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.

books background

Newsletters & Media

Cost Conscious

ISSUE 19-22; November 1, 2019

TODAY’S TOPIC: Company Travel Budgets – We periodically ask our member companies about their travel policies for conferences, continuing education, and other meetings. We would like to compare the current policies of member companies on this issue with the previous responses. Which of the following statements best describes your company’s current approach to employee travel?

Twitter

Bloomberg TAX

Uber, Lyft Tax Passes in San Francisco

 

San Francisco users of rideshare services including Lyft Inc. and Uber Technologies Inc. will be paying more starting in January, when a voter-approved ballot measure takes effect.

Puerto Rico Sees Job Creation After Corporate Tax Breaks

 

Puerto Rico’s plan to boost the export of services from the island created 36,222 jobs since 2012, when lawmakers enacted tax breaks to increase such business activity, according to the commonwealth’s commerce department.

Alabama DOR Issues Memorandum on Legislative Changes Concerning Motor Vehicle Registration Records

 

The Alabama Department of Revenue Nov. 8 published a memorandum on legislative changes affecting motor vehicle registration records, for excise tax purposes. As a follow-up to the Rebuild Alabama Act Memo, registration validation edits are added to the registration record update routine to identify omitted or incorrect fuel types in the registration error report. The memorandum lists the fuel types that must be included in the motor vehicle registration record (except with regard to trailers), and provides a link to the updated registration record format. [Ala. Dep't of Revenue, Memorandum 2019-006, 11/08/19]

Arkansas Appeals Office Finds Finance Department Correctly Assessed Sales Tax on Vehicle Purchase

 

The Arkansas Office of Hearings and Appeals (OHA) Nov. 8 found that Taxpayer was liable for sales and use tax on the purchase of a motor vehicle. Taxpayer purchased a vehicle, but didn't register or pay tax on it. The Department of Finance and Administration (DFA) issued a notice of the proposed assessment assessing tax, a late payment penalty, and interest. Taxpayer claimed that she voluntarily returned the vehicle to the seller because she was unable to afford and tag it. The DFA noted: 1) Taxpayer took ownership and possession of the vehicle; 2) the sale of tangible personal property was subject to sales tax; 3) the documentation provided by Taxpayer was insufficient to establish a rescinded sale occurred; and 4) the DFA properly assessed the penalty and interest. Accordingly, the OHA sustained the DFA's assessment. [Ark. Dep't of Fin. & Admin., Docket No. 20-233, 11/08/19]

Arkansas Appeals Office Finds Taxpayer Not Eligible for Sales Tax Credit, Sustained Finance Department Assessment

 

The Arkansas Office of Hearings and Appeals (OHA) Nov. 8 found Taxpayer wasn't liable for a sales and use tax credit on a motor vehicle purchase, sustaining the Department of Finance and Administration's (DFA) assessment. The DFA determined that Taxpayer purchased a new vehicle and didn't sell a used vehicle within 45 days as required by law to claim the trade-in credit. The DFA issued a title of suspense and a notice of proposed assessment. Upon review, the OHA found: 1) Taxpayer didn't prove the new vehicle's delivery was delayed; 2) Taxpayer received the new vehicle April 16, and sold the old vehicle 67 days after the purchase date; and 3) Taxpayer didn't prove entitlement to the motor vehicle tax credit. Accordingly, the OHA sustained the DFA's assessment. [Ark. Dep't of Fin. & Admin., Docket No. 20-140, 11/08/19]

Arkansas Appeals Office Finds Taxpayer Repair Services, Replacement Parts Subject to Sales and Use Tax

 

The Arkansas Office of Hearings and Appeals (OHA) Nov. 6 sustained the Department of Finance and Administration's (DFA) sales and use tax assessments. Taxpayer sold machinery and equipment, replacement parts, and repair services. The DFA asserted Taxpayer's repair and maintenance services were subject to sales tax and the replacement parts were subject to use tax. Taxpayer conceded its repair services were taxable, but stated it was entitled to two exemptions, including an exemption for replacement of certain directly used manufacturing machinery and equipment. The OHA noted: 1) Taxpayer couldn't be exempt from sales tax in the absence of an exemption claim from its customers on the purchases; and 2) Taxpayer didn't prove that the replacement of any of the purchased components represented substantial replacement of all the components of its machinery. After the concessions agreed to by the DFA, the OHA sustained the remaining assessment. [Ark. Dep't of Fin. & Admin., Opinion Nos. 20-155, 20-156, 11/06/19]

Arkansas Appeals Office Finds Taxpayers Didn't Abandon Domicile, Liable for Individual Income Tax, Penalty, Interest

 

The Arkansas Office of Hearings and Appeals (OHA) Nov. 4 sustained the Department of Finance and Administration's (DFA) individual income tax assessment. Taxpayers failed to file a return or submit proof indicating that they weren't required to file the return. Auditors conducted a tax audit and issued a notice of proposed assessment with interest and penalty. Taxpayers protested, stating that they moved to another state. The OHA found that Taxpayers: 1) were domiciled within the state prior to the purchase of a home in another state; 2) retained substantial connections with the state by retaining drivers' licenses, vehicle registrations, and voter registration within the state; 3) didn't establish that they abandoned their domicile or that the DFA's returns and assessments were incorrect; and 4) didn't establish the accuracy of farming expenses that resulted in a farming loss. Therefore, the OHA sustained the assessment. [Ark. Dep't of Fin. & Admin., Docket Nos. 20-029 et al., 11/04/19]

Arkansas Finance Department Secretary Finds Appeals Office Erred in Reversing Income Tax Negligence Penalty

 

The Arkansas Secretary of the Department of Finance and Administration (DFA) Oct. 31 reversed a decision of the Office of Hearings and Appeals (OHA) concerning an individual income tax negligence penalty. Taxpayers operated a farm at their residence and reported net farm losses on Schedule F for 10 consecutive years. The DFA audited Taxpayers, disallowed the losses for three years, and assessed a negligence penalty. Taxpayers protested and the OHA reversed the penalty and found the fourth factor of IRC Section 138 weighed in favor of Taxpayers. The DFA sought revision and the Secretary found that: 1) reversal of the penalty wasn't supported by appropriate reasoning or analysis; 2) negligent misuse of Schedule F deductions allowed Taxpayers to claim net farming losses for ten consecutive years; and 3) OHA erred in analyzing factor four of the IRC Section 183. Therefore, the DFA reversed and modified the OHA's decision. [Ark. Dep't of Fin. & Admin., Docket Nos. 19-096, 19-097, 19-098, 10/31/19]

California Appeals Office Affirms FTB Assessment, Finds Taxpayer Negligent in Filing Returns

 

The California Office of Tax Appeals (OTA) Sept. 18 affirmed the Franchise Tax Board's (FTB) assessment of additional individual income tax and penalties, since Taxpayers didn't act with due care filing their return. Taxpayers used tax preparation software and alleged it didn't alert them when their 2015 return was rejected. Taxpayers filed an appeal against the FTB's denial of their refund claim for the late-filing penalty. The OTA found: 1) Taxpayers didn't file the 2015 return until 2017, more than 13 months after the due date; 2) the software gave notice of unsuccessful filing, affording Taxpayers an extension to file; and 3) Taxpayers didn't describe any efforts taken to file the return under the extension. Accordingly, the OTA sustained the FTB's assessment. [Cal. Office Tax App., Case No. 18010744, 09/18/19]

California Appeals Office Affirms FTB's Assessment, Finds Taxpayer Didn't File State Return

 

The California Office of Tax Appeals (OTA) Sept. 17 affirmed the Franchise Tax Board's (FTB) assessment of corporate income tax, penalties, and interest against Taxpayer. Taxpayer, a Delaware corporation, filed a federal income tax return but didn't file a California state return. The FTB assessed tax, penalties, and interest. Taxpayer protested, the FTB affirmed the assessment, and Taxpayer appealed. The OTA found: 1) the assessment wasn't reasonable, since it didn't allow a deduction for compensation paid; 2) Taxpayer didn't establish reasonable cause for not filing a return, so it wasn't entitled to a late-filing or demand penalty abatement; and 3) Taxpayer didn't allege or prove unreasonable delay or error by the FTB, so it wasn't entitled to an interest abatement. Accordingly, the OTA modified the assessment to allow a compensation deduction, and sustained the FTB's proposed assessment with interest and penalties. [Cal. Office Tax App., Case No. 18042977, 09/17/19]

Tax Notes

Massachusetts House to Vote on Vaping Tax, Flavored Tobacco Ban

 

Massachusetts legislators will vote November 13 on a bill taxing e-cigarettes and banning flavored tobacco.

Connecticut Municipalities Looking to Tackle Property Tax Relief

 

The Connecticut Conference of Municipalities is working to develop a comprehensive property tax relief initiative meant for the 2020 ballot.

Boston Coalition Proposes Statewide Gas Tax Increase

 

A coalition of Boston business leaders has called for Massachusetts to increase its gas tax to help fund transportation expenses.

Pennsylvania Enacts Uniform Definition of Blight

 

Pennsylvania’s statutes will now rely on a uniform definition of blighted property, paving an easier path forward for redevelopment tax credits.

Pennsylvania Governor Approves Repeal of Expired Property Tax

 

Pennsylvania Gov. Tom Wolf (D) has approved legislation repealing an expired property tax, eliminating fears that the law could be used to implement a wealth tax in the state.

Massachusetts Mulls Proposed Changes to NOL Regulation

 

The Massachusetts Department of Revenue will hold a December hearing on updating its net operating loss deduction and carryforward regulation.

Circuit Court Upholds Millions in Cigarette Tax Penalties Against UPS

 

The Second Circuit reduced a penalty against UPS for knowingly shipping untaxed cigarettes from Native American reservations throughout New York state and New York City, but still upheld nearly $100 million in penalties and taxes.

New Jersey Proposed Rules on Market-Based Sourcing Imminent

 

The New Jersey Division of Taxation’s proposed market-based sourcing regulations will likely be published the week of November 11 for formal comment, according to division Director John Ficara.

Texas School District Can’t End-Run Voters on Homestead Exemption

 

A Texas school district’s decision to reduce its homestead property tax exemption just before voters ratified a constitutional amendment prohibiting such a reduction violates state law and is void, according to a state appellate court.

New Mexico Court Denies Deduction for Natural Gas Purchases

 

A utility company’s purchases of natural gas used to produce electricity do not qualify for a statutory tax deduction that covers chemical sales, a New Mexico appellate court has ruled.

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

Comments on Massachusetts Decoupling from IRC § 163(j) in the FY2019 Deficiency Budget

Letter to Massachusetts Senate and House leadership to encourage their support on the inclusion of language decoupling Massachusetts from the federal interest expense limitations under IRC § 163(j) in the 2019 supplemental deficiency budget.