By Suzanne Palms and Timothy Gustafson

The Vermont Commissioner of Taxes determined that conference bridging and meeting collaboration software services provided to Vermont customers were not subject to sales and use tax. The service provider’s conference bridging service allowed customers to call into a number with an access code to participate in a conference call for both an annual and a monthly subscription fee. The meeting collaboration software service allowed audio and video conferencing along with the use of shared computer screens and files during the conference. Customers were charged based on a per-minute access fee. The Commissioner ruled that the conference bridging service was not a taxable telecommunications service, but was instead specifically exempt as an ancillary “vertical service” under Code of Vt. Rules § 1.9771(5)-2.B.1, which is defined to include “conference bridging services.” Additionally, the Commissioner determined that the meeting collaboration software service was not a taxable telecommunications service because customers were only purchasing the ability to share and access information from the service provider, and they paid other third parties for Internet access and voice transmission services. Furthermore, the customers did not receive a disk containing the service provider’s software nor did they download, host, or directly access the software. Finally, since the conference bridging and meeting collaboration software services were separately exempt, the Commissioner found that bundled transactions including both services were also exempt. Vermont Formal Ruling No. 2015-01, Vermont Department of Taxes, May 1, 2015.

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A divided U.S. Supreme Court ruled that Maryland’s personal income tax regime is unconstitutional. Comptroller of the Treasury v. Wynne, 575 U.S. __ (2015). The Court affirmed the Maryland Court of Appeals in a 5-4 decision and held that Maryland unconstitutionally created the risk of multiple taxation.

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This morning the U.S. Supreme Court ruled that Maryland’s personal income tax regime is unconstitutional. By failing to provide a full credit to its residents for taxes paid to other states, Maryland unconstitutionally created the risk of multiple taxation. The Maryland Court of Appeals was affirmed. The decision was 5-4, with the majority opinion authored by Justice Alito. Dissenting opinions were authored by Justices Scalia, Thomas and Ginsburg. Sutherland will release a comprehensive Legal Alert later today.

Sutherland and the Tax Executives Institute (TEI) are pleased to present this first ever full-day program dedicated to the “Theory, Strategy and Practice of State Tax Controversy” in San Francisco, California on May 21. Topics covered will include:

Continue Reading Join Sutherland and TEI for a full day SALT controversy workshop at the 2015 Audits and Appeals Seminar in San Francisco (May 19-21, 2015)

In New Jersey, Governor Christie conditionally vetoed AB939/S1403. The bill, as written, would modify tax expenditure reports produced by the Department of the Treasury during the annual budget process. “Tax expenditures” includes credits such as the film tax credit. Further, the legislation would require additional reports regarding tax expenditures associated with development subsidies primarily used to incentivize large-scale development projects in areas that companies might not otherwise consider. The Governor’s proposed amendments would remove the requirement that evaluations be part of the annual budget process and would modify the items considered in evaluating expenditures.  

A conditional veto is one in which the Governor objects to parts of a bill and proposes amendments that would make it acceptable. The bill goes back to the Legislature for consideration of the Governor’s recommendations. If the bill is passed again, it will go to the Governor for signature again. The bill is being reconsidered in the Assembly today.

After nearly a year of planning, the Multistate Tax Commission Executive Committee today approved the Arm’s-Length Adjustment Services Advisory Group Final Program Design. The following six states have agreed to participate in the Program:  Alabama, Iowa, Kentucky, New Jersey, North Carolina and Pennsylvania.

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Perhaps no aspect of New York’s expansive 2014 tax reform has generated as much excitement as the incentives for qualified New York manufacturers. The new law spells out the requirements for qualification and has been supplemented by some additional guidance, including legislation passed a few weeks ago.
In their article for State Tax Notes, Sutherland attorneys Leah Robinson and Andrew Appleby pull together the 2014 tax law changes, various guidance published by the New York State Department of Taxation and Finance, and the recently passed 2015 tax law changes to provide a complete guide to the manufacturing benefits.
Just last week, New York City’s conforming legislation was enacted. It includes similar, but generally more restrictive benefits. Following the State Tax Notes article is a primer on the City’s differing manufacturer regime.
View full article and addendum.

Perhaps no aspect of New York’s expansive 2014 tax reform has generated as much excitement as the incentives for qualified New York manufacturers. The new law spells out the requirements for qualification and has been supplemented by some additional guidance, including legislation passed a few weeks ago.

In their article for State Tax Notes, Sutherland attorneys Leah Robinson and Andrew Appleby pull together the 2014 tax law changes, various guidance published by the New York State Department of Taxation and Finance, and the recently passed 2015 tax law changes to provide a complete guide to the manufacturing benefits.

In April, New York City’s conforming legislation was enacted. It includes similar, but generally more restrictive benefits. Following the State Tax Notes article is a primer on the City’s differing manufacturer regime.

View full article and addendum.

Read our April 2015 posts on stateandlocaltax.com or read each article by clicking on the title. For the latest coverage and commentary on state and local tax developments delivered directly to your phone, download the latest version of the Sutherland SALT Shaker mobile app.

By Jessica Kerner and Madison Barnett

Colorado determined in two private letter rulings that a number of electronic messaging services are not subject to Colorado sales or use tax as a telephone or telegraph service or any other taxable service. The Company, which is not a regulated provider of telecommunications services, provides various messaging services to businesses using the businesses’ own networks of computer servers and the Internet. The services addressed in the rulings include: integrated desktop messaging (IDM), electronic data interchange (EDI) value added network (VAN) service, broadcast fax, notifications email and production email. The Department concluded that the Company’s IDM service, an electronic fax service, is not a telephone service because it is a one-way closed communication that does not allow the party receiving the fax to respond instantly. The fax service thus falls outside of the Department’s historical interpretation of telephone service as an open communication line that allows two or more parties to communicate instantaneously in a two-way communication. The Department ruled that the broadcast fax service is also not subject to tax for the same reason. The EDI VAN service is a service that allows businesses to electronically exchange routine business documents using industry standard data formats. The Department determined that the EDI VAN service is not taxable because the true object of the transaction is for the customer to obtain the data conversion service performed by the Company’s software, which formats the communications, and that the data transmission is incidental. Finally, the Department concluded that any potential taxation of the email services, including the Company’s production messaging, is preempted by the Internet Tax Freedom Act. Colo. Dept. of Rev. PLR-15-001 (released April 5, 2015). Colo. Dept. of Rev. PLR-15-003 (Feb. 4, 2015, released April 5, 2015).

By Charles Capouet and Open Weaver Banks

The Kansas Department of Revenue addressed the taxability of sales of video game access codes, subscription cards, point cards, and notional dollar value cards. Initial sales of access codes that allow customers to download video games or video game add-ons directly to the customer’s computer or other device are subject to sales tax, according to the Department, because the items are prewritten software. Generally, downloadable prewritten software that is delivered physically or digitally to a Kansas user is subject to Kansas sales tax. On the other hand, the Department ruled that initial sales of access codes that allow customers to access digital content for use in an online video game (typically a complete video game or additional content within a game) that resides on a third-party server are not taxable. Redemptions of such codes are also not subject to sales tax because the items are not prewritten software. Similarly, initial sales of subscription cards, point cards, and notional dollar value cards that may be redeemed for access to online networks that allow gameplay, interaction among other players on the network, access to digital online content, or the direct download of digital content to consumers’ devices are not taxable. The redemptions of the cards are also not taxable because the Department determined such items are not prewritten software. Kan. Private Letter Ruling No. P-2015-001, Kan. Dep’t of Revenue, (Mar. 25, 2015).