The Arizona Department of Revenue (DOR) Nov. 1 published information for unlicensed motor vehicle dealers liable for transaction privilege sales and use tax. Used motor vehicle dealers are persons selling seven or more used vehicles in a continuous 12 months period. They buy, sell, auction, exchange, offer, or attempt to negotiate the sales of vehicles. They aren't new, wholesale motor vehicle auctions, and public consignment auction dealers. The DOR also provided that: 1) the director of the Arizona Department of Transportation requires the unlicensed motor vehicle dealers to pay all transaction privilege taxes on vehicles sold in violation of the licensing provisions; and 2) the reporting of tax on gross receipts is under the retail classification. [Ariz. Dep't of Revenue, Publ'n No. 560A, 11/01/19]

The California Office of Tax Appeals (OTA) Oct. 15 affirmed the Franchise Tax Board's (FTB) action denying Taxpayer's refund claims for untimely filing. Taxpayer filed claims for individual income tax refunds in 2017, asserting that she reported nontaxable annuity payments as taxable during the 2000 through 2008 tax years. The FTB denied the claims as untimely. The OTA held: 1) the statute of limitations for claiming a refund is four years from the date the return was timely filed or the due date of the return, or one year from the date of overpayment; 2) there is no reasonable cause or equitable basis for suspending the statute of limitations; and 3) none of Taxpayer's claims for refund were timely filed within the four-year statute of limitations or the one-year statute of limitations. Therefore, the OTA sustained the FTB's denial of Taxpayer's claims for refund. [Cal. Office Tax App., Case No. 18011125, 10/15/19]

The California Office of Tax Appeals (OTA) Oct. 15 found that Taxpayer failed to establish reasonable cause for failure to timely file an individual income tax return, and was responsible for the collection cost recovery fee. Taxpayer, a limited liability company (LLC) with 60 member classified as a partnership for tax purposes, was assessed an LLC Notice of Balance Due, including a late-filing penalty, and interest. Taxpayer paid the account balance in full, and timely filed a claim for refund of the late-filing penalty, interest, and the collection cost recovery fee claiming that Taxpayer's accountant failed to timely file the returns. The OTA concluded that: 1) Taxpayer failed to show reasonable cause because there wasn't a substantiation of what efforts were taken to verify filing of the return, and 2) Taxpayer failed to show that the collection recovery cost fee was for any invalid or improper reason. Therefore, the OTA denied Taxpayer's claim for refund. [Cal. Office Tax App., Case No. 18093759, 10/15/19]

The California Office of Tax Appeals (OTA) Oct. 10 found that Taxpayers failed to establish reasonable cause for the delay in filing their individual income tax returns. Taxpayers, non-residents living abroad during the applicable tax year, paid individual income taxes four months after the payment deadline. Taxpayers paid the tax due, self-imposed late-payment penalties, and interest. The Franchise Tax Board denied Taxpayers' claims for refund. Taxpayers protested, stating that reasonable cause for untimely filing and payment existed because Taxpayers hadn't received their Individual Taxpayer Identification Numbers (ITIN). The OTA concluded: 1) reasonable cause doesn't include a taxpayer's difficulty in obtaining necessary information; 2) Taxpayers could have timely paid the tax even without the ITINs; and 3) Taxpayers failed to meet the burden of proving the failure to make timely payments was the result of reasonable cause. Therefore, the OTA denied Taxpayers' claims for refund. [Cal. Office Tax App., Case Nos. 19044577, 19044586, 10/10/19]

The California Office of Tax Appeals (OTA) Oct. 18 affirmed the Franchise Tax Board's (FTB) action denying Taxpayer's claim for refund of late filing and late payment penalties, finding that Taxpayer didn't establish reasonable cause. Taxpayer, a non-managing member of a limited liability company doing business in California, didn't file a state return. The FTB imposed the annual minimum corporate franchise tax, penalties, and interest. Taxpayer argued it should be excused from the penalties because its tax return preparer was incorrectly advised that Taxpayer had no California filing requirement. The OTA held: 1) reliance on a qualified tax professional's advice may be reasonable cause for untimely filing; but 2) Taxpayer didn't show evidence of the actual substantive advice given, the qualifications of the advisor, or the exercise of ordinary business care in considering the issues prior to the filing deadline. Therefore, the OTA affirmed the FTB's action denying the refund. [Cal. Office Tax App., Case No. 18093846, 10/18/19]

The California Office of Tax Appeals (OTA) Oct. 14 reversed the Department of Tax and Fee Administration's (CDTFA) sales and use tax assessments on Taxpayer's salvage title vehicles. Taxpayer was a licensed wholesale motor vehicle dealer who purchased salvage title vehicles at auction and sold them to a small group of buyers in Cambodia. Taxpayer did not obtain resale certificates or letters from some of the purchasers. The CDTFA assessed sales tax on those vehicles and on others the CDTFA claimed that Taxpayer had personally used in California. Taxpayer appealed and contended: 1) it was not authorized to make retail sales of vehicles; 2) the vehicles were salvage title vehicles which could not legally be driven in the state; and 3) it resold all of the vehicles to the same buyers. The OTA found Taxpayer provided sufficient evidence to conclude that the disputed transactions were nontaxable sales for resale. [Cal. Office Tax App., Case No. 18073394, 10/14/19]

The California Office of Tax Appeals (OTA) Oct. 15 affirmed the Franchise Tax Board's (FTB) proposed assessment of additional tax based on a federal determination, after Taxpayer failed to show error. The FTB issued Taxpayer a notice of proposed assessment adjusting Taxpayer's taxable income and limiting itemized deductions based on federal information from the IRS. Taxpayer protested that the wage information listed on his W-2 was overstated and that some of the amounts listed on the employee's payroll register were fraudulent personal loans. The OTA found: 1) Taxpayer didn't clearly explain why the W-2 information was overstated nor how he calculated his reduced wage assertion; 2) Taxpayer didn't provide paychecks or other evidence sufficient to support his claims; and 3) Taxpayer didn't satisfy his burden of showing error in the federal assessment or overcome the presumption of correctness in FTB's determination. Therefore, OTA affirmed the assessment. [Cal. Office Tax App., Case No. 18011029, 10/15/19]

The California Office of Tax Appeals (OTA) Oct. 3 determined the sales and use tax liability attaching to numerous transactions involving Praxair, an industrial gas company. The transactions fell into 2 main categories; first, the design and construction of air separation plants, and second, the sale of gases to food production companies. In the construction plant transactions, the California Department of Tax and Fee Administration (CDTFA) claimed that the engineering fee was taxable as services included in the sale of tangible personal property. However, Praxair submitted evidence that showed a significant portion of the fee was attributable to exempt installation charges. In the food company transactions, Praxair demonstrated that the gases were used to cool meat in the manufacturing process. Praxair noted an exemption for gases used in the packing of fruits and vegetables, and argued it should be extended to meat packing. The OTA was not persuaded, finding they had no constitutional authority to do so. Therefore, the OTA sustained the CDTFA's assessment of tax on the gas sales, but partially reversed the assessment on the engineering fees to account for installation. [Cal. Office Tax App., Case No. 18011846, 10/13/19]

The District of Columbia Office of Tax and Revenue Dec. 1 announced that Form D-40EZ is no longer available for 2019 and later years. Taxpayers can now use Form D-40 for individual income tax purposes. [D.C. Office of Tax & Revenue, Press Release, 12/01/19]

The Hawaii Department of Taxation Dec. 11 issued a tax information release on mandatory verification review for the motion picture, digital media, and film production corporate income tax credit. State law requires every taxpayer claiming the film credit to submit to the Hawaii Film Office a production report and a verification review. Applicable regulations define the review as an agreed-upon procedures report prepared by a qualified certified public accountant. The main purpose of the review is to ensure that claims for the film credit are proper under the statute and applicable administrative rules. The release clarified: 1) general requirements of the report's preparation and content; and 2) procedures of the report, including the required documentation, minimum expenditure threshold, verification of expenditures, and application of the rate of exceptions. [Haw. Dep't of Tax'n, Tax Info. Release No. 2019-04, 12/11/19]