- State income tax reform/response to federal tax reform (which covers a wide variety of issues - depreciation, foreign income, dividends, charitable contributions, NOLs, Domestic Production Deduction, Sec. 199A, M&E, interest expenses, Sec. 118, related party expenses, deemed repatriation, like-kind exchange repeal, Sec. 179 expense, R&E expenses amortization)
- Wayfair Supreme Court Case regarding sales tax nexus/collection obligations/possible overturn of Quill/physical presence
- State taxation of foreign income
- Market-based sourcing impact (continuing trend)
- Alternative apportionment (is it all alternative?)
- Management & utilization of NOLs / 382 NOL issues
- Combined reporting vs. separate reporting
- Single-sales factor apportionment impacts (continuing trend)
- Whether to utilize Voluntary Disclosure Agreement/Amnesty programs
- Utilizing and negotiating credits and incentives
- State income taxation of pass-through entities (new pass-through entity audit rules)
- Related party expenses / transfer pricing
- Private letter ruling requests
- Other?????
Businesses Want to Do Business, NOT Taxes
Businesses are playing a game where the rules keep changing, in the middle of the game.
Taxes keep changing. A constant battle for businesses to keep up when all businesses want to do is business, not taxes.
Businesses must be able to do business with certainty. State tax laws already lack uniformity and create so many opportunities for businesses to screw up. Now, they keep changing, year to year, day to day.
Over the past few months as state governments have been in session, they have passed numerous pieces of legislation to balance the budget including changes to tax rates, filing methodologies, sourcing rules, etc. along with how or if they will conform to all or parts of federal tax reform.
I have been monitoring state tax legislation and have submitted approximately 30 alerts to clients regarding the changes (and we aren't done yet). More to come.
Let's work together to make state taxes less important, so businesses can thrive.
Will You Have Pie Leftover?
Scenario #1 - you start with a pie. You give some away. Then you give it all away. Then someone comes along and asks for some. They don't care that you gave it all away already. They want some. You scrape the pie pan and give them some. This continues to happen until it feels like you gave 2 pies away.
Scenario #2 - you start with a pie. You give some away. Then you give what you think is all of it, but somehow you end up with 2 pieces left. No one comes calling. You have pie leftover.
Both scenarios can happen to a company when filing state income tax returns due to the lack of uniformity among states in filing methodologies, income sourcing, and apportionment methods. This year, states are passing legislation that is not only responding to federal tax reform, but also changing each of these areas for some states.
Companies should monitor state tax legislation and model out the changes to determine how their income tax liability will shift from state to state.
The question is - will you have pie leftover or will it feel like you have given 2 pies away when you only had one to begin with?
STATE TAX KNOWLEDGE UPDATE (62 ITEMS) - MAY 2, 2018
The following are state tax and business developments I have curated since April 11th, and posted in the LEVERAGE SALT LinkedIn group:
Some of the items may be on the same state/issue/topic, but they are from different sources which may give you a broader perspective to help your company or client.
Maryland Legislature Sends Single-Sales Factor Bill to Governor
Oregon Extends Interstate Broadcaster Apportionment Provisions
Virginia Allows Modified Apportionment Factors for Certain Companies
Tennessee Allows Financial Asset Managers to Elect Single Receipts Factor Apportionment
New Arizona Law Updates State Conformity to Some Provisions of IRC
Kentucky Broadens Sales Tax Base, Hikes Cigarette Tax, Makes Other Changes
Digital Tax Arguments Focus on Role of Congress, Compliance Costs
Insight: ‘Wayfair: Covering the Waterfront—Amicus Briefs Supporting Respondents
A Brief History of the Biggest State Tax Case in a Generation
South Dakota v. Wayfair - TTR Explains What Tax Technology Options Really are Available
Cap on the State and Local Tax Deduction Likely to Affect States Beyond New York and California
Adopt or adapt? New IRS partnership audit rules affect states
New Jersey Permits Dedicated Prepayment of Anticipated Taxes
Maryland Phases in Single-Sales Factor Apportionment Formula
California FTB Issues Fourth and Final Report to Legislature on Recently Enacted Federal Tax Reforms
New Maryland Law Phases in Single-Sales Factor Apportionment for Corporate Income Tax Purposes
New Nebraska Law Provides Adjusted Basis Computation for Certain IRC Sec 179 Depreciable Property
New York City Memo Explains Deemed Repatriation Income under GTC, BTX, and UBT
Pennsylvania DOR Discusses Application of IRC Sec 965 RTT to State CNIT
MTC Approves Hearing Officer Report on Apportionment Regulation Amendments
Years of work to simplify the collection of remote state sales taxes may soon pay off.
Alabama Provides Guidance on IRC Sec. 965 Repatriation Income
Kentucky Clarifies Definition of Prewritten Computer Software
The above represents 'general curating' of state tax developments into one spot. If you still feel overwhelmed by the volume of state tax developments, please consider my 'custom curating' service. Meaning, clients hire LEVERAGE SALT to daily curate state tax developments relating to a specific industry, state(s), tax type and issue. You can make it as granular as you prefer. This allows you to reduce information overload, and only get the information you need to help your clients or company. This service is provided on a fixed-fee or subscription basis. Contact me at strahle@leveragesalt.com.
Wayfair v. South Dakota - What is the Practical Issue?
I just finished reading the transcripts for the Oral Arguments in the Wayfair v. South Dakota (U.S. Supreme Court case). Despite all of the arguments, discussion and debate, one practical, simple matter came into focus - this whole thing is about whether a business (small or large) will have to complete sales tax compliance in 45 states (plus D.C.) or simply the one state it has a physical presence in. Obviously, the facts differ by company as some have a physical presence in several states or all states. But I am talking about those companies who have a physical presence in 1 or a handful of states. If South Dakota wins this case, that company's sales tax compliance burden goes from 1 state to 45 states (plus D.C.). And since most businesses (yes, even brick and mortar businesses) have a website, the sales tax compliance burden will increase on ALL businesses. Does that meet constitutional muster? Does that NOT increase burdens on interstate commerce?
As some of the Justices said - this is not a physical presence problem, this is the state's inability to collect use tax problem. I urge the Court to not transfer the state's problem, and burden Internet commerce. If states can't collect the tax, maybe they should impose a different tax they can collect.
P.S. - I have been reading lots of articles, posts about the case and the Oral Arguments. I have also read all of the briefs. If you would like more resources regarding this issue, check out the LEVERAGE SALT Linkedin group for several resources.
STATE TAX KNOWLEDGE UPDATE (54 ITEMS) - APRIL 11, 2018
The following are state tax and business developments I have curated since March 13th, and posted in the LEVERAGE SALT LinkedIn group:
Some of the items may be on the same state/issue/topic, but they are from different sources which may give you a broader perspective to help your company or client.
California Issues Notice Regarding Processing Docketed Protests
Vermont Department of Taxes Issues Nexus Bulletin Including List of Nexus-Creating Activities
State Tax Reform Opportunities and Challenges: The STAR Partnership
Utah Enacts Tax Rate Cuts, Single Sales Factor Apportionment
New York allows withdrawal of certain combined elections by June 1
New Georgia Law Decouples from 2017 Tax Reform Act’s GILTI Provisions
New Idaho Law Generally Updates State Conformity to Federal Bipartisan Budget Act of 2018
Memo Explains Limited-Time Withdrawal Procedure from Some Commonly Owned Group Elections in New York
New Idaho Law Imposes Remote Seller Click-Through Nexus Provisions
Indiana New Law Provides that Remote Access Software is Not Subject to Tax
Arizona Changes Multistate Service Provider Apportionment Rules
New Utah Law Revises Certain Single Sales Factor Apportionment Method Provisions
Louisiana: Online marketplace provider required to collect sales tax
The above represents 'general curating' of state tax developments into one spot. If you still feel overwhelmed by the volume of state tax developments, please consider my 'custom curating' service. Meaning, clients hire LEVERAGE SALT to daily curate state tax developments relating to a specific industry, state(s), tax type and issue. You can make it as granular as you prefer. This allows you to reduce information overload, and only get the information you need to help your clients or company. This service is provided on a fixed-fee or subscription basis. Contact me at strahle@leveragesalt.com.