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State & Local Tax Update: 3/4/16

Posted 5:00 AM by

Personal Property Changes for the 2016 Filing Season

With the 2016 filing season underway, please be aware that substantial changes have occurred to Indiana personal property tax filings. For example:

  • Assessment date changed to Jan. 1, 2016
  • Exemption for companies that have less than $20,000 of asset costs in a county
  • Removal of the duplicate filing requirement for assessments greater than $150,000
  • Exemption application Form 136 date change to April 1

For more information on these and other personal property tax filing changes, contact your KSM advisor or our property tax leader, Chad Miller, as soon as possible.


Alabama Updates Rule on Contractor Liability

Effective Feb. 10, 2016, Alabama amended Rule 810-6-1-.46 to reflect specific definitions of when the contractor-specific sales tax rules apply to a transaction. The definitions are the result of various Alabama court cases.  

California Revises Publication for Construction and Building Contractors

The California State Board of Equalization has reissued Publication 9. The publication, which has been rewritten and expanded, provides basic information on the California Sales and Use Tax Law and applicable regulations for building construction contractors, subcontractors and restaurant equipment contractors.

Georgia Amends Regulation on Deduction for Taxes Paid

Effective Oct. 29, 2015, Georgia has amended Ga. Comp. R. & Regs 560-7-4-.01 to allow a subtraction at the individual level for Texas Franchise Tax and other entity level income taxes paid by a pass through entity owned by the individual. See Rule 560-7-4-01 for details on how to calculate the deduction. 

Michigan Issues Bulletin on Determination of Property as TPP or Real Property

The Michigan Department of Treasury has issued RAB 2016-4 outlining the factors it will apply in determining whether property remains tangible personal property or becomes a fixture through affixation to real estate. This determination can have an important impact on how the Michigan sales and use tax rules apply.  

Michigan Issues Guidance on Cloud-Computing Products

The Michigan Department of Treasury has issued a release announcing a change in its policy on the taxation of certain prewritten computer software delivered electronically in light of the Michigan Court of Appeals decision in Auto-Owners Insurance Company v. Department of Treasury, Dkt. No. 321505, 10/27/2015. As a result of this and other decisions, the department has announced it will give these judicial decisions full retroactive effect, and announced procedures for taxpayers to claim refunds. See Notice to Taxpayers Regarding Auto-Owners Insurance Company v. Michigan Department of Treasury for details.  

Missouri Issues PLR on Credit for Tax Paid

Individual partners of a Missouri limited liability partnership (LLP) will be allowed to claim a credit on their Missouri individual income tax returns for their proportionate share of the Texas Margin tax, but not the Washington business and occupation tax, paid directly by the limited partnership, which operates as a broker/dealer and conducts business in all 50 states. 

The basis of the Texas Margin tax is federal income, as adjusted, and the Texas Margin  tax is an income tax for purposes of Missouri law. Accordingly, individual partners of the LLP are allowed to claim a credit on their Missouri individual income tax returns for their proportionate share of the Texas Margin tax. See Private Letter Ruling 7665 for more information.

North Carolina Updates Guidance on Repair, Maintenance and Installation Charges

Effective March 1, 2016, North Carolina sales tax will apply to repair, maintenance and installation services, even if these charges are separately stated. North Carolina has issued a few publications addressing questions surrounding application of the new law, including: SD-16-2: Sales and Use Tax Directive on Repair, Maintenance and Installation Services: and Important Notice regarding the Sale or Renewal of a Service Contract.

South Carolina Issues Publication for Auto and Truck Dealers

The South Carolina Department of Revenue has updated its sales and use tax guide for automobile and truck dealers. The purpose of the guide is to provide information on transactions involving sales of motor vehicles to nonresidents, leases, short-term rentals, maximum tax provisions, loaner cars, repairs and other issues.

The guide divided into the following sections:

  1. Responsibility of the dealer;
  2. Sales, leases, and rentals of vehicles, trailers, and semitrailers;
  3. Repairs of motor vehicles, trailers, and semitrailers; and
  4. Gross proceeds of sales and how to measure the tax. 

See 2016 Sales and Use Tax Guide for Automobile and Truck Dealers for more information.  

Tennessee Issues Guidance on Taxation of Computer Software Maintenance Contracts

The Tennessee Department of Revenue has issued Tennessee Important Notice 15-25 explaining the taxation of computer software maintenance contracts. Sales of computer service maintenance contracts are taxable if they are sold for computer software located in Tennessee. If the location of the computer software is not known, the sales of those contracts are taxable if the purchaser has a Tennessee address.

Sales of support services that meet all three of the following conditions are not taxable as part of the software maintenance contract:

  1. The seller sells the support services separately from the sale of the computer software maintenance contract; 
  2. The purchaser is not required to purchase the support services in order to purchase the software maintenance contract; and
  3. The support services do not include the installation, transfer, repair, or maintenance, including updates and upgrades, of the computer software. 

No additional tax will be owed on any of the repairs or maintenance (including updates and upgrades) to the software that are performed as part of the contract. 

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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