The dog days of summer are here, and the Fiefdoms are still busy. First, the Amazon sales tax law plague has spread further west, as Missouri has enacted a version of this now oft-mimicked piece of legislation. I doubt they will be the last ones to wade into this cesspool. On a completely different note, Massachusetts recently enacted market based sourcing for corporate income tax along with the dreaded throw-out rule. In addition, Massachusetts will now charge sales tax on a whole bevy of computer services previously not taxed. Interestingly enough, all of these new tax laws were enacted by overriding the veto of the Governor. You don’t see many tax laws get enacted as a result of an override. Could this be the beginning of the return of Taxachussets? It sure does look like it. Have an enjoyable rest of your summer.

Illinois – Sales and Use Tax – Certain Licenses of Software Not Taxable, Even When Reseller Is Involved

The Illinois Department of Revenue has issued a general information letter discussing sales of canned software and the exemption of certain software licenses from sales tax. The release stated that a reseller of software will not be liable for sales tax, where a license agreement exists between the original seller of the software and the customer, provided that the reseller maintains a copy of the signed license agreement in its records and other criteria concerning the license transaction are met. General Information Letter ST 13-0032-GIL.

Illinois – Sales and Use Tax – Payment to Creditors Other Than State Was Willful Failure to Pay

An individual who was a vice president, treasurer, and secretary of a business that failed without paying some Illinois sales and use tax was an admittedly responsible person who willfully failed to pay the tax even though he surrendered the business’s assets and his personal residence to pay off other creditors. The decision to transfer control of all assets of the business before verifying that the company’s tax liability had been paid was deemed to be a conscious and deliberate choice made by the individual and his partner. The choice implicitly entailed a decision to prefer creditors of the state and, therefore, constituted a conscious and deliberate or “willful” decision on their part. Administrative Hearing Decision No. ST 13-05.

Massachusetts – Corporate Income Tax – Market-Based Sourcing and Throw-Out Rule Enacted

The Massachusetts Legislature has overridden the Governor’s veto of a bill that changes the apportionment formula for corporate excise tax purposes to market-based sourcing. Applicable to tax years after 2013, sales, other than sales of tangible personal property, are considered in the state if the corporation’s market for the sale is in the state. Previously, sales, other than sales of tangible personal property, were considered in the state if the income-producing activity was performed in the state and, if the income-producing activity was performed both in and out of the state.

In addition, the state also adopted a throw-out rule by which sales, other than sales of tangible personal property, to a state where the taxpayer is not taxable, or if the location of the sale cannot be determined or reasonably approximated, are excluded from both the numerator and the denominator of the sales factor. H.B. 3581/H.B 3535.

Massachusetts – Sales and Use Tax – Tax on Computer Services Enacted

The Massachusetts Senate and House of Representatives have voted to override a veto from the governor and enact legislation that imposes sales and use tax on computer system design services and the modification, integration, enhancement, installation, or configuration of standardized software, effective July 31, 2013. “Computer system design services” means the planning, consulting, or designing of computer systems that integrate computer hardware, software, or communication technologies and are provided by a vendor or a third party. The tax does not apply to data access, data processing, or information management services. H.B. 3581/H.B 3535.

Missouri – Sales Tax- Amazon Law Adopted

A new law in Missouri contains the now pandemic remote seller affiliate nexus and “click-through” nexus provisions. The new law also states that a vendor is presumed to “engage in business activities” within Missouri for state sales/use tax purposes if any person, other than a common carrier acting in its capacity as such, that has substantial nexus with Missouri:

  • Sells a similar line of products as the vendor and does so under the same or a similar business name;
  • Maintains an office, distribution facility, warehouse, or storage place, or similar place of business in Missouri to facilitate the delivery of property or services sold by the vendor to the vendor’s customers;
  • Delivers, installs, assembles, or performs maintenance services for the vendor’s customers within Missouri;
  • Facilitates the vendor’s delivery of property to customers in Missouri by allowing the vendor’s customers to pick up property sold by the vendor at an office, distribution facility, warehouse, storage place, or similar place of business maintained by the person in Missouri; or
  • Conducts any other activities in Missouri that are significantly associated with the vendor’s

S.B. 23.

New Jersey – Sales Tax – Guidance Issued on Cloud Computing

New Jersey issued a Technical Bulletin addresses the application of the New Jersey Sales and Use Tax to the sale of cloud computing. Cloud computing refers to services that allow a customer to access and use the software of a service provider. Per the release, cloud computing is offered in three product categories: Software as a Service (“SaaS”), Platform as a Service (“PaaS”), and Infrastructure as a Service (“IaaS”). The release lists out the taxability of the various aspects of cloud computing. TB-72.

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