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.
Colorado: Direct Marketing Association Injunction to Be Dissolved
The United States Court of Appeals for the Tenth Circuit has dismissed the appeal in the case brought by the Direct Marketing Association that barred enforcement of Colorado's notice and reporting requirements on retailers who do not collect taxes on sales to Colorado purchasers. A federal district court had issued a permanent injunction that barred enforcement of those requirements after concluding that they violated the Commerce Clause. Without reaching the merits of the Commerce Clause claims, the appellate court ordered that the injunction be dissolved and the appeal be dismissed because the federal Tax Injunction Act divested the district court of jurisdiction over those claims. Direct Marketing Assn. v. Brohl, et al., U.S. Ct. App., 10th Cir., Dkt. No. 12-1175, 08/20/2013
Illinois Court Rules Cook County Use Tax Unconstitutional
The Cook County Circuit Court granted summary judgment to the taxpayers prohibiting enforcement of the Non-Titled Personal Property Use Tax ("use tax") in holding that the Non-Titled Personal Property Use Tax Ordinance ("ordinance") violates the limitation on home rule powers, is an unconstitutional ad valorem tax, and is per se discriminatory against interstate commerce. Effective April 1, 2013, the Cook County Board enacted the ordinance imposing a use tax on the use within Cook County of non-titled personal property purchased outside of Cook County. The court noted that under ILCS Chapter 55 § 5/5-1009 no home rule county has the authority to impose a use tax. Consequently, the "use tax on the value of personal property is a tax on the selling price or purchase price of the tangible personal property when first subjected to use in the County," which is prohibited by a home rule county. Additionally, since the ordinance applies the tax to the value of the personal property, the tax violates a specific prohibition by the Illinois Constitution on the power to tax. Finally, the use tax is per se discriminatory against interstate commerce because purchase may be made in a state that does not impose a tax on sales resulting in a tax only in Cook County on out-of-state purchases. The court further noted that the voluntary payment doctrine does not apply because the taxpayers are not seeking a refund of the tax, but rather are seeking a declaratory judgment prohibiting enforcement of the use tax. (Reed Smith LLP, et. al. v. Ali, et. al., Cook County Cir. Ct., Dkt. No. 2013 L 050454, 10/11/2013.)
Illinois Court Rules Pass-Through Miles Are Included in Sales Factor Numerator
The Cook County Circuit Court has reversed the trial court's summary judgment determination and concluded that the Department of Revenue can tax pass-through miles as revenue miles in Illinois pursuant to ILCS Chapter 35 § 5/304(d)(1). The taxpayer is an interstate trucking company trying to recover funds submitted in protest following an audit where the department took the position that the taxpayer should include miles driven through Illinois without picking up or delivering goods (i.e., pass-through miles) in the numerator of its apportionment factor as revenue miles "in this State." The circuit court determined the "pass-through miles establish a physical and economic presence in Illinois which must be taxed according to ILCS Chapter 35 § 5/304(d)(1)." The circuit court further defined "in this State" to include having a presence or existence in Illinois and the taxpayer meets this definition since it has property and employees physically present in Illinois and utilizes infrastructure and roadways in Illinois. The court noted the taxpayer also has an economic connection with the state by paying Illinois fuel tax and that revenue miles are not conditional on the taxpayer generating income but rather that the miles be traveled "for a consideration." Finally, the court pointed out that the statute was amended in 2008 to expressly include pass-through miles in the apportionment factor. (White v. Hamer, et al., Cook County Cir. Ct., Dkt. No. 11 L 50282, 09/30/2013.)
Kentucky Remote Vendor Use Tax Notice Reminder
The Kentucky Department of Revenue has posted a notice on their website reminding remote vendors that, effective July 1, 2013, out-of-state retailers with no legal requirement to collect tax in Kentucky, and who expect more than $100,000 in gross annual sales to Kentucky residents, must notify their Kentucky customers that use tax must be reported and paid directly to the Department of Revenue on applicable purchases in accordance with Ky. Rev. Stat. Ann. § 139.450 . The notice must be readily visible and contain the information set forth as follows: (1) the retailer is not required to and does not collect Kentucky sales or use tax; (2) the purchase may be subject to Kentucky use tax unless the purchase is exempt from taxation in Kentucky; (3) the purchase is not exempt merely because it is made over the Internet, by catalog, or by other remote means; and (4) the Commonwealth of Kentucky requires Kentucky purchasers to report all purchases of tangible personal property or digital property that are not taxed by the retailer and pay use tax on those purchases unless exempt under Kentucky law. The tax may be reported and paid on the Kentucky individual income tax return or by filing a consumer use tax return with the Kentucky Department of Revenue. See KY Notice to Remote Vendors for more information.
Ohio Issues Information Release Outlining New Tiered CAT Minimum Fees
Effective Jan. 1, 2014, the Ohio annual minimum tax (AMT) for Commercial Activity Tax will be based on a new tiered structure. In general, persons with $150,000 or less in taxable gross receipts are not subject to the CAT. The CAT rate of 0.26% remains unchanged and continues to apply to those taxpayers with taxable gross receipts over $1 million (with the first $1 million in taxable gross receipts excluded from CAT liability). Currently, the AMT is $150. For tax periods beginning on January 1, 2014, and thereafter, the AMT will become a tiered structure, and taxpayers will pay an amount that corresponds with their overall commercial activity. The taxpayer will use its previous calendar year's taxable gross receipts to determine the current year's AMT. Taxpayers with $1 million or less in taxable gross receipts will pay $150 AMT (no change). The AMT for taxpayers with total taxable gross receipts of more than $1 million but less than or equal to $2 million will be $800; AMT for taxpayers with taxable gross receipts more than $2 million but less than or equal to $4 million, $2,100; and AMT for taxpayers with taxable gross receipts in excess of $4 million, $2,600. See Information Release 2013-05 for more information.
New Jersey Announces 2013 Composite Tax Rate
The New Jersey Division of Taxation has announced that for tax years beginning on or after Jan. 1, 2013, all members who elect to participate in a composite return filing will be required to pay tax at the highest rate, in compliance with N.J. Admin. Code § 18:35-5.2. The division had previously permitted members with New Jersey sourced income of less than $250,000 to apply the 6.37% tax rate rather than the highest New Jersey tax rate. The division reminds taxpayers that participation in a composite return is elective. If the nonresident individual does not believe that the benefits derived from the composite return outweigh the additional tax paid, they can file an individual nonresident return (Form NJ-1040NR). As a result of the enforcement of the regulation, some filing entities may receive a notice for failure to make the required estimated payments. If the filing entity believes the correct estimated payments were remitted using the two tiered tax rate calculation, please contact the division at: New Jersey Division of Taxation ITAB - Composite Return P.O. Box 288 Trenton, NJ 08646-0288
Texas Rules No Franchise Tax Nexus for Out-of-State Online Vendor
The Texas Comptroller of Public Accounts has ruled that a Florida LLC that offered nutritional supplements to the general public through an Internet website was not subject to the Texas franchise tax. Franchise tax is imposed on each taxable entity that does business in Texas or that is chartered or organized in Texas. For receipts to be taxable by Texas, the act done or property producing the income must be located in Texas. It is the localization of the transaction in Texas and not the place of physical handing over or receiving of money that is significant. In this case, by simply making assertions in the pleadings, the comptroller failed to meet its burden to establish a prima facie case that the LLC did business in Texas. See Decision 107,715 for details.