The Iowa Department of Revenue issued a bulletin explaining its sales tax exemption for purchases of computers, along with the recently-enacted exemption for purchases of computer peripherals. The exemption applies to computers and computer peripherals used in processing or storage of data or information by an insurance company, financial institution, or commercial enterprise. The guidance provides a list of exempt items, including keyboards, monitors, hard drives, printers, docking stations, routers, and webcams. Taxable items include cables, hardware maintenance agreements, uninterruptible power supplies, and firewall hardware.

On January 21, 2021, the Idaho House Committee on Taxation introduced a market-based sourcing bill, which if enacted would change the state’s approach to sourcing the sales of certain multistate businesses. The state currently sources sales other than sales of tangible property to Idaho if the income-producing activity is performed in the state, or if the income-producing activity takes place in multiple states, based on the costs of performance.  Idaho continues to utilize a three-factor apportionment formula with double-weighted sales.

The proposed legislation, HB 19, would implement the Multistate Tax Commission’s market-based approach for sourcing sales receipts:

  • Sales, rental, licenses, or leases of real property are sourced to Idaho if the property is within the state.
  • Similarly, the rental, licensing, or leasing of tangible personal property is sourced to Idaho if the property is within the state.
  • The sale of a service is sourced to Idaho if and to the extent the service is delivered to a location in the state.
  • Intangible personal property that is rented, leased, or licensed is sourced to Idaho to the extent that the property is used within the state. Sales of intangible personal property that are contingent on the productivity, use or disposition of the property are treated the same way.
  • Sales of intangible personal property are sourced to Idaho if the contract right, government license, or similar intangible property authorizes the holder to conduct a business activity in a geographic area that includes part of the state.
  • All other receipts from the sale of intangible property are excluded from the numerator and denominator of the receipts factor.

The bill also includes a “throw out” provision, which would require taxpayers to exclude receipts from the denominator where the source state cannot be determined or if the taxpayer is not taxable in the state where the receipts are assigned. This provision is opposed by business groups. The bill would retroactively apply to January 1, 2021.

To ring in the New Year, this month’s SALT pet is not our typical cuddly mammal, but is a friendly part of the family all the same. Meet Greeny, the 4-inch goldfish!

Greeny belongs to Open Weaver Banks, Counsel in the New York office and joined the family in 2006 after Open received an urgent phone call from her daughter’s science teacher. Avery had a rough day, and was hoping she could take one of the class fish home with her as a result. Since that fateful call, Greeny has lived most of his life of luxury on the family’s kitchen counter. Fourteen years later (!) he was upgraded to a deluxe 10-gallon tank to better support his needs as a senior fish.

Greeny’s name might puzzle you, since his shiny, sleek green scales have evolved into his current orange color. But, that’s just how he has grown in the last 15 years! Beyond his daily routine of gobbling up fish flakes, he likes to get grooving once his owners play music, especially with a lot of percussion. He’s a big Richard Blade fan, and according to his family, has impressive lip sync abilities.

We hope Greeny continues to move and groove in 2021! We’re so happy to feature him as our January Pet of the Month.

Greeny and Stella

The topic of individuals leaving California, many of them for tax reasons, is a timely one. While some such moves are visible, the vast majority of these departures gather no publicity.

In an article for Bloomberg Tax, Eversheds Sutherland attorney Eric Coffill analyzes several recent decisions from the Office of Tax Appeals to see what it takes to prove an actual change in residency.

On January 13, 2021, the governor of Kansas released her budget report for fiscal year 2022, which would require marketplace facilitators to begin collecting retail sales and compensating use taxes on sales to Kansas customers on July 1, 2021. The budget also contains a proposal to impose sales tax on all sales of digital property and subscription services beginning July 1, 2021. Digital property and subscription services would include “digital audio-visual works, digital audio works, digital books, artwork, digital photographs and pictures, periodicals, newspapers, magazines, video, audio and other greeting cards, graphics, applications (desktop, mobile, web, and cloud-based), games (online, video, and electronic), digital codes, and streaming services.”

On January 11, 2021, the New York State Assembly introduced A.B. 1612, which would impose a three dollar ($3.00) surcharge on each delivery transaction where the delivery is made within New York City. The surcharge would not apply to deliveries of food or essential medical supplies. Liability for the surcharge would be imposed on a person that sells by any means any item to be delivered within the city and the surcharge would be passed along to the purchaser and separately stated on a receipt. The surcharge would become effective January 1, 2023.

In response to numerous inquiries, the Chicago Departments of Finance and Law issued an Information Bulletin on their application of nexus to Chicago taxes in light of Wayfair v. South Dakota, 585 U.S. __, 138 S. Ct. 2080 (2018). Illinois has adopted an economic nexus standard by which out-of-state retailers making sales of tangible personal property to Illinois must collect state use tax if, in a 12-month period: (1) the cumulative gross receipts from such sales are $100,000 or more; or (2) the retailer enters into 200 or more separate such transactions. As the nexus requirement applies to state use tax, but not local home rule taxes, Chicago concludes that it “does not limit the analysis of what constitutes nexus for the purpose of determining whether the City can require an out-of-state entity to collect a City tax.”

While Chicago will consider these thresholds for whether an entity has nexus with Chicago, the City will “not necessarily” treat this factor as “determinative.” Chicago will also consider other factors, including:

  1. Agreements that the entity has with other businesses in Chicago;
  2. Activities that the entity’s employees or other agents perform on the entity’s behalf in Chicago;
  3. Any physical presence that the entity has in Chicago;
  4. Advertising directed at Chicago customers; and
  5. Any other facts that support or oppose the conclusion that the entity has purposefully availed itself of the privilege of carrying on business in Chicago.

Chicago will also allow for a safe harbor by which out-of-state entities that receive under $100,000 in revenue from Chicago customers during their most recent four calendar quarters and meet certain other requirements are not expected to collect tax from their Chicago customers during the current calendar quarter.  However, the safe harbor is very limited.  It applies to only:

  1. The Amusement Tax on electronically delivered amusements (e., video and audio streaming and online games); and
  2. The Personal Property Lease Transaction Tax on nonpossessory computer leases (i.e., cloud computing).

New York Governor Andrew Cuomo released his Fiscal Year 2022 budget and accompanying legislation on January 19, 2021 (the Budget Bill). Although the State projects billions of dollars in lost revenue because of the fallout from the COVID-19 pandemic, the Budget Bill does not propose significant new taxes on businesses.

While the Governor stated during his Budget address that he is requesting $15 billion in aid from the federal government, the Budget Bill assumes that the State will only receive $6 billion in new aid—an amount which the Briefing Book summarizing all of the budget legislation claims is at “the lower end of possible outcomes.” If the State instead receives the full $15 billion in requested aid, the Briefing Book claims “the State would be able to reverse or modify” some of the Budget Bill’s most “difficult proposals.”

Read our full Legal Alert here.

The Tennessee Department of Revenue posted Revenue Ruling #20-13 regarding whether a taxpayer is a marketplace facilitator subject to sales and use tax collection on sales made on its platform. The taxpayer in this ruling operates an online forum that connects retailers (mostly restaurants) with independent delivery persons. The definition of a marketplace facilitator in Tennessee excludes a delivery network company, which is defined as a “business entity that maintains an internet website or mobile application used to facilitate delivery services for the sale of local products.” The Department concluded that the taxpayer was a delivery network company not required to collect the tax on sales made on its online forum so long as: (1) it does not have common ownership or control of the sellers with whom it contracts; and (2) the deliveries it facilitates occur within fifty miles of the sellers.

The fallout from the Covid-19 health crisis dominated almost every part of New York life in 2020, including New York tax law.

In their column for Bloomberg Tax, Eversheds Sutherland attorneys Michael Hilkin and Chelsea Marmor discuss some of the most important New York legislative and regulatory tax developments to address the pandemic.

Read the full article here.