The Nevada Tax Commission proposed draft regulations implementing sales and use tax collection requirements for marketplace sellers and facilitators without a physical presence in Nevada. In determining whether marketplace sellers or marketplace facilitators meet the Nevada threshold of $100,000 in gross receipts from Nevada retail sales or 200 separate retail sales not for resale through all sources (including various marketplace facilitators) are used. A marketplace seller meeting the threshold, but with no physical presence, making sales only through marketplace facilitators is not required to register for sales tax if the marketplace facilitators are all registered to collect and remit the tax. If the marketplace seller makes sales through an unregistered marketplace facilitator, the marketplace seller must register, collect, and remit tax on those sales. A marketplace facilitator must provide the marketplace sellers notice that it will be collecting and remitting the tax on all applicable sales; or, if not registered, a marketplace facilitator must provide notice to the marketplace sellers that they may be required to register, collect, and remit tax on Nevada sales.

Since 2001, Georgia has provided a sales and use tax exemption for high-technology companies that invest at least $15 million in eligible computer equipment (including hardware and software) in a calendar year. O.C.G.A. § 48-8-3(68). During the 2021 legislative session, the Georgia General Assembly passed SB 6, which included significant changes the High-Tech Exemption. See prior coverage here.

One of the new provisions requires companies that use an exemption certificate to purchase computer equipment tax-exempt to annually report the amount of sales tax exempted to the Georgia Department of Revenue. This report is due 90 days after the end of the calendar year in which the exemption is claimed. Accordingly, reporting for 2021 exemptions is due by March 31, 2022. The Department issued Policy Bulletin SUT-2021-03 with additional information on the reporting requirement. There is no particular form or portal for this reporting, but we expect that it will be similar to the reporting requirement for the high technology data center exemption found in O.C.G.A. § 48-8-3(68.1). If any taxpayer fails to timely file this report, the Department will not issue an exemption certificate for this exemption in the subsequent calendar year. Thus, taxpayers that held an exemption certificate for 2021 that fail to timely file the report would be ineligible to receive an exemption certificate in 2023 to claim the exemption at the time of purchase (and could only claim the exemption via refund claim).

SB 6 also added a complete sunset of the exemption on June 30, 2023. As the exemption is measured by calendar year purchases, the sunset of the exemption during the middle of a calendar year is peculiar. We are hopeful that the General Assembly will revisit the sunset of the exemption, as well as the exclusion of “wireline and wireless telecommunications systems” from the exemption during the 2022 legislative session which convened January 10, 2022 and runs for 40 legislative days.

For more information regarding this exemption please contact any member of the Eversheds Sutherland State and Local tax team.

The Minnesota Department of Revenue has released updated guidance regarding the state’s requirement that out-of-state marketplace providers collect and remit Minnesota sales tax if their total sales (including facilitated sales) over the prior 12-month period total either 200 or more retail sales shipped to Minnesota, or more than $100,000 in retail sales shipped to Minnesota. Marketplace providers subject to this rule include any person, other than the seller, who facilitates a retail sale by both (i) listing or advertising the seller’s products and (ii) processing the payments from the customer, either directly or indirectly, regardless of whether the marketplace provider receives compensation or other consideration for its services. When calculating the threshold, marketplace providers include both marketplace provider sales and facilitated sales, but exclude sales where the purchaser is making the purchase for resale. The guidance also includes, among other things, directions for how marketplace providers register to collect tax, and their filing frequency, which is based on average annual tax liability.

On January 25 and 26, Eversheds Sutherland Partner Nikki Dobay will present during the Ohio Chamber of Commerce’s 2022 Business Tax Conference, which will offer both in-person and virtual attendance options.

In two panels, Nikki will cover federal and state constitutional provisions that should be on your radar, as well as information for remote sellers.

For more information about the conference, click here.

On January 18, 2022, New York Governor Kathy Hochul released her fiscal year 2023 budget and accompanying legislation (the Budget Bill).  The Briefing Book accompanying the Budget Bill highlights New York’s “remarkable reversal of fortune as tax revenues rebound”—giving the Governor the room to propose a variety of tax cuts targeted toward the middle-class and small businesses.

Read the full Legal Alert here.

In this episode of the SALT Shaker Podcast, host and Eversheds Sutherland Associate Jeremy Gove welcomes Partner Jeff Friedman for a discussion of the most interesting SALT trends and developments that occurred in 2021. In case you missed it, read our year-end post here and be sure to subscribe to receive our regular updates hosted on this blog.

Together, Jeremy and Jeff review developments and cases from the following areas:

  • Tax jurisdiction
  • Sales tax marketplace issues
  • Corporate income tax apportionment
  • Personal income tax residency
  • Franchise fee battles
  • The rise of the MTC and its work
  • Digital taxes
  • Transfer pricing

Finally, they conclude with Jeremy’s always engaging overrated/underrated question. This week, they tackle whether or not soup is worth all of the commotion!

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

 

 

 

 

 

 

 

 

 

 

 

 

 

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The Massachusetts Appellate Tax Board found that software-as-a-service (SaaS) provider Akamai Technologies Inc. was a manufacturing corporation, rather than a service provider. Akamai, headquartered in Massachusetts, provided software-based cloud services allowing customers to manage the delivery of web and media content over the Internet. In Massachusetts, a manufacturing corporation must use single sales factor apportionment, instead of the standard three factor formula. Manufacturing corporations may also claim the Investment Tax Credit and a limited exemption from local property tax.

The Board ruled that because Akamai developed and sold standardized computer software, which its customers accessed remotely, Akamai qualified as a manufacturing corporation. The Board rejected the Commissioner’s arguments that Akamai provided a service instead of selling software.

In holding that Akamai was a manufacturer, the Board looked to how the Department had previously distinguished sales of prewritten software from sales of services for sales tax purposes.  In the Board’s view there was a transfer of property because Akamai’s software products operated almost automatically without its employees’ intervention, it charged separately for personalized professional services, and its software was not designed for any specific customer.  The Board rejected the Commissioner’s argument that the object of the transaction test dictates that Akamai provides a service because Akamai billed separately for its services.  The Board also disagreed with the Commissioner that Akamai provided services because it held itself out to be a “service” provider and because its large computer server network cost more than its software development. Rather, Akamai’s expenses to maintain its network hardware were part of its overhead for its standardized software products. Akamai’s use of the word “services” in describing its software products is not determinative, nor is the financial reporting description of its “internal-use software” costs. Ultimately, the Board looked to the substance of what Akamai sold to its customers – remotely-accessed computer software – to determine it was a manufacturing corporation.

Notably, this decision may result in an increased Massachusetts apportionment factor for out-of-state sellers of remotely accessed prewritten software, as they could be considered manufacturers subject to single sales factor apportionment.

Akamai Technologies Inc. v. Commissioner of Revenue and Board of Assessors of the City of Cambridge, Intervenor, Dkt. Nos. C332360, C334907 and C336909 (Mass. App. Tax Bd. Dec. 10, 2021).

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 recently-introduced bill would impose both a new excise tax and a new payroll tax, and increase personal income tax rates to fund universal single-payer health care coverage and a health care cost control system for state residents?

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 Shaker Weekly Digest. Be sure to check back then!

An Alabama legislator has re-introduced a bill that would expressly exempt “virtual currency” from ad valorem tax. Alabama broadly imposes its ad valorem tax on all property, unless expressly exempt. Under current law, several other forms of currency are enumerated as exempt, such as “money on deposit in any bank or banking institution and all other solvent credits”; stock; and federal, state, and municipal bonds. The bill defines “virtual currency” as a “digital representation of value, other than a representation of the United States dollar or a foreign currency, that functions as a unit of account, a store of value, and/or a medium of exchange.” A similar bill failed to pass the Alabama legislature last year.

On January 18, 2022, Governor Kathy Hochul released the fiscal year 2023 budget Briefing Book. While we are still waiting for the public release of accompanying legislation (i.e., the Budget Bill) and memoranda, the Briefing Book indicates that the Budget Bill will propose a variety of tax cuts targeting middle-class individuals and small businesses. Other notable proposals include:

  • Sales taxation of vacation rentals: Similar to a proposal in the fiscal year 2022 budget bill released by then-Governor Cuomo last year (see our prior legal alert), the Budget Bill will propose subjecting all “vacation rentals” to state and local sales taxes, as well as the daily NYC Convention Center hotel fee of $1.50 per unit.  Under the proposal, any vacation rental marketplace provider that facilitates the occupancy of a vacation rental would be responsible for collecting and remitting the state and local sales taxes, in addition to the NYC hotel unit fee.
  • Treating federal S corporations as S corporations for franchise tax purposes: Also similar to a proposal in last year’s executive budget, the Budget Bill will propose requiring all S corporations at the federal level to be treated as such for state franchise tax purposes.
  • Make Local Sales Tax Rate Authorizations Permanent: Also similar to a proposal in last year’s executive budget, the Budget Bill will include a proposal to grant permanent local sales tax authority for all counties and cities at their existing rates or up to 4 percent. Under this proposal, local governments would no longer need to seek and receive the state’s approval as long as they want to extend their existing rates or increase their rate to no more than 4 percent. However, all local governments will still be required to seek and receive temporary approval by a majority vote of the local government’s governing body in order to impose additional sales tax above the current statutory 3 percent threshold.

The Briefing Book also indicates that the Budget Bill includes proposals to:

  • Extend the real property tax telecommunications assessment ceiling programs for four years; and
  • Establish a permanent rate for the franchise tax MTA Surcharge.

The Eversheds Sutherland SALT team is closely monitoring New York budget legislation and will keep you apprised when actual legislation is released in the coming hours or days.