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New York State & Local Tax Update: November 2017

Posted 2:25 PM by

NY SALT Update

New York Issues Opinion on City Residency

An administrative law judge has agreed that the New York State Division of Taxation correctly determined that taxpayers were statutory residents of New York City for the 2011 through 2012 tax years. In this matter, the uncontested record revealed that the taxpayers were physically present for more than 183 days. Further, the taxpayers maintained a permanent place of abode in the city because they entered into a month-to-month license agreement for exclusive use of an apartment for more than six years until June 29, 2013, and continually and uninterruptedly maintained and resided at the apartment in 2011 and 2012. While one of the taxpayers was employed at a hospital completing her residency, neither taxpayer was a full-time undergraduate student; therefore, the apartment could not be viewed as a temporary dwelling place.

See In the Matter of the Petition of Shearer for more information.

New York Changes POA Application Process

The New York State Department of Taxation and Finance has issued an important notice advising taxpayers that it has changed its rules and regulations relating to powers of attorney (POA) for matters administered by the Department (including Division of Tax Appeals proceedings) and the New York City Department of Finance. Form POA-1 has been revised for all state taxes, except estate tax and exempt organization applications, and has been shortened to one page, with only the taxpayer's signature now required. POAs for estate tax matters (Form ET-14) and exempt organizations (Form ST-119.4) have also been revised.

The New York State Department of Taxation and Finance has designed a web application to process Form POA-1 from a taxpayer's online services account. Taxpayers not using the web application must fax or mail the form. The Department will continue to accept a POA that was completed on a previous version of Form POA-1, as long as the POA conforms to the Department's rules and regulations. A POA filed on the (6/17) version of POA-1 does not automatically revoke a POA that is already on file with the Department, unless the POA specifically states it revokes all prior POAs.

For more information, see New York Special Tax Department Notice No. N-17-9.

New York Issues Opinion on Sales Tax Refund

A taxpayer was denied a refund of sales tax erroneously paid on its sales of securities rating services because the taxpayer did not refund the tax paid to its clients. The taxpayer provides securities rating services. During the period at issue, the taxpayer was unsure whether the service that it provided was subject to New York sales tax and requested an advisory opinion from the New York State Department of Taxation and Finance as to whether its services were taxable. The advisory opinion was not issued until 18 months later. In the interim, the taxpayer issued invoices to its clients that included the statement “includes any applicable sales taxes,” and allocated the invoice amount into taxable and non-taxable charges and applicable sales tax. The sales tax was remitted to the Department.

The New York State Department of Taxation and Finance subsequently determined in its advisory opinion that the taxpayer's credit rating service was not subject to sales tax, but was subject to the NYC Tax on credit rating services under N.Y. Tax Law § 1212-A(a)(3) for services delivered in New York City. The taxpayer requested a refund of the sales tax that it paid on sales of securities rating services, which was denied, and the taxpayer appealed. The taxpayer argued that it paid the tax on behalf of its customers and, thus, its customers were not required to be refunded in order for it to prevail in this matter. However, sales tax was not paid on the total amount of the invoice. Rather, the taxpayer subtracted the sales tax rate from the invoice amount. The customer paid the entire amount set forth on the invoice, a portion of which represented the sales tax that was remitted to the Division.

The administrative law judge ruled that the taxpayer was only entitled to a refund if it demonstrated that the sales tax had been refunded to its customers. Since the taxpayer did not refund its customers, the claims for refund were denied. 

For more information, see In the Matter of the Petitions of Kroll Bond Rating Agency, Inc.

About the Author
Donna Niesen is a partner in Katz, Sapper & Miller’s State and Local Tax Group. Donna helps keep clients up-to-date on the multitude of tax rules and requirements in all 50 states. She guides them in the right direction as they address the complex issues that emerge on both the state and local levels. Connect with her on LinkedIn.

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