By Michael Penza and Todd Lard

The Wyoming Board of Equalization (BOE) held that purchases of chemicals by an electric utility operating coal-fired electric generation plants were subject to sales tax because the utility was not a manufacturer or a processor. The Board found that the utility was not a manufacturer because it did not transform raw materials into a new product with a distinctive character or use, and that the utility was not a processor because it did not change the state or form of raw materials to use as an ingredient or component of a final product offered for sale. In the Matter of the Appeal of PacifiCorp Inc., Nos. 2012-51, 2013-03 (Wyo. State Bd. of Equalization, Jan. 8, 2016).

By Liz Cha and Amy Nogid

The Utah State Tax Commission ruled that sales to financial institutions in Utah of the right to use online banking software, finance and budget tool software, online bill payment software, mobile banking software, and a mobile banking application are sales of tangible personal property subject to Utah sales and use tax. In its request for a letter ruling, the taxpayer acknowledged that the budget tool software and mobile banking application were taxable. However, the taxpayer argued that it was providing online banking, online bill payment and mobile banking services, which are non-taxable data processing and custom information services under both the statute and the essence of the transaction test. However, the Tax Commission, applying the essence of the transaction test, concluded that all of the transactions constituted sales of the right to use the taxpayer’s tangible personal property, i.e., the prewritten application software, which enables financial institutions to offer online services to customers. Utah Private Letter Ruling No. 15-005, Nov. 16, 2015 (released January 2016).

By Nick Kump and Scott Wright

The Missouri Supreme Court held that a dance school was subject to sales tax on its charges for dance lessons as fees paid to a place of amusement, entertainment or recreation. The court reasoned that even though the school had a primary purpose of teaching students how to dance, amusement or recreational activities comprised more than a de minimis portion of the business activities. Miss Dianna’s Sch. of Dance, Inc. v. Dir. of Revenue, No. SC 95102, 2016 WL 143277 (Mo. Jan. 12, 2016).

 

By Ted Friedman and Jonathan Feldman

The Utah Supreme Court held that optional liability waiver fees paid by customers along with lease-to-own rental payments were not subject to sales and use tax. Customers that choose to pay this extra fee are not required to reimburse the corporation for any loss if the goods are damaged before acquiring ownership. The court reasoned that the fee is not “paid or charged for leases or rentals of tangible personal property,” as required by statute, because the fee does not affect the customer’s possession, use or operation of the goods and, therefore, is not subject to sales and use tax. Rent-A-Center West, Inc. v. Utah State Tax Comm’n, No. 20140129 (Utah Jan. 5, 2016).

image1_20160125.jpg Members of the Washington, DC Sutherland SALT team “geared up” for the historic East Coast blizzard that arrived in the metro area this weekend. Follow updates and photos by searching #Blizzard2016 or #Snowzilla — Stay warm out there! Pictured from back left: Todd Betor, Stephanie Do, Ted Friedman, Chris Mehrmann, Elizabeth Cha, Samantha Trencs, Charles Capouet, Jessica Eisenmenger, Todd Lard. We hope you enjoy some of our snow photos from this weekend. image2_20160125.jpg “Salty the snowman goes to the White House.” –Liz Cha image3_20160125.jpg Marc Simonetti’s son Nicholas volunteers for shovel duty. Good luck, Nicholas! image4_20160125.jpg Jeff Friedman’s daughter Rachel and pup Harry are all smiles in the snow this weekend! image5_20160125.jpg Todd Lard’s dog, Cooper, playing fetch in the DC snow. image6_20160125.jpg Leah Robinson’s husband and son sledding in their front yard in New Jersey. image7_20160125.jpg Sutherland SALT Admin Barbara Keihani-Dubison’s girls enjoying the snow. image8_20160125.jpg Open Weaver Banks plows through two feet of snow in her New Jersey yard! image9_20160125.jpgMaria Todorova’s kiddos sledding in all the Atlanta snow. image10_20160125.jpgStephen Burroughs and son enjoy some baseball in the Georgia snow. image11_20160125.jpg image12_20160125.jpgTodd Betor captures a great photo of the Washington Monument and his girlfriend Michelle in the winter wonderland. image13_20160125.jpg Stephanie Do enjoyed watching neighborhood kids sledding on Capitol Hill. image14_20160125.jpg Jonathan Feldman and family trekked to REI for some blizzard survival must-haves. image15_20160125.jpgimage16_20160125.jpg Sam Trencs enjoyed an awesome view of Pennsylvania Avenue and made the perfect snow angel on the Mall. image17_20160125.jpg Sutherland SALT Admin Debbie Manders and family making snow paths in Maryland. image18_20160125.jpgimage19_20160125.jpg Sutherland SALT Admin Melissa Bragg’s daughters, Emma and Madelyn, enjoy the Atlanta “white stuff.” image20_20160125.jpgimage21_20160125.jpg Sutherland Client and Practice Development Coordinator Ashley McNew captures some Capitol Hill blizzard fun. image22_20160125.jpg Michele Borens’s porch in Virginia looks pretty cold. image23_20160125.jpg Amy Nogid brings out the shovel to unbury her car in the New York snow.

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“All of these pictures reinforce the wisdom of the different view we in California have about snow: it is something we visit; it doesn’t visit us.” – Sutherland SALT Of Counsel Prentiss Willson image24_20160125.jpg (Prentiss’ view this weekend). image25_20160125.jpgimage26_20160125.jpg Carley Roberts‘ clan looking pretty warm in Cali. Thumbnail image for Sacramento-Snow.jpgTim Gustafson spots snow…but keeps a safe distance.

Over the last decade, multistate employers have witnessed a blizzard of state enforcement efforts of their nonresident withholding requirements. During that same time, large business tax departments have been snowed under by internal auditors’ questions of policies and procedures related to state nonresident withholding compliance. Even the U.S. Congress has shown an interest in plowing new ground in multistate withholding simplification and uniformity.

View this article, reprinted from the Journal of Multistate Taxation and Incentives (Thomson Reuters/Tax & Accounting) Volume 25, Number 7, which explores the legal bases for withholding state taxes from deferred compensation and other special compensatory payments like noncompete agreements.

While we’re not sure what “Auld Lange Syne” really means, we are sure that many older New Jersey tax cases remain helpful in addressing current corporation business tax and sales tax issues and, therefore, should not be forgotten.

View this article, reprinted from the January 4, 2016 issue of State Tax Notes, which examines six older New Jersey cases, arguing that New Jersey does not have its own unique test for determining the unitary group. As a result, in the absence of centralized management, functional integration and economies of scale, a unitary business does not exist.

When a company undertakes a financing transaction, federal and state income tax considerations most frequently take priority in the tax department. In certain financing transactions, however, one would be remiss to ignore potential sales tax issues that can be traps for the unwary.

Reprinted from the Journal of Multistate Taxation and Incentives (Thomson Reuters/Tax & Accounting) Volume 25, Number 10, view this article for sales tax considerations a taxpayer should consider when a company engages in these common financing transactions.

The Michigan Department of Treasury issued a Notice announcing that it will no longer impose sales or use tax on certain prewritten computer software accessed electronically and associated online services. The Notice comes on the heels of the Michigan Court of Appeals decision in Auto-Owners Insurance Company v. Department of Treasury and the Michigan Supreme Court’s refusal to review Thomson Reuters Inc. v. Department of Treasury. The Department is departing from its long-standing policy on the taxation of electronically accessed prewritten software and associated online services, which paves the way for taxpayer refund claims.

View the full Legal Alert.

By Samantha Trencs and Amy Nogid

The California Board of Equalization (BOE) voted to adopt an amendment to Ca. Code Regs. tit. 18, § 1525.4, to resolve a statutory ambiguity by clarifying that a taxpayer will qualify for the partial sales and use tax exemption available for certain manufacturing and research and development equipment purchases and leases if the purchase has a useful life of one or more years, even if the taxpayer expensed the purchase. The amendment was prompted by a rulemaking petition submitted by the California Taxpayers Association that raised concerns that taxpayers could receive disparate treatment under the exemption depending on whether they capitalized or expensed their acquisitions on their state income/franchise tax returns.

The changes expressly allow taxpayers to substantiate their qualification under the “useful life” criteria by reference to either a warranty, a service contract, or an industry replacement standard of one year or more.

The BOE adopted the amendments despite the Department of Finance’s position that the amendments exceeded the scope of the BOE’s statutory authority and that the BOE failed to consider the economic impact of the amendments. However, the BOE maintained that the amendments were necessary to ensure that the partial exemption from sales tax legislation, California Revenue and Taxation Code § 6377.1, which became effective on July 1, 2014, was utilized “as originally anticipated and intended by the Legislature.”[1] Accordingly, the BOE made the amendments retroactive to the effective date of the statute. Under California’s rulemaking process, the BOE’s adoption was forwarded to the Office of Administrative Law (OAH) to confirm compliance with the Administrative Procedure Act for approval by February 17, 2016. State Board of Equalization’s Adoption of Proposed Amendment to California Code of Regulations, Title 18, Section 1525.4, Manufacturing and Research and Development Equipment (Cal. State Bd. of Equalization).

 

[1] Updated Informative Digest for the State Board of Equalization’s Adoption of Proposed Amendment to California Code of Regulations, Title 18. Section 1525.4, Manufacturing and Research and Development Equipment (Cal. State Bd. of Equalization).