Upcoming National Meeting

2019 Canadian Tax Workshop For U.S. Companies

2 ½ day workshop covering the key tax issues that U.S. companies outside of Canada who are doing business with Canadians or in Canada need to know. The primary focus of the workshop will be on GST, HST and Income Tax. It will also cover QST, Payroll and Property Taxes. An interactive audit session covering Canadian taxes is also planned.

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Newsletters & Media

Cost Conscious

ISSUE 19-18; September 6, 2019

Transfer Pricing Audit Activity – Several COST members have reported increased transfer pricing audit activity by states that have engaged RoyaltyStat or other third-party consultants. Concern continues to grow about the tactics used during such audits, such as aggressive use of novel transfer pricing theories and excessive IDRs that appear to be designed to force settlements. Which of the followi

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Bloomberg TAX

Arizona DOR Publishes Newsletter on Transaction Privilege Tax Updates

 

The Arizona Department of Revenue (DOR) Sept. 1 published a newsletter on transaction privilege sales and use tax (TPT) updates. The publication includes information on: 1) the implementation of the new remote seller and marketplace facilitator TPT, noting that additional information is available online; 2) the DOR's E-Commerce Compliance and Outreach team that is in place to assist remote sellers and marketplace facilitators with questions about the TPT legislation, licensing, and registration process; 3) online lodging marketplaces; 4) local sales and use tax rate changes effective Nov. 1; and 4) August period TPT filing deadlines. [Ariz. Dep't of Revenue, TPT Newsletter, 09/01/19]

Arkansas Appeals Office Finds Taxpayer Couldn't Prove Purchase for Commercial Farming Business, Exemption Denied

 

The Arkansas Office of Hearings and Appeals (OHA) Sept. 16 found that Taxpayer couldn't prove entitlement to a farm sales and use tax exemption as a representative of a farm. Taxpayer claimed the exemption for the purchase of an all-terrain vehicle, asserting that he was engaged in a commercial farming business. The Department of Finance and Administration disallowed the exemption. Taxpayer timely protested the assessment. The OHA noted that: 1) the purchase made by Taxpayer represented tangible personal property and was subject to the tax unless Taxpayer demonstrates that an exemption applies; 2) Taxpayer made an exemption claim at the time of the purchase, thereby shifting the liability to pay tax on himself; and 3) Taxpayer didn't prove that the all-terrain vehicle purchased was directly and exclusively used in the commercial production of food or fiber. Accordingly, the OHA partly sustained the assessment of sales tax and interest. [Ark. Dep't of Fin. & Admin., Docket No. 20-007, 09/16/19]

Arkansas Appeals Office Sustains Tax, Interest Assessments on Club's Sales of Food, Alcoholic Beverages

 

The Arkansas Office of Hearings and Appeals (OHA) Sept. 16 sustained the assessments as Taxpayer failed to present sufficient evidence to refute the estimated assessments. Taxpayer was a private club and sold snacks, drinks, beer, wine, mixed drinks, and door fees. The Department of Finance and Administration conducted a tax audit and assessed sales and use tax and excise tax because the auditors detected unreported taxable sales. Taxpayer protested the assessments. The OHA found that: 1) the items of food and beverages sold by Taxpayer were subject to tax; 2) Taxpayer's sales involving alcoholic beverages were also taxable; 3) Taxpayer failed to maintain suitable records, therefore, the department was justified in making estimated assessments; 4) Taxpayer's contention regarding drink prices and ounces of liquor used per drink without supporting documentation were insufficient to refute the assessments. Therefore, the OHA sustained the assessments of tax and interest. [Ark. Dep't of Fin. & Admin., Docket Nos. 19-517, 19-518, 19-519, 09/16/19]

California Governor Issues Executive Order Requiring CDTFA to Develop Recommendations to Reduce Youth Vaping

 

The California Governor Sept. 16 issued an executive order on electronic cigarettes for excise tax purposes. The order includes measures requiring the California Department of Tax and Fee Administration to: 1) develop recommendations to remove illegal or counterfeit vaping products from stores and reduce youth vaping consumption through increased enforcement and incorporating nicotine content into the calculation of the existing tax on electronic cigarettes; 2) consider revenues currently derived from taxation of electronic cigarettes and the revenues that may be collected from a nicotine-based tax, the potential for evasion, and the feasibility of instituting a stamping requirement to maximize compliance; and 3) submit its recommendations to the Governor's office by Oct. 29. [Cal. Governor's Office, Exec. Ord. N-18-19, 09/16/19]

California BOE Announces First Statewide Informational Hearing to Gather Information on Modernizing Property Tax System

 

The California Board of Equalization (SBOE) Sept. 13 announced that the SBOE will hold the first statewide informational hearing on Sept. 19 in San Diego to gather information from industry experts and the public on modernizing California's property tax system. The hearing will encourage the county assessors, taxpayers, taxpayer advocates, the business community, and others, to participate and provide comments. The meeting will focus on emerging issues that may affect the administration of property taxes and bring to light the challenges facing the property tax system. A panel of industry experts will discuss the current and future state of property tax administration at the national, state, and local level, and will provide background on how the complex system works. [Cal. State Bd. of Equalization, SBOE News Release, 09/13/19]

California Governor Signs Law Adding Unclaimed Life Insurance and Annuities Act to Insurance Code

 

The California Governor Sept. 12 signed a law adding the Unclaimed Life Insurance and Annuities Act to the Insurance Code for corporate income tax purposes. The law includes measures: 1) providing standards for identifying a deceased individual whose death may require an insurer to pay benefits to beneficiaries in accordance with the terms of a life insurance policy, annuity contract, or retained asset account; 2) requiring the insurer to match its insureds with deceased individuals in the U.S. Social Security Administration's Death Master File; 3) requiring the insurer to conduct a thorough search for a beneficiary, is completed within one year if not contacted by a beneficiary within 120 days of the insurer's establishing its knowledge of death of the insured; and 4) requiring the insurer to provide appropriate claim forms or instructions to a beneficiary within 15 days of locating the beneficiary. The law takes effect Jan. 1, 2020. [S.B. 740, enacted 09/12/19]

Florida DOR Publishes E-Services Calendar Electronic Payment Deadlines for 2020

 

The Florida Department of Revenue (DOR) Sept. 1 published its e-Services due dates calendar for 2020, for payments initiated through software programs for sales and use, excise, and corporate income tax purposes. The calendar provides deadlines for the latest date to initiate electronic payments for the taxes or fees, including: 1) prepaid wireless e911 fee and solid waste surcharge; 2) insurance premium tax; 3) gross receipts (utilities); 4) oil production tax; and 5) retirement contributions (except universities). Taxpayers can initiate and schedule the withdrawal of electronic payment up to 30 calendar days in the future using the DOR's payment-scheduling feature. Tax or fee due dates that occur on a weekend or holiday are moved forward to the next business day. The DOR also provided a holiday schedule for 2020. [Fla. Dep't of Revenue, Florida E-Services Calendar of Electronic Payment Deadlines, 09/01/19]

Illinois DOR Issues Informational Bulletin on Imposing Local Cannabis Retailers Occupation Tax to Municipalities, Counties

 

The Illinois Department of Revenue (DOR) Sept. 1 issued an informational bulletin on imposing a local cannabis retailers occupation tax beginning Sept. 1, 2020 to all municipalities and counties for sales and use tax purposes. The tax on retail sales of cannabis, other than medical cannabis, may be imposed in 0.25 percent increments by: 1) municipalities at a rate not exceeding three percent; and 2) counties at a rate not exceeding 3.75 percent in unincorporated areas, and at a rate not exceeding three percent in a municipality located in the county. The bulletin provided a statutory deadline and address for municipalities and counties to submit ordinances to the DOR in order to have the DOR administer and enforce the tax. [Ill. Dep't of Revenue, Info. Bull. FY 2020-6, 09/01/19]

Illinois Appellate Court Finds Trial Court Erred in Issuing Tax Deed to Purchaser, Reverses Decision

 

The Illinois Appellate Court Sept. 16 reversed the trial court's order, finding that the purchaser failed to diligently notify Taxpayer to obtain tax deed for a property purchased in a property tax sale. The purchaser filed a petition for tax deed and sent a notice to all the interested parties, including Taxpayer. However, Taxpayer didn't receive the notice. The trial court found that the purchaser sent all the notices promptly and allowed to take possession of the property. The taxpayer appealed and argued that the purchaser committed fraud by ignoring the information it discovered regarding his whereabouts and by failing to notify his known attorney, and yet attesting that it conducted a diligent inquiry. The appeals court found that: 1) Taxpayer raised issues of material fact regarding the purchaser's attempts to serve notice, including the purchaser's insufficient scope of the purchaser's review of government records to obtain Taxpayer's whereabouts; and 2) the purchaser's attempts to serve the notice required a resolution before deciding the matter. Accordingly, the appeals court reversed and remanded the trial court's decision. [ZHY Invs. v. Hsing, Ill. App. Ct., No. 17-TD-123, 09/16/19]

Kansas Appeals Board Reduces Subject Property's Valuations Based on County's Cost Approach

 

The Kansas Board of Tax Appeals (BTA) Sept. 4 reduced Taxpayer's property tax valuations based on the Johnson County Assessor's cost approach. The subject property consisted of six Home Depot big-box facilities valued for 2016 and 2017 tax years at issue. For each property, the county conducted cost and income analyses and relied on the income approach to value the subject properties. Taxpayer relied on their appraiser's sales comparison and income approaches. The BTA found the county's cost approach the best indicator of market value and the income approaches of both the county and Taxpayer problematic. Accordingly, the BTA reduced the property valuations and ordered the county officials to correct their records, re-compute the taxes, and issue refunds. [Kan. B.T.A., Docket Nos. 2018-3455-EQ, et al., 09/04/19]

Tax Notes

Kentucky Gubernatorial Candidate Commits to Gaming Expansion

 

Kentucky Attorney General and gubernatorial candidate Andy Beshear (D) said he is committed to expanding gaming in the state and using the tax revenues to fund Kentucky’s pension system.

Michigan Sports Betting Bill Mirrors Stalled Internet Gaming Bill

 

A Michigan lawmaker has introduced a bill that would legalize and tax sports gambling at 8 percent, the same tax rate proposed in the recent internet gaming bills opposed by the governor and the state budget office.

D.C. Report Examines Worker Misclassification in Construction Industry

 

District of Columbia construction companies that misclassify workers as independent contractors have lower operating costs than companies that properly classify workers, according to a recent report on payroll fraud and tax evasion in the industry.

Wisconsin Bill Would Double Opportunity Zone Tax Incentive

 

A Wisconsin bill would double the state's Opportunity Zone tax incentive, which lawmakers and economic developers hope will give it an advantage over other states.

Issues Over Wayfair Reference to ‘Undue Burden’ Coming to the Fore

 

A year after the U.S. Supreme Court decided South Dakota v. Wayfair Inc., state tax experts are starting to zero in on the Court’s reference to and reshaping of the concept of “undue burden.”

Nebraska County Approves 'Beatrice 6' Sales Tax

 

A Nebraska county will impose a half-cent sales tax to pay off a $28.1 million court judgment over the wrongful imprisonment of the "Beatrice Six."

California Pot Banking Bill on Hold

 

A California bill to allow specially licensed banks to provide limited services to the state's legal cannabis industry has been put on hold until 2020.

California Legislature Passes Pot Business Expense Deduction Bill

 

A California bill to allow marijuana businesses to claim state income tax deductions against their expenses and state business tax credits now heads to Gov. Gavin Newsom (D) for approval.

Chicago Mayor Turns to Congestion Taxes as Revenue-Raising Option

 

Chicago is turning to a possible congestion tax as an option to address a looming $838 million deficit in 2020.

Arizona High Court Says Online Travel Companies Owe Local Taxes

 

Online travel companies must pay local business activity taxes on the revenue they receive for arranging hotel stays in Arizona, according to the state’s supreme court.

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

Comments on TB-92, Sourcing of GILTI and FDII

COST comments to the New Jersey Division of Taxation on TB-92, issued August 22, 2019, concerning the sourcing of global intangible low-taxed income (GILTI) under IRC Sec. 951A and foreign derived intangible income (FDII) under IRC Sec. 250.