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:
Enacted in 1976, which federal law prohibits state and local governments from imposing discriminatory taxes against railroad companies?

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

The prize for the first response to today’s question is a $20 UBER Eats gift card.

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

This podcast discusses SALT issues concerning mergers and acquisitions that tax professionals should consider including:

  • Tax diligence for buyers
  • The impact of tax reform on SALT M&A issues
  • State transactional and transfer taxes

 


Listen Now:

Subscribe to our Podcast for more: 

  

In a recently issued revenue ruling, the Tennessee Department of Revenue determined that a taxpayer’s digital services provided to other businesses were taxable “specified digital products,” a broad term based on definitions (and subject to detailed operating rules) in the Streamlined Sales and Use Tax Agreement. Sellers of business-to-business digital services should review this ruling to determine whether their offerings may be subject to Tennessee sales tax as a specified digital product, which historically has been associated with consumer digital goods like digital video and digital music.

First, the DOR determined that overhead music services and on-hold messaging services are taxable “digital audio works.” The taxpayer’s overhead music services consist of pre-programmed, commercial-free music, along with optional add-on services involving the insertion of customer-specific promotional messages into the music playlists, all of which were determined to be taxable. Its on-hold messaging services include the production of customized recorded messages, including script (advertising/marketing/copyrighting), consultation services, any music licensing fees incurred in production of the messaging, and professional talent options used to produce the messages.

The DOR further ruled that the taxpayer’s customized videocast programming services, which allow custom promotional content to be played on video screens at customers’ locations, are subject to sales and use tax as a “digital audio-visual work.” However, the DOR concluded that optional weather, news, and stock-ticker feeds that could be included with the videocast programming services are exempt information services pursuant to Tenn. Code Ann. § 67-6-233(d).

Finally, for each digital service under consideration, the DOR found that the taxpayer did not permit its customers to retransmit the content. Accordingly, the customers bore the incidence of the tax as end users, thereby obligating the taxpayer to collect.

Tenn. Dep’t Revenue, Ruling #20-03 (May 4, 2020)

The Delaware Supreme Court reversed a lower court’s ruling and held that Overstock.com was not liable for nearly $7 million in damages because there was insufficient evidence to show that Overstock violated the Delaware False Claims Act by not reporting gift card unredeemed balances. The Plaintiffs – Delaware and the whistleblower who brought this case under Delaware’s whistleblower law – argued that Overstock engaged in a scheme to avoid paying abandoned gift card balances to the State because Overstock did not file escheat reports. The court disagreed, holding that in order for Overstock to be found liable for making a reverse false claim, it must have submitted a false record or statement that gave the State the impression that Overstock either did not owe the State money or owed the State less money than Overstock was required to pay. “The absence of a record or statement cannot form the basis of a reverse false claim…,” the Court ruled. Accordingly, the Court held that the lower court’s jury instruction “that the failure to file an escheat report in the face of an obligation to do so was the equivalent of a false record of statement for purposes of a reverse false claims” was a reversible error.

State of Delaware ex. rel. William Sean French, C.A. No. N13C-06-289 (Del. 2020)

On June 24, the Rhode Island Governor signed into law S2650 Substitute A, which clarifies the state’s sales taxation of cloud computing and streaming digital products to comply with the Streamlined Sales & Use Tax Agreement. The bill amends the definition of a taxable sale to include any license, lease, or rental of prewritten or vendor-hosted computer software and specified digital products.  The bill also amends the sales tax base for specified digital products, confirming that the tax is only on sales to end-users and is imposed regardless of whether the right to use the specified digital products is on a permanent or less than permanent basis and whether the purchaser must make continued payments for such right. The act is immediately effective.

Indiana released Information Bulletin #89 updating guidance for remote sellers and marketplace facilitators. The guidance, which became effective July 1, implements SEA 408. It also notes, among other things, that marketplace facilitators must include both transactions made on its own behalf and transactions facilitated on behalf of their sellers when making the determination as to whether the economic nexus thresholds apply.

In a recently released letter ruling, the Georgia Department of Revenue concluded that charges for the electronic delivery of medical records, and services related to the management and processing of medical records, are not subject to sales and use tax, while charges for transferring medical records delivered on paper or another “tangible format” are subject to sales and use tax.

The taxpayer who received the letter ruling requested guidance regarding the taxability of activities including:

  1. providing medical records maintained by the taxpayer to third-parties including patients, medical providers, and insurance companies;
  2. retrieving medical records maintained by persons other than the taxpayer; and
  3. services related to the collection, management, storage and use of healthcare data such as: (a) the translation of medical information into industry-standard codes for purposes such as risk adjustment and claims processing; (b) converting and updating medical records; and (c) data mining and extraction of clinical data from a large volume of medical records.

Under Georgia law, sales of tangible personal property generally are subject to sales and use tax unless an exemption applies, but sales of information or material delivered electronically typically are not considered taxable sales of tangible personal property. Further, sales of services are not subject to tax unless specifically designated as taxable. Therefore, the Department concluded that sales and use tax only applied to charges related to medical records delivered in a tangible format, but tax did not apply to charges related to the transfer of electronic records or the management and processing of medical records.

Georgia Letter Ruling No. LR SUT-2019-04 (Jun. 20, 2019) (released June 15, 2020).

Wisconsin’s Department of Revenue (DOR) released two proposed guidance documents answering common questions and clarifying rules applicable to marketplace sellers and providers. The proposed Marketplace Provider Common Questions generally explains the DOR registration process and offers other clarifications; for example, it notes that facilitators can prepare a single sales tax return that includes all facilitated sales, that facilitators must collect sales taxes on any fees, and that facilitators may be audited.

The proposed Marketplace Seller Common Questions offers similar guidance for sellers. It explains, for example, when a marketplace seller may rely upon a marketplace facilitator to collect and remit sales tax, notes that marketplace sellers will be notified if the marketplace facilitator has a collection waiver, and offers guidance on how to account for sales revenue on the return form.

On June 30, the North Carolina Governor signed into law a wide-ranging tax bill that includes marketplace facilitator rules for meals taxes and clarifies sales tax for download codes. HB 1080 extends marketplace facilitator collection and remittance obligations to local meals taxes, effective July 1, 2020. In addition, the law clarifies that the sale of a digital download code is taxed the same as a sale of the property to which the code relates.