Upcoming National Meeting

2020 SALT Basics School

The COST SALT Basics School includes 3 separate tracks – Sales Tax, Income Tax and SALT (an overview of all state taxes) taught by leading authorities in the SALT community and is a great educational opportunity for tax professionals with 0 – 3 years of experience; tax professionals transitioning between transactional and income taxes and vice versa.

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Bloomberg TAX

Arizona DOR Publishes Transaction Privilege Sales Tax Information for Unlicensed Motor Vehicle Dealers

 

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]

California Appeals Office Denies Refund Claims for Untimely Filing

 

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]

California Appeals Office Finds LLC Failed to Establish Reasonable Cause for Untimely Income Tax Filing

 

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]

California Appeals Office Finds Taxpayers Failed to Show Reasonable Cause in Income Tax Filing Delay

 

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]

California Appeals Office Denies Penalties Refund Where Taxpayer Can't Show Reasonable Cause for Late Filing

 

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]

California Appeals Office Reverses CDTFA's Sales Tax Assessment on Motor Vehicle Wholesaler's Salvage Title Vehicles

 

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]

California Appeals Office Affirms Additional Tax Assessment After Taxpayer Fails to Prove Error

 

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]

California Appeals Office Decides Taxability of Praxair's Gas Sales, Engineering Fees

 

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]

District of Columbia Tax Office Announces Unavailability of Individual Income Tax Form D-40EZ

 

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]

Hawaii DOT Issues Information on Mandatory Verification Review for Motion Picture, Film Production Tax Credit

 

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]

Tax Notes

Louisiana Local Tax Board Funding Held Unconstitutional

 

The provision funding Louisiana’s Uniform Local Sales Tax Board through a percentage of local taxes violates the state constitution, the state high court has ruled.

Utah Legislature to Meet in Special Session on Tax Reform Bill

 

Utah lawmakers will meet in a special legislative session December 12 to consider a tax reform package proposed by Republican lawmakers.

Clearer Goals Urged for Washington State’s Boeing Tax Credits

 

A Washington legislative committee has approved a report recommending that lawmakers clarify whether billions of dollars in tax breaks approved for the Boeing Co. were intended to bolster in-state employment.

Nebraska Issues Guidance on Treatment of GILTI, FDII

 

Global intangible low-taxed income must be included in Nebraska taxable income, according to guidance from the Department of Revenue.

First Circuit Allows Truckers’ Challenge to Rhode Island Tolls

 

The First Circuit has ruled that a constitutional challenge to Rhode Island’s tolls on truckers is not barred by the Tax Injunction Act.

Connecticut Settles Hospital Provider Tax Litigation

 

Connecticut Gov. Ned Lamont (D) announced that the state has settled a lawsuit with hospitals challenging the hospital provider tax.

No Tokens for Chuck E. Cheese After Texas Court Denies Refund

 

A Texas appellate court concluded that the state’s sale-for-resale exemption does not apply to purchases of coin-operated gaming equipment for Chuck E. Cheese restaurants.

New Hampshire Senate Kills Pot Legalization and Tax Bill

 

A New Hampshire Senate committee has shelved a House-passed bill that would legalize and tax recreational marijuana, but the bill's author vows to come back with a narrower plan.

Illinois Still Working on Complex Statewide Parking Tax Rules

 

The intricacies of Illinois's new parking tax are laid out in over 20 pages of proposed rules that won’t be final when the tax takes effect January 1.

Report: Corporate Profits Soar as Massachusetts Business Tax Share Declines

 

While corporate profits have soared over the past four decades, business tax collections have fallen as a share of total Massachusetts taxes paid, according to a recent Massachusetts Budget and Policy Center report.

Featured Resources

COST - Council on State Taxation

Amicus Briefs

Express Scripts Inc., v. State of Washington, Dep’t of Rev.

COST on July 22 filed an amicus curiae brief with the Washington Supreme Court urging the Court to review a case, Express Scripts Inc., v. State of Washington, Dep’t of Rev., addressing whether “pass-through” funds should be included in the B&O tax base and whether taxpayers are entitled to retroactive relief when relying on written DOR advice under the State's Taxpayer Bill of Rights.

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

Testimony in Support of House Bill 75 – Local Political Subdivision Property Tax Complaints

COST supports Ohio House Bill 75 which requires a local political subdivision to notify property owners that a property tax valuation complaint may be filed along with requiring a formal resolution process prior to the subdivision contesting a property owner’s valuation.