SALT Report: October 2017

October 4, 2017

Each month, our State and Local Tax team will provide highlights of recent state tax law changes that may affect you. Updates are sorted by state so that you can easily view the changes that impact the state(s) in which you are doing business.

Contact any member of our State and Local Tax team for specific guidance.

Alabama

  • A taxpayer was subject to Alabama tax on income earned in Tennessee as he failed to take standard measures to establish residency in Tennessee after moving there for a new job. Although he purchased a home in Tennessee, he did not apply for a Tennessee driver’s license. In addition, he retained his Alabama home and claimed homestead exemption, maintained his Alabama vehicle registration, kept his Alabama driver’s license and was registered to vote in the state.

Florida

  • The parent company of an affiliated group of corporations was allowed to stop filing consolidated corporate income tax returns after being acquired by another company without nexus in Florida. Florida follows federal tax guidance where an affiliated group exists as long as the parent company and at least one affiliated subsidiary remain the same at the beginning of the year.
  • A taxpayer with call centers in Florida and others contracted outside the U.S., but whose customers are primarily located out of the state, sought guidance on sourcing sales for their customer support services. For their telephone and online support services, those activities generate revenue in the customer’s location—not necessarily in Florida. For this taxpayer, the income producing activity would occur in Florida only when the customer is physically located in Florida and the services would then be considered a Florida sale.

Illinois

  • Retailers doing business in Illinois must annually renew certificates of registration issued on or after July 1, 2017, a change from the previous renewal period of five years.
  • Effective January 1, 2018, two 6.25% taxes take effect: rental sales tax and rental use tax, which are imposed when a consumer rents merchandise or uses rented merchandise, respectively. Businesses must register with the Department of Revenue, collect rental sales and rental use tax, and file returns electronically. The taxes do not apply to tangible personal property titled and registered by the state.

Indiana

  • An out-of-state corporation received a reduction of its Indiana sales factor because sales in foreign jurisdictions should not have been sourced to Indiana under the throwback rule. The taxpayer established nexus in eight foreign countries, and sales in those countries should not be subject to Indiana tax as the taxpayer was subject to net income tax in those countries. Nexus was denied in other countries due to lack of documentation.

Michigan

  • The August 2017 issue of the Michigan Department of Treasury Update provides guidance on a number of topics:
    • Sales and use tax treatment of warranties and extended service contracts
    • Effective January 1, 2017, the Michigan Business Tax (MBT) annual surcharge expired for taxpayers that file and pay the MBT rather than the corporate income tax
    • Guidance on tax information that flow-through entities should report to owners; insufficient information can cause delays in return processing and audits
    • Resources and guidance for taxpayers seeking an informal conference to appeal a Department of Treasury decision

Minnesota

  • Effective September 30, 2017, the Transit Improvement Area Sales and Use Tax ended. Beginning October 1, 2017, transit sales and use taxes took effect in the following Twin Cities area counties:
    • Hennepin and Ramsey Counties implemented 0.50% transit tax.
    • Anoka, Dakota, and Washington Counties implemented a 0.25% transit tax.

Oklahoma

  • Numerous changes to sales and use taxes were adopted, including updates to:
    • The nexus definition of "maintaining a place of business in this state"
    • Resale exemption claim documentation requirements
    • Credit or refund requests submission procedures
    • Additional requirements needed for noncollecting retailers

Virginia

  • Virginia’s 2017 Tax Amnesty program is in effect September 13 through November 14, 2017. Eligible taxpayers can pay their tax due and half the interest on eligible bills and delinquent tax returns.

Wisconsin