Policy and Legislation

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We recently launched the Sutherland SALT Digital Economy Forum, which provides comprehensive state tax resources regarding the taxation of the digital economy. Following is a summary of recent digital economy administrative guidance, noteworthy cases and legislation. If you would like to learn more about the Sutherland SALT Digital Economy Forum or any of the issues covered here, please contact us.

Sales, Use and Other Transaction Taxes

Administrative Guidance

  • Massachusetts Soliciting Comments on Software Directive. On February 7, the Massachusetts Department of Revenue issued a draft directive that addresses the application of the Massachusetts sales and use tax to sales of software and computer-related services.
  • Wisconsin Updates Guidance Regarding the Sales and Use Tax Treatment of Computer Hardware, Software, and Services; Addresses Cloud Computing. On January 25, 2013, the Wisconsin Department of Revenue (DOR) updated its software guidance for sales occurring on and after October 1, 2009. While the taxability conclusions and destination-based sourcing regime remain largely unchanged, the DOR expressly addressed software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS).
  • Missouri DOR: Computer Software May Not Be Eligible for Manufacturing Exemption. The Missouri Department of Revenue (DOR) recently determined that a company’s software programs were not eligible for the manufacturing equipment exemptions from sales and use tax because the software was not directly used in the manufacturing process.

Continue Reading Digital Economy Update: Administrative Guidance, Noteworthy Cases and Legislation

The Nebraska Department of Revenue (Department) recently declared, by way of an article in a third-party newsletter, that it has the authority to “examine all aspects of a return, including federal items.” George Kilpatrick, Nebraska Revenue Department’s Audit and Examination Powers Discussed, THE NEBRASKA CPA (Oct. 2012). While the article is aimed at personal income taxpayers, corporate taxpayers have good reason to be concerned because the statutory language relied on by the Department is applicable also to the corporate income tax.
Continue Reading Nebraska’s Below-the-Belt Decision to Audit “Above the Line”

The Kansas Attorney General issued an opinion in which it concluded that passing proposed legislation during the 2013 legislative session to amend legislation enacted in 2012 would not result in an unconstitutional retroactive tax increase. The proposed legislation, if signed into law, would define the tax basis for sales of business interests or shares, eliminate credits…

On August 21, the California State Senate passed AB 2323, requiring the State Board of Equalization (BOE) to issue written opinions in cases where the amount in controversy exceeds $500,000. If the Governor signs the legislation as expected, the BOE will be required to publish written, formal memorandum or summary opinions on its website within…

Illinois Senate President John Cullerton introduced a bill on May 9 that would require publicly traded corporations doing business in Illinois, and those that are at least 50% owned by a publicly traded company, to disclose certain income tax liability information for eventual publication on an Internet database. SB 282 would require the information, usually considered confidential, to be disclosed by corporations that are not obligated to file a corporate income tax return. The data would be publicly searchable, although the data would not be disclosed until two years after the relevant tax year. Although the General Assembly adjourned on May 31 without voting on the bill, Senator Cullerton plans to work on the bill over the summer with the intent of holding hearings before the November veto session.

The information that Illinois would require to be disclosed in an annual statement filed with the Secretary of State includes, among other items: (1) name and address of the corporation; (2) name and address of any corporation that owns 50% or more of the voting stock; (3) modified taxable income; (4) business and nonbusiness income; (5) apportioned income; (6) Illinois apportionment factor; (7) Illinois credits claimed; and (8) Illinois tax liability before and after credits.Continue Reading Illinois Senate President Wants Corporate Tax Liabilities on Internet

In the latest edition of A Pinch of SALT, Sutherland SALT’s Carley Roberts, Prentiss Willson and Maria Todorova discuss the California Franchise Tax Board’s recent chief counsel ruling stating that California’s alternative apportionment provisions do not apply to the combined group’s intrastate apportionment results.

Read “Intrastate Apportionment: Ripe for Equitable Relief?”…

In an interesting move that will make the New York State Advisory Opinion process more transparent, the New York State Department of Taxation and Finance has established a new process that will allow interested parties to comment on pending Advisory Opinions. When the Department receives a request for an Advisory Opinion, the Department will post…

Florida Department of Revenue (DOR) ruled that tuition receipts from online courses are sourced to the location of the student, as opposed to the location where the costs of performance (COP) are incurred. Technical Assistance Advisement, 12C1-006 (May 17, 2012). While the ruling acknowledges that Florida applies COP for sourcing service revenue (by virtue of…