Upcoming National Meeting

2019 State and Local Tax Workshop for the Tech Industry

One and a half day conference focusing on state and local tax issues for technology companies. Leading practitioners from across the U.S. will get those new to the area of state and local tax up to speed on all types of taxes, including sales and use, income, property and local taxes, and will provide in-depth panel discussions on other specific state and local issues impacting the tech industry.

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Newsletters & Media

Cost Conscious

ISSUE 19-14; July 12, 2019

Impact of the Wayfair Ruling One Year Later – The U.S. Supreme Court’s decision in Wayfair overruling the Quill physical presence test was issued over a year ago. Which of the following best describes the impact of the decision and state responses to it on your company?

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Bloomberg TAX

Ohio Governor Vetoes Expanding Sales Tax to Internet Platforms

 

Ohio's governor vetoed part of a bill that would have expanded Ohio sales tax obligations to internet-based service platforms and likely triggered litigation from the e-commerce industry.

Arizona DOR Announces Use Tax Rate Increase in City of Flagstaff

 

The Arizona Department of Revenue July 1 announced that the City of Flagstaff approved an ordinance to increase use tax purchases and use tax from inventory to 2.281 percent. The changes take effect on Aug. 1. [Ariz. Dep't of Revenue, Model City Tax Code: City of Flagstaff, 07/01/19]

Alabama Supreme Court Finds Tax Sale Purchaser's Challenge to Redemption Action Barred by Res Judicata

 

The Alabama Supreme Court July 12 affirmed the Baldwin Circuit Court's judgment permitting Taxpayer to redeem the subject property. An individual purchased a property at a property tax sale. Subsequently, the property's owner transferred its interest in the property to Taxpayer. Taxpayer informed the purchaser of his intent to redeem the property. The purchaser filed a quiet-title action, which the circuit court dismissed. Subsequently, Taxpayer filed a redemption action, which the circuit court granted. On appeal, the purchaser asserted that he cut off Taxpayer's right of redemption by adversely possessing the property following the tax sale. The supreme court held that: 1) the purchaser's claim was barred by the doctrine of res judicata because he presented the same argument in both the quiet-title and the redemption actions; and 2) the circuit court properly denied attorney fees to Taxpayer. Therefore, the supreme court affirmed the circuit court's judgment. [Austill III v. Prescott, Ala., Nos. 1170709, 1170730, 07/12/19]

California Appeals Office Finds SBOE's Decision Granting Sales Tax Refund Unsupported by Law, Facts

 

The California Office of Tax Appeals (OTA) March 26 found that the State Board of Equalization's (SBOE) decisions granting Taxpayer's untimely petition for redetermination and related sales and use tax refund claims were erroneous. Taxpayer based its administrative protest and refund claims on: 1) undocumented loans and bank transfers; 2) the sales for resale exemption; and 3) the sales in interstate commerce exemption. The Department of Tax and Fee Administration (CDTFA) contended that there was insufficient evidence to justify the SBOE's decisions in favor of Taxpayer and that an irregularity in the appeal process prevented a fair consideration of the issues. Upon review, the OTA found: 1) the SBOE's decision was both contrary to the law and unsupported by any substantial evidence; and 2) irregularities at the CBOE's oral hearing prevented a fair consideration of the CDTFA's position. Accordingly, the OTA granted a rehearing as to all issues. [Cal. Office Tax App., Case Nos. 18042580, 18042581, 03/26/19]

California Appeals Office Finds Taxpayer Didn't Establish Reasonable Cause for Penalty Abatement, Sustains FTB's Decision

 

The California Office of Tax Appeals (OTA) April 15 affirmed the Franchise Tax Board's (FTB) decision denying Taxpayer's claim for an individual income tax refund. Taxpayer didn't file a return for 2015, so the FTB made a demand for tax return. Taxpayer did not respond until after the FTB issued a proposed assessment based on its estimates, a late-filing penalty, and a demand penalty. Taxpayer paid the assessment and applied for a refund, which the FTB denied. On appeal, the FTB and Taxpayer resolved all issues except the demand penalty. Taxpayer claimed his lack of response to the demand was that he moved and his tax papers were stolen. The OTA found: 1) Taxpayer chose to sacrifice the timeliness of responding to tax matters in favor of addressing his personal matters; and 2) Taxpayer failed to establish reasonable cause. Therefore, the OTA sustained the demand penalty. [Cal. Office Tax App., Case No. 18042746, 04/15/19]

California Appeals Office Finds Taxpayer Liable for Additional Income Tax, Accuracy Related Penalty, Applicable Interest

 

The California Office of Tax Appeals (OTA) March 29 found that Taxpayer was liable for additional individual income tax, an accuracy-related penalty, and modified interest abatement for the period from July 27, 2016, through October 12, 2017. Taxpayer protested the notice of the proposed assessment and requested a waiver of the accuracy-related penalty and interest on the basis that it took the Franchise Tax Board (FTB) too long to propose the additional tax. The OTA noted that Taxpayer: 1) failed to establish an error in FTB's proposed assessment, which was based on a final federal determination; 2) failed to establish a basis for abatement of the accuracy-related penalty; and 3) established a basis for interest abatement for the period July 27, 2016, through October 12, 2017, but not for any other period. Accordingly, the OTA modified FTB's action for interest abatement but otherwise sustained the FTB's action. [Cal. Office Tax App., Case No. 18032549, 03/29/19]

California FTB Publishes List of Top 500 Delinquent Individual Income Taxpayers

 

The California Franchise Tax Board (FTB) July 16 published an updated list of the top 500 delinquent individual income taxpayers. The FTB publishes the list twice a year. [Cal. Franchise Tax Bd., Top 500 Delinquent Taxpayers, 07/16/19]

California Appeals Office Finds Taxpayer Didn't Document Tips, Cover Charges to Reduce Sales Tax Liability

 

The California Office of Tax Appeals (OTA) April 3 found Taxpayer liable for underreported sales and use tax liabilities. Taxpayer operated a tobacco smoke lounge. The California Department of Tax and Fee Administration (CDTFA) audited Taxpayer's business and issued a notice of determination that assessed underreported sales tax and interest. Taxpayer requested a redetermination. The CDTFA's Appeals Bureau denied Taxpayer's redetermination petition. Taxpayer appealed contending that the tax liability should be reduced to account for tips and cover charges. The OTA found that: 1) Taxpayer provided incomplete records for the audit; 2) the CDTFA applied an average markup of 341.18 percent to Taxpayer's cost of goods sold, as reported on Taxpayer's own federal income tax returns; and 3) Taxpayer failed to provide documentation establishing an adjustment for tips and cover charges. Accordingly, the OTA affirmed the CDTFA's determination. [Cal. Office Tax App., Case No. 18012010, 04/03/19]

Connecticut Governor Announces Lawsuit Against New IRS Rules Undermining State Programs

 

The Connecticut Governor July 17 announced a lawsuit against the IRS challenging its new rules designed to undermine state programs that promote charitable giving adopted in the aftermath of the state and local tax deduction cap for corporate income, individual income, excise, sales and use, property, estate, and trust income tax purposes. The lawsuit seeks to strike down a new punitive IRS that would prevent state taxpayers from obtaining a full federal charitable deduction whenever they contribute to charitable organizations established by local governments and receive tax credits in return. [Conn. Governor's Office, Press Release, 07/17/19]

Connecticut Revenue Department Announces Fee for Single-Use Plastic Bags Effective August 1

 

The Connecticut Department of Revenue Services (DRS) July 1 announced that retailers making sales in Connecticut of tangible personal property to the public are required to collect a $0.10 fee per single-use plastic checkout bag for sales and use and excise tax purposes. The store must indicate the number of single-use plastic checkout bags provided, and the total amount of the fee charged on any transaction receipt provided to taxpayers. The announcement includes information on: 1) the definition of "single-use checkout bag" and "store;" 2) the conditions when municipalities may enact or enforce an ordinance concerning single-use plastic checkout bags made of plastic and ; 3) the guidance issued by the DRS regarding the single-use plastic bag fee. The provisions of Public Act 19-117 are effective August 1 through June 30, 2021, after which date, single-use plastic checkout bags are scheduled to be banned. [Conn. Dep't of Revenue Servs., Single-Use Plastic Bag Fee – Effective August 1, 2019, 07/01/19]

Tax Notes

Income Tax Nexus Influenced by Market-Based Sourcing and Wayfair

 

Wayfair and the trend to market-based sourcing could see states more eager to assert that businesses have nexus for income tax purposes based on economic presence, according to panelists.

Ohio Passes Budget With Income Tax Cut, Remote Seller Law

 

Ohio lawmakers have approved a budget that would reduce income tax rates, require remote sellers and marketplace facilitators to collect and remit sales taxes, and prohibit lawyers and lobbyists from taking the state's passthrough deduction.

States Seek Outside Help With Transfer Pricing Audits

 

Several state departments of revenue have sought expert help to train their staff on handling transfer pricing issues.

California Presidential Return Bill Now With Governor

 

A California bill to require presidential and gubernatorial primary candidates to release their tax returns before they can appear on the state’s primary ballot is now awaiting action by Gov. Gavin Newsom (D).

Connecticut Governor Signs Bill to Ease TIF Requirements

 

Connecticut Gov. Ned Lamont (D) has signed a bill into law that will speed up the process for establishing municipal tax increment financing districts.

Michigan County Sued Over Property Seizure for Tax Underpayment

 

A woman is suing a Michigan county after it foreclosed on her property over just hundreds of dollars in tax debt.

Hawaii Governor Allows Film Tax Credit Increase to Become Law

 

Hawaii Gov. David Ige (D) has reversed his decision to veto a bill expanding the state’s film tax credit, instead allowing the legislation to become law without his signature.

Kentucky Appellate Court: Liability Coverage Charges Not Taxable

 

Charges for liability coverage on rental items are not subject to sales tax, the Kentucky Court of Appeals has held.

Cannabis Banks Bill Advances in California

 

A California bill to create special banks for the state's legal cannabis industry has moved one step closer to passage.

Chicago Cubs Owner May Have Gamed the Property Tax System

 

The Cook County Assessor's Office is taking another look at the suburban home of Chicago Cubs co-owner Todd Ricketts after allegations that the businessman has underpaid property taxes for years.

Featured Resources

COST - Council on State Taxation

Amicus Briefs

Jefferson Parish v. Walmart.com

COST filed an amicus brief on the merits on June 20, 2019 stressing to the Louisiana Supreme Court that a marketplace facilitator does not meet the definition of a “dealer” under the State’s law, violates due process because adequate notice was not provided, and the Parish of Jefferson’s interpretation could result in retroactive imposition of a tax from the Louisiana Dep’t of Revenue and 62 other

COST - Council on State Taxation

COST Studies, Articles & Reports

2019 State and Local Amnesty Programs

This report tracks state and local tax amnesty programs by state for 2019.

COST - Council on State Taxation

COST Comments & Testimony

Letter to the Joint Revenue Committee in Opposition to House Bill 220 – Corporate Income Tax on Certain Retailers

COST testimony in opposition to H.B. 220, which COST argues is facially discriminatory because it imposes a corporate income tax solely on two industries: certain retailers and accommodation and food services providers that have 100 shareholders or more. If Wyoming were to adopt the tax contemplated in H.B. 220, it would be an outlier. Although states may limit their corporate income taxes to corp