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


Bloomberg TAX

South Carolina Administrative Court Finds ATVs, UTVs Subject to Motor Vehicle Maximum Sales Tax Limit


The South Carolina Administrative Law Court Sept. 13 found that Taxpayer properly remitted the maximum motor vehicle sales and use tax on its sales of all-terrain vehicles (ATVs) and side-by-side vehicles (UTVs). The Department of Revenue (DOR) contended that ATVs and UTVs designed for off-road use weren't entitled to the motor vehicle maximum tax limitation. The administrative court found: 1) the plain language of "motor vehicle," on its face, includes ATVs and UTVs because they are, in the general sense, motorized vehicles; 2) the legislature intended "motor vehicle" to be more expansive than just motor vehicles operated upon public highways; 3) the DOR's interpretation wasn't entitled to deference as it ignored the statutes' plain language; and 4) the tax statutes and the motor vehicle registration statutes did not deal with the same subject matter. Accordingly, the administrative court found ATVs and UTVs were motor vehicles for maximum tax purposes. [Jack's Custom Cycles v. Dep't of Revenue, S.C. Admin. Law Ct., No. 18-ALJ-17-0393-CC, 09/13/19]

South Carolina DOR Announces $50 Rebate Checks to Qualifying Taxpayers by Early December


The South Carolina Department of Revenue (DOR) Sept. 16 announced that $61 million of the tax dollars generated from the 2018 Mega Millions winner would be used to fund $50 rebate checks for qualifying individual income taxpayers. To qualify for the rebate, taxpayers: 1) must have filed a 2018 state individual income tax return on or before Oct. 15; and 2) must have a state tax liability after credits of at least $50. The DOR provided that the rebates will be issued as paper checks by Dec. 2, and will be mailed to the most recent address on file for eligible taxpayers. Only one check will be sent per tax return, meaning joint returns receive only one $50 check. The DOR provided instructions on updating a new address. Non-residents who filed a return and meet the eligibility criteria will also receive the rebate. [S.C. Dep't of Revenue, Press Release, 09/16/19]

South Carolina DOR Publishes Ruling to Federal, State Government Employees, Foreign Diplomats on Sales Tax


The South Carolina Department of Revenue (DOR) Sept. 13 published a revenue ruling on the application of the sales and use, and excise tax on sales of tangible personal property and sleeping accommodations for: 1) employees of the federal government, including instrumentalities of the federal government, such as the American Red Cross and federal credit unions; 2) foreign diplomats, including Taipei officials; and 3) employees of nonprofit organizations, state governments, and colleges. The applicability of sales and use tax depends upon whether the government r nonprofit organization is making the purchase or the employee. The purpose of the ruling was to inform retailers that federal government employees are using new credit cards to purchase tangible personal property and sleeping accommodations. The DOR also provided exhibits summarizing the taxability of sales transactions with federal government or federal employees using the card. The ruling took effect Nov. 30, 2018. [S.C. Dep't of Revenue, Revenue Ruling No. RR 19-7, 09/13/19]

South Carolina DOR Issues Revenue Ruling on Sales and Use Taxability of Telephone Service Charges


The South Carolina Department of Revenue (DOR) Sept. 13 issued a revenue ruling on the sales and use tax applicability of the Universal Service Fund Surcharge, Dual Party Relay Charge, and 911 Service Charge on customer's telephone bills. The ruling provides that: 1) the Universal Service Fund Surcharge billed by certain telephone service providers is part of the gross proceeds of sales of the providers and is subject to sales and use tax, unless the charges are already exempt from sales and use tax; 2) the Universal Service Fund Surcharge billed by prepaid wireless sellers to customers is not subject to sales and use tax; and 3) the Dual Party Relay Charge and 911 Service Charge billed by a telephone service provider to customers aren't subject to tax. The DOR also attached a chart summarizing the application of the tax to the charges by type of service provider. [S.C. Dep't of Revenue, Revenue Ruling No. RR 19-8, 09/13/19]

Tennessee DOR Publishes FAQ on Requirements for Receiving Franchise, Excise Tax Extension


The Tennessee Department of Revenue (DOR) Sept. 13 published a FAQ on the requirements for receiving a corporate income and excise tax extension. The DOR provided that a taxpayer must have paid taxes on or before the original due date to receive a six month extension. The amount paid must be equal to or greater than 90 percent of the current period liability, or 100 percent of the previous period liability annualized to 365.25 days, or $100 if the previous period doesn't exist. [Tenn. Dep't of Revenue, Franchise & Excise Tax FAQs, 09/13/19]

Tennessee SBOE Finds Jack Daniels Whiskey Barrels Eligible for Property Tax Exemption


The Tennessee State Board of Equalization (SBOE) Sept. 13 found that Taxpayer's previously unused whiskey barrels qualified for property tax exemption and rescinded the back assessments. Taxpayer timely appealed the assessor's back assessment of its whiskey barrels. Taxpayer contended based on a recently enacted statutory provision that the whiskey barrels were tax exempt. The assessor contended that the barrels were properly back assessed because they were never eligible for the exemption and the statutory provision shouldn't be applied retrospectively. The assessor also contended that the administrative judge lacked the authority to adjudicate the facial constitutionality of a statute. The SBOE: 1) found that the subject barrels met the criteria for "aged whiskey barrels" and therefore qualified for the exemption; and 2) recommended that the assessor's office direct the constitutional argument to a court of competent jurisdiction. Accordingly, the SBOE rescinded the back assessments attributable to the subject whiskey barrels. [Tenn. State Bd. of Equalization, Docket Nos. 117543, 117544, 120742, 09/13/19]

Texas Comptroller Finds Restaurant's Smallware, Dual-Purpose Items Purchases Not Exempt From Sales Tax


The Texas Comptroller of Public Accounts Aug. 1 decided to adopt the Administrative Law Judge's (ALJ) recommendation that Tax Division's (Staff) sales and use tax audit be amended only as agreed by the Staff. Taxpayer operated a chain of restaurants in the state. The Staff audited and assessed Taxpayer's liability. Taxpayer requested redetermination, contending that it erroneously paid tax on the purchases of smallware and on exempt dish soap, hand soap, and paper towels (dual-purpose items). The Staff issued an amended assessment. The ALJ found that: 1) the smallware purchases weren't eligible for the resale exemption as they weren't purchased for reselling purpose; and 2) Taxpayer didn't provide documentation to establish that the dual-purpose items were used for exempt purposes. Accordingly, the comptroller adopted the ALJ's recommendation and affirmed the amended assessment. [Tex. Comptroller of Pub. Accts., Comptroller's Dec., Hearing No. 112,818, Accession No. 201908002H, 08/01/19]

Texas Comptroller Publishes Alcohol Distributors Monthly Reporting Requirements


The Texas Comptroller of Public Accounts Sept. 1 published information on the monthly reporting requirements for alcohol distributors for excise tax purpose. Brewers, manufacturers, distributors and package store local distributors must file a monthly report with the comptroller's office showing their net sales to retailers. The report is due on the 25th of the month following the reporting month and must be filed electronically. The publication includes information on the details required in the reports, civil and criminal penalties for late filing, and suspension or cancellation of the distributor's permit for not filing. The civil penalties are $50 for each report filed after the due date, $500 for the first day, and $25 per day thereafter until a complete report is filed. [Tex. Comptroller of Pub. Accts., Alcohol Distributors – Monthly Reporting Requirements, 09/01/19]

Washington DOR Publishes Watercraft Excise Tax Depreciation Schedule


The Washington Department of Revenue Sept. 1 published the watercraft excise tax depreciation schedule for use through Sept. 30, 2020. [Wash. Dep't of Revenue, Watercraft Excise Tax (WET) Depreciation Schedule, 09/01/19]

Wisconsin Appeals Commission Finds John Deere Entitled to Dividend Received Deduction, Grants Summary Judgment Motion


The Wisconsin Tax Appeals Commission Aug. 21 found that John Deere (Taxpayer) was entitled to the Wisconsin Dividend Received Deduction and granted its motion for summary judgment for corporate income tax purposes. Taxpayer, a corporation, claimed a Dividends Received Reduction relating to distributions received from an affiliated foreign entity. Taxpayer was allowed a federal Dividend Received Deduction but was denied a similar deduction in Wisconsin. The Department of Revenue (DOR) contended that the affiliated foreign entity wasn't a corporation in this case and the distributions weren't dividends. The commission concluded that: 1) the affiliated foreign entity should be treated as a corporation for state tax purposes; and 2) the DOR's guidelines regarding limited liability companies' treatment as corporations also applied to limited liability partnerships. Accordingly, the commission granted Taxpayer's motion for summary judgment finding that Taxpayer was entitled to the Wisconsin Dividend Received Deduction. [Deere & Co. v. Dept. of Rev., Wis. Tax App. Comm'n., No. 18-1-135, 08/21/19]

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.