State and local taxes impact almost every taxpayer, and developments in any one jurisdiction can be frequent and sometimes confusing. ln this newsletter edition, we will briefly summarize selected state and local tax (SALT) developments in several states which may be important to you.
Alabama – Updates Reported
Nexus Questionnaire and Voluntary Disclosure Agreement Processes: The Alabama Department of Revenue (Department) recently announced an upgrading and relocation of the Department's Nexus Questionnaire and Voluntary Disclosure Agreement processes through the My Alabama portal at https://myalabamataxes.alabama.gov. In this Notice, the Department stated that the Questionnaire is designed to allow business taxpayers to provide information to the Department for use in determining the taxpayer's filing obligations with the State. The Voluntary Disclosure Program, as noted by the Department, is offered as a service to business taxpayers who want to become compliant with the tax laws of Alabama and limit their exposure to retroactive tax liability and penalties. The Department noted that beginning September 15, 2023, electronic questionnaires and applications must be submitted through the My Alabama Taxes portal. Further, the Department noted that third-party submitters/representatives who do not already have an Agent Account with the Department must register for a Bulk Filer/Agent Account before submitting applications or questionnaires for their clients in My Alabama Taxes. More information can be found here.
District of Columbia – Updates Reported
Notice of Tax Changes: The Office of Tax and Revenue (OTR) recently published a reminder to taxpayers, tax professionals, businesses, and others about recent tax changes, including those taking effect on October 1, 2023. The OTR stated in that reminder that these changes include those pursuant to the Fiscal Year 2024 Budget Support Emergency Amendment Act of 2023, previously enacted legislation applicable on October 1, 2023, as well as other changes required by the District's laws. Among the many tax changes summarized in this reminder, the OTR referenced the Tourism Recovery Tax Amendment Act of 2023 and the Street Vendor Advancement Amendment Act of 2023 for sales tax purposes, and the sunsetting of the Recordation and Transfer Taxes Amendment Act of 2019 for commercial recordation and transfer taxes. Additionally, other legislative tax developments are addressed in this reminder. More information can be found here.
Florida – Updates Reported
Sales Tax Rate Reduction on Real Property Rentals: On September 25, 2023, the Florida Department of Revenue (Department) issued Tax Information Publication No: 23A01-20 (Publication) announcing that effective December 1, 2023, the state sales tax rate imposed under Florida law on the total rent charged for renting, leasing, letting, or granting a license to use real property (commercial rentals) is reduced from 5.5 percent to 4.5 percent. The Department stated in this Publication that some examples of real property rentals subject to tax under Florida law include rentals for commercial office or rental space, warehouses, and self-storage units or mini-warehouses. The Department also noted that total rent charged includes all consideration due and payable by the tenant for the privilege or right to use or occupy the real property. Further, the Department stated that the local option discretionary sales surtax imposed by the county where the real property is located continues to apply to the total rent charged. Further, the Department noted that the reduced state sales tax rate on commercial rentals does not apply to the tax rate imposed on parking or storage of motor vehicles, docking or storage of boats, or tie-down or storage of aircraft. More information can be found here.
Georgia – Updates Reported
Motor Fuel Tax Suspension Extended: On October 6, 2023, Governor Kemp signed Executive Order 10.06.23.01 renewing the suspension of the collection of motor fuel excise tax, such suspension originally beginning on September 13, 2023. This suspension of the motor fuel excise tax is now set to last from September 13, 2023, through November 11, 2023. Information regarding the terms and conditions of this extended suspension can be found here.
Louisiana – Updates Reported
Income Tax Return Filing Deadlines Extended for Seawater Intrusion: On October 6, 2023, the Louisiana Department of Revenue (Department) issued Revenue Information Bulletin No. 23-026 (Bulletin) granting an automatic filing extension to taxpayers whose primary residences, principal places of business, critical tax records, or paid tax advisers are located in parishes within the federal disaster declaration as a result of seawater intrusion that began on September 20, 2023. The declared disaster areas, as referenced in this Bulletin, for Louisiana include Jefferson, Orleans, Plaquemines, and St. Bernard Parishes. According to this Bulletin, automatic extensions are based on the taxpayer's location address on file with the Department. If a taxpayer's location address is not within the parishes listed above, the Department stated that the taxpayer may nevertheless be eligible for penalty relief although an automatic extension does not apply. The Department noted in this Bulletin that no late filing penalty shall be due if a tax return is submitted by the extended deadline. For individual, fiduciary, and partnership income tax extensions, where the original due date is May 15, 2023, and the extended due date is November 15, 2023, with a calendar year or fiscal year due date or extended due date on or after September 20, 2023, and before February 15, 2024, this automatic extension for qualifying taxpayers would be February 15, 2024. For corporate income tax extensions, qualifying taxpayers with a calendar or fiscal year extended due date on or after September 20, 2023, and before February 15, 2024, the automatic extended due date is February 15, 2024. A similar extension applies to taxpayers filing a corporation franchise tax return in conjunction with the corporation income tax return. Terms and conditions apply with respect to this automatic extension, and more information can be found here.
Maryland – Updates Reported
Online Tax Tool Being Launched: On October 6, 2023, the Comptroller of Maryland (Comptroller) published a News Release (Release) announcing that the Comptroller is launching a new online newsletter tool that allows the public – from individual residents and community leaders to members of the media and governmental officials – to sign up for regular agency updates. According to this Release, a key goal of the Comptroller's Office is to build active partnerships with community leaders, small businesses, and Maryland residents, ensuring the agency is accessible to everyone and an increase in transparency around data and the decision-making process. As noted in this Release, when signing up for the online listserv, stakeholders and partners will be able to select topics of interest including taxes, unclaimed property, and legislation/regulations, among many other topics. The Release encourages residents to get involved with the agency by signing up for this new online tool. For those currently receiving updates from the Comptroller's Office, the Comptroller strongly urged they sign up for the newsletter before October 27, after which all notifications and updates from the agency will be transmitted through the new online engagement portal. More information can be found here.
Mississippi – Updates Reported
Revised Depreciation Methods: On October 20, 2023, the Mississippi Department of Revenue (Department) published Notice 80-23-003 (Notice) addressing the revised methods of depreciation that may be used for certain expenditures and property for State income tax purposes resulting from legislation enacted this year and effective from and after January 1, 2023. As noted by the Department in this Notice, and for tax years beginning after December 31, 2022, a taxpayer may treat specified research or experimental expenditures that were paid or incurred by the taxpayer during the tax year in connection with the taxpayer's trade or business as expenses that are not chargeable to the capital account, and may elect to take a full and immediate deduction for such expenditures and/or depreciate the expenditures in accordance with Section 174 of the Internal Revenue Code as it existed on January 1, 2021 (Code). Additionally, and also for tax years beginning after December 31, 2022, the Department in this Notice states that expenditures for business assets that are qualified property or qualified improvement property shall be eligible for 100 percent bonus depreciation and may be deducted as an expense incurred by the taxpayer during the tax year in which the property was placed in service, with the term "qualified property" having the same meaning as in Section 168(k) of the Code and the term "qualified improvement property" having the same meaning as defined in Section 168(a)(6) of the Code. Other information regarding these revised depreciation methods is set forth in this Notice, which can be found here.
North Carolina – Updates Reported
Online Seller Seminar: The North Carolina Department of Revenue (Department) has recently published information pertaining to an upcoming seminar that will assist online sellers who are engaged in business in North Carolina. Areas of discussion within the seminar will include such topics as sellers with physical presence in North Carolina; remote sales to North Carolina; marketplace facilitators and marketplace sellers; as well as applying for a North Carolina Sales and Use Tax Account ID if necessary. This seminar is scheduled for November 8, 2023, and registration and related information can be found here.
South Carolina – Updates Reported
Recognized Training Programs Relative to Alcoholic Beverage Licensing: The South Carolina Department of Revenue (Department) has recently issued Information Letter #23-13 (Information Letter), superseding Information Letter #14-6 and all previous documents and any conflicting directives, which addresses the consideration of certain recognized training programs as mitigating factors in regard to evaluating the appropriate penalty for a violation of the State's statutes and regulations governing the sale, distribution, or possession of beer, wine, and/or alcoholic liquor. According to this Information Letter, "mitigating circumstances" are circumstances that may warrant a less severe sanction than would otherwise be appropriate; and, if recognized mitigating circumstances are present, the Department will consider whether to reduce monetary penalties, the lengths of suspensions, and whether revocations should be reduced to suspensions with monetary penalties. The Department states in this Information Letter that when the violation involves the sale of beer, wine, or alcoholic liquor to an underage person, the Department will consider whether the employee committing the violation has completed a training program recognized by the Department within a reasonable period of time (but no longer than one year) prior to the violation; and the Department must receive verification that the employee attended and completed the program which must include training covering the prevention of underage sales. The Information Letter then sets forth various recognized training programs for these purposes. However, the Department states in this Information Letter that completion of one of these recognized training programs is not a guarantee of the reduction in the penalty imposed by the Department; and that the determination of whether mitigating circumstances warrant a reduction is within the sole discretion of the Department. More information can be found here.
Tennessee – Updates Reported
Industrial Machinery/Manufacturing Exemption Available to Single Member LLC: The Tennessee Department of Revenue (Department) has recently posted Letter Ruling #23-08 (Ruling) addressing the question of whether a wholly-owned single member limited liability company qualifies for the sales and use tax industrial machinery exemption and the business tax exemption for manufacturers if the owner (Parent) of that limited liability company is a corporation but such limited liability company elects to be treated as a corporation for federal income tax purposes. Under the facts in this Ruling, the Parent corporation operates a fabrication plant and provides design services, project management, and detailing services. The Parent is in the business of selling fabricated goods to contractors, consumers, and users as well as installing goods for others. The Parent proposed to expand its operations by establishing a new legal entity, a single member limited liability company (Taxpayer), to be owned by the Parent that will only fabricate goods for resale and use off the Taxpayer's premises. Further, the Parent will transfer all machinery, equipment, and personnel specifically involved in such fabrication work to the Taxpayer; and the Taxpayer will be located in a physically separate fabrication facility from that of the Parent. Additionally, the Taxpayer will elect to be treated as a corporation for federal income tax purposes. In response to the requested rulings, the Department concluded that since the Taxpayer will elect on IRS Form 8832 to be treated as an association taxable as a corporation, then the Taxpayer will be treated as a separate entity for state and local tax purposes. Based on the facts set in this Ruling request, the Department then determined that the Taxpayer would qualify for the sales and use tax exemption for industrial machinery and reduced rates for water and energy fuel; and additionally qualifies as a manufacturer for business tax purposes and thus qualifies for the exemption from such tax. In response to the question in this Ruling as to whether the outcome would be any different if the Taxpayer does not elect to be treated as a corporation and remains as a disregarded entity for federal income tax purposes, the Department stated that the Taxpayer would be disregarded for sales and use tax purposes and would be treated as a division of the Parent, and thus the eligibility for those exemptions may fluctuate depending upon the facts pertinent to the Parent. More information can be found here.
Texas – Updates Reported
Adopted Rule Not Invalidated by Lack of Summary: As recently published by the Comptroller's Office (Comptroller) in the August 2023 Tax Policy News under the Other Legislative Developments segment, the Comptroller noted that House Bill 139 requires a state agency to provide notice of a proposed rule to be adopted. According to the information published by the Comptroller, the notice only applies to rules that are proposed to be adopted by a state agency under statutory authority that specifically authorizes the agency to adopt the rule and that became law during the proceeding four-year period. The Comptroller noted that House Bill 139 adds that the failure by a state agency to publish on the agency's internet website a summary of a proposed rule written in plain language in both English and Spanish does not invalidate the rule adopted by a state agency or an action taken by the agency under that rule. More information can be found here.
