S.A.L.T. Select Developments – Tax Payment and Return Filing Responsibilities, Supplement #7

Baker Donelson

Baker Donelson

Due to COVID-19, the Internal Revenue Service (IRS) announced extensions of deadlines to pay various taxes and file various tax returns. Although some of these extension dates are different, most are automatically granted to July 15, 2020. However, the IRS announcements may not govern tax payment and return filing requirements imposed by states.

This special edition reviews updates by several states which may be important to taxpayers.

Alabama – Updates Reported

The Alabama Department of Revenue issued an order on June 9, 2020 extending the deadline until July 17, 2020 for purposes of obtaining annual registration and renewal of vehicles with respect to the months of March through June for registrants in counties where the county license plate issuing official's office was closed at any time during the month of May or June 2020 due to COVID-19. The order states that this extension includes the registration of vehicles purchased or otherwise acquired where the registration requirement imposed by Alabama law falls during the period of March 17 through July 17, 2020. Further, the order states that this extension applies to motor vehicle registrations and renewals for vehicles registered pursuant to the International Registration Plan when the ad valorem tax was due in a county where the issuing official's office was closed anytime during May or June 2020 because of the virus. Further, penalty charges associated with motor vehicle registrations and renewals extended to July 17 will not be charged until July 20, 2020; and penalty charges associated with motor vehicle property tax payments extended to July 17 will not be charged until July 20. More information can be found here.

District of Columbia – Reminder Reported

On May 26, 2020, the District's Office of Tax and Revenue (OTR) published a reminder of the important tax filing due dates, with new due dates for some taxes in response to COVID-19. This publication stated that if a taxpayer is unable to timely remit payments of amounts due, the taxpayer should contact the OTR at MyTax.DC.gov to submit a request to be placed on a payment plan. More information can be found here.

Florida – Updates Reported

Florida has not followed the lead of the 38 other states that, consistent with the U.S. Supreme Court's mid-2018 decision in South Dakota v. Wayfair, have given a green light to the collection of tax from online sellers. In-state retailers have decried this refusal as unfair to them. Sales taxes collections in Florida have declined precipitously in recent months, falling almost $600 million. All the while, more and more packages have been flowing untaxed into the state as a result of households increasing the amount of their purchases made online. Of course, online customers are supposed to voluntarily pay the tax themselves, yet few do. Imposition of the use tax has long been in effect, but before Wayfair states had no practical means to ensure its collection.

State Senator Joe Gruters estimates are that by not collecting sales tax on online sales, Florida has been foregoing at least $700 million a year in revenue. Gruters predicts that "as a result of the crisis and the move to more online purchases being made, that could turn into a billion dollars or more." Until new revenue reports come out in late June and July, however, showing how deep a hole the state is really in, it is unlikely there will be any action, particularly since the legislative session is over for this year. Every state is certain to be looking for any opportunities for revenue enhancement to partially counterbalance the inevitable shortfalls. Florida has an obvious partial fix, bringing it in line with other states. The Governor and more legislators may come around to Gruters' view and see that collection of sales tax from all online sellers is imperative for Florida's future fiscal health. More information not available at present.

Georgia – Developments Discussed

Many Georgia counties exempt from property taxes "inventory of finished goods" destined for shipment out of state. Most people would construe the term "inventory" as meaning something the taxpayer holds for sale to others. In a surprising decision, the Georgia Court of Appeals upheld a trial court's decision that self-checkout components that Wal-Mart agreed to purchase from NCR qualified for freeport exemption as constituting "inventory of finished goods."

NCR had gathered the component parts at its facility in Fayette County, Georgia and held them for up to 90 days before shipping them to out-of-state Wal-Mart stores for installation in those stores. By contrast, the same equipment which was destined for installation in Georgia stores was conceded to not qualify for freeport exemption.

The court, relying on the Merriam-Webster Dictionary, held that the self-checkout component parts constituted inventory.

The decision does not discuss why the equipment was considered to be the property of Wal-Mart as it had apparently not left the possession of NCR on January 1 of the year in question. More information can be found here.

Louisiana – Updates Reported

On June 4, 2020, Louisiana Governor Edwards signed a bill into law that would allow the Louisiana Department of Revenue, upon the occurrence of a gubernatorial or presidential declared disaster or emergency, to grant reasonable extensions of time for the filing of returns and reports and payment of taxes, fees or services charges for which the Department has been delegated as the collection authority. These extensions of time shall not exceed six months in the case of income and franchise taxes and three calendar months in the case of any other tax, fee or service charge collected by the Department. Further, whenever an extension is granted pursuant to this new law, the return, report, tax fee or service charge for which the extension is granted shall not become delinquent until the expiration of the extension period, and the Department will suspend the accrual of interest for all or part of the extension period. Separately, effective July 1, 2020, the jurisdiction of the Board of Tax Appeals has been expanded and petitions or pleadings may be filed with Board for any matter within its jurisdiction. That same legislation amends the definition of "dealer" for sales and use tax purposes so as to include any person who operates, maintains or facilitates a peer-to-peer vehicle sharing program and provides that the state sales tax collected by such dealers must be filed and paid electronically. More information can be found here and here.

Maryland – Updates Reported

On June 8, 2020, the Maryland Office of the Comptroller issued a news release stating that the first phase of the agency's new tax processing system, called Compass, will launch on July 6, 2020. According to this news release, the $160 million Compass will upgrade the state's tax processing system and integrate with the data warehouse to create a state-of-the-art program that will expand revenue-generating projects, provide enhanced reporting functionality and make it easier for taxpayers to view and manage their account online. The Comptroller's Office stated that "At a time when most businesses are facing extraordinary challenges, our agency is launching a much improved, easier-to-use reporting and payment system that will help business owners better navigate and manage this end of their accounting." The first phase, according to the news release, is focused on alcohol tax collection and license renewals; and that the Compass integrated tax system will continue to be implemented over the next several years, with corporate taxes launching in the first quarter of 2021, followed by business taxes and individual income taxes in 2022. This new system, according to the release, will improve fraud detection and prevention programs, increase the ability for taxpayers to manage their own accounts via an online portal, maximize compliance with best-practice security standards and maximize audit, collection, and reporting and estimating functionality. More information can be found here.

Mississippi – Updates Reported

On May 29, 2020, the Mississippi Department of Revenue published information regarding the recently enacted "Mississippi COVID 19 Relief Payment Fund" which has been established to assist Mississippi small businesses impacted by the COVID-19 outbreak. According to this publication, eligible taxpayers must be a Mississippi resident or have permanent permitted location in the state prior to March 1, 2020. Further, eligible taxpayers must have 50 or fewer employees and have an active sales or withholding account with the Department. Eligible taxpayers must also have filed income tax returns in 2018, 2019 "or intends to file for 2020." The business must have been subject to a COVID-19 related business closure required by the state, municipality or county. The publication also lists the types of industries in which the taxpayer must be involved. There is no application process for this $2,000 relief payment; rather, the Department will issue the payments to eligible businesses based on tax returns filed with the Department or other information verified by other state agencies. Separately, the Department advised that there is a grant program which is administered through the Mississippi Development Authority that does require an application process, and the amount of the grant will depend upon the number of employees but may not exceed $25,000. This publication also sets forth various additional information regarding the relief payment. More information can be found here.

South Carolina – Updates Reported

The South Carolina Department of Revenue has very recently published Information Letters #20-12 and #20-13. In Information Letter #20-12, the Department established the interest rate to be applied to underpayments of taxes at the rate of 3 percent for the period beginning July 1, 2020 through September 30, 2020 (down from 5 percent for the earlier period through June 30, 2020). In Information Letter #20-13, the Department confirmed that the federal economic impact payments to South Carolina taxpayers will not be taxable for South Carolina income tax purposes. Further, the Department stated that since federal income taxes are not deductible in arriving at individual South Carolina taxable income, the federal income tax refund (or the stimulus payment in the form of a rebate or refundable tax credit) is not includable in arriving at South Carolina taxable income. Separately, the Department published a News Release in early June reminding taxpayers that the South Carolina motor fuel user fee, which helps support road, bridge and infrastructure construction in South Carolina, will increase from 22¢ to 24¢ per gallon beginning July 1. More information can be found here, here and here.

Tennessee – Updates Reported

The Tennessee Legislature adjourned its re-convened 2020 Session in the early hours of June 19, 2020. During that re-convened session, the legislature made several revisions to Tennessee's sales tax laws including revising the marketplace facilitator sales tax law that was enacted April 1, 2020 to be effective October 1, 2020. One of the amendments to that marketplace facilitator sales tax law requires dealers with no physical presence in Tennessee to collect and remit the sales and use tax if the dealer makes sales that exceed $100,000 to consumers in Tennessee during the previous 12-month period. That particular amendment also provides that such dealers with no physical presence, but who exceed the $100,000 sales threshold, shall begin to collect and remit the tax by the first day of the third calendar month following the month in which this threshold was met; provided that this new amendment does not require a dealer to collect the tax for sales made before October 1, 2020. Further, this amendment states that this $100,000 sales threshold for out-of-state dealers does not change the substantial nexus criteria for determining tax nexus with Tennessee for purposes of the business, excise or franchise taxes. Separately, the amendment also reduces the safe harbor for a marketplace facilitator from $500,000 to $100,000 of sales made or facilitated to consumers in Tennessee during the previous 12-month period. These amendments, which became part of the budgetary bill process, are expected to be signed into law in the coming weeks by Governor Lee. More information can be found here.

Texas – No Further Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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