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NEWS BRIEFS -

The world of state taxes is constantly changing. The Tax Coefficient remains active in numerous organizations and has a daily regiment of reading state tax news to keep abreast of the many changes affecting the equipment lease, rental and finance industry.

Top Stories

  • ALABAMA ENACTS SB 459 'ONE SPOT' STREAMLINED FILING SYSTEM      May 3, 2011

The Optional Network Election for Single Point Online Transactions or "ONE SPOT' system will allow all taxpayers to e-file and e-pay all Alabama state and local sales, use and rental taxes through a centralized system that will be available for tax periods beginning October 1, 2013.  In addition, the new law provides that all local penalties and interest will be assessed in accordance with state law except for local jurisdictions that elect a 1% per month interest rate.

This centralized system will be a compliance relief for many rental and leasing companies that file their sales tax in-house.  Companies that have outsourced their sales tax returns should consider renegotiating their filing fees for the multitude of Alabama returns that tend to drive up the monthly filing costs.

Regretfully, this legislation provides no relief in the multitude of rate combinations that vary based on the type of equipment being rented or leased, local jurisdiction boundaries and the substance of the transaction.  Our front end systems will continue to carry the burden of complex logic necessary to properly apply Alabama taxes for proper reporting on the back end. Alabama remains the poster child for leasing tax complexity.

  • MTC PROPOSES MODEL STATUTE FOR 'SALES AND USE TAX NOTICE AND REPORTING ACT' MODELED AFTER LEGISLATION ENACTED BY COLORADO IN 2010                                       April 18, 2011

  • At an Executive Committee meeting of the MTC on April 18th, the committee unanimously agreed to advance this proposed model statute for public hearing on Wednesday, May 18, 2011.  In addition to a notice to purchaser at the time of transaction, the model statute requires non-collecting sellers to provide purchasers with an annual statement recapping the purchaser’s untaxed purchases along with information about state reporting requirements of both the purchaser and seller in situations of untaxed transactions. The model statute also requires non-collecting sellers to electronically submit to applicable State Departments of Revenue, an annual statement about untaxed purchases to shipped to the state in the prior calendar year.  A small seller and de minimus in-state sales exception is currently being considered using a $100,000 threshold.  To see the agenda for the May 18th hearing and complete text of the model statute, click on the following link:  http://www.mtc.gov/uploadedFiles/Multistate_Tax_Commission/Uniformity/Sales_Use_Tax/Notice%20of%20Public%20Hearing%20UTR(2).pdf

    Without regard to a preliminary injunction granted by the United States District Court in the civil case of The Direct Marketing Association v. Huber (U.S. District Court, D. Colorado, No. 10-cv-01546-REB-CBS, January 26, 2011), several states continue to advance legislation similar to that enacted by Colorado in 2010.   Thus far in 2011, Oklahoma and South Dakota have enacted this legislation.

  • LOUISIANA ATTORNEY GENERAL, JAMES D. "BUDDY" CALDWELL ISSUES OPINION FOR PARISH AUDITORS                     April 5, 2011

In his opinion, Opinion # 11-0038, In responding to the question of whether other taxing authorities may contract with Rapides Parish for the puposes of auditing for sales/use tax compliance, Buddy responds "The short answer to your question is yes." and goes further to state,". . . it is the opinion of this office that, under La. R.S. 47:337.26(A), the governing authority of any taxing authority may contract with Rapides Parish for the examination or investigation of the place of business, if any; the tangible personal property; and the books, records, papers, vouchers, accounts, and documents of any taxpayer for the purposes of enforcement and collection of any tax imposed by that taxing authority."

Noteworthy is the fact that the original question stipulated that the arrangement would based on an hourly fee and reimbursement of expenses.  And although the original question was regarding a sales/use tax, Buddy's opinion was extended to "any tax" imposed by that taxing authority.

 As local governments tighten their belts and conserve on expenses, do expect this opinion to open the door to the frequency with which taxpayers will see Louisiana parishes auditing for a number of other taxing jurisdictions.  Heads up!

  • STREAMLINED SALES AND USE TAX CONFORMING LEGISLATION ENACTED IN GEORGIA                                  June 1, 2010

Georgia Gov. Sonny Perdue has signed legislation that conforms the state sales and use tax law to the Streamlined Sales and Use Tax Agreement.  The legislation takes effect January 1, 2011.

  • VOTERS APPROVE ARIZONA 1% STATE SALES AND USE TAX RATE INCREASE, EFFECTIVE JUNE 1, 2010

Arizona voters approved Proposition 100, at election held May 18th,  to temporarily increase the state's sales and use tax rate from 5.6% to 6.6% for the period June 1, 2010 through May 31, 2013.

  • KANSAS STATE SALES AND USE TAX RATE INCREASES 1%, EFFECTIVE JULY 1, 2010 UPDATED June 1, 2010

Kansas Gov. Mark Parkinson has signed HB 2360 into law, Kansas Department of Revenue has issued Notice to all sellers and lessors concerning  the rate increase.  The Notice provides the following guidance concerning the rate increase on lease and rentals:

6) Leases and rentals of tangible personal property. Kansas sales tax is imposed both on the service of renting or leasing tangible personal property and on the sale of tangible personal property by way of a lease or rental agreement. Each lease installment is treated as a separate sale. Monthly lease payments for periods that begin on or
after July 1, 2010 are subject to the 6.3% state rate even though the lease agreement was entered into before July 1, 2010. A monthly lease payment for a period beginning before and ending after July 1, 2010 is taxed at the 5.3% state sales tax rate.

A rental agreement for a period not exceeding one month is taxed at the 5.3% state sales tax rate for the entire rental period if the customer takes possession of rental goods and the rental period begins before July 1, 2010. The 6.3% state sales tax rate applies to: (a) a rental agreement when a customer takes possession of rental goods on or after July 1, 2010; and (b) an extension of a rental agreement entered into before July 1, 2010 when the extension
period begins on or after July 1, 2010.

  • COURT UPHOLDS STATUTE PROHIBITING LEASE AGREEMENT PASS-THROUGH OF LESSOR'S TAX            April 2, 2010

In a summary judgment dated March 23, 2010, Delaware's Superior Court ruled collection of the Lessor's Delaware license tax pursuant to a lease agreement as unenforceable.  In arriving at it's opinion, the Court  looked to the title and text of Section 2110 of the tax code which states: "Contract to pay another’s license tax. No person shall agree or contract directly or indirectly to pay or assume or bear the burden of any license tax payable by any person, firm or corporation under the provisions of this Part. Any such agreement shall be null and void and shall not be enforced or given effect by any court."

The State of Delaware does not have a sales tax but does impose a 2.0736%  use tax on lease payments that is collected from the lessee on the monthly lease payments.  In addition the use tax on lease payments, Delaware has a 0.311% license tax that is imposed on the lessor lease receipts.  The 0.311% license tax is the tax at issue and  ruled upon in the case Tunnell Companies, L.P. v Delaware Division of Revenue.  Although it is customary for many Lessors to pass through the Lessor's Delaware License Tax per the terms of the lease agreement, Delaware's high court has ruled that such a pass through is unenforceable by any court.

  • STATE TAX AMNESTY PROGRAMS CONTINUE IN 2010  UPDATED June 9, 2010

    In an effort to find revenue and balance budgets, states and local government may consider instituting a tax amnesty program.

    Thirteen states offered tax amnesty programs in 2009.  New Jersey was the big winner with a whopping $725 million received. . . $525 million more than the estimated goal of $200 million.  Louisiana was second with $303 million, Virginia third at $102  and  was followed by Oklahoma with $81 million raised.

    2010 programs announced include:

    • Florida - July 1st through September 30th

    • Massachusetts - April 1st through June 30th

    • Nevada - July 1st through October 1st

    • New Mexico -  June 7th through September 30th

    • Pennsylvania - April 26th through June 18th 

    • Philadelphia - May 3rd through June 25th

    • Richmond, VA - Dates not yet determined

    • Programs concluded include:

      • Illinois 1/1/10 - 2/15/10

      • New York 1/15/10 - 3/15/10.

    • Legislation (SB 377) passed by Illinois General Assembly includes an amnesty program.  If signed by the Governor, the amnesty program will run from October 1 through November 8, 2010 and includes abatement of both penalty and interest.

    Mississippi's Governor Barbour has rejected an amnesty program and instead proposes increasing the budget to beef up collection efforts on unpaid taxes.

    http://www.stateline.org/live/details/story?contentId=424742

    http://www.taxadmin.org/fta/rate/amnesty1.html

  • LIMITED LIABILITY COMPANIES AND MICHIGAN DEPARTMENT OF TREASURY NOTICE DATED FEB. 5, 2010 - UPDATED April 2, 2010

    If you have a Limited Liability Company that is a disregarded entity for federal tax purposes and included with prior year filings of Michigan Single Business Tax (‘SBT’) you will want to make note of this posting.

    On February 5 , 2010, Michigan Department of Treasury issued a Notice to taxpayers concerning a SBT case, Kmart Michigan Property Services, LLC v. Dep’t of Revenue.  Among other things, the Notice advised all taxpayer’s with disregarded entities for federal purposes that were filed as a branch, division or sole proprietor of their owner for SBT purposes to amend and file a separate SBT return for all open tax periods.   In addition . . . and this is the real blow below the belt . . .  the Notice further states that all disregarded entities shall be considered non-filers for purposes of the statute of limitations and therefore returns must be filed for ALL back years for which the previously disregarded entity had receipts that exceeded the filing threshold.  A September 30, 2010 deadline was set for the filing of amended and back year returns.

    Before you give this Notice any credibility please take note of this update to the situation in Michigan.  Regarding the Department of Treasury’s Notice, several leading Michigan attorneys question proper authority for this Notice.  In fact one well respected firm, Miller Canfield, has written an article that will be published in numerous law and tax journals.  An advance preview of the article is made available through the following link http://image.mc.millercanfield.com/lib/fef81278746107/m/1/kmart_decision_article.pdf .  Regarding the Supreme Court ruling in the Kmart case and retroactive application . . .  a legislative fix is on the horizon.  On Tuesday of this week, HB 5937 was introduced by Reps. Kandrevas and Calley .  On Wednesday, HB 5937 passed out committee without amendment and sent back to the floor for final passage by the House which is expected sometime next week. Full text of the bill is available through the following link:  http://www.legislature.mi.gov/documents/2009-2010/billintroduced/House/pdf/2010-HIB-5937.pdf
    UPDATE - HB 5937 was approved by the Governor on March 31, 2010 and ordered enrolled with immediate effect.

  • STREAMLINED SALES TAX ORIGIN SOURCING AND THE  EXCLUSION FOR LEASE AND RENTALS UPHELD BY CRIC  UPDATED May 6, 2010


In a unanimous decision, the Streamlined Sales Tax Governing Board ('SSTGB') Compliance Review and Interpretations Committee ('CRIC') rejected a interpretation request submitted by Tim Maloney - President of Canton Chair Rentals, proposing that a circular reading of SSUTA sourcing rules  would allow short term rentals with non-recurring payments to be treated the same as sales in a state that opts for origin sourcing under subsection 310.1 of the Agreement.  In support of their rejection, CRIC cited origin sourcing subsection 310.1 B and its exclusion for lease and rental as being applicable to all rentals . . . inclusive of those with non-recurring payments.  The interpretation request was prompted as a result of Ohio adopting subsection 310.1 origin sourcing effective January 1, 2010. 

Several SLAC members, including Ohio, participating on the CRIC call opined that short term rentals should be included in subsection 310.1 origin sourcing.  Subsequent to the call, Mark Haskins - Virginia and Bill Riesenberger - Ohio, circulated a written proposal to amend subsection 310.1 B to be inclusive of short term rentals less than 14 days.  The proposal was further revised and formally submitted by Associate Member States, Ohio and Utah, for consideration at the SSTGB meeting in Washington DC on April 29th -30th.  SSTGB assigned the proposal to SLAC to vet the matter further and make a recommendation to the Board. 

 

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