SC&H Group Blog: "Expertise Beyond the Numbers"

State & Local Tax Updates: California Income Tax; Florida Sales Tax Rates; and North Carolina Property Tax Rates

Through its content-sharing partnership with Thomson Reuters Checkpoint, SC&H Group’s State and Local Tax practice has compiled the following round up of actionable state tax news.

Please note that a subscription will be required to access the links through Thomson Reuters Checkpoint.

California Corporate Income Tax — Single sales factor and assignment of sales for California.
The California Franchise Tax Board has created a web page that provides guidance to taxpayers in connection with the passage of Proposition 39 in November 2012 and its requirement that most businesses use a single sales factor to apportion business income to California for tax years beginning on or after January 1, 2013, for corporate franchise and income tax purposes. The topics discussed are: (1) who do the new laws affect (all taxpayers carrying on or doing business in and out of California or taxpayers who have income from California sources); (2) who has a filing requirement in California; (3) how is California income computed for taxpayers who do business inside and outside of California; (4) who must use the single-sales factor (for tax years beginning on or after January 1, 2013, all apportioning trade or businesses, except those that derive more than 50% of their gross receipts from qualified business activities (agricultural, extractive, savings and loan, and banking or financial) are required to use a single sales factor; (5) what are the rules for assigning to California sales of tangible personal property (sales of tangible personal property are in California if the property is delivered or shipped to a purchaser in California or the property is shipped from California to a state where the taxpayer is not taxable or the purchaser is the U.S. government); (6) what are the rules for assigning to California sales of other than tangible personal property (for tax years beginning on or after January 1, 2013, sales of other than tangible personal property are assigned for sales factor purposes using market assignment for all taxpayers required to apportion their income in accordance with the Uniform Division of Income for Tax Purposes Act (UDITPA) rules or within the special industry regulations under Cal. Code Regs. 18 § 25137-1 through Cal. Code Regs. 18 § 25137-14 ); and (7) what is market assignment (under market assignment, sales of other than tangible personal property are assigned to the California sales factor numerator if: (a) sales from services are in California to the extent the purchaser of the service received the benefit of the services in California, (b) sales from intangible property are in California to the extent the property is used in California (in the case of marketable securities, sales are in California if the customer is in California), (c) sales from the sale, lease, rental, or licensing of real property are in California if the real property is located in California, and (d) sales from the rental, lease, or licensing of tangible personal property are in California if the property is located in California). Market assignment is a significant law change since it causes the sales to be assigned to the state where the customer is located, generally. Numerous examples are provided. (FTB Tax News Flash, 10/02/2014; Single Sales Factor and Assignment of Sales (Sales Factor), California Franchise Tax Board, 10/02/2014.)

California Personal Income Tax — Single sales factor and assignment of sales.
The California Franchise Tax Board has created a web page that provides guidance to taxpayers in connection with the passage of Proposition 39 in November 2012 and its requirement that most businesses use a single sales factor to apportion business income to California for tax years beginning on or after January 1, 2013, for personal income tax purposes. The topics discussed are: (1) who do the new laws affect (all taxpayers carrying on or doing business in and out of California or taxpayers who have income from California sources, including nonresident individual income taxpayers); (2) who has a filing requirement in California; (3) how is California income computed for taxpayers who do business inside and outside of California; (4) who must use the single-sales factor (for tax years beginning on or after January 1, 2013, all apportioning trade or businesses, except those that derive more than 50% of their gross receipts from qualified business activities (agricultural, extractive, savings and loan, and banking or financial) are required to use a single sales factor; (5) what are the rules for assigning to California sales of tangible personal property (sales of tangible personal property are in California if the property is delivered or shipped to a purchaser in California or the property is shipped from California to a state where the taxpayer is not taxable or the purchaser is the U.S. government); (6) what are the rules for assigning to California sales of other than tangible personal property (for tax years beginning on or after January 1, 2013, sales of other than tangible personal property are assigned for sales factor purposes using market assignment for all taxpayers required to apportion their income in accordance with the Uniform Division of Income for Tax Purposes Act (UDITPA) rules or within the special industry regulations under Cal. Code Regs. 18 § 25137-1 through Cal. Code Regs. 18 § 25137-14 ); and (7) what is market assignment (under market assignment, sales of other than tangible personal property are assigned to the California sales factor numerator if: (a) sales from services are in California to the extent the purchaser of the service received the benefit of the services in California, (b) sales from intangible property are in California to the extent the property is used in California (in the case of marketable securities, sales are in California if the customer is in California), (c) sales from the sale, lease, rental, or licensing of real property are in California if the real property is located in California, and (d) sales from the rental, lease, or licensing of tangible personal property are in California if the property is located in California). Market assignment is a significant law change since it causes the sales to be assigned to the state where the customer is located, generally. Numerous examples are provided. (FTB Tax News Flash, 10/02/2014; Single Sales Factor and Assignment of Sales (Sales Factor), California Franchise Tax Board, 10/02/2014.)

Florida Sales Tax Rates — County rates.
The Department of Revenue has updated its tax rate table containing current local sales tax rates. (Florida Sales and Use Tax Rates by County, Fla. Dept. Rev., 10/01/2014.)

Florida Sales Tax Rates — Local rate changes.
The Department of Revenue announced the following local rate changes: on October 1, 2014, the Hernando County local option tourist development tax increased to 5% (from 3%) and the Walton County local option tourist development tax decreased to 4% (from 4.5%). (History of Local Sales Tax and Current Rates, Fla. Dept. Rev., 10/01/2014.)

Florida Sales And Use Tax — County rates.
The Department of Revenue has updated its tax rate table containing current local sales tax rates. (Florida Sales and Use Tax Rates by County, Fla. Dept. Rev., 10/01/2014.)

Florida Sales And Use Tax — Local rate changes.
The Department of Revenue announced the following local rate changes: on October 1, 2014, the Hernando County local option tourist development tax increased to 5% (from 3%) and the Walton County local option tourist development tax decreased to 4% (from 4.5%). (History of Local Sales Tax and Current Rates, Fla. Dept. Rev., 10/01/2014.)

Minnesota Real Property — Valuation of gas pipeline distribution system.
In determining the value of a taxpayer’s gas pipeline distribution system located in Minnesota, the Commissioner could not include intangible personal property when determining what pipeline property was taxable personal property. Personal property is generally exempt from taxation in Minnesota, except for the personal property that is part of a pipeline system transporting or distributing gas. Minn. Stat. § 272.03, Subd. 2(5) is clear that only tangible personal property is subject to taxation. Because the tax court must consider every factor in its de novo determination of market value, the court is not bound by the methodological limitations imposed by Minn. Rule 8100, which establishes a framework for the Commissioner in determining the value of utility property for assessment purposes, if those limitations do not result in an accurate reflection of market value. Accordingly, the tax court agreed with the parties that the sales comparison approach was not appropriate for the taxpayer’s property, and instead used the income approach, using a direct capitalization method, and rejected the Commissioner’s discounted cash flow analysis. The tax court also utilized the cost approach in valuing the subject property, based on the cost of the system plant less accumulated depreciation, but rejected the taxpayer’s argument that its property suffered from external obsolescence. The court found that based on the evidence presented, the method of determining the unit value of the company and then adjusting for the Minnesota allocated value and the gross excludables most accurately reflects the market value of the taxpayer’s property. (Minnesota Energy Resources Corporation v. Commissioner of Revenue, Dkt. Nos. 8041; 8135; 8271; 8375; 8482, 09/29/2014.)

North Carolina Property Tax Rates — 2014-2015 county property tax rates.
The North Carolina Department of Revenue has released the 2014-2015 property tax rates and revaluation schedules for North Carolina counties. The county tax rates range from $0.2790 to $1.0300; rate is per $100 valuation. (2014-2015 Property Tax Rates and Revaluation Schedules for North Carolina Counties, N.C. Dept. Rev., 10/01/2014.)

North Carolina Corporate Income Tax — Renewable energy property credit in North Carolina.
The North Carolina Department of Revenue has issued guidelines for determining the tax credit for investing in renewable energy property. The document describes the North Carolina tax credit for investing in renewable energy property taken against the franchise, corporate income, personal income, or insurance premiums tax. In addition, the document explains the provisions pertaining to the credit for donating funds to a nonprofit organization or unit of state or local government to enable the nonprofit or government unit to acquire renewable energy property taken against corporate, franchise, or personal income tax. This document provides background information, explains the various provisions of the tax credits, provides definitions for key terms, includes a chart of the ceiling limits for the different kinds of renewable energy property, and identifies the expenditures that are eligible and ineligible for the tax credit for each kind of technology. This document includes legislative changes enacted as of August 20, 2014. (Guidelines for Determining the Tax Credit for Investing in Renewable Energy Property, N.C. Dept. Rev., 10/01/2014.)

North Carolina Credits and Incentives — Renewable energy property credit.
The North Carolina Department of Revenue has issued guidelines for determining the tax credit for investing in renewable energy property. The document describes the North Carolina tax credit for investing in renewable energy property taken against the franchise, corporate income, personal income, or insurance premiums tax. In addition, the document explains the provisions pertaining to the credit for donating funds to a nonprofit organization or unit of state or local government to enable the nonprofit or government unit to acquire renewable energy property taken against corporate, franchise, or personal income tax. This document provides background information, explains the various provisions of the tax credits, provides definitions for key terms, includes a chart of the ceiling limits for the different kinds of renewable energy property, and identifies the expenditures that are eligible and ineligible for the tax credit for each kind of technology. This document includes legislative changes enacted as of August 20, 2014. (Guidelines for Determining the Tax Credit for Investing in Renewable Energy Property, N.C. Dept. Rev., 10/01/2014.)

North Carolina Personal Income Tax — Renewable energy property credit.
The North Carolina Department of Revenue has issued guidelines for determining the tax credit for investing in renewable energy property. The document describes the North Carolina tax credit for investing in renewable energy property taken against the franchise, corporate income, personal income, or insurance premiums tax. In addition, the document explains the provisions pertaining to the credit for donating funds to a nonprofit organization or unit of state or local government to enable the nonprofit or government unit to acquire renewable energy property taken against corporate, franchise, or personal income tax. This document provides background information, explains the various provisions of the tax credits, provides definitions for key terms, includes a chart of the ceiling limits for the different kinds of renewable energy property, and identifies the expenditures that are eligible and ineligible for the tax credit for each kind of technology. This document includes legislative changes enacted as of August 20, 2014. (Guidelines for Determining the Tax Credit for Investing in Renewable Energy Property, N.C. Dept. Rev., 10/01/2014.)

North Carolina Real Property — 2014-2015 county property tax rates.
The North Carolina Department of Revenue has released the 2014-2015 property tax rates and revaluation schedules for North Carolina counties. The county tax rates range from $0.2790 to $1.0300; rate is per $100 valuation. (2014-2015 Property Tax Rates and Revaluation Schedules for North Carolina Counties, N.C. Dept. of Rev., 10/01/2014.)

North Carolina Sales And Use Tax — November Energy Star sales tax holiday.
The North Carolina Department of Revenue has issued an important notice to remind taxpayers that the sales and use tax holiday for Energy Star qualified products during the first weekend in November has been repealed. The following Energy Star qualified products sold between 12:01 a.m. on the first Friday of November and 11:59 p.m. the following Sunday are no longer exempt from sales and use tax: clothes washers; freezers and refrigerators; central air conditioners and room air conditioners; air-source heat pumps; ceiling fans; dehumidifiers; and programmable thermostats. Further, the Department reminds retailers that any retailer who by any character or public advertisement offers to absorb the sales and use tax or in any manner directly or indirectly advertises that the tax imposed is not considered an element in the price to the purchaser will be guilty of a Class 2 misdemeanor. (Important Notice: November Energy Star Sales Tax Holiday Repealed, N.C. Dept. Rev., 10/01/2014.)

New Hampshire Business Tax Rates — Medicaid enhancement tax.
The New Hampshire Department of Revenue Administration has issued a technical information release to provide a synopsis of the recently enacted statutory changes pertaining to the Medicaid enhancement tax. The tax rate is 5.5% for the current taxable period ending June 30, 2015. The rate is scheduled to be reduced to 5.45% for the taxable period ending June 30, 2016 and further reduced to 5.4% for the taxable period ending June 30, 2017. For taxable periods ending June 30, 2018 and beyond, the tax rate will remain at 5.4% unless the total aggregate uncompensated care for hospitals with both a critical and noncritical designation falls below $375,000, at which point the tax rate will be reduced to 5.25%. ( New Hampshire Technical Information Release 2014-008, 10/02/2014 .)

New Hampshire Cigarette, Alcohol & Miscellaneous Taxes — Medicaid enhancement tax.
The New Hampshire Department of Revenue Administration has issued a technical information release to provide a synopsis of the recently enacted statutory changes pertaining to the Medicaid enhancement tax. The tax rate is 5.5% for the current taxable period ending June 30, 2015. The rate is scheduled to be reduced to 5.45% for the taxable period ending June 30, 2016 and further reduced to 5.4% for the taxable period ending June 30, 2017. For taxable periods ending June 30, 2018 and beyond, the tax rate will remain at 5.4% unless the total aggregate uncompensated care for hospitals with both a critical and noncritical designation falls below $375,000, at which point the tax rate will be reduced to 5.25%. ( New Hampshire Technical Information Release 2014-008, 10/02/2014 .)

New Jersey Estate & Gift, Inheritance, And Transfer — Refund properly denied.
The New Jersey Tax Court (Court) has ruled that a refund claim for estate taxes paid was properly denied because the refund claim was filed more than three years after the tax was paid. The estate had submitted a payment of $80,000 on August 16, 2007 but did not file a tax return until November 29, 2010. A refund of $1,371 was requested with the return. In 2012, after the estate failed to supply the Division of Taxation with requested information to support the valuations reported on the return, the Division issued a Notice of Assessment that showed that the estate owed additional tax of $51,844. The estate responded by submitting the requested information and the Division issued a new Notice of Assessment that showed the tax that should have been assessed to the estate was $77,277 and that there was a tax overpayment of $2,723. The Division refused to refund the tax to the estate because under N.J. Rev. Stat. § 54:38-3 and N.J. Admin. Code § 18:26-3A.12(a) , a refund claim must be filed within three years of the tax being paid. The Court ruled that the Division properly denied the refund claim and that issuing a new assessment did not extend the statute of limitations for refunds. (Estate of Michael Chiuccarello v. Director, Division of Taxation, N.J. Tax Ct., Dkt. No. 007010-2013, 10/01/2014 (not for publication).)

New Jersey Cigarette, Alcohol & Miscellaneous Taxes — Tax imposed on unstamped cigarettes.
The New Jersey Tax Court (Court) has ruled that the Division of Taxation (Division) properly assessed cigarette tax and use tax on a resident’s purchases of unstamped cigarettes. Under federal law, every entity shipping cigarettes in interstate commerce is required to file a report with the Division that lists the names and addresses of persons to whom the cigarettes were shipped and the quantities of each brand of cigarettes that were shipped. The reports filed by the entity shipping the cigarettes showed that the resident purchaser had received 59 cartons of cigarettes. The Division based its assessments of cigarette and use tax on those reports and that evidence was bolstered by credit card statements that showed that the resident purchaser was billed for the cigarettes. The Court found the Division provided the evidence to support the assessments of cigarette and use tax and rejected the resident purchaser’s claim that she was a victim of identity theft and never received the cigarettes. (Jovanovic v. Director, Division of Taxation, N.J. Tax Ct., Dkt. No. 016785-2011, 09/23/2014 (not for publication).)

New Mexico Sales And Use Tax — Taxability of real estate marketing and construction transactions.
A New Mexico limited liability company (LLC) formed to market and sell single-family homes to the general public (realtor) and its affiliate, a New Mexico LLC formed to construct single-family homes (construction company), requested a ruling on the taxability of certain receipts. The realtor enters into a contract with a customer to sell the customer a particular model of home. Then the realtor will either: (1) enter into a contract with the construction company to construct the home for the realtor on the realtor’s lot; or (2) enter into a real property purchase agreement with the construction company to purchase a home constructed by the construction company on the construction company’s lot. The construction company engages in business in New Mexico by performing construction services in New Mexico and the related receipts meet the definition of gross receipts. Thus, the construction company’s receipts from performing construction services in New Mexico for a realtor are subject to gross receipts tax. When the construction company calculates the gross receipts tax from the sale of a home constructed on land that it owns, it may deduct the cost of the land pursuant to NMSA 1978 § 7-9-53 and N.M. Admin. Code § 3.2.211.9 . Because the realtor does not perform any construction services and is only in the business of selling the completed homes, its receipts from the sale of the home are deductible under NMSA 1978 § 7-9-53 . Even though the realtor’s receipts are deductible, it is required to report the receipts from sales of homes to its customers. ( New Mexico Taxation and Revenue Dept. Ruling 430-14-1, 07/25/2014 .)

Oregon Real Property — Cable television and Internet access services subject to central assessment.
The Oregon Supreme Court determined that the taxpayer that operated both cable television services and Internet access services was subject to central assessment for property tax purposes because both services qualified as “data transmission services.” Relying on text, context, and legislative history, the court concluded that the term “data transmission service” is defined as services that provide the means to send data from one computer or computer-like device to another across a transmission network as well as voice, video, text, or anything else in coded electronic form. In applying the term “data transmission service” to the taxpayer’s cable television and Internet access services, the court held that both services fall under the meaning of the term. Although the court noted that, at one time, these services operated quite differently, it reasoned that they now basically both consist of digital data transmissions over a cable network. Lastly, the court rejected the taxpayer’s argument that such an expansive reading of the statute would make many information-based industries subject to central assessment. (Comcast Corp. v. Dept. Rev., Or. S. Ct., Dkt. Nos. TC 4909; S059764, 10/02/2014.)

Pennsylvania Corporate Income Tax — Method of filing—Pennsylvania corporate partner return.
For all calendar years following a calendar year in which the preparer prepares 11 or more Directory of Corporate Partners Returns (Form PA-65 Corp), the third party preparer is required to electronically file all such PA Directory of Corporate Partners Returns and associated schedules (including Federal Form 1065 and Schedule K-1) and attachments. A third party preparer who is subject to this filing mandate must have tax software that is compatible with Department e-filing requirements, and once a third party preparer is subject to this filing mandate, the third party preparer must continue to be subject to the mandate regardless of how many PA Directory of Corporate Partners Returns he or she prepares during a calendar year. “Third party preparer” means any natural person, fiduciary, corporation or other entity who or that prepares for remuneration, or who employs one or more persons to prepare for remuneration, any return for a tax administered by the Department or is assigned a Preparer Tax Identification Number (PTIN) by the Internal Revenue Service. None of the following, however, are considered third party preparers for remuneration: (1) tax return preparers who voluntarily prepare the returns of others for no pecuniary benefit; (2) persons who merely provide mechanical assistance such as typing; (3) regular employees of an employer who prepare returns for other regular employees of the employer or the employer’s officers and regular employees; or (4) fiduciaries who prepare returns for the trusts or estates that they serve. A third party preparer who fails to adhere to the filing requirements is subject to a fine from $10 for each improperly filed return, however, the penalty may be waived if the taxpayer has specifically directed the third party preparer to file the report pursuant to a different filing method or the preparer’s tax software does not support e-filing of a required attachment to the report. (Notice: Method of Filing; PA Directory of Corporate Partners Return, PA-65 Corp, RCT-101, Pa. Bull. Doc. No. 14-2076. Pa. Bulletin Vol. 44, No. 40, 10/04/2014.)

Pennsylvania Special Local Taxes — Earned income tax—Scranton.
The Court of Common Pleas has struck down a local ordinance that would have imposed a local earned income tax that applied only to nonresident workers in the City of Scranton. Nothing in the statutes authorizing the City of Scranton give specific authority to levy a tax solely on nonresidents, and Pa. Cons. Stat. Ann. 53 § 2962 specifically prohibits a home rule municipality from establishing a tax on nonresidents that is higher than the amount of tax that would have been levied on residents but for the adoption of a home rule charter. (In re City of Scranton Ordinance No. 36 of 2014, Ct. of Common Pleas (Lackawanna County), Dkt. No. 2014 CIV 4799, 09/26/2014.)

South Carolina Real Property — Taxpayer not entitled to refund through equitable estoppel.
The administrative law judge (ALJ) reversed the county board of appeal’s determination that the taxpayer was entitled to a refund of taxes for tax years 2007, 2008, and 2009. In 2006 the taxpayer was assessed at 4%. As a result of an error during a county reassessment in 2007, the taxpayer was assessed at 6%, which continued through 2012. In June 2013, the taxpayer discovered the error and requested a refund of excess taxes paid at the higher rate. The county audit and review committee, agreed to refund excess taxes paid for the tax years 2010, 2011, and 2012, but for years prior to 2010, the committee found the refund to be barred by the statute of limitations. The taxpayer then appealed to the county review board, which granted the refund for 2007-2009, and the assessor appealed. On appeal, the taxpayer argued that the county should be equitably estopped from enforcing the statute of limitations because the county made the error of changing the assessment rate from 4% to 6%, along with changing the format of the property tax notice, which the taxpayer argued was confusing and difficult to read. The ALJ disagreed, finding that the taxpayer failed to establish the first prong in proving estoppel against the government, namely that the taxpayer did not have knowledge and did not have the means to obtain the knowledge of the truth of the facts in question. The ALJ found that the taxpayer had numerous opportunities on each of the tax property bills and reassessment notices to see that the ratio had changed and that the property was classified as “all other property” and not “owner occupied residential.” In addition, the taxpayer should have questioned the dramatic increase in the tax amount when the assessment ratio changed. Thus, the ALJ concluded that while the taxpayer did not have actual knowledge, he did have the means to obtain the knowledge of the change of his assessment rate, therefore the taxpayer was not entitled to the refund. (Aiken Co. Assessor v. Marvin, S.C. Admin. Law Ct., Dkt. No. 14-ALJ-17-0194-CC, 10/02/2014.)

Virginia Corporate Income Tax — Virginia land preservation tax credits—extension of time.
A protective claim was allowed to toll the running of the 5-year Land Preservation Tax Credit (LPTC) carry over period until the final resolution of a dispute relating to the underlying conservation easement appraisals and denial of the LPTC. The taxpayer timely filed an appeal of the determination pursuant to Va. Code Ann. § 58.1-1821 and the matter remains in dispute. The 5-year carry over period within which the taxpayer may use or transfer its LPTC was tolled upon its December 12, 2011 submission of a protective claim. Based on that, the taxpayer is granted until one year from the final resolution of the appeal or until the expiration of the statute of limitations, whichever is later, to transfer the LPTCs that it retained upon learning of the contested valuation. Further, the known and unknown transferees will have until one year from the final resolution of the appeal or until the expiration of the statute of limitations, whichever is later, to file amended returns for Taxable Year 2011 claiming credits transferred from the taxpayer. ( Virginia Public Document Ruling 14-170, 09/12/2014 .)

Virginia Credits and Incentives — Land preservation tax credits—extension of time.
A protective claim was allowed to toll the running of the 5-year Land Preservation Tax Credit (LPTC) carry over period until the final resolution of a dispute relating to the underlying conservation easement appraisals and denial of the LPTC. The taxpayer timely filed an appeal of the determination pursuant to Va. Code Ann. § 58.1-1821 and the matter remains in dispute. The 5-year carry over period within which the taxpayer may use or transfer its LPTC was tolled upon its December 12, 2011 submission of a protective claim. Based on that, the taxpayer is granted until one year from the final resolution of the appeal or until the expiration of the statute of limitations, whichever is later, to transfer the LPTCs that it retained upon learning of the contested valuation. Further, the known and unknown transferees will have until one year from the final resolution of the appeal or until the expiration of the statute of limitations, whichever is later, to file amended returns for Taxable Year 2011 claiming credits transferred from the taxpayer. ( Virginia Public Document Ruling 14-170, 09/12/2014 .)

Virginia General Administrative Provisions — Virginia 2014 fourth quarter interest rates.
The Virginia interest rates for the fourth quarter (October 1 through December 31) of 2014 will remain at 5% for tax underpayments and 5% for tax overpayments. Virginia interest rates are 2% higher than the corresponding 3% federal rates established in IRC § 6621 . For assessments for which administrative appeal was filed on or after July 1, 2011, a reduced rate applies. Interest begins accruing at the standard underpayment rate until nine months from the date of assessment but from nine months after the date of assessment until a determination is issued, interest accrues at the lower federal short-term rate established in to IRC § 6621(b). The IRC § 6621 federal short-term rate for the fourth quarter of 2014, rounded to the nearest whole percent, is 0%. Accordingly, the Virginia reduced rate for the fourth quarter of 2014 for qualifying assessments in dispute is 0%. ( Virginia Public Document Ruling 14-171, 09/23/2014 ; Virginia Tax Bulletin 14-6, 09/23/2014 .)

Virginia Personal Income Tax — Land preservation tax credits—extension of time.
A protective claim was allowed to toll the running of the 5-year Land Preservation Tax Credit (LPTC) carry over period until the final resolution of a dispute relating to the underlying conservation easement appraisals and denial of the LPTC. The taxpayer timely filed an appeal of the determination pursuant to Va. Code Ann. § 58.1-1821 and the matter remains in dispute. The 5-year carry over period within which the taxpayer may use or transfer its LPTC was tolled upon its December 12, 2011 submission of a protective claim. Based on that, the taxpayer is granted until one year from the final resolution of the appeal or until the expiration of the statute of limitations, whichever is later, to transfer the LPTCs that it retained upon learning of the contested valuation. Further, the known and unknown transferees will have until one year from the final resolution of the appeal or until the expiration of the statute of limitations, whichever is later, to file amended returns for Taxable Year 2011 claiming credits transferred from the taxpayer. ( Virginia Public Document Ruling 14-170, 09/12/2014 .)

Virginia Personal Income Tax — Erroneous adjustments to income.
Assessments for an audited increase in Schedule C income from a single member limited liability company (VALLC) attributed to alleged withdrawals in inventory and adjustments to business deductions were erroneous because the assessment was based on the wrong assumption that VALLC was related to another limited liability company (SALLC). The auditor combined SALLC’s Virginia sales with the receipts of VALLC and also concluded that some products were withdrawn from inventory instead of being sold and reduced VALLC’s cost of goods sold. Documentation showed that the two entities although managed by the same individual were separate legal entities and so the adjustments to attribute SALLC’s sales to VALLC cannot be sustained. Further, evidence shows that pianos were not withdrawn from inventory. Accordingly, the adjustments to reduce cost of goods sold for the taxable years at issue were also reversed. ( Virginia Public Document Ruling 14-166, 09/09/2014 .)

Virginia Personal Income Tax — Carryover of prepaid tuition deduction.
A taxpayer who failed to claim the full amount of the prepaid tuition deduction in 2008 and 2009 to which he was entitled could not carry the under claimed deduction amounts forward to 2010. The taxpayer had a total of $6,000 tuition payments but only claimed $4,000 in each year, and instead of amending his returns, he attempted to carryover the unclaimed amounts on his 2010 return. A carryover occurs when the amount of a taxpayer’s eligible deduction or subtraction exceeds the annual limitation or the taxpayer is unable to use the full amount of tax credit because his or her tax liability is less than the credit. In such cases, taxpayers may only carryover the amount that exceeds the annual limitation or tax liability. Deductions and subtractions allowable in computing income and credits against a tax liability are legislative grants and must be strictly construed against the taxpayer and in favor of the taxing authority. ( Virginia Public Document Ruling 14-167, 09/10/2014 .)

Virginia Sales And Use Tax — Sales by unrelated entity.
Assessments against a taxpayer, a Virginia business, for pianos sold to Virginia customers without the Virginia retail sales and use tax being charged made, were abated in full. The untaxed piano sales were actually made by a Maryland company, a store that is unrelated to the taxpayer, but which provides management and sales services to the taxpayer. Because ownership of the taxpayer and the Maryland company is not held by the same persons and the taxpayer and the Maryland company are separate entities, the taxpayer cannot be held liable for the tax assessed in the audit on sales made by the Maryland company. ( Virginia Public Document Ruling 14-164, 09/09/2014 .)

Virginia Sales And Use Tax — No related business activity.
Assessments against the taxpayer, a Maryland business, for pianos sold to Virginia customers without the Virginia retail sales and use tax being charged made, were abated in full. The assessments were made on the assumption that the taxpayer’s store was affiliated with a Virginia store of the same name, and that sales were moved between the two stores. There was no evidence that during the audit period the taxpayer and the Virginia company were affiliated entities, owned and operated by like owners or anything to suggest that the taxpayer and the Virginia company were the same legal entity. Although the taxpayer is considered a dealer pursuant to Va. Code Ann. § 58.1-612(B) , none of the criteria in Va. Code Ann. § 58.1-612(C) have been met that would lead to a finding that the taxpayer had sufficient activity with Virginia that would have required the taxpayer to be registered for the collection and remittance of the Virginia retail sales and use tax. ( Virginia Public Document Ruling 14-165, 09/09/2014 .)

Virginia Sales And Use Tax — Virginia manufacturing exemption.
The taxpayer was entitled to the manufacturing exemption for certain purchases of equipment to upgrade its manufacturing plant. The compressed air system and bulk gases that will be used to power equipment used directly in the manufacturing process were exempt; improvements to provide bulk gases directly to welding stations were exempt because the gases were used directly in the manufacturing process. The computer controlled machining center to control machinery used directly in the industrial manufacturing process was exempt, and the machining center foundation required for the machining center to reach the tolerances necessary for the manufacturing process by preventing jarring by equipment and ground vibrations was also exempt. The manufacturing exemption also applied to the transformers and electrical distribution equipment purchased for the general expansion of the plant because 87% of the power handled by the transformer and other electrical distribution equipment was distributed to production machinery. ( Virginia Public Document Ruling 14-172, 09/24/2014 .)

Vermont Sales And Use Tax — Taxability matrix revised.
The Vermont Department of Taxes has revised its Streamlined Sales and Use Tax (SST) Taxability Matrix. Under “Prepared Food” two categories have been moved from “Included in Prepared Food” to “Excluded from Prepared Food”: (1) food sold without eating utensils provided by a seller whose primary NAICS classification is manufacturing (bakeries); and (2) food sold without eating utensils provided by the seller in an unheated state by weight or volume as a single item. Other changes include moving grooming and hygiene products for animal use from exempt to taxable; and a statutory reference was added to the cites for directory assistance. (Revised Vermont State Taxability Matrix, 10/01/2014.)

Washington Sales Tax Rates — City of Marysville—Transportation Benefit District.
The Washington State Department of Revenue reminds taxpayers of an increase in the City of Marysville’s sales and use tax rate by 0.002, making the city’s local sales use tax rate 0.023. The city established a Transportation Benefit District effective October 1, 2014. The tax will be used for transportation services. Businesses must collect the appropriate new rate of sales tax for retail sales and services provided within the city. Persons or businesses within the city will be subject to the new tax rate for reporting use tax on items purchased for their personal or business use if sales tax has not been paid. (City of Marysville—Transportation Benefit District Rate Change, Wash. Dept. Rev., effective 10/01/2014.)

Washington Sales Tax Rates — Skagit County—Public Transportation Benefit Area boundary change.
The Washington State Department of Revenue reminds taxpayers that due to a boundary change in the Skagit County Public Transportation Benefit Area (PTBA), effective October 1, 2014, businesses or persons within a portion of Unincorporated Skagit County that reported to location code number 2900 now report to the Unincorporated Areas PTBA with location number 2929. Such businesses must collect the appropriate new rate of sales tax which is 0.020 for retail sales and services provided within this area. Persons or business within this area will be subject to the new rate of use tax on items purchased for their personal or business use if sales tax has not been paid. Contact the Department at 1-800-647-7706 to obtain the new boundary and the proper codes and rates of local sales tax. (Skagit County—Public Transportation Benefit Area Boundary Change, Wash. Dept. Rev., effective 10/01/2014.)

Washington Sales And Use Tax — City of Marysville—Transportation Benefit District.
The Washington State Department of Revenue reminds taxpayers of an increase in the City of Marysville’s sales and use tax rate by 0.002, making the city’s local sales use tax rate 0.023. The city established a Transportation Benefit District effective October 1, 2014. The tax will be used for transportation services. Businesses must collect the appropriate new rate of sales tax for retail sales and services provided within the city. Persons or businesses within the city will be subject to the new tax rate for reporting use tax on items purchased for their personal or business use if sales tax has not been paid. (City of Marysville—Transportation Benefit District Rate Change, Wash. Dept. Rev., effective 10/01/2014.)

Washington Sales And Use Tax — Skagit County—Public Transportation Benefit Area boundary change.
The Washington State Department of Revenue reminds taxpayers that due to a boundary change in the Skagit County Public Transportation Benefit Area (PTBA), effective October 1, 2014, businesses or persons within a portion of Unincorporated Skagit County that reported to location code number 2900 now report to the Unincorporated Areas PTBA with location number 2929. Such businesses must collect the appropriate new rate of sales tax which is 0.020 for retail sales and services provided within this area. Persons or business within this area will be subject to the new rate of use tax on items purchased for their personal or business use if sales tax has not been paid. Contact the Department at 1-800-647-7706 to obtain the new boundary and the proper codes and rates of local sales tax. (Skagit County—Public Transportation Benefit Area Boundary Change, Wash. Dept. Rev., effective 10/01/2014.)

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