State and local taxes impact almost every taxpayer, and developments in any one jurisdiction can be frequent and sometimes confusing. In this newsletter edition, we will briefly summarize certain SALT developments in several states which may be important to you.
Alabama – Updates Reported
Coal Severance Tax Extended: The Alabama Department of Revenue (Department) published a Notice dated April 19, 2021 stating that Governor Ivey signed Act Number 2021-120 on April 1, 2021, pursuant to which the coal severance tax which was due to expire on October 1, 2021, is extended until October 1, 2031. The Notice states that the total tax levied on coal severed in Alabama remains at $0.335 per ton. Further, and pursuant to the provisions of this Act, the Notice states that the term "loaded for shipping" was included related to coal severance, and that such term means coal that is severed from a mine located in one county and then loaded for shipping in another county. According to the Notice, and effective with the September 2021 coal severance tax return, which is due no later than October 20, 2021, indication must be made as to whether coal is being severed in one county and loaded for shipping in another county. The Department's Notice also directed that the MyAlabamaTaxes account is to be used in filing the coal severance tax return and remitting the tax by the due date. More information may be found here.
District of Columbia – Updates Reported
Treatment of Federal Unemployment Compensation Exclusion: On April 15, 2021, the District's Office of the Tax Revenue (OTR) posted Tax Notice 2021-06 which addressed the treatment for Maryland tax purposes of the federal unemployment compensation exclusion. The Notice stated that if a taxpayer's modified adjusted gross income is less than $150,000, the federal American Rescue Plan Act, which was enacted on March 11, 2021, excludes from income up to $10,200 of unemployment compensation paid in 2020. This Notice goes on to provide various information regarding the impact of that exclusion for Maryland tax purposes and states that such federal exclusion will also be reflected on the District individual tax returns. The OTR then discusses in this Notice the steps District taxpayers need to take in the event the District return has not yet been filed, as well as in those situations where the District return has been filed. With respect to the latter situation, the OTR states the taxpayer should not file an amended District return at this time since the OTR is waiting for more guidance from the Internal Revenue Service on how these recalculations will be reported to taxpayers and state taxing agencies. The Notice provides the OTR Customer Service Center contact number in the event additional information is needed. More information may be found here.
Florida – Updates Reported
Disaster Preparedness Sales Tax Holiday: The Florida Department of Revenue (Department) issued Tax Information Bulletin #21A01-04 dated May 21, 2021, stating that the Disaster Preparedness Sales Tax Holiday begins May 28, 2021 and ends June 6, 2021; and during this holiday period various qualifying items related to disaster preparedness are exempt from sales tax. This publication references a list of those qualifying items and also sets forth various examples and other guidance with respect to application of the exemption. More information may be found here.
This is but one of three sales tax holidays enacted in this year's legislative session. The others are the traditional tax-free period to purchase school supplies which will run between July 31 and August 9 and a new "Freedom Week," July 1 – 7, 2021. During Freedom Week, sales tax will not be imposed on purchases of certain outdoor equipment such as tents, grills, bicycles, kayaks and fishing gear, as well as no tax on tickets bought for things that take place before the end of the year such as live music, athletic contests, in-theater movies, cultural events, museums, state parks, and fitness.
Florida Enacts Online Sales Tax Bill: On April 19, 2021 Governor Ron DeSantis signed into law Senate Bill 50, which provides that, effective July 1, 2021, all businesses making remote sales into the state are required to collect and electronically remit sales and use tax, including any applicable discretionary sales surtax, if the business has made taxable remote sales in excess of $100,000 over the previous calendar year. The Department has issued Tax Information Publication (TIP) #21A01-03 outlining the requirement that marketplace providers are required by July 1 to register to collect and electronically remit sales and use tax on taxable sales they facilitate for marketplace sellers for delivery into Florida (more information may be found here). The law's estimated annual $1 billion of new revenue is earmarked for the Florida unemployment trust fund, which became depleted because of massive job losses during the COVID-19 pandemic. After the fund is replenished, the revenue will be used to make a cut in the commercial rent tax from 5.5 percent to 2 percent. More details about this new enactment will follow in next month's alert.
Georgia – Updates Reported
Entity Level Taxation for Electing S Corporations/Partnerships: Act 164, as signed by Governor Kemp on May 4, 2021, permits Subchapter S corporations and electing partnerships to elect irrevocably to pay tax at the entity level at the rate of 5.75 percent of its net income, in lieu of the shareholders or partners paying tax on the entity's net income. There are various qualifying conditions for this election. Just a few of such conditions are, following such election, neither the entity nor the shareholders/partners are entitled to a deduction on account of the payment and the election has no effect on the basis of the shareholders/partners in their stock/partnership interests in the entity. This new law is effective with respect to taxable years beginning on or after January 1, 2022. More information may be found here.
Louisiana – Updates Reported
Portion of 2020 Unemployment Benefits Exempt from State Income Tax: The Louisiana Department of Revenue (Department) issued a Revenue Information Bulletin in late March 2021 addressing the Louisiana tax implications of the federal $10,200 unemployment compensation exclusion. The Bulletin's purpose is to explain that this federal exclusion also applies to Louisiana individual income tax and to provide instructions to taxpayers. The Bulletin then reviews the background of the federal exclusion and how such exclusion impacts the computation of the Louisiana individual income tax. The Bulletin provides guidance to taxpayers who have not yet filed the 2020 federal or state tax return, as well as provides guidance to those taxpayers that have already filed their 2020 federal and state tax return. The Bulletin explains that the Internal Revenue Service will determine the correct taxable amount of unemployment compensation and the federal income tax, and will adjust federal tax returns accordingly. These adjustments, according to the Bulletin, could result in an overpayment of tax, and the Bulletin provides guidance with respect to those situations. If a Louisiana return is required, the Department's Bulletin states for faster refund processing the taxpayer may amend the 2020 tax return electronically through Louisiana File Online, and return processing and refund tracking will be available online as well. More information may be found here.
Maryland – Updates Reported
Impact of Consolidated Appropriations Act of 2021: On April 7, 2021, the Comptroller of Maryland published Tax Alert 04-07-21 which addresses the impact of the federal Consolidated Appropriations Act of 2021 (CAA) with respect to Maryland taxation. For instance, the Tax Alert noted that the CAA enhanced and expanded certain provisions of prior federal law so as to increase cash flow and reduce the income tax burden on a wide variety of taxpayers, and at the same time overturn the Internal Revenue Service's prior position on several issues involving the deductibility of expense paid with PPP loan proceeds as well as expands certain revisions made by other federal law. The Tax Alert noted some of these changes are retroactive and thus extend to past tax years. An analysis of the fiscal impact of the CAA was performed by the Bureau of Revenue Estimates, which found no provision in the CAA met the automatic decoupling threshold for Maryland tax purposes. As a result, the Tax Alert noted that Maryland conforms to all provisions of the CAA unless legislative action is taken to specifically decouple. The Tax Alert also addresses how the CAA may impact Maryland taxation with respect to a number of issues, including the extension of the medical expense deduction, the depreciation of certain residential rental property over a 30-year period; the temporary business meal deduction expansion; the paycheck protection program and deductibility of business expenses; and the temporary lookback for the earned income tax credit. More information may be found here.
Mississippi – Updates Reported
Accelerated Tax Payments No Longer Required: The Mississippi Department of Revenue (Department) recently issued Notice 72-21-07, dated May 3, 2021, advising that taxpayers are no longer required to submit accelerated payments for sales, use, and withholding tax. The Department stated in that Notice that House Bill 1139 of the 2021 Regular Session repealed these requirements. The Notice provides contact information in the event additional information is needed. More information may be found here.
South Carolina – Updates Reported
Buydowns For Sales Tax Purposes: The South Carolina Department of Revenue (Department) issued Information Letter #21-12, dated April 21, 2021, advising that effective April 16, 2021, the South Carolina Legislature amended the definition of "gross proceeds of sales" so as to exclude amounts received from a "buydown" from gross proceeds. Under this new exclusion, the term "buydown" means an agreement between a retailer and a manufacturer or wholesaler in which the retailer receives a payment from the manufacturer or wholesaler that requires the retailer to reduce the sales price of the manufacturer's or wholesaler's product to the retail purchaser. As stated in this Information Letter, the Department had previously determined that buydowns were included in gross proceeds and subject to the sales tax effective January 1, 2021; however, that previous determination was delayed and now is superseded by this new legislation. More information may be found here.
Abandoned Buildings Revitalization Act Extension: As noted in the Department's Information Letter #21-13, dated May 19, 2021, this Act provides taxpayers a credit against income taxes or property taxes for rehabilitating an abandoned building in South Carolina. This Information Letter notes this Act has been extended from December 31, 2021 to December 31, 2025, and such Letter includes a reference to previous publications by the Department providing guidance and examples of the credit requirements. More information may be found here.
Tennessee – Updates Reported
Various Tax Legislation Enacted: The Tennessee Legislature adjourned the 2021 Session in early May, but not before passing various tax and related legislation which have now been signed by Governor Lee. Just some of those tax related legislative enactments include 2021 Public Chapter 154 which allows businesses to subtract COVID related relief received from the State in computing net earnings and losses for excise tax purposes, effective April 14, 2021 (more information may be found here); Public Chapter 480 which allows sales or use taxes collected from a customer to be refunded to the customer, rather than to the dealer, under certain circumstances, effective October 1, 2021 (more information may be found here); Public Chapter 285 which deletes certain streamlined sales tax definitions and other provisions first enacted in 2007, the implementation of which have been delayed through subsequent legislation, effective April 30, 2021 (more information may be found here); Public Chapter 214 which establishes protections for taxpayers relying on guidance issued by the Tennessee Department of Revenue, effective July 1, 2021 (more information may be found here); Public Chapter 86 which for sales tax purposes excludes from the definition of tangible personal property certain mains, pipes, pipeline and tanks, as well as certain railroads, railroad structures and related items, and deems the foregoing as realty upon installation for purposes of the sales tax laws, effective July 1, 2021 (more information may be found here); Public Chapter 456 which enacts a sales tax holiday on food and food ingredients and on prepared food sold between July 30, 2021 and August 5, 2021, effective July 1, 2021 (more information may be found here); and Public Chapter 420 which makes numerous changes to Tennessee's laws involving trusts and rights and responsibility related thereto, generally effective July 1, 2021 with certain amendments effective January 1, 2022 (more information may be found here).
Texas – Updates Reported
Deadline Extension for Disaster Areas: The Texas Comptroller of Public Accounts issued a Release dated May 20, 2021, advising that most businesses in State declared disaster areas impacted by recent severe weather will be granted an extension to file certain tax reports. Tax reports due on the date of that Release and on May 25 can now be filed by June 1 without penalty, according to the Release. Some of those tax reports include sales and use tax, mixed beverage gross receipts tax and gasoline tax; however, a complete list of the due dates for Texas taxes can be found on the Comptroller's website. This extension, according to the Release, is for taxpayers in Calhoun, Jasper, Jefferson, Kleberg, Newton and Tyler counties, which Governor Abbott declared a state of disaster on May 19, 2021. Those counties were hard hit by significant flooding, tornadoes, hail and damaging winds, according to the Release. More information may be found here.