2013 Trending for Indiana Real Property Taxes
Indiana counties are currently wrapping up their 2013 trending assessments. During a trending year, county and township assessors are required to review arms-length transaction sales within a given time period and trend values up or down accordingly. Once the values have been updated, ratio studies are required to be submitted to the Department of Local Government Finance (DLGF). The DLGF will review the ratio study and approve or deny it. Once the ratio study has been approved and values have been certified counties will start releasing notice of assessments.
Property owners are encouraged to review their assessment notices (Form-11) as soon as they receive them to make sure the assessed value looks appropriate. The property owner has 45 days to file an appeal after the mailing of the first notice of assessment. When a property owner receives their tax bill, it is often too late to appeal the assessed value for that year. Some counties have already mailed their notice of assessments, and the 45-day appeal period is well underway.
We would be happy to review the reassessed value of your commercial property to help you consider whether an appeal should be filed. For assistance, contact your KSM advisor or KSM property tax leader Chad Miller as soon as you receive your Form-11.
U.S. Senate Passes Marketplace Fairness Act
The U.S. Senate has passed S743, the Marketplace Fairness Act of 2013. S743 generally provides that states can require remote sellers to collect sales tax on goods shipped to consumers in the state. The bill provides an exception for small retailers that have $1 million or less of gross annual receipts in total remote sales in the United States for the preceding calendar year. The bill has been referred to the House Committee on the Judiciary.
Indiana Lawmakers Override Governor's Veto
On June 12, the Indiana House voted 68-23 and the Indiana Senate 34-12 to override Governor Pence's veto of HEA 1546: Tax Administration. The bill, which will now become law, addresses withholding remittance due dates, late penalties for partnerships and corporations, sales tax on gasoline, Jackson and Pulaski County LOIT extension, Vigo County Innkeeper's tax, and other tax related provisions. See HEA 1546 for details.
Indiana Rules Texas Franchise Tax Is a Required Add Back
A telephone company was required to add back Texas Franchise Tax to federal taxable income for the purpose of calculating its Indiana adjusted gross income. Ind. Code § 6-3-1-3.5(b) requires an add back for taxes based on or measured by income in calculating adjusted gross income. As the result of an audit, the Department of Revenue issued a proposed assessment for additional income tax due to the taxpayer's failure to add back the Texas Franchise Tax. In its protest, the taxpayer argued that it was not required to add back the tax because the Texas Franchise Tax is not an income tax. The Department ruled that because the Texas tax starts with and is based on the entity's income as reported on the federal income tax, it is apparent that the tax is based on or measured by income and, therefore, should be added back. See LOF 02-20120562 for details.
Indiana Rules on Software Maintenance Agreements
A taxpayer's purchases of computer software maintenance agreements, which included services, were considered unitary transactions and, therefore, subject to use tax on the total amount of the maintenance agreements. As the result of an audit, the taxpayer was assessed use tax on the total contract price of software maintenance agreements. The taxpayer was charged one price for the contract, a portion of which represented services such as phone support. Although the taxpayer protested the portion of the assessment related to the services, the Department of Revenue determined that the software agreements were unitary transactions that included items of personal property and services, which are furnished under a single order or agreement and for which a total combined charge or price is calculated. Accordingly, the entire contract price of the maintenance agreements, including the amount representing services, was subject to use tax, rather than just the portion relating to the software. See LOF 04-20120689 for details.
Arizona Issues New Guidance on Composite Returns
The Arizona Department of Revenue reiterates that it will accept a composite return of the qualifying nonresident shareholders of an S corporation or of the qualifying nonresident individual partners of a partnership in lieu of each such shareholder or each such partner filing a separate Arizona individual income tax return, provided certain conditions are met. The new ruling also sets forth the limitations and conditions that will apply to the members included in the composite return; describes what the filing of the composite return will consist of; explains how to compute each member's deductions, exemptions and liability; and covers certain other matters relating to composite returns. See Ruling 13-2 for details.
Connecticut Changes Business Entity Tax Filings
The Connecticut Department of Revenue Services has issued a special notice describing legislative changes to the Connecticut business entity tax, making the tax payable biennially rather than annually. The amount of the tax remains $250. For taxable years commencing on or after Jan. 1, 2013, a business entity will be required to file Form OP-424, Business Entity Tax Return, and pay the business entity tax every other year, rather than every year. Entities will file and pay on or before the 15th day of the fourth month following the close of every other taxable year. The notice contains a chart showing due dates applicable to various taxable years. For example, for taxable years Jan. 1, 2013, through Dec. 31, 2013, and Jan. 1, 2014, through Dec. 31, 2014, the due date would be April 15, 2015. See Connecticut Special Notice 2013(1) for details.
Illinois Issues Guidance to Construction Contractors
The Illinois Department of Revenue has issued a general information release stating that construction contractors who physically incorporate tangible personal property into real estate owned by exempt organizations or governmental entities that hold tax exempt "E" numbers can purchase such property tax free by providing their suppliers with the certification requirements stated in Ill. Admin. Code § 130.2075(d). Among the required documentation is a copy of a certification from the contractor stating that the purchase is for conversion into real estate under a contract with an exempt organization or governmental entity, identifying the organization or entity by name and address and stating on what date the contract was entered into. Both the "E" number and the certification must be provided to the supplier by the contractor. See ST 13-0012-GIL for details.
Kentucky Issues Guidance on Taxability of Federal Medical Device Excise Tax and Other Charges; Use Tax Notification Rules
The Kentucky Department of Revenue has issued a new Sales Tax Facts addressing the treatment of the federal medical device excise tax, credit card surcharges and local restaurant taxes for Kentucky sales and use tax purposes. As part of the federal Patient Protection and Affordable Health Care Act, a new 2.3% medical device excise tax has been imposed on manufacturers and importers based on their sales price of certain medical devices beginning Jan. 1, 2013. Manufacturers and importers may pass this tax on to their customers, and if this charge appears as a line item on a retail transaction, the charge will be subject to the Kentucky sales and use tax if the medical device is otherwise taxable in Kentucky. Credit card surcharges, if passed on to the consumer by the retailer, become part of gross receipts and are subject to Kentucky sales and use tax. Ky. Rev. Stat. Ann. § 91A.400 authorizes fourth- and fifth-class cities to impose a tax up to 3% on restaurant receipts for support of local tourist and convention activity. If the restaurant chooses to pass the tax on to the consumer, any collections are part of gross receipts and are subject to sales tax. Also effective July 1, 2013, out-of- state retailers with no legal requirement to collect tax in Kentucky must notify their Kentucky customers that use tax must be reported and paid to the DOR on applicable purchases. These notifications must be posted on the retailer's website, on any electronic confirmation order, and on other applicable invoicing documents or the notification can be provided as a supplemental page or by electronic link. See June 2013 Sales Tax Facts for details.
New York Court Upholds Internet Tax
The Court of Appeals has rejected the constitutional challenges of Amazon.com and Overstock.com to New York Tax Law § 1101(b)(8)(vi) (the "Internet Tax") and held that the Internet Tax does not violate the Commerce Clause or the Due Process Clause of the U.S. Constitution. See Dkt. No. 33 for details.
Texas Rules on Taxability of Broadcast E-mails
The Texas Comptroller of Public Accounts has ruled that broadcast e-mail services and e-mail advertisements provided by a real estate television producer are subject to sales tax as telecommunications services. The taxpayer produces real estate television shows for homebuilders, operates a website through which it offers Internet-based services for the homebuilders, and, for an additional and separate fee, provides "hot sheets" (i.e., weekly e-mail advertisements of the builders' homes and residential communities) and "broadcast e-mails" (i.e., advertisements of upcoming events organized by the homebuilders promoting homes for sale and incentives). Texas taxes telecommunications services, which are the electronic or electrical transmission, conveyance, routing or reception of sounds, signals, data or information utilizing wires, cable, radio waves, microwaves, satellites, fiber optics, or any other method now in existence or that may be devised, including but not limited to long-distance telephone service, and does not include the storage of data or information for subsequent retrieval or the processing, or reception and processing, of data or information intended to change its form or content. In this case, the hot sheet and broadcast e-mail services are taxable telecommunications services because the taxpayer is engaged in electronically transmitting information via e-mail transmissions. The customers are not paying for the placement of advertisements, but rather are paying solely for the electronic transmission of information via e-mail and the taxpayer does nothing more than provide the means for electronically transmitting its customers' advertisements. See Comptroller's Decision 105,515 for details.