SALT Report: October 2018

October 4, 2018

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 our State and Local Tax team for specific guidance.

All states

Reminder—the sales tax rules have changed as a result of the U.S. Supreme Court’s Wayfair decision. Please review this table to learn which states have enacted economic nexus threshold. In many states, exposure began October 1.

We are busy discussing sales tax and nexus with clients. Please contact us to start the conversation.

California

  • California can force interstate unitary businesses to use the combined method of reporting income and apportioning taxes, while allowing intrastate unitary businesses to pick a reporting method. The Court of Appeal of California found this taxing scheme does not unconstitutionally discriminate against interstate commerce as without the combined reporting, the state could not accurately measure, apportion and tax all of an interstate unitary business’s California revenue.

Colorado

Illinois

  • Beginning October 1, 2018, remote sellers that meet either of the following thresholds must register and begin collecting and remitting Illinois sales tax:
    • The retailer’s cumulative gross receipts from sales of tangible personal property to purchasers in Illinois are $100,000 or more, or
    • The retailer enters into 200 or more separate transactions for the sale of tangible personal property to purchasers in Illinois
  • View these resources to better understand how filing requirements have changed. In particular, the publication Use Tax Guidance for Remote Sellers notes the following:
    • Sales for resale can be excluded from the threshold determinations
    • Illinois remote seller rules only apply to sales of tangible personal property, not services
    • Similar to Wisconsin, retailers with 100% nontaxable sales do not need to register
    • Information regarding changing from a voluntary to mandatory use tax collector, as noted on page 2

Indiana

  • Indiana began enforcing its sales tax economic nexus law on October 1, 2018, following the resolution to a legal challenge to Indiana’s remote sellers law. The economic thresholds for enforcing sales tax collection by remote sellers, regardless of physical presence, are:
    • Gross revenue from sales into Indiana exceeding $100,000, or
    • 200 or more separate transactions into Indiana

Visit the department’s Wayfair FAQ page for more information.

Kentucky

  • On July 1, 2018, Kentucky enacted a law to tax a group of services, but it did not provide an exemption for services sold for resale. The Department of Revenue is working with the state legislature to consider changing this situation. The services in question include landscaping services, janitorial services, certain veterinary services, pet care services, laundry services, tanning services, diet services, limousine services, and extended warranty services.

Maine

  • Effective September 12, 2018, a Maine income tax conformity bill became law, which also makes other significant changes surrounding:
    • Corporate tax brackets
    • Net operating loss deductions
    • Alternative minimum tax for corporations
    • Foreign-earned income
    • Standard deductions
    • Itemized deductions
    • Personal exemptions
    • Education savings plans
    • Domestic production activities deductions
    • Sales and property tax fairness credits
    • Fiduciary adjustments for tax on trusts and estates
    • New credits for dependent exemptions and employer-paid family and medical leave

Minnesota

North Carolina

  • North Carolina issued IRC Section 965 Repatriation Guidance, which provides details for reporting income on 2017 North Carolina tax returns for C corporations, S corporations, partnership income, estate and trust income, and individual income. The Tax Cuts and Jobs Act of 2017 enacted IRC section 965, which requires taxpayers to include untaxed foreign earnings and profits from post-1986 tax years in their Subpart F income. If you already filed a 2017 North Carolina income tax return and owe tax on IRC section 965 income, you must file an amended return.

Rhode Island

  • Starting October 1, 2018, Rhode Island sales tax applies to software as a service (SaaS), including software accessed from the web even if it's not downloaded. Under the new law, the purchase of e-books, digital videos, and/or digital music products—whether by download or by stream—will continue to be tax-free.

South Carolina

South Dakota

  • South Dakota enacted two economic nexus laws. Remote sellers and marketplace providers that meet the annual economic nexus threshold must register for a South Dakota sales tax license and collect and remit South Dakota sales tax. The economic nexus threshold, including the sale of tangible personal property, products transferred electronically, and services, is:
    • $100,000 or more in annual sales into South Dakota, or
    • 200 or more annual transactions into South Dakota
  • Remote sellers meeting the threshold must comply by November 1, 2018. Marketplace providers meeting the threshold must comply by March 1, 2019. You can register for a South Dakota sales tax license or register with more than one state.

Tennessee

  • Tennessee provides sales and use tax advice for out-of-state dealers in Notice No. 18-11. A dealer with no physical presence in Tennessee is not required to collect sales and use tax until the state issues a notice providing additional information. Dealers that had no physical presence in Tennessee and did not collect the tax will not be assessed for any periods that precede the department’s notice. The Tennessee Department of Revenue encourages such dealers, however, to voluntarily collect and remit the tax.

Dealers may register through the online Tennessee Taxpayer Access Point under "Register a New Business" or by accessing the Streamlined Sales Tax Registration System.

West Virginia

  • Beginning January 1, 2019, certain remote sellers are required to collect and remit West Virginia sales and use taxes on taxable sales delivered in West Virginia, including those that during calendar year 2018 either:
    • Delivered more than $100,000 of goods or services into West Virginia, or
    • Engaged in 200 or more separate transactions for the delivery of goods and services into West Virginia
  • Small remote sellers that have no physical presence in West Virginia, or those that have volunteered to collect West Virginia taxes, will not be required to collect state and municipal sales and use taxes when the remote seller has annual sales of products and services of:
    • No more than $100,000, and
    • Less than 200 separate transactions for goods and services delivered in West Virginia

Wisconsin

  • As of October 1, certain remote sellers will be required to collect sales tax on Wisconsin sales.
  • The Wisconsin Department of Revenue eliminated state income tax Forms 1A and WI-Z for tax year 2018, which corresponds with the elimination of federal Forms 1040A and 1040EZ. In 2019, Wisconsin residents will file their 2018 individual income tax returns using Form 1, while nonresidents and part-year residents will continue to file using Form 1NPR.
  • Publication No. 506, Taxpayers’ Appeal Rights of Audit Adjustments, was updated, combining content from Publication No. 505 (which has since been discontinued) and Publication No. 506. The updated publication includes information reflecting laws enacted by the Wisconsin Legislature effective as of August 1, 2018.
  • Tax Bulletin No. 202 was updated to reflect that motor vehicle dealer’s measure of Wisconsin use tax increases from $157 to $162 per plate per month, effective January 1, 2019.
  • For sales and use tax purposes, Wisconsin created a rule that establishes criteria applicable to field audits for which the Department of Revenue’s auditor uses a statistical sampling method. All of the following criteria should be met before statistical sampling may be used on a sample population:
  1. All accounting transactions must be maintained in an electronic format and be capable of secure electronic transfer to the department.
  2. The data processing accounting system must be capable of producing and transferring to the department an electronic spreadsheet of all accounts for each period under audit, including account number, account description, and year-end and pre-closing balances.
  3. All electronic sales transactions must include customer name, electronic transaction number, date, amount, and information necessary to determine where sourced.
  4. All electronic purchase transactions must include vendor name, electronic transaction number, date, amount, account number from accounting system or other information that identifies where the purchased item was stored, used, or consumed.
  5. Documentation used to prepare each tax return must be available for review, including transaction detail, reports, and work papers.
  6. All sample unit source documents must be available for review.
  7. There must be at least 10,000 sample units in the sample population.