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.
Sales Tax On Aircraft Parts: On June 16, 2021, the Alabama Department of Revenue (Department) issued a Notice to all sellers making retail sales of aircraft parts, stating in essence that the exemption enacted in 2012 which was set to expire May 30, 2022, has been extended as a result of the 2021 Legislature removing that sunset provision. This sales and use tax exemption applies to aircraft parts, components, and systems for refurbishing certain aircraft according to Alabama law. The Department states in this Notice that questions regarding the Notice or the sale of aircraft parts should be directed to the Sales and Use Tax Division at the address set forth in the Notice. More information can be found here.
Marketplace Sellers FAQs: The Office of Tax and Revenue (OTR) has published on its website frequently asked questions (FAQs) regarding the responsibilities of marketplace sellers for sales tax collection and remittance purposes. These FAQs include addressing the definition of a remote seller; the responsibilities that a remote seller has under the District's current sales tax laws; the economic nexus standard in regard to which the District will require the remote seller to obtain a retail license and begin collecting and remitting tax; the beginning date for a remote seller's obligations; and many other such FAQs. More information can be found here.
2021 Sales Tax Holiday: On July 7, 2021, the Florida Department of Revenue (Department) issued Tax Information Publication #21A01-08 announcing a sales tax holiday for the period from Saturday, July 31, 2021 to Monday, August 9, 2021. According to this Publication, and during this sales tax holiday, Florida law directs that no sales tax or local option tax will be collected on purchases of clothing, footwear, and certain accessories for $60 or less per item; purchases of certain school supplies selling for $15 or less per item; and the first $1,000 of the sales price of personal computers and certain computer-related accessories, when purchased for noncommercial home or personal use. Additionally, attached to the Department's Publication are specific examples of the exempt clothing and accessories, school supply items, and computers and computer-related accessories. Examples of taxable items are also included. More information can be found here.
Emergency Rule Requiring Electronic Filing/Payment of Sales Taxes: The Department has promulgated an emergency rule effective July 1, 2021 which provides that a marketplace provider that is a dealer under Florida Statutes Chapter 212, as amended as referenced in that Rule, and a person who is required to collect and remit sales tax on remote sales, must timely file Florida sales and use tax returns and remit sales tax and discretionary sales surtax to the Department by electronic means. This emergency rule, designated as Rule No. 12ER21-6, can be found here.
Proposed Amendment to Manufacturing Sales Tax Rule: On June 11, 2021, the Georgia Department of Revenue (Department) issued Notice SUT 2021-002, which proposes to amend Rule 560-12-2-.62 "Manufacturing Machinery and Equipment, Industrial Materials, and Packaging Supplies." The Department states in this Notice that the proposed amendment will be considered at a remote regulation hearing to be held on July 27, 2021. In the synopsis following the Notice, the Department states that it proposes to amend that Rule by making changes as indicated in the copy attached to the Notice. The copy of the Rule attached to the Notice contains the word "PROPOSED" on each page of the proposed amendment to Rule 560-12-2-.62. The Department also states in the synopsis that the purpose of the proposed amended Rule is to conform the Rule to O.C.G.A. Section 48-8-3.2 as amended in 2021. The Notice states that comments may be submitted to the Department in advance of the hearing. More information can be found here.
Tax Filing And Payment Deadlines Extended Because of Severe Weather: The Louisiana Department of Revenue (Department) recently issued Revenue Information Bulletin No. 21-015 (the Bulletin) providing that an automatic filing and payment extension has been granted to taxpayers whose homes, principal places of business, critical tax records, or paid tax preparers are located in parishes declared federal disaster areas following the severe storms and flooding that occurred May 17, 2021. According to the Bulletin, the Department is providing an automatic extension until August 16, 2021, for individual income, corporation income and franchise, fiduciary income, partnership, and partnership composite tax returns and payments with original or extended due dates on or after May 17, 2021. This extension applies to tax returns and payments for the 2020 income tax year and the 2021 franchise tax year. Further, if a taxpayer requires additional time to file the 2020 income or 2021 franchise tax return beyond August 16, 2021, an extension request may be submitted on the applicable extension form which must be submitted by August 16, 2021; and, if so submitted, the extension period runs from August 16, 2021 to the general extension date of November 15, 2021 for individual, fiduciary, and partnership returns, and to December 15, 2021 for corporation returns. The Bulletin states that interest and late payment penalties shall accrue beginning August 16, 2021 on the outstanding balance of tax due. Other extension related information can be found in the Bulletin, located here.
Revised Regulatory Authority For Installment Payment Agreements: The Department recently amended Louisiana Administrative Code Section 61.I.4919 entitled "Installment Agreement For Payment of Tax." According to the Department's statement of purpose, this regulatory amendment is intended to clarify that a continuing guaranty agreement may be required for installment agreements requested by limited liability companies, partnerships and limited partnerships, to the extent the payment period for which an informal installment agreement is authorized, and to make technical changes. Further, it appears that this regulatory change has added an additional 12 months that may be available to taxpayers seeking an installment payment agreement. More information can be found here.
Filing and Payment Extension for PTEs: On June 30, 2021, the Comptroller of Maryland issued a news release extending the filing and payment deadlines for pass-through entities (PTEs) for 2020 income tax returns to September 15, 2021. According to the release, such extension was granted as the result of new laws (see our June 2021 edition of SALT Select, here) requiring extensive changes to tax forms that would be available to PTEs that are accessible on the Comptroller's website. Those forms are expected to be available through software vendors "soon" but the release stated that the Comptroller's Office cannot guarantee the date. The release further stated that taxpayers who file PTE returns and pay any outstanding liabilities by September 15 will not be charged interest or pay a penalty, and no further action is required for PTEs to receive this waiver − "it will be automatically granted." Additionally, the release stated that the waiver is limited to late payment interest and late payment penalty and does not apply to interest or penalty charged on the underpayment of estimated tax. More information can be found here.
Certain Filing Fees No Longer Charged: By Notice dated effective July 1, 2021, the Maryland Secretary of State's Office has advised that the State Department of Assessments and Taxation no longer charges a base filing fee for the cancellation, dissolution, or termination of a registered business. That Notice also states that neither cancellations, dissolutions, or terminations submitted before July 1, 2021, nor resubmission of these filings through a transaction originally completed before July 1, 2021, will be eligible for a refund. More information can be found here.
Revised Regulations Involving Alcohol Beverage Control: The Mississippi Department of Revenue (Department) has published various proposed regulations which are effective July 23, 2021 pertaining to the control of alcoholic beverages. Some of those revised regulations as proposed by the Department can be found here, here, here, here, and here.
Zero Percent Interest Rate On Refunds Through September 30, 2021: On June 28, 2021, the South Carolina Department of Revenue (Department) issued Information Letter #21-19 providing in essence that no interest would be paid on refunds during the first quarter of the State's fiscal year 2021-2022 ending September 30, 2021. The Information Letter lists that an interest rate of three percent would be paid on refunds during the period from July 1, 2021 through September 30, 2021, but that the Budget Provisions of the State direct that the Department reduce the rate of interest paid on eligible refunds by a total of three percentage points above those listed rates, producing a zero percent rate on refunds. Interest will still be charged on underpayments. More information can be found here.
Sales Tax Holiday Dates: On June 22, 2021, the Department issued SC Information Letter #21-17, which sets forth the sales tax holiday dates for this year. According to this Information Letter, the sales tax holiday for 2021 will begin Friday, August 6, 2021 through Sunday, August 8, 2021. This holiday applies to eligible new or used items of any dollar amount, purchased online or in store, for use by any age. Included within the sales tax holiday are clothing, school supplies, computers, and certain bed and bath supplies. Excluded from the holiday are items used in a trade or business, clothing or footwear rentals, and watches, among other items. Specific examples of exempt and taxable items are attached to the Information Letter. More information can be found here.
Interest Rate Changes: In early July, the Tennessee Department of Revenue (Department) announced that the interest rate to be applied to assessments and refunds relative to the period from July 1, 2021 through June 30, 2022, continues to be 7.25 percent, which is the same interest rate that applied to the prior year period. The interest rate for installment payment agreements, however, has been increased to 9.25 percent for the period July 1, 2021 through June 30, 2022, up from 8.25 percent for the prior year period. More information can be found here.
Proposed Repeal of Sales Tax Rule: In early July, the Department filed a Notice of Rulemaking Hearing with the Tennessee Secretary of State announcing a hearing to be held on August 17, 2021 in the Andrew Jackson Building, Nashville, Tennessee, to address matters pertaining to the proposed repeal of Sales and Use Tax Rule 1320-05-01-.96 (Rule 96). That Rule 96, which originally was certified in 1974, provides in essence that, except where the Department agrees otherwise, sales of tangible personal property or taxable services made by a dealer to an out-of-state vendor who directs that the dealer act as the out-of-state vendor's agent to deliver or ship tangible personal property or taxable services to that out-of-state vendor's customer, who is a user or consumer, are subject to the sales and use tax. Rule 96 goes on to state that the dealer so acting as an agent for the out-of-state vendor must collect the tax involved on the transaction unless the transaction comes within the conditions indicated in Rule 96. By seeking repeal of Rule 96, the Department is apparently acknowledging that, with the enactment of recent legislation, out-of-state dealers now have sales tax collection and remittance responsibilities under either the new filing threshold (see Notice #20-14, dated July 2020, here) or as a marketplace facilitator (see Notice #20-15, dated July 2020, here), and therefore Rule 96 would no longer be required. More information regarding the hearing for this proposed repeal can be found here.
Impact of IRC Sections 754 And 743(b) For Franchise And Excise Tax Purposes: On July 14, 2021, the Department posted Letter Ruling No. 21-06, dated June 10, 2021. This Ruling addresses the effect for Tennessee franchise tax purposes of an election under Internal Revenue Code Section 754 and the subsequent decision to push down the adjustment in partnership property to the "Taxpayer"; as well whether, for Tennessee excise tax purposes, the Taxpayer's net earnings or net loss will be determined with or without making any addition or subtraction relating to a Section 743(b) basis adjustment pursuant to that Section 754 election. The facts in this Ruling indicate that the Taxpayer is a single-member limited liability company that is owned through a tiered ownership structure consisting of other single-member limited liability companies ultimately owned by a multi-member limited liability company classified for federal tax purposes as a partnership ("Partnership"). Members in the Partnership sold controlling interest in the Partnership to "Purchasers", and thereafter the Partnership made an election under Section 754 such that the Purchasers' adjusted basis in the Partnership's property was stepped up to fair market value under Section 743(b). The Partnership intends to use "pushdown accounting" on its books and records and on its consolidated financial statements prepared under generally accepted accounting principles (GAAP).
Under these facts, the Department determined in this Ruling that the pushdown accounting allows for the Purchasers' higher purchase price to be used in the preparation of the Taxpayer's separate financial statements as well as the consolidated financial statements; and, therefore, if the Taxpayer elects to apply pushdown accounting, the Taxpayer must compute its net worth for franchise tax purposes consistent with its GAAP balance sheet. With respect to the excise tax, the Department noted in this Ruling that an election under Section 754, followed by a basis adjustment with respect to a transferee partner, is applicable with respect to that transferee partner only pursuant to Treasury Regulations under Section 743. Based upon the foregoing, and based on references to Treasury Regulations under Section 743 to the effect that adjustments to the basis of partnership property under Section 743(b) have no effect on the common basis of partnership property, the Department determined that for Tennessee excise tax purposes the Taxpayer's net earnings or net loss will be determined without making any addition or subtraction relating to the Section 743(b) basis adjustment pursuant to a Section 754 election. More information can be found here.
Enhanced Sales Tax Reporting Feature: The Comptroller's Office recently announced that a new feature will help provide sellers with more information about their tax responsibilities at the time of a sale. According to the Comptroller's announcement, and beginning June 30, 2021, sellers are now able to download files which can be incorporated into their tax reporting and point-of-sale software. These files include a comprehensive dataset of Texas addresses and associated state and local sales and use tax responsibilities, as well as a local jurisdiction tax rate file. The Comptroller's Office stated that these files will be updated quarterly to account for new tax jurisdictions and tax rate changes within jurisdictions, and that such tax responsibility and rates will be valid for that quarter. More information can be found here.