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

State & Local Tax Updates: California Corporate Tax; Idaho Corporate Income Tax; and Michigan Real Property Tax

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 Cigarettes, Tobacco and Miscellaneous Tax Rates — Underground storage tank maintenance fee increase.
The State Board of Equalization (SBE) has issued a reminder to taxpayers that the fee for petroleum products placed into underground storage tanks will increase from 14 mil ($0.014) to $0.02 per gallon, effective January 1, 2015, until January 1, 2026. ( California SBE Information Publication 388, 12/01/2014 .)

California Corporate Income Tax — Extensions for earthquake victims.
The Franchise Tax Board has announced that it will follow the federal tax relief provided for taxpayers impacted by the August 2014, South Napa earthquake. Taxpayers with returns, payments or other time sensitive actions due between August 24, 2014 and January 15, 2015 will receive an automatic postponement until January 15, 2015. In addition, disaster victims are permitted to claim disaster losses either in the tax year in which the disaster occurred or on the prior year return. Taxpayers whose state tax returns have been lost or damaged may receive free return copies by filing Form FTB 3516 (Request for Copy of Tax Return) and writing NAPA EARTHQUAKE 2014 at the top of the form. ( California FTB News Release 10/30/2014, 10/30/2014 .)

California Corporate Income Tax — “Ask a Legal Expert” Program.
The California Franchise Tax Board has established the “Ask a Legal Expert” Program (Program), which allows taxpayers or their representative to submit legal questions directly to a specific Legal Division Bureau and provides assigned staff with an avenue to directly respond to basic legal questions quickly and informally. The Program is for basic legal questions and submitted questions should not pertain to matters that are under audit, at protest, on appeal, in settlement, or in litigation. Any inquiry submitted must follow certain guidelines. For example, requests to explain, interpret, or apply new law must describe the new law or authority and clearly state the question, and technical tax questions must, among other things, clearly describe the issues, provide a complete material facts statement, and identify the relevant statutes or materials that prompted the inquiry. Questions are directed by an email link to the following tax bureaus: (1) the Business Entity Tax Bureau (BETB), which handles personal income and corporation tax law provisions that pertain to businesses and taxation of pass-through entities (other than those that involve apportionment and administration); common subject matters handled by the BETB include: pass-through entities (partnerships, LLCs, S corporations); tax shelters; corporate reorganizations and liquidations; insurance company taxation; and qualified S corporation subsidiaries; (2) the Multistate Tax Bureau (MTB), which administers and enforces the corporation tax law pertaining to the unitary business concept and the apportionment and allocation of income of multijurisdictional businesses; common subject matters handled by the MTB include: unitary business, combined reporting issues, sales factor, doing business/nexus; (3) the Tax Administration and Procedures (TAP) Bureau—common subject matters handled by the TAP Bureau include the statute of limitations, federal determinations, California source income of individuals, tribal taxation, and penalty and interest computation and abatement; and (4) the Technical Resources Bureau (TRB)—common subject matters handled by the TRB include legislation, regulations, rulings, and federal conformity. (Ask a Legal Expert, California Franchise Tax Board, 10/28/2014.)

California General Administrative Provisions — SBE online services.
The California State Board of Equalization (SBE) has issued Publication 439, Online Services, which provides taxpayers with information on the online services available to them. Taxpayers can use the SBE’s online system to register for a permit, license, or account and can also file returns and make payments for the following types of accounts: sales and use tax, motor fuels, IFTA, and cigarette tax. The online system offers taxpayers multiple payment options including payment from a bank account, through electronic funds transfer, or by credit card. Other online services available to taxpayers include: verifying permits and licenses, requesting relief or a payment plan, finding tax and fee rates, accessing previously filed returns, and reviewing taxpayers’ payment history. ( California SBE Information Publication 439, 09/14/2014 .)

California General Administrative Provisions — SBE’s Van Nuys District Office moving.
The California State Board of Equalization (SBE) has announced that its Van Nuys District Office, currently located at 15350 Sherman Way, Suite 250, Van Nuys, CA 91406-4203, will be moving to a new location in Glendale: 505 North Brand Boulevard, Suite 700, Glendale, CA 91203-3946. The move will occur by the end of 2014 and the SBE will post a special notice on its website when the Glendale office opens. ( California SBE Information Publication 388, 12/01/2014 .)

California General Administrative Provisions — Disaster relief for wildfire, Napa earthquake victims.
The State Board of Equalization (SBE) has issued a reminder that California Emergency tax relief is available for business owners and feepayers directly affected by the Napa earthquake and the wildfires in Amador, Butte, El Dorado, Humboldt, Lassen, Madera, Mariposa, Mendocino, Modoc, Shasta, and Siskiyou counties. Tax relief may include extending return filing dates, relieving penalties and interest, or replacing copies of records lost to fire damage. Relief from interest and penalties may be provided for those who, because of the wildfires or earthquake, are unable to file their returns and pay taxes and fees when due. To request a filing extension or relief from interest and penalties, taxpayers are instructed to visit the SBE’s relief request webpage (www.boe.ca.gov/elecsrv/esrvcont.htm#Request_Relief). Individuals and/or businesses with taxable property damaged or destroyed by the wildfires or by the Napa earthquake may be eligible for property tax relief. However, since property tax is collected at the county level, taxpayer questions regarding specific property, claims for property tax relief, and applications for reduced assessment should be directed to the respective county. ( California SBE Information Publication 388, 12/01/2014 .)

California General Administrative Provisions — Managed Audit Program expanded.
The State Board of Equalization (SBE) has issued a reminder that, beginning January 1, 2015, in addition to seller’s permit holders, special tax and fee program account holders may be eligible for the managed audit program (MAP) which allows some businesses to conduct a type of “self-audit” with instructions and guidance from an SBE auditor. Once a business is selected for an audit, the auditor will evaluate whether the business is a candidate for a managed audit. Participation in a managed audit is voluntary and if the auditor determines that the business qualifies for a managed audit, the auditor will discuss the MAP with the taxpayer during the entrance conference. A taxpayer’s account will be eligible to participate in the program if: (1) the taxpayer’s business involves few or no statutory exemptions; (2) the taxpayer’s business involves a single or a small number of clearly defined taxability issues; (3) the taxpayer is subject to a qualifying tax and agrees to participate in the program; and (4) the taxpayer has the resources to comply with the managed audit instructions provided by SBE. Taxpayers who complete a MAP and owe additional taxes or fees will pay interest on that liability at one-half the rate that would otherwise apply. ( California SBE Information Publication 388, 12/01/2014 .)

California Cigarette, Alcohol & Miscellaneous Taxes — Underground storage tank maintenance fee increase.
The State Board of Equalization (SBE) has issued a reminder to taxpayers that the fee for petroleum products placed into underground storage tanks will increase from 14 mil ($0.014) to $0.02 per gallon, effective January 1, 2015, until January 1, 2026. ( California SBE Information Publication 388, 12/01/2014 .)

California Cigarette, Alcohol & Miscellaneous Taxes — Cigarette and tobacco products licensing program.
The California State Board of Equalization (SBE) is inviting cigarette and tobacco products stakeholders to a meeting on November 13, 2014, to hear their suggestions for new or alternative methods to supplement the funding for the Cigarette and Tobacco Licensing Program (Licensing Program). For fiscal year 2013–14, revenues for the Cigarette and License Act Compliance Fund were $1.8 million and the costs of the Licensing Program during the same period exceeded those revenues by $8.1 million. Suggestions from stakeholders may include a legislative proposal, a regulatory change, or a different approach to increase the revenues generated for the Licensing Program on an annual basis. On or before April 1, 2015, the SBE will submit a report to the Legislature describing at least three alternative approaches for future funding of the Licensing Program. Stakeholders planning to attend the November 13, 2014, meeting are asked to confirm their attendance by contacting Ms. Laurel Smith at Laurel.Smith@boe.ca.gov or by telephone at 1-916-322-3211, by November 7, 2014. Stakeholders who are unable to attend but would like to submit a proposal or comment in writing should email their suggestions to Ms. Smith by December 1, 2014. ( California SBE Special Tax Notice L-392, 10/01/2014 .)

California Personal Income Tax — Extensions for earthquake victims.
The Franchise Tax Board has announced that it will follow the federal tax relief provided for taxpayers impacted by the August 2014, South Napa earthquake. Taxpayers with returns, payments or other time sensitive actions due between August 24, 2014 and January 15, 2015 will receive an automatic postponement until January 15, 2015. In addition, disaster victims are permitted to claim disaster losses either in the tax year in which the disaster occurred or on the prior year return. Taxpayers whose state tax returns have been lost or damaged may receive free return copies by filing Form FTB 3516 (Request for Copy of Tax Return) and writing NAPA EARTHQUAKE 2014 at the top of the form. ( California FTB News Release 10/30/2014, 10/30/2014 .)

California Personal Income Tax — “Ask a Legal Expert” Program.
The California Franchise Tax Board has established the “Ask a Legal Expert” Program (Program), which allows taxpayers or their representative to submit legal questions directly to a specific Legal Division Bureau and provides assigned staff with an avenue to directly respond to basic legal questions quickly and informally. The Program is for basic legal questions and submitted questions should not pertain to matters that are under audit, at protest, on appeal, in settlement, or in litigation. Any inquiry submitted must follow certain guidelines. For example, requests to explain, interpret, or apply new law must describe the new law or authority and clearly state the question, and technical tax questions must, among other things, clearly describe the issues, provide a complete material facts statement, and identify the relevant statutes or materials that prompted the inquiry. Questions are directed by an email link to the following tax bureaus: (1) the Business Entity Tax Bureau (BETB), which handles personal income and corporation tax law provisions that pertain to businesses and taxation of pass-through entities (other than those that involve apportionment and administration); common subject matters handled by the BETB include: pass-through entities (partnerships, LLCs, S corporations); tax shelters; corporate reorganizations and liquidations; insurance company taxation; and qualified S corporation subsidiaries; (2) the General Tax Bureau (GTB), which administers and enforces the personal income tax provisions that pertain to individuals and pass-through entities; common subject matters handled by the GTB include casualty losses, net operating and disaster losses, tax credits (research, new employee, other state tax), income exclusions and deductions, and like-kind exchanges; (3) the Tax Administration and Procedures (TAP) Bureau—common subject matters handled by the TAP Bureau include the statute of limitations, federal determinations, California source income of individuals, tribal taxation, and penalty and interest computation and abatement; and (4) the Technical Resources Bureau (TRB)—common subject matters handled by the TRB include legislation, regulations, rulings, and federal conformity. (Ask a Legal Expert, California Franchise Tax Board, 10/28/2014.)

California Real Property — Oil and gas wells subject to supplemental assessment.
In a tax refund suit, the California Court of Appeal has held that supplemental assessments of new construction consisting of the drilling, development and completion of oil and gas wells and related improvements and facilities on various oil and gas properties operated by Chevron USA, Inc. (Chevron) made by the Kern County Assessor and upheld by the Kern County Assessment Appeals Board (Board) were proper, reversing the trial court’s determination that the Board had used the wrong valuation method. The County of Kern appealed, arguing that Chevron does not have standing and that the Board did not act arbitrarily, abuse its discretion, or violate the law when it approved the valuation method the Assessor used (the cost method). Chevron has standing to pursue the refund action because it paid the taxes at issue, even though its parent’s name appeared on the checks (the parent was the conduit for Chevron’s tax payments). On the valuation method question, the issue before the court was whether the cost approach used to value the new wells, which the Board approved, was arbitrary, an abuse of discretion, or in violation of law. To establish valuation principles for oil and gas properties in light of Proposition 13, the State Board of Equalization adopted Rule 468, Cal. Code Regs. 18 § 468 . While the base year value of nonpetroleum interests is fixed, under Proposition 13 and Rule 468, the base year value is reestablished if there is new construction. The drilling and deepening of wells constitutes new construction. The use of the cost method was not unreasonable or a violation. Instead, its use was consistent with the statutes and rules. The Assessor valued the new wells as of the date of completion; assessed only the value of each well, not the mineral rights; and added the new base year value to the base year value of the nonpetroleum interests. Chevron’s contention that the Assessor’s valuation method is incompatible with Rule 468, which requires the use of the income approach to determine the fair market value of the oil and gas property, was rejected. The Assessor’s use of the cost method was reasonable, and the court had no choice but to accept the Board’s decision. Also, the court rejected Chevron’s contention that the replacement wells qualified under the “normal maintenance and repair” exemption to supplemental assessments in Rule 468. The replacement wells are not alterations to existing improvements that can be considered repairs or maintenance; instead, they are entirely new wells. (Chevron USA, Inc., et al. v. County of Kern, Cal. Ct. App., Dkt. No. F066273, 10/28/2014.)

California Sales And Use Tax — Taxable food sales by food truck operators in California.
The State Board of Equalization (SBE) has issued a reminder to taxpayers that, after June 30, 2014, taxable sales made by mobile food vendors such as food truck operators are presumed to include tax, unless a separate sales tax amount is added to the charged price. This presumption does not apply when mobile food vendors make sales as caterers hired by a private party to provide food and/or drink on the customer’s premises or on premises supplied by the customer. This change allows vendors to charge the same tax-included price for each menu item no matter where they are without additional signage, eliminating the need to recalculate sales tax at each stop where the tax rate changes. When filing a return, it will then be necessary to calculate and report tax-included sales for each sales location. The SBE cautions that vendors will still need to calculate and report tax at the proper rate of the various locations of their sales. Vendors can find the list of current tax rates on the SBE website at www.boe.ca.gov. ( California SBE Information Publication 388, 12/01/2014 .)

California Sales And Use Tax — Buying and selling dogs, cats, and other nonfood animals.
The California State Board of Equalization has reissued Publication 122, Buying and Selling Dogs, Cats, and Other Nonfood Animals, without making any substantive changes to it. The Publication is designed to help interested parties understand how sales and use tax applies on sales or purchases of dogs, cats, and other nonfood animals. ( California SBE Information Publication 122, 11/01/2014 .)

Idaho Corporate Income Tax — Tax on receipts from Internet access services to Idaho customers.
A taxpayer company that provided cable television and Internet service in Idaho and 18 other states was subject to Idaho corporation income tax on its revenue from providing Internet access and other services to Idaho customers, even though the taxpayer could not provide Internet access to its Idaho customers without the use of the facilities located at its headquarters in Phoenix, Arizona. The taxpayer’s income-producing activities occurring or located in Idaho were having employees and offices in Idaho, and using the local backbone services provided by companies it contracted with to provide the Internet services to its Idaho customers. Those local backbone services included local service fiber optic connections from the local Idaho head end to the other company’s local facility and a connecting port at the other company’s local facility. Additionally, 68% of taxpayer’s costs in providing Internet service to its Idaho customers were incurred in performing income-producing activities in Idaho. Accordingly, the taxpayer’s sales of Internet services to Idaho customers were sales in Idaho and taxable there. (Cable One, Inc. v. Idaho State Tax Commission, Idaho S. Ct., Dkt. No. 41305-2013, 10/29/2014.)

Indiana Corporate Income Tax — Indiana state and county withholding—incentive plan.
The taxpayer, a bank, is subject to state income tax withholding on the incentive awards paid to an employee, however, the taxpayer is not subject to county income tax withholding on the incentive awards payments. In this instance, the taxpayer will pay incentive awards for the years 2010 through 2013 to a retired employee with an established domicile outside of Indiana prior to January 1, 2014; the incentive award payments will be paid to the employee beginning in 2014 and ending in 2017. The employee’s qualification for the incentive awards are the result of the employee’s labor within Indiana, therefore, the awards are Indiana-source income and the taxpayer is required to withhold state income taxes on the award payments. However, because the employee’s residency and principal place of business or employment is in Florida on January 1 of each of the years in question, the employee is not a resident of an Indiana county and is not subject to county income tax. Accordingly, the taxpayer is not subject to county tax withholding on the award payments. ( Indiana Revenue Ruling IT 14-02, 10/01/2014 .)

Indiana Personal Income Tax — State and county withholding—incentive plan.
The taxpayer, a bank, is subject to state income tax withholding on the incentive awards paid to an employee, however, the taxpayer is not subject to county income tax withholding on the incentive awards payments. In this instance, the taxpayer will pay incentive awards for the years 2010 through 2013 to a retired employee with an established domicile outside of Indiana prior to January 1, 2014; the incentive award payments will be paid to the employee beginning in 2014 and ending in 2017. The employee’s qualification for the incentive awards are the result of the employee’s labor within Indiana, therefore, the awards are Indiana-source income and the taxpayer is required to withhold state income taxes on the award payments. However, because the employee’s residency and principal place of business or employment is in Florida on January 1 of each of the years in question, the employee is not a resident of an Indiana county and is not subject to county income tax. Accordingly, the taxpayer is not subject to county tax withholding on the award payments. ( Indiana Revenue Ruling IT 14-02, 10/01/2014 .)

Indiana Sales And Use Tax — Hostessing discount not subject to tax.
A taxpayer’s gross retail income with respect to sales of products to hostesses is the amount paid by the hostesses after any discount and not the listed price of the products prior to the discount. The taxpayer sells its products through a network of independent sales consultants who solicit sales and facilitate orders; the taxpayer generates the majority of its revenue through its consultants’ sales activities, which include soliciting hostesses (third-party sales organizers) to arrange events, at non-public settings. In return for hosting the events, hostesses may receive discounts on purchases of certain products. Pursuant to Ind. Code § 6-2.5-1-5(b)(3) , Indiana excludes from the definition of “gross retail income” charges attributable to discounts that are not reimbursed by a third party and that are allowed by a seller and taken by a purchaser on a sale. In this instance, the taxpayer is receiving only the amount actually paid for the products by the hostesses; accordingly, the taxpayer’s gross retail income from the sales of products to the hostesses is the amount actually paid by the hostesses. The discount from the listed price of the products is not subject to Indiana sales tax. ( Indiana Revenue Ruling ST 14-02, 09/22/2014 .)

Michigan Real Property — Changes for 2015 assessment year.
The Michigan State Tax Commission has issued a release outlining various statutory or procedural changes for the 2015 assessment year. Topics covered include: the inflation rate used in the 2015 capped value formula; federal poverty guidelines used in determining poverty exemptions for 2015; multipliers for the valuation of free-standing communication towers; property classification; sales studies; statutory changes; and the disabled veterans exemption. ( Michigan State Tax Commission Bulletin 2014-14, 10/13/2014 .)

Michigan Sales And Use Tax — Audit method used was proper.
The audit method used by the Department of Treasury’s auditor to compute the amount of sales tax the taxpayer owed on its merchandise and prepared food sales was appropriate and based on the auditor’s assessment of the best information, given the taxpayer’s failure to provide adequate records. The auditor explained that the sales tax on prepared food was charged because the prepared food was not sold by weight, which would have been nontaxable. The auditor assumed all prepared food was taxable because the taxpayer’s manager told him that prepared food was not sold by weight and there was no information that it was sold by weight,. The auditor explained that the method of determining merchandise sales was finding the ratio of merchandise sales to fuel sales for the two weeks that sales data was available and calculating the merchandise sales for the rest of the audit period by using this ratio times the known fuel purchases from the vendors. Given the limited evidence provided by the taxpayer, the auditor’s method complied with the statutory scheme. Also, the taxpayer did not present a witness to provide evidence to establish that its merchandise sales were less than those determined by the Department and the taxpayer did not offer any evidence that the assessment method was actually inaccurate. (BF Enterprises, Inc. v. Department of Treasury, Mich. Ct. App., Dkt. No. 317278, 10/28/2014 (unpublished).)

Minnesota Cigarette, Alcohol & Miscellaneous Taxes — License requirements for cigarette retailers.
The Minnesota Department of Revenue has issued a release that summarizes the requirements for obtaining a cigarette and tobacco products retailer’s license and the responsibilities of a license holder. Retailer sellers of cigarettes and tobacco products in Minnesota must have a Minnesota cigarette and tobacco product retailer’s license before purchasing or selling cigarettes or tobacco products. A separate license is required for each location or vending machine from which cigarettes or tobacco products are sold at retail. Licenses are administered by the city, county, or town in which the business is located. The release discusses the responsibilities of license holders, including license display, recordkeeping, the requirement to purchase inventory only from a licensed Minnesota cigarette and/or tobacco distributor or subjobber, sales to minors, and inspections. The release also discusses the Minnesota Unfair Cigarette Sales Tax (USCA), definitions, penalties, and the presumption that cigarettes are kept or held illegally whenever a package is found in the place of business or in the possession of any person without a proper stamp affixed. (Cigarette and Tobacco Products Taxes Fact Sheet 2, Minn. Dept. of Rev., 10/01/2014.)

Montana Credits and Incentives — Property tax classification and assistance programs regulations.
The Montana Department of Revenue has amended ARM 42.19.401, 42.19.406, and 42.19.1211 pertaining to property classification and property tax assistance programs, effective November 7, 2014. Specifically, section (2) of ARM 42.19.401 has been amended to allow otherwise eligible applicants, who live in a nursing home or long-term care facility, to be exempt from the 7-month occupancy requirement. This rule amendment allows such applicants to satisfy the program requirements even though they are unable to occupy their home due to a heightened need for care, which at times, may be temporary. Section (1) of ARM 42.19.406 has been amended to clarify that the Department determines the potential Extended Property Tax Assistance Program (EPTAP) eligible taxpayers and forwards an application to those applicants. The Department will not know whether an applicant actually qualifies until the applicant responds with the appropriate income documentation and occupancy verification. The changes in sections (2) and (3) of ARM 42.19.406 explain how the benefit applies to multi-dwelling units and occupancy. New section (5) of ARM 42.19.406 explains how the benefit applies to land and to mobile and manufactured home owners who own the land. Newly numbered section (16) of ARM 42.19.406 requires the applicant to submit income information with the application even though a completed tax return is not available at the time of application. The confidentiality statement is stricken from newly numbered section (18) of ARM 42.19.406 and added to newly numbered section (15). Newly numbered sections (22) and (23) have been updated for the coming years (2015 and 2016, respectively). The remaining sections of ARM 42.19.406 have been renumbered accordingly. Finally, ARM 42.19.1211 has been amended as a matter of housekeeping to make grammatical corrections for better clarity.

Montana General Administrative Provisions — Electronic service of levies and writs regulations.
The Montana Department of Revenue has adopted new Rules I through IV (42.5.301, 42.5.302, 42.5.303, and 42.5.304, respectively) pertaining to the electronic service of levies and writs, effective November 7, 2014. Specifically, the Department has adopted new Rules I through IV to implement House Bill 66, L. 2013, which allows for the electronic service of notices of levy and writs of execution and requires the Department to adopt rules to define and implement these services. New Rule I defines terms not found in Montana statutes that will be used in the new rules related to the electronic service of levies and writs. New Rule II sets forth the required actions a process server must undertake in order to electronically submit levies and writs upon the Department for collection assistance. New Rule III sets forth how the Department will accept and treat writs received from process servers. New Rule IV sets forth how the Department will use electronic means to submit levies, writs, or garnishments to financial institutions and employers.

Montana Real Property — Property tax classification and assistance programs regulations.
The Montana Department of Revenue has amended ARM 42.19.401, 42.19.406, and 42.19.1211 pertaining to property classification and property tax assistance programs, effective November 7, 2014. Specifically, section (2) of ARM 42.19.401 has been amended to allow otherwise eligible applicants, who live in a nursing home or long-term care facility, to be exempt from the 7-month occupancy requirement. This rule amendment allows such applicants to satisfy the program requirements even though they are unable to occupy their home due to a heightened need for care, which at times, may be temporary. Section (1) of ARM 42.19.406 has been amended to clarify that the Department determines the potential Extended Property Tax Assistance Program (EPTAP) eligible taxpayers and forwards an application to those applicants. The Department will not know whether an applicant actually qualifies until the applicant responds with the appropriate income documentation and occupancy verification. The changes in sections (2) and (3) of ARM 42.19.406 explain how the benefit applies to multi-dwelling units and occupancy. New section (5) of ARM 42.19.406 explains how the benefit applies to land and to mobile and manufactured home owners who own the land. Newly numbered section (16) of ARM 42.19.406 requires the applicant to submit income information with the application even though a completed tax return is not available at the time of application. The confidentiality statement is stricken from newly numbered section (18) of ARM 42.19.406 and added to newly numbered section (15). Newly numbered sections (22) and (23) have been updated for the coming years (2015 and 2016, respectively). The remaining sections of ARM 42.19.406 have been renumbered accordingly. Finally, ARM 42.19.1211 has been amended as a matter of housekeeping to make grammatical corrections for better clarity.

Nebraska General Administrative Provisions — Revised e-pay user guide.
The Nebraska Department of Revenue has revised its user guide containing information for making electronic funds transfer payments to the Department using e- pay. Nebraska e-pay allows users to schedule tax payments that will be debited from their chosen financial institution accounts on the dates and in the amounts they specify. Nebraska e-pay may be used to make payments for general sales and use tax, income tax withholding, corporate income tax, motor fuels tax, prepaid wireless surcharges, fiduciary income tax, partnership income tax, all-terrain vehicle and utility type vehicle sales tax, motor boat sales tax, documentary stamp tax, car line tax, air carrier tax, severance and conservation tax, cigarette tax, tobacco products tax, waste reduction and recycling fees, tire fees, litter fees, and lodging tax. The revised user guide discusses how to make payments through Nebraska e-pay, which tax type codes to use for various Nebraska taxes, how to confirm transactions in the system, and other general e-pay instructions. (Nebraska e-pay User Guide, Nebraska Dept. of Rev., 10/01/2014.)

Nebraska Real Property — Valuation of tavern property upheld.
The Nebraska Tax Equalization and Review Commission affirmed a decision of the Hitchcock County Board of Equalization determining the value of the taxpayer’s property for the tax year 2013. The taxpayer’s property was a commercial parcel improved with a 2,880 square foot tavern. The taxpayer argued that the assessed value of his property was too high and provided the Commission with a list of comparable properties (Frank’s Bar; Whistle Stop; and Hillside Perk) in Hitchcock County, together with a chart analyzing the assessment of these parcels in comparison to his property. The County assessor asserted that the comparable properties submitted by the taxpayer were not truly comparable to the taxpayer’s property. The Commission found that the characteristics of the properties submitted by the taxpayer as comparable properties varied significantly in age, condition, size of improvements, style, and amenities from the taxpayer’s property. The Commission further found that the differences in assessed values between the taxpayer’s property and the comparable properties were the direct result of these differences. (Dack v. Hitchcock County Board of Equalization, Nebraska Tax Equalization and Review Commission, 13C 003, 10/24/2014.)

Nebraska Sales And Use Tax — Notice to lessors of ATVs, UTVs, motorboats, and motorized personal watercraft.
The Nebraska Department of Revenue has posted a notice to lessors of ATVs, UTVs, motorboats and motorized personal watercraft regarding their sales and use tax reporting requirements. According to the Department, lessors of ATVs, UTVs, motorboats and motorized personal watercraft must report their lease or rental receipts as part of the net taxable sales on Line 2 of Form 10 (Nebraska and Local Sales and Use Tax Return). In addition, lessors must complete the Nebraska Schedule I – MVL, ATV, UTV, and Motorboat Leases or Rentals (bottom of page 3). For Line 2 of Nebraska Schedule I – MVL, ATV, UTV, lessors should enter the amount of Nebraska sales tax included on Line 3 of Form 10 that was reported on leases or rentals of ATVs and UTVs. For Line 3 of Nebraska Schedule I – MVL, ATV, UTV, lessors should enter the amount of Nebraska sales tax included on Line 3 of Form 10 that was reported on leases or rentals of motorboats and motorized personal watercraft. (Sales and Use Tax on the Sales of All-Terrain Vehicles (ATVs) and Utility-Type Vehicles (UTVs); and Lessors of ATVs, UTVs, Motorboats, or Motorized Personal Watercraft, Nebraska Dept. of Rev., 10/29/2014.)

Nebraska Sales And Use Tax — New payment option in NebFile for business sales and use tax.
The Nebraska Department of Revenue has posted a notice on its website regarding a new payment option in NebFile for business sales and use tax. A business taxpayer can now schedule payments while e-filing Form 10 (Nebraska and Local Sales and Use Tax Return). If an amount is due with Form 10, a taxpayer will be directed to a new page allowing a payment to be scheduled. This new payment option is in addition to payment options that already exist. (New Payment Option in NebFile for Business Sales and Use Tax, Nebraska Dept. of Rev., 10/29/2014.)

Ohio Personal Income Tax — Tax refund delays.
The Ohio Department of Taxation is informing taxpayers that due to a high number of returns filed using suspected stolen personal IDs that were received during the recent six-month filing extension, the issuance of legitimate tax refunds may be delayed. The Department has systems in place to detect possible fraud and has added additional personnel to help fulfill legitimate refund requests and expedite reviews and inquiries from taxpayers. Refunds may also be delayed during the tax filing season beginning January 2015 because of a continuing effort to intercept returns filed using stolen IDs. (Notice: Tax Refund Delays, OH Dept. Tax., 10/30/2014.)

Ohio Personal Income Tax — School district assessment affirmed—burden of proof not met.
A school district income tax assessment issued for tax year 2010 was affirmed since the taxpayers failed to meet their burden of proof. The taxpayers contended that they lived at a different address and were not residents of the district during 2010, producing two paystubs and a letter from their daughter’s school principal stating that the taxpayers lived at another address. The Board of Tax Appeals agreed with the tax commissioner’s findings that the evidence presented was insufficient to prove the taxpayers’ residency at the different address. (Killebrew v. Testa, Ohio BTA, Case No. 2014-1492, 10/29/2014.)

Ohio Sales And Use Tax — Quick Service Restaurants compliance report.
The Ohio Department of Taxation has issued a Quick Service Restaurants (QSR) Compliance Report that is intended to provide guidance to quick service restaurants by discussing the applicable sales tax statutes for predetermined and prearranged agreements for sales tax liability and answering frequently asked questions. In April 2014, the Department initiated interested party meetings with the QSR industry to discuss issues regarding the collection and remittance of sales tax and discuss how QSR compliance with sales tax law could be improved. The resulting report discusses additional audit options that will be available to QSR vendors and a new “restaurant compliance program,” that reduces a QSR’s likelihood of being selected for audit and allows waiver of the 15% penalty if an audit is performed. For audits initiated by the Department, a modified test check, a managed test check, or an enhanced statistical analysis agreement will be offered in addition to the standard test check option. For restaurant-initiated audits, a QSR may enter into a prearranged agreement that establishes a set percentage for reporting taxable sales. The percentage is determined either by a test check or by using an alternate method agreed to by the Department and the QSR. (Quick Service Restaurants Compliance Report, Ohio Dept. Tax., 10/31/2014.)

Ohio Sales And Use Tax — Assessment affirmed—no evidence of tax-exempt status.
The Ohio Board of Tax Appeals (BTA) sustained the determination of the Tax Commission that affirmed a sales tax assessment issued against the taxpayer, an alleged “501c3 free church.” The taxpayer contended that it was a Native American Church that provided holistic healing sacraments for a suggested donation and that because it was a tax-exempt organization, it was not liable for sales tax. The BTA determined that the particular tribe to which the taxpayer ascribed itself was not a federally recognized tribe by the U.S. government and that applications to the IRS for non-profit status and as a church were both denied. Further, the business was not located on tribal land. Nothing in the evidence offered demonstrated error in the Tax Commissioner’s determination and there was no proof of federal tax-exempt status. Based on the foregoing, the taxpayer failed to meets its burden on appeal and the sales tax assessment was affirmed. (Anyana Kai, Inc. v. Testa, Ohio BTA, Case No. 2014-1486, 10/29/2014.)

Pennsylvania Cigarette, Alcohol & Miscellaneous Taxes — Nuclear facility and transport fees.
L. 2014, S1355, effective 10/29/2014 , increases the annual facility fee per nuclear power site from $550,000 to $650,000. The amendment provides that by July 1, 2015, and each July 1 thereafter, each person who has a current nuclear power reactor construction permit or operating license from the federal Nuclear Regulatory Commission (NRC) must pay the Pennsylvania Department of Environmental Protection (DEP) an annual fee of $650,000 per nuclear power reactor site, regardless of the number of individual nuclear power reactors located at the site. In addition, the Pennsylvania Emergency Management Agency (PEMA) fee is increased from $200,000 to $275,000 per nuclear power reactor site, for fees due July 1, 2015 and each July 1 thereafter.

Pennsylvania Cigarette, Alcohol & Miscellaneous Taxes — Nuclear facility and transport fees.
L. 2014, S1355, effective 10/29/2014 , increases the annual facility fee per nuclear power site from $550,000 to $650,000. The amendment provides that by July 1, 2015, and each July 1 thereafter, each person who has a current nuclear power reactor construction permit or operating license from the federal Nuclear Regulatory Commission (NRC) must pay the Pennsylvania Department of Environmental Protection (DEP) an annual fee of $650,000 per nuclear power reactor site, regardless of the number of individual nuclear power reactors located at the site. In addition, the Pennsylvania Emergency Management Agency (PEMA) fee is increased from $200,000 to $275,000 per nuclear power reactor site, for fees due July 1, 2015 and each July 1 thereafter.

Wisconsin General Administrative Provisions — Negligence penalties.
The Department of Revenue reminds taxpayers that 2011 Act 68, created Wis. Stat. § 73.16(4) , which states “[t]he department shall not impose a penalty on a taxpayer under §§ 71.09 (11) (d), 71.83 (1) (a) 1. to 4. and (3) (a), 76.05 (2), 76.14, 76.28 (6) (b), 76.39 (3), 76.645 (2), 77.60 (2) (intro.), (3), and (4), 78.68 (3) and (4), and 139.25 (3) and (4), unless the department shows that the taxpayer’s action or inaction was due to the taxpayer’s willful neglect and not to reasonable cause.” The statute created a uniform standard for imposing negligence penalties, and shifted the burden of proof from the taxpayer to the Department, but it did not establish a new standard for what needs to be proved to impose negligence penalties. Although “reasonable cause” and “wilful neglect” are not defined in the statute, their meaning has been determined through statutory and case law. “Reasonable cause” means the taxpayer’s action or inaction occurred even though the taxpayer exercised ordinary business care and prudence, and “willful neglect” does not mean intentional conduct, as other statutory provisions in the tax statutes penalize intentional or fraudulent conduct, and those penalties are significantly higher than the penalties for negligence. ( Wisconsin Dept. Rev. Tax Bulletin 186, 10/01/2014 .)

Wisconsin Personal Income Tax — Forms changed for 2015 filing season
The Wisconsin Department of Revenue has added new forms and eliminated Form WT-4B for the 2015 filing season. The following form and schedules are being added: Form X-NOL (2012 and 2013), Carryback of Wisconsin Net Operating Loss (NOL); Schedule CF, Carryforward of Unused Credits; Schedule CS, College Savings Accounts (EdVest and Tomorrow’s Scholar); Schedule DE, Disregarded Entity Schedule; and Schedule PS, Private School Tuition. Form WT-4B (Certificate of Exemption From Wisconsin Withholding for 2014 Based on the Working Families Tax Credit) will be eliminated for 2015. Individuals who qualify for the working families tax credit could claim an exemption from withholding for 2014 using Wisconsin Form WT-4B. Due to increases in the standard deduction and personal exemption, many individuals no longer need to claim the working families tax credit to obtain the same relief from Wisconsin income tax. Starting in 2015, any individuals who are full-year legal residents of Wisconsin with income under $10,000 (married couples under $19,000), are not claimed as a dependent, and had no liability for income tax in 2014 can use Wisconsin Form WT-4 (Employee’s Wisconsin Withholding Exemption Certificate) to claim complete exemption from withholding. ( Wisconsin Dept. Rev. Tax Bulletin 186, 10/01/2014 .)

Wisconsin Sales And Use Tax — Credit card purchases—avoid double tax.
The Wisconsin Department of Revenue wants to make businesses and individuals who pay for purchases using credit cards aware of the potential to pay the tax twice on a sales transaction; thereby, emphasizing the importance of maintaining a copy of the sales receipt. According to Wis. Stat. § 77.53(2) , a “person’s liability is not extinguished until the tax has been paid to this state, but a receipt with the tax separately stated from a retailer engaged in business in this state…given to the purchaser…relieves the purchaser from further liability for the tax to which the receipt refers.” Moreover, absent documentation showing that sales or use tax has been paid on a taxable transaction, a purchaser could be at risk to pay the tax twice. ( Wisconsin Dept. Rev. Tax Bulletin 186, 10/01/2014 .)

Wisconsin Sales And Use Tax — Exemption—TTFields therapy.
The sale of TTFields therapy is exempt from Wisconsin sales and use taxes as durable medical equipment when sold for use in a person’s home TTFields therapy is for the treatment of cancer patients with solid tumors, and consists of an electric field generator; connection cables; a portable battery; power supply; rack and a power cord; INE transducer arrays; and ancillary items and accessories including boxes, TTF bags, operations manuals and self-exchange kits. The treatment is approved by the Food and Drug Administration, only available by prescription, and set-up and administered in the patient’s home, although the therapy is portable and designed to allow the patient to go about daily activities, including activities outside the home. TTFields therapy meets the definition of “durable medical equipment” because the equipment is primarily and customarily used for a medical purpose related to a person, can withstand repeated use, is not generally useful to a person who is not ill or injured, and is not placed in or worn on the body (although there are electrodes placed on the patient’s head, for mobility the user must place the device in an over-the-shoulder bag or backpack, which is not considered wearing the device on the body). The therapy does not meet the definition of a prosthetic device, and does not need to meet that definition for exemption because the exemption for durable medical equipment only requires that the equipment be sold to an individual for use where they are living, it does not require that the only use of the durable medical equipment must be in a person’s home. Note however, that TTFields therapy sold to a hospital or medical clinic that does not hold a Wisconsin Certificate of Exempt Status number is subject to tax. ( Wisconsin Private Letter Ruling W1434002, 07/04/2014 .)

Wisconsin Sales And Use Tax — Common and contract carrier exemption.
The Wisconsin Department of Revenue has issued a tax release concerning the sales and use tax exemption for common and contract carriers, which replaces the tax release on this topic that appeared in the Wisconsin Tax Bulletin 110, issued in July 1998. The updated tax release reflects the change in the amended definition of “common carrier” in Wis. Stat. § 194.01(1), along with the decision in Freight Lime and Sand Hauling, Inc. v. Wis. Dept. Rev., WTAC, Dkt. No. 00-S-215, 11/20/2002. Wis. Stat. § 77.54(5)(b) exempts from sales and use tax the sales price from the sale of and the storage, use, or other consumption of the following: “Motor trucks, truck tractors, road tractors, buses, trailers and semitrailers, and accessories, attachments, parts, supplies and materials therefor, sold to common or contract carriers who use such motor trucks, truck tractors, road tractors, buses, trailers and semitrailers exclusively as common or contract carriers, including the urban mass transportation of passengers as defined in § 71.38.” Three requirements must be met to qualify for the sales and use tax exemption: (1) the item must be sold to a common or contract carrier; (2) the item sold must be a motor truck, truck tractor, road tractor, bus, trailer, or semitrailer, or accessory, attachment, part, supply, or material for a motor truck, truck tractor, road tractor, bus, trailer, or semitrailer; and (3) the item sold must be used by the common or contract carrier exclusively as a common or contract carrier. The tax release provides additional information about each of the three requirements, and provides various examples to illustrate how the exemption applies. ( Wisconsin Dept. Rev. Tax Bulletin 186, 10/01/2014 .)

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