South Dakota Senate Bill 157 proposes an exemption from gross receipts tax for sales of “enterprise information technology equipment” and software in excess of $2 million used in South Dakota data centers. Enterprise information technology equipment eligible for the exemption includes: (i) computer hardware, servers, routers, cooling systems and towers; (ii) temperature control and power infrastructure; (iii) exterior dedicated business-owned substations, and (iv) racking systems and other equipment necessary to maintain and operate a qualified data center. A qualifying data center is a South Dakota facility with a primary purpose to serve as a centralized repository for the storage, management, and dissemination of electronic information and data. This proposal would be restricted to data centers completed or “substantially refurbished” after December 31, 2021. Currently, the bill is set for a hearing before the South Dakota house commerce and energy committee on February 23, 2022.

On this episode of the SALT Shaker Podcast focused on policy issues, host and Eversheds Sutherland Partner Nikki Dobay entertains a full house. She is joined by Annabelle Canning, Partner at Capitol Tax Partners, and Eversheds Sutherland attorneys Maria Todorova and Justin Brown from the firm’s Atlanta office.

Justin gets the conversation started with an overview and background of the Tax Injunction Act (TIA) and the need for modernization to provide access to Federal Court for state tax cases that involve a federal question. The group then jumps into a discussion of the FAIR Coalition—the Fair Access to Interstate Remedies Coalition. The FAIR Coalition was formed to secure federal legislation that would modernize the TIA, due to inequities faced by taxpayers that are precluded from litigating in Federal Court.  They then detail the work of the FAIR Coalition, why it’s important to make changes now, and how it aims to reconcile inconsistent court decisions and provide additional guidance.

Wrapping up the conversation, Nikki’s surprise non-tax question this week deals with “walk-out” songs. What would your entry theme song be if you were a professional wrestler—or speaking at a SALT conference?

To learn more about the TIA, read an article written by Eversheds Sutherland SALT attorneys for the July-August 2021 issue of Tax Executive.

The Eversheds Sutherland SALT team has been engaged in state tax policy work for years, tracking tax legislation, helping clients gauge the impact of various proposals, drafting talking points and rewriting legislation. Partner Nikki Dobay, who has an extensive background in tax policy, hosts this series, which is focused on state and local tax policy issues.

Questions or comments? Email SALTonline@eversheds-sutherland.com. You can also subscribe to receive our regular updates hosted on the SALT Shaker blog.

 

 

 

 

 

 

 

 

 

 

 

 

 

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Today, California Governor Gavin Newsom signed budget trailer bill SB 113, allowing taxpayers to again fully utilize business tax credits, like the R&D credit, and net operating loss deductions for taxable years beginning on or after January 1, 2022. For tax years 2020 to 2022, AB 85 (enacted in 2020), limited the amount of business tax credits that could be claimed annually to $5 million and suspended use of net operating loss deductions for business taxpayers with income of $1 million or more (see our previous coverage on AB 85 here and here). Enactment of SB 113 is great news for businesses, as it lifts the restrictions imposed by AB 85 a year early, allowing businesses to use their net operating losses and full tax credits in computing their 2022 California corporate tax liability.

On February 11, Eversheds Sutherland Partner Nikki Dobay will present during the hybrid 2022 National Multistate Tax Symposium, which will explore some significant multistate tax and technology issues facing today’s tax departments.

As a panelist, Nikki will examine sourcing scenarios in light of some recent developments and consider documentary and electronic data collection and compliance options for your company, including what may be a permissible “reasonable approximation”; ways to plan for and manage related audits and disputes; and whether it makes sense to pursue proactive measures to reach a workable solution.

For more information about the meeting and how to register, click here.

In a recently released private letter ruling (issued October 13, 2021), the Wisconsin Department of Revenue concluded that certain online learning platform services were not subject to sales tax, whereas others were a bundled transaction and potentially taxable. The company’s platform is a virtual learning environment where students stream on-demand digital academic courses that consist of video lessons on a variety of topics, including academic subjects, professional topics, or vocational licensing preparation courses. Subscriptions also include access to live online tutoring to answer questions. Users cannot download the courses, but may be access them through the company’s mobile app that is downloaded. The company offered its service through different packages. Only those packages restricted to college courses for credit and tutor access were nontaxable educational services. Packages that with both taxable and nontaxable elements were bundled transactions. However, if the sales price attributable to taxable and nontaxable products in the bundled transactions could be determined, then tax should only be collected on the portion of the sales price attributable to taxable products, and if the taxable portion of the sale is less than 10%, the whole package is not taxable.

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: Which state was the first to pass legislation decreasing corporate and individual income tax rates this year?

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!

On February 4, Idaho Governor Little signed into law HB 436, which will decrease individual and corporate income tax rates. HB 436 was passed and signed into law in just over 20 days after being introduced.  Specifically, the legislation lowers the corporate income tax rate from 6.5% to 6% and consolidates the personal income tax brackets from five brackets to four and lowers the rates as well. HB 436 also provides a one-time tax rebate totaling $350 million of personal income taxes (returning approximately 12% of an individual’s 2020 Idaho personal income tax or $75 per individual taxpayer and dependents, whichever is greater). These individual and corporate income tax changes are retroactive to January 1, 2022.

Although we have seen several states introduce legislation that would decrease corporate and individual income tax rates, Idaho is the first state to pass such legislation this year.

Introduced this week, California AB 87 implements Governor Gavin Newsom’s proposed budget plan to allow taxpayers to again fully utilize business tax credits, like the R&D credit, and net operating loss deductions in 2022 (see our previous coverage on Governor Newsom’s proposed budget here).  For tax years 2020 to 2022, AB 85 (enacted in 2020), limited the amount of business tax credits that can be claimed annually to $5 million and suspended use of net operating loss deductions for business taxpayers with income of $1 million or more (see our previous coverage on AB 85 here and here).  On February 3rd, the Senate Budget and Fiscal Review Committee passed AB 87.  

Further, AB 1400, which proposed universal single-payer health care coverage and a health care cost control system for state residents, failed to advance out of the state Assembly by the January 31 deadline for bills introduced in 2021 and has been declared dead for the year.  Consequently,  ACA 11, which would have funded the single-payer healthcare system by imposing a variety of new taxes and tax increases, is effectively dead this year too (see our previous coverage on ACA 11 here). 

Following on Maryland’s heels, there are currently five separate digital advertising tax measures pending before the Massachusetts legislature. H. 2894 would impose a 5% tax on the annual digital advertising revenue from companies generating more than $25 million in digital advertising sales in Massachusetts. H. 2928 would not impose a tax directly, but would create a commission to study the potential effects of imposing a tax on digital advertising by those companies generating over $100 million in global revenue. H. 3081 would create a gross revenue tax on digital advertising services with a rate varying form 5% for companies with a minimum annual gross revenue of $50 million up to 15% for companies with annual gross revenue exceeding $200 million. H. 4042 would create a 6.25% excise tax on the annual revenue from the digital advertising services provided in Massachusetts, while exempting the first $500,000 in revenue from Massachusetts digital advertising services. H. 4179 is similar to H. 4042, but is a 6.25% gross receipts tax on revenue from digital advertising services, with the first $1 million in digital advertising service revenue in Massachusetts exempt.