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State & Local Tax Update: 5/24/16

Posted 2:09 PM by

Indiana Personal Property Tax Exemption

Starting in 2016, Indiana adopted a small business personal property tax exemption. This exemption exempts personal property for businesses that have less than $20,000 of taxable acquisition cost in a county. Prior to the 2016 legislative session, business owners had to complete an affidavit stating they had less than $20,000 in acquisition cost, sign and notarize the form. During the 2016 legislative session, the notarization requirement was removed retroactively. Currently, business owners have two options to claim the exemption:

  • Complete the affidavit form (nonnotarized) or
  • Download an updated Form 103-Long from the Department of Local Government Finance website and check the box stating they have less than $20,000 in acquisition cost; then sign the form and mail to their local Assessor’s office. 

If you would like additional information regarding the less than $20,000 personal property tax exemption, Chad Miller, as soon as possible.


Idaho Updates Guidelines on Contractors Working In-State

The Idaho State Tax Commission has revised guidelines provided on its Contractors Working in Idaho for contractors who work in Idaho, including out-of-state contractors and contractors working on federal projects in Idaho. The guidelines discuss activities that define contractors, property and fixtures, sales and use tax liability and exemptions, retailing activities, certain types of contractors, applicable forms and publications, and other related information. Revised guidelines clarify provisions applicable to contractors who install data cabling and when they are acting as retailers vs. contractors. 

Illinois Amends Guidance on Taxability of Delivery

Effective April 1, 2016, The Illinois Department of Revenue has amended regulations 86 IAC §§ 130.410 and 130.415,  providing details on the taxability of shipping and handling charges. Outgoing transportation and delivery charges are part of the gross receipts subject to tax when there is an inseparable link between the sale of tangible personal property and the transportation and delivery of that property. An inseparable link exists when the charges are not separately identified to the purchaser on the contract or invoice or when the charges are separately identified but the seller does not offer the option to receive the property in any other manner.

Internet purchases where the retailer does not have a brick and mortar store results in an inseparable link because the purchaser does not have the option to pick the item up and consequently the delivery charges should be included in gross receipts. For Internet retailers that provide purchasers with a pickup option there is no inseparable link and delivery charges are not taxable. The amended regulations also discuss incoming transportation and delivery costs as well as providing extensive examples on the taxability of delivery charges related to internet purchases.

Michigan Expands Industrial Processing Exemption

Purchases of tangible personal property used or consumed in an industrial processing activity to produce alcoholic beverages that are sold at retail by that industrial processor through its own locations are exempt from sales tax effective Nov. 30, 2015. Previously, the industrial processing exemption did not apply to tangible personal property used for the preparation of food or beverages by a retailer for ultimate sale at retail through its own locations. See Senate Bill 370 for more information. 

Minnesota Issues Guidance on Optional Warranty and Maintenance Contracts

The Minnesota Department of Revenue has issued a release explaining the sales tax treatment of optional maintenance and warranty contracts on equipment. This release does not apply to optional maintenance contracts on computer software which are governed by Minn. R. § 8130.9910. The release revokes and replaces Minnesota Revenue Notice No. 12-12, , Nov. 26, 2013 . The current release in substance does not differ in result from the revoked notice but clarifies the information and adds additional information about unbundled maintenance contracts. See Minnesota Revenue Notice No. 16-03 for more information. 

New Jersey Updates Guidance on Leases and Rentals

The New Jersey Division of Taxation has updated a bulletin that discusses the taxation of leases and rentals. The publication provides examples of how to calculate the sales tax on long-term leases. See S&U-12 for more information. 

Virginia Asserts Income Tax Nexus Based on In-State Administrative Activities

The Virginia Department of Taxation held that an employee performing accounting support services for a taxpayer creates nexus for corporate income tax purposes. The taxpayer is an S corporation providing Internet templates to customers and is registered outside of Virginia. The taxpayer has one employee working from home in Virginia who handles bookkeeping, payroll and human resource functions. The Department noted that the administrative services provided for the company are unrelated to the solicitation of sales and also exceed the protections of P.L. 86‐272.

Consequently, accounting support services create sufficient nexus for corporate income tax purposes unless the activities are de minimis in nature. The Department is unable to determine if the activities performed are de minimis compared to the taxpayer's overall operations. The Department further noted that a pass‐through entity with Virginia taxable income must pay withholding taxes unless there is an applicable exception. See Tax Commissioner Ruling 16-15 for more information. 

Wisconsin Issues Guidance on Educational Products, Goods and Services

The Wisconsin Department of Revenue has issued guidance concerning the sales tax treatment of educational products, goods, and services.

The article covers the following topics:

  • Live in-person educational services;
  • Live digital online educational services;
  • Tangible books and videos; and
  • Digital books, videos, and pre-recorded seminars.

See the article for more information.

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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