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.

In this episode of the SALT Shaker podcast, host Chris Lee discusses the Verisign decision from Delaware concerning NOL limitations, an Indiana letter ruling concerning the taxation of software (2019-09ST), and a Washington Department of Revenue decision concerning nexus (Det. No. 15-0036).

Questions or comments? Email SALTonline@eversheds-sutherland.com.

 

 

 

 

 

 

 

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On December 29, 2020, the Rhode Island Division of Taxation issued a declaratory ruling concerning the taxability of marketing analytic services using proprietary software and an online dashboard hosted on the taxpayer’s own servers. The software and services help customers develop advertising services and evaluate the effectiveness of advertising. According to the Division, the taxpayer’s sales are subject to sales and use tax because the software is taxable vendor-hosted prewritten computer software and the analytic service is inseparably intertwined with the taxable software.

Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!

We will award prizes for the smartest (and fastest) participants.

This Week’s Question: What plains state recently introduced a much-anticipated IRC 965/GILTI “fix” bill?

E-mail your response to SALTonline@eversheds-sutherland.com.

The prize for the first response to today’s question is a $25 UBER Eats gift card.

Answers will be posted on Saturdays in our SALT Weekly Digest. Be sure to check back then!

On January 12, 2021, the Oregon Legislature introduced nine new Corporate Activity Tax (CAT) bills as the 2021 legislative session began.  The bills introduced in both the House and Senate ranged in scope from treatment of receipts in specific industries to modifications of provisions of the CAT more generally.

Some of the bills introduced include:

  • HB 2259 – Exempts certain medical items, including prescription drugs and medical supplies from the CAT
  • HB 2268 – Exempts small business loan interest from the CAT
  • HB 2293 – Exempts receipts from the sales of agricultural, floricultural, horticultural, viticultural or food products from the CAT
  • HB 2633 – Exempts contraction receipts for repair or rebuilding of structures destroyed or damaged by wildfires from the CAT
  • HB 2753 – Exempts certain pharmacy receipts from the CAT
  • SB 521 – Exempts certain essential goods, including prescription drugs, feminine hygiene products, diapers and baby formula, from the CAT
  • SB 522 – Directs the Division of Audits to conduct performance audits and issue recommendations for addressing risks

In addition, two bills—HB 2429 and SB 164, which include broad relating to clauses (i.e., “related to corporate activity tax”), were also introduce.  One of these two bills is expected to the vehicle for technical corrections, which we expect will include a full fiscal year fix.  As such, the Eversheds Sutherland SALT team will continue to monitor these two bills closely.

On January 7, 2021, New York senator Michael Gianaris introduced S.1124, which would impose a new gross revenues tax on digital ads. The tax would be imposed on the annual gross revenues any person derives from digital advertising services apportioned to the state based on digital advertising receipts. “Digital advertising services” is defined to include “advertisement services on a digital interface, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services, that use personal information about the people the ads are being served to.” Depending on the taxpayer’s global annual gross revenues, the tax rate would vary from 2.5% to 10%. Separate legislation was previously filed in the New York Senate that would expand the sales tax base to digital advertising services.