the Department of Revenue may not issue any assessment or act on any claim for a refund or bad debt adjustment after the end of the calendar year that is four years after the year in which the county imposing the tax has enacted a repeal ordinance.
  • Updated: Publication 200, Electrical Contractors, regarding a number of sales and use tax topics, including a chart summarizing the Wisconsin sales and use tax treatment for the sales, installation, and maintenance and repair of security and burglar and fire alarm systems. Other important changes include:
    • Effective for contracts entered into on and after October 1, 2013, an exemption is available for a contractor's sale of taxable products sold in a lump sum contract for real property construction if the selling price of the taxable products is less than 10% of the total contract price.
    • Effective August 14, 2015, an exemption is available for materials, supplies, equipment and landscaping services used to build sports and entertainment arena facilities.
    • Applicable to contracts entered into on or after January 1, 2016, an exemption is available for building materials sold to contractors for use in constructing certain facilities for certain exempt entities.
    • The 0.5% county tax was adopted by Sheboygan and Kewaunee Counties and became effective January 1, 2017, and April 1, 2017, respectively.
    • Updated information about purchases of construction information transferred electronically.