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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.


Well the Amazon law has spawned a child, and an ugly one at that, The Marketplace Fairness Act. This interesting piece of legislation has been around in one iteration or another for years, and it has now been passed in the United State Senate. There is an old adage in the law, bad facts make bad law. Well in this case, short sighted self-serving Senators make short sighted, unenforceable, unconstitutional, and overburdensome tax law. If this Act passes in the House, and the President signs it, the words quagmire and disaster will take on whole new meanings. The states can’t handle the tax collection responsibilities that they already have and their taxation websites are already labyrinthal and outdated at best. Couple this with the eventual unleashing of various States’ Department of Taxation auditors like locusts across the country, and its going to get ugly. This doesn’t even take into account the timing issue. Do we really think passing this legislation while Obamacare is coming into force and is still a complete unknown is such a good idea? So, I guess burdening small businesses with additional regulatory, collecting, and remitting responsibilities as we pull out of a recession makes sense? Maybe I’m missing something. Have a pleasant May.

The United States Senate Passes The Marketplace Fairness Act, House is Up Next

In a brazen disregard for Constitutional and Supreme Court Law, the Senate has passed the Marketplace Fairness Act. The Act grants States the authority to compel online and catalog retailers (“remote sellers”), no matter where they are located, to collect sales tax at the time of a transaction. As a result, remote sellers will now have same tax collection requirements as brick and mortar businesses UNLESS they meet the small seller exception of less than $1 million in remote sales. This law, if passed, will in effect overturn the 1992 US Supreme Court landmark decision in Quill v. North Dakota, 504 U.S. 298(1992), which held that an out of state corporation must have a physical presence in a state before it can be subject to sales tax collection and remittance responsibilities.

Now keep in mind that there is a caveat, states are only granted this authority after they have simplified their sales tax laws. Only some states have undergone this process to date, and those states that have met the prescribed requirements under this Act can start collecting sales tax 90 days after the bill is signed by the President. S. 336.

Alabama – Corporate Income Tax – New Rule Implements Move from “Costs of Performance” to “Market-Sourcing” of Sales Other than Tangible Personal Property

The Alabama Department of Revenue has now finalized a new rule implementing legislation enacted during 2011 regarding Alabama’s corporate income tax apportionment formula, which amended the sales factor sourcing rule for sales other than sales of tangible personal property to reflect Alabama’s move from “greater costs of performance” to “market sourcing” for taxable years beginning on or after December 31, 2010. Al. Rule 810-27-1-.71.01.

Idaho – Sales Tax – New Law Creates Exemption for Cloud Computing as a Service

A new law excludes from the definition of taxable “tangible personal property” application software accessed over the Internet or through wireless media. “Application software accessed over the Internet or through wireless media” means the right to use computer software where the software is accessed over the Internet or through wireless media from a location owned or maintained by the seller or an agent of the seller and is not loaded and left at the user’s location.

The term does not include such remotely accessed computer software if the primary purpose of such computer software is for entertainment use, or if the vendor of that computer software offers for sale, in a storage media or by an electronic download, to the user’s computer or server, and either directly or through wholesale or retail channels, that same computer software or comparable computer software that performs the same functions. H.B. 243.

Kansas – Sales/Use – New Law Provides Remote Seller “Click-Thru” and Affiliate Nexus Provisions

A new law implements “click-thru” and affiliate nexus provisions for Kansas sales/use tax purposes by expanding the definition of a retailer “doing business” in Kansas for state sales/use tax collection purposes to generally include those retailers that enter into certain agreements with Kansas residents, or with in-state affiliates selling similar products, having an in-state physical location/warehouse or employees/agents, using substantially the same trademarks/trade names, and/or conducting in-state activities that are significantly associated with the retailer’s ability to establish and maintain an in-state market.

Qualifying agreements include those entered into with one or more Kansas residents under which the resident, in exchange for some consideration, directly or indirectly refers potential customers from Kansas so long as the cumulative gross receipts stemming from transactions generated by such references exceed $10,000 during the preceding twelve months. These two new “click-thru” and affiliate nexus presumptions may be rebutted if retailers submit sufficient proof that they do not meet the requirements established in the expanded definition. S.B. 83.


With the end of March Madness, spring appears to finally have sprung, and my home state of New York continues to show that their interpretation of the US Constitution has sprung a leak, as their application of long standing precedent and legal logic differs significantly from reality. As a New York court once again affirms this ridiculous “Amazon/Click Through Nexus” law, you really come to question, well… I’ll just leave it there. Meanwhile, another state jumps into the Amazon pool as Utah comes up with an incentivized voluntary sales collection regime, read bribery, for remote sellers. I have seen some interesting ways to try and get compliance, but this one may very well take the cake. Have a great April.

Idaho – Income Taxes – New Law Revises Procedure for Forgoing Net Operating Loss (NOL) “Carrybacks”

Idaho recently retroactively passed legislation that “simplifies” the treatment of net operating losses (NOLs) for Idaho individual and/or corporate income tax purposes by eliminating the required separate state election to forego an NOL “carryback” for taxpayers wanting to carry forward all NOLs (i.e., prior Idaho law required such taxpayers to make a separate election to forego the NOL carryback by checking a box on the Idaho return). Revising the default rule, taxpayers wanting to claim an NOL carryback for any taxable year commencing on or after January 1, 2013, must now file an amended return carrying the loss back within one year of the end of the taxable year of the NOL that results in such carryback. H.B. 184.

New York – Sales Tax – Click-Through Nexus Provision Is Constitutional on Its Face

Online retailers appellants who sell their products solely through the Internet, failed to demonstrate that a statutory provision that requires out-of-state Internet retailers with no physical presence in New York to collect New York sales and use taxes is facially unconstitutional under either the Commerce Clause or the Due Process Clause. The court held that the statute at issue created a rebuttable presumption that a retailer solicits business in New York if any in-state entity is compensated for directly or indirectly referring customers to the retailer, whether by a link on an Internet website or otherwise, and the cumulative gross receipts from these and other New York affiliate referrals exceed $10,000. The appellants in the instant case both offered programs through which third parties (affiliates), who are compensated on a commission basis, agreed to place links on their own websites that directed users to the taxpayers’ websites. Overstock.com, LLC v. New York State Department of Taxation and Finance, Court of Appeals of the State of New York, Nos. 33 and 34, March 28, 2013.

New York – Sales and Use Tax – Bulk Sale Purchaser Liable for Seller’s Unpaid Tax

A purchaser of a retail liquor store in a bulk sale transaction was liable for New York sales tax assessed against the seller prior to the purchase because the taxpayer did not timely notify the Division of Taxation of the transfer. Under New York Tax Law, the purchaser in a bulk sale transaction must notify the division of the sale at least 10 days before taking possession of or making payment for the business assets in order to avoid liability for any sales and use tax due from the seller. Here, the taxpayer did not comply with the notice requirements and therefore, the taxpayer exposed itself to liability for sales and use taxes due from the seller. Sky Liquor, Inc., New York Division of Tax Appeals, Administrative Law Judge Unit, DTA No. 823935, March 14, 2013.

Utah – Sales Tax – New Law Permits Remote Sellers that Voluntarily Step Forward to Collect Tax to Receive 18% Discount

A new law, effective January 1, 2014, authorizes certain remote sellers not otherwise required to collect or remit Utah sales/use tax under state or federal law, which voluntarily come forward to collect Utah sales/use tax on their Utah sales, to retain a portion of these collected taxes (i.e. an amount equal to 18% of any amounts the seller would otherwise have remitted to the Utah State Tax Commission). H.B. 300.


The joys of tax season coupled with some snow in the Northeast has really kicked March off with a bang. In an interesting move, the IRS has jumped on the aggressive employee vs. independent contractor bandwagon by expanding its voluntary classification settlement program. The states have been on a tirade in this area for the last few years, and now the Feds are expanding this program to encourage worker re-classification. Seems like a bit of hard ball “collusion” between the Fiefdoms and the Federal government if you ask me. The times, they really are a changing. Have a great month, and enjoy March Madness.

IRS Expands Voluntary Classification Settlement Program

The IRS has expanded its Voluntary Classification Settlement Program (VCSP), which allows taxpayers to achieve legal certainty by reclassifying their workers as employees for future tax periods. Several eligibility requirements have been changed to allow more employers, particularly larger ones, to apply for the VCSP. The program, which provides partial relief from federal payroll taxes for eligible employers who are treating their workers, or a class or group of workers, as independent contractors and want to treat them as employees. Businesses, tax-exempt organizations, and government entities can apply to participate in the VCSP by filing Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees.

Under the program as expanded, employers under IRS audit (other than an employment tax audit) can qualify for the VCSP. In addition, employers allowed into the program will no longer be subject to the “special” six-year statute of limitations. Further, until June 30, 2013, the IRS is waiving the eligibility requirement that an employer must file Forms 1099 with respect to workers they are seeking to reclassify for the past three years. To be eligible for the VCSP, an employer must currently be treating workers as nonemployees and consistently have treated them as such in the past, and not be under audit on a payroll tax issue. Further, the employer cannot currently be under audit by the Department of Labor or a state agency concerning worker classification, or be challenging worker classification in court. IR-2013-23.

Delaware – Income/Franchise – New Law Deletes Imputed Capital Addback Requirement Imposed on Bank Branches

A new law was recently passed that removes language in the Bank Franchise Tax law requiring imputed capital addbacks for out-of-state banks with Delaware branches. The law is effective immediately for tax years beginning after December 31, 2012. S.B.1.

New Jersey – Corporate & Personal Income Taxes – Angel Investor Credit Enacted

An angel investor credit is allowed against the New Jersey corporation business tax (CBT) or the gross (personal) income tax for privilege periods or taxable years beginning on or after January 1, 2012. A taxpayer must apply to, and be approved by, the Economic Development Authority (EDA) to be eligible for the credit. The credit is equal to 10% of the qualified investment made by the taxpayer in a New Jersey emerging technology business up to a maximum allowed credit of $500,000 for the taxable year for each qualified investment made by the taxpayer. The amount of the credits approved by the EDA and the Director of the Division of Taxation may not exceed a cumulative total of $25,000,000 in any calendar year.A “New Jersey emerging technology business” is a company:

  • with fewer than 225 employees, of whom at least 75% are filling a position in New Jersey,
  • that is doing business, employing or owning capital or property, or maintaining an office in the state, and
  • that has qualified research expenses paid or incurred for research conducted in the state, and
  • conducts pilot scale manufacturing in the state; or
  • conducts technology commercialization in the state in the fields of advanced computing, advanced materials, biotechnology, electronic device technology, information technology, life sciences, medical device, technology, mobile communications technology, or renewable energy technology.

S.B. 581.

New York City—Personal Income Tax – Credit Enacted for General Corporation Tax Paid by S Corporations

Under recently enacted legislation, a New York City personal income tax credit is allowed to city residents for certain general corporation tax payments made by New York S corporations. The credit is available for taxable years beginning on or after January 1, 2014, and before July 1, 2015.If city taxable income is $35,000 or less, the credit is 100% of the applicable pro rata amount of tax paid. If city taxable income is more than $35,000 but less than $100,000, the credit percentage is calculated as follows: subtract from 100% a percentage determined by subtracting $35,000 from city taxable income, dividing the result by $65,000, and multiplying by 100%. If city taxable income is $100,000 or more, no credit is allowed. S.B. 2320.


So the Northeast gets pounded by a fun little storm called Nemo, and tax season has begun, isn’t winter fun? Now, it is quite impressive to see Connecticut step so quickly into the 21st century regarding identity theft. It usually takes the fiefdoms years upon years to catch up on issues like this. Considering all the press regarding identity and tax refund theft, it is great to see a tax department take preventative measures in this area. The real question becomes can they administer this program while causing minimal harm? I’m betting not; Let’s hope I’m wrong. Have a great February.

California – Corporate Income Tax – Supreme Court Grants Review in Gillette

The California Supreme court recently granted the Franchise Tax Board’s (“FTB”) petition for review of the California Court of Appeal’s decision in The Gillette Company, et al., v. California Franchise Tax Board (“Gillette”). In that decision, the California Court of Appeals upheld the right of the taxpayers to elect to allocate and apportion income to California using the Multistate Tax Compact (the “Compact”) as statutorily adopted in California Revenue and Taxation Code. The election at issue allowed the taxpayers to apply the Compact’s equally-weighted, three-factor apportionment formula (property, payroll and sales), while eliminating the double weighting of the sales factor applicable to most taxpayers. The Gillette Company, et al. v. California Franchise Tax Board, 2013 Cal. LEXIS 282 (Jan. 16, 2013), petition for review granted.

This case has considerable tax implications for businesses with significant California sourced revenues, and taxpayers may want to consider electing to apply the Compact methodology, both prospectively and retroactively, if the election would yield a material tax benefit.

Connecticut – Personal Income Tax – Refund Protection Program Announced

The Connecticut Department of Revenue Services (DRS) announced that it is launching a new taxpayer refund protection program to help prevent identity theft and tax fraud. Under the refund protection program, some taxpayers will be notified in writing, asked to call the DRS, and requested to provide additional identity information before refunds are issued, which may result in a small delay in receiving a refund for affected taxpayers. In addition, the DRS notes that taxpayers who do not choose direct deposit for refunds of less than $5,000 will receive their refund in the form of a debit card that can either be cashed at any VISA-affiliated bank or used to make purchases from vendors that accept VISA. News Release, Connecticut Department of Revenue Services, January 28, 2013.

Michigan – Income/Franchise Tax – Tax Provisions Amended Involving Business Losses & Sales Factor Computations

The Michigan Business Tax (MBT) was recently amended indicating that for purposes of computing a “business loss,” a taxpayer that acquires the assets of another corporation in a transaction described under Internal Revenue Code section 381(a)(1) or (2) may deduct any business loss attributable to that distributor or transferor corporation. In addition, sourcing rules for goods in transit were amended in the same legislation. The amendment stated that property stored in transit for 60 days or more prior to receipt by the purchaser or the purchaser’s designee, or in the case of a dock sale not picked up for 60 days or more, shall be deemed to have come to rest at this ultimate destination. Property stored in transit for fewer than 60 days prior to receipt by the purchaser or the purchaser’s designee, or in the case of a dock sale not picked up before 60 days, is not deemed to have come to rest at this ultimate destination. S.B. 1037.

New York – Income Tax- State Adopts Amendments to Combined Filing Regulations

The New York State Department of Taxation and Finance (the “Department”) recently adopted amendments to the combined reporting regulations applicable to general business corporations (including REITs and RICs) subject to the tax (Franchise Tax) imposed by New York Tax Law. The new regulation, Reg. Sec. 6-2.3(c), sets forth 10 steps that should be used to determine whether a combined report is required and, if so, which corporations are included in that combined report. The amended regulation changes its syntax to eliminate language that infers that all corporations must be combined regardless of whether they had substantial intercorporate transactions. Further, the new regulation adds New York S corporations and non-New York taxpayer federal S corporations to the list of corporations eliminated from combination. New York Reg. Sec. 6-2.3(c).

New York – Sales Tax – Collection on a Court Judgment for a Taxable Lease is Still Subject to Sales Tax

New York State Department of Taxation and Finance concluded that when a Petitioner enters into a true lease of taxable equipment, and the lessee defaults and the Petitioner eventually wins a court judgment against the lessee for a portion of the amount due under the lease, any collection of the judgment would be taxable. The Division also concluded that Petitioner’s subsequent recovery of a part of a bad debt involving a taxable sale would not be subject to sales tax if Petitioner never received any bad debt credit or refund in regard to that bad debt. TSB-A-13(3)S.

Texas – Corporate Income Tax – Telecommunications Provider not Entitled to Cost of Goods Sold (COGS) Deduction

A taxpayer could not take a cost of goods sold (COGS) deduction for Texas franchise tax purposes for costs associated with providing a service that is sold in a mixed transaction. The taxpayer sold telecommunication products such as local and long-distance telephone, Internet access, and video and requested a refund of franchise tax based on its claim of a COGS deduction.

The comptroller denied the request on the grounds that Texas franchise tax law does not authorize a taxable entity to take a COGS deduction for costs associated with providing a service that is sold in a mixed transaction. For franchise tax purposes, the telecommunication products that the taxpayer sold in 2008 were determined to be services. Decision, Hearing No. 102,735, Texas Comptroller of Public Accounts, October 24, 2012, released January 2013.


So I guess the Mayan cliff was somewhat avoided, or was it the Fiscal Apocalypse? I lose track. I won’t get into my thoughts on our elected “leaders,” but they did come up with something that will raise some revenue, but very little happened on the expense side of the ledger. Things that make you go hmmm. It will be interesting to see how the next few rounds of this melodrama play out. Stay tuned. I hope you all enjoyed the holidays. Have a great January.

The Fiscal Cliff Bill is dubbed the American Taxpayer Relief Act of 2012 (H.R. 8).

Please find a summary of the major provisions below:


Permanently extend most of the individual income tax relief provided in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) for unmarried taxpayers with income of $400,000 or less and married taxpayers with income of $450,000 or less.

Permanently set the top marginal tax rate at 39.6 percent (up from 35 percent in 2012) for unmarried taxpayers with income over $400,000 and married taxpayers with income over $450,000.

Permanently set the top rate on income from capital gains and qualified dividends at 20 percent (up from 15 percent in 2012) for unmarried taxpayers with income over $400,000 and married taxpayers with income over $450,000.

Increase the individual AMT exemption to $50,600 for unmarried filers and $78,750 for married filers for 2012, permanently index those exemption amounts for inflation beginning in 2013, and allow nonrefundable personal credits against the AMT.

Permanently reinstate the personal exemption phase-out (PEP) and limitation on itemized deductions (Pease) for single taxpayers with adjusted gross income (AGI) above $250,000 and joint filers with AGI over $300,000, with the thresholds indexed annually for inflation.


Extend through 2013 an array of expired and expiring tax provisions such as the research and experimentation credit, the subpart F active financing exception, and the look-through rule for payments between related controlled foreign corporations.


Permanently set the top estate tax rate at 40 percent for estates worth more than $5 million.


The new law does not extend the reduction in payroll taxes that was in effect in 2011 and 2012.


Does not reduce or delay new tax increases on earned and unearned income that were enacted under the Patient Protection and Affordable Care Act of 2010 and that took effect on January 1, 2013.


As the Northeast continues to recover from Sandy, the IRS shows that is has a heart by allowing taxpayers to take out monies from their retirement plans due to hardships. While out in California, voter approved tax increases will soon kick in. Never thought I’d see tax increases by popular vote, I guess anything is possible when your jurisdiction is in dire financial straits. Have a great December and enjoy the holidays.

IRS – Retirement Plans Can Make Loans, Hardship Distributions to Sandy Victims

The Internal Revenue Service recently announced that 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Sandy and members of their families. 401(k) plan participants, employees of public schools and tax-exempt organizations with 403(b) tax-sheltered annuities, and state and local government employees with 457(b) deferred-compensation plans may be eligible to take advantage of these streamlined loan procedures and liberalized hardship distribution rules. Though IRA participants are barred from taking out loans, they may be eligible to receive distributions under liberalized procedures.

Retirement plans can provide this relief to employees and certain members of their families who live or work in the disaster area. To qualify for this relief, hardship withdrawals must be made by Feb. 1, 2013. IR-2012-93.

California – Multiple Taxes – Voters Approve Temporary Tax Rate Hikes and Mandatory Single Sales Factor Apportionment Formula

California voters approved temporary increases to the personal income tax and state sales and use tax rates and made the current elective corporation franchise and income tax single sales factor apportionment formula mandatory along with moving to market based sourcing for service revenue. Propositions 30 and 39.

Illinois – Corporate Income Tax – Sales Activities Not Protected Under P.L. 86-272

Sales activities conducted within Illinois by employees of the taxpayer with regard to insurance policies are not protected under Public Law 86-272. Illinois construes the protection of P.L. 86-272 very narrowly. Almost any activity exceeding the parameters of that statute will cause that protection to be lost. The Department of Revenue noted that the taxpayer’s employee sells insurance, which is considered “intangible” property. Activities that involve sales of other than tangible personal property (i.e., insurance) are not protected by P.L. 86-272. Accordingly, the taxpayer is liable for Illinois income tax on all of its income allocable to Illinois in accordance with the Illinois Income Tax Act. General Information Letter IT 12-0029-GIL.

Massachusetts – Sales and Use Tax – Web-Based Portal Access Taxable as Software

An internet marketing and communications company’s sales of a platform that allows clients access to a web-based portal are subject to Massachusetts sales and use tax because the object of the transaction is the use of software. The platform allows clients to send automated communications, such as appointment reminders, thank-you notes, customer review communications, and promotions, to their customers. Clients may also integrate portions of the platform on their websites or Facebook pages and access the taxpayer’s offerings on smartphones. The taxpayer also helps clients manage their online profiles by submitting their business profiles to Internet sites and contracting with third parties that engage in the business of managing online profiles. Although the taxpayer’s staff may provide some personal services in connection with these offerings, such services are inconsequential. Letter Ruling 12-13.

Massachusetts – Sales and Use Tax – Virtual Computing Offerings Taxable

A taxpayer’s sales of virtual computing offerings, including remote access, remote support, and online conferencing, are subject to Massachusetts sales and use tax because the object of the transaction in each instance is the use of computer software. Although the taxpayer may provide some personal and professional services to its customers in connection with the offerings, such services are inconsequential. Letter Ruling 12-10.

Michigan – Income/Franchise – Wireless Service Provider’s Sales Sourced Out-of-State Based on Network Location

The Michigan Court of Appeals affirmed summary judgment in favor of a regional wireless service provider used the cost of performance methodology in calculating the portion of its “sales other than sales of tangible personal property” sourced to Michigan for single business tax (SBT) purposes for the prior years at issue. In doing so, the Court agreed that the company could exclude from its SBT sales factor numerator its receipts related to “long distance calls, international long distance, enhanced features and ‘incollect’ roamer charges,” because it successfully showed that the costs to perform these services included the use of network equipment and the “manpower” to support the wireless services – which were all largely located outside Michigan for the prior years at issue. Michiana Metronet, Inc. v Department, Mich. Ct. App. (November 8, 2012).

New York – Sales and Use Tax – Rent Factor Audit Methodology Properly Determined Taxable Sales

The Division of Tax Appeals recently held that the New York Division of Taxation’s use of a rent factor audit methodology to estimate the sales and use tax due from a corporation that operated a kiosk in a mall was proper. The record established the Division’s clear and unequivocal written request for books and records of the taxpayer’s sales, as well as the taxpayer’s failure to produce such books and records. Having established the unavailability of required books and records, the Division was clearly entitled to resort to the use of indirect methods, including the use of a rent factor, to determine the taxpayer’s sales and sales tax liability. Here, the Division identified and introduced the statistical report on which its calculations were based, and it also described and responded to the taxpayer’s inquiries as to how the report was used in the audit. Ultimately, the taxpayer failed to establish that the division’s audit method was unreasonable or that the amount of tax determined by application of such method was erroneous. New Intrigue Jewelers, Inc., New York Division of Tax Appeals, Administrative Law Judge Unit, DTA No. 823770.


The end of October delivered a horrific blow to the Northeast with Hurricane Sandy. This newsletter will be abbreviated and will just highlight any tax relief and other various websites and contact information, etc. to obtain tax, financial and/or other assistance in the jurisdictions that were affected by the Storm.

I hope that you, your families, and your business were not impacted by the storm in any significant fashion. Have a pleasant November.

Federal – IRS Offers Storm Relief

The Internal Revenue Service has announced additional tax relief to affected individuals and businesses in Connecticut, New Jersey, and New York.

The tax relief postpones various tax filing and payment deadlines that occurred starting in late October. As a result, affected individuals and businesses will have until February 1, 2013 to file these returns and pay any taxes due. This also includes the fourth quarter individual estimated tax payment, normally due January 15, 2013. It also includes payroll and excise tax returns and accompanying payments for the third and fourth quarters, normally due on October 31, 2012 and January 31, 2013 respectively. It also applies to tax-exempt organizations required to file Form 990 series returns with an original or extended deadline falling during this period.

Federal Emergency Management Agency (FEMA) Website Information

Website – http://www.fema.gov/

Hurricane Sandy Information – http://www.fema.gov/sandy

Hurricane Sandy Disaster Survivor Assistance –


Connecticut – Storm Sandy Relief

Storm Sandy (2012) form is to be completed by those Connecticut taxpayers who were affected by Storm Sandy. Taxpayers who, as a direct result of the storm and related flooding, are unable to comply with Connecticut tax payment and/or filing obligations may be eligible for relief from penalty and interest that resulted from their noncompliance.

If you believe that you are eligible for relief, please complete the Request for Relief – Storm Sandy (2012) form link –


Connecticut Division of Emergency Services and Public Protection Website Information

Website – http://www.ct.gov/demhs/site/default.asp

Hurricane Sandy Information – www.ct.gov/sandy

Delaware – Assistance Websites

After the Storm Information and Assistance –


Delaware Emergency Management Agency Website – www.dema.delaware.gov/

District of Columbia – FEMA District of Columbia Website Information

Website – http://www.fema.gov/state/district-columbia

Maine – Maine Emergency Management Agency (MEMA) Website Information

Website – http://www.state.me.us/mema/

Maryland – Maryland Emergency Management Agency (MEMA) Website Information

Website – http://mema.maryland.gov/Pages/homeEmergency_hurricane.aspx

Massachusetts – Massachusetts Emergency Management Agency (MEMA) Website Information

Website – http://www.mass.gov/eopss/agencies/mema/

New Hampshire – New Hampshire Homeland Security and Emergency ManagementWebsite Information

Website – http://www.nh.gov/safety/divisions/hsem/

New Jersey – Governor Extends Tax Deadline for Businesses Disrupted by the Storm

Governor Christie has extended certain tax filing and payment deadlines for businesses whose operations were disrupted by Hurricane Sandy. Taxpayers who qualify will include businesses located in New Jersey, out-of-state businesses with operations in the State, and those whose tax records are located here. Taxpayers who cannot meet normal filing and payment deadlines because of the storm now have until November 7, 2012, to file returns and tax payments that would have been due October 30 and 31. Filings and payments covered by the state extension include Form NJ-927, Employer’s Quarterly Report; Form DSF-100, Domestic Security Fee Quarterly Return; and Form TMF-10, Transporter of Motor Fuels Report. http://www.state.nj.us/treasury/pdf/Governor-Christie-Extends-Tax-Deadline-for-Businesses-Disrupted-by-Storm.pdf

New Jersey – Hurricane Response and Recovery Website

Website – http://nj211.org/hurricane.cfm

New York – Governor Extends Tax Deadlines for Individuals and Business Affected by the Storm

Governor Andrew M. Cuomo has declared a State Disaster Emergency for the entire state of New York. As a result of this declaration, Commissioner Thomas H. Mattox has postponed certain tax filing and payment deadlines for taxpayers who were directly affected by Hurricane Sandy (the storm). The relief provided for in this notice applies to taxpayers directly affected by the storm. Deadlines have been postponed for the period beginning on October 26, 2012, and ending before November 14, 2012, for filing any returns, including those for personal income tax, corporate taxes, sales tax, highway use tax and any other taxes administered by the Tax Department; Please see Notice N-12-11 for all specific details.

New York State- Hurricane Response and Recover Website

Website – http://www.governor.ny.gov/

New York City – Hurricane Response and Recover Website

Website – http://www.nyc.gov/html/index.html

North Carolina – North Carolina Department of Public Safety Website

Website – https://www.nccrimecontrol.org/

Pennsylvania – Pennsylvania Emergency Management Agency (PEMA) Website Information

Website –


Rhode Island – Rhode IslandEmergency Management Agency (RIEMA) Website Information

Website – http://www.riema.ri.gov/

Virginia – Governor Waives All Penalties for Late Filings Due to Sandy

Tax Commissioner Craig M. Burns has announced that Virginia will provide a penalty waiver to those individuals and businesses affected by Hurricane Sandy. This penalty waiver applies to any late returns filed or payments made by affected taxpayers between October 29, 2012 and November 9, 2012. To notify the Department of Taxation that you were affected by Hurricane Sandy, you must write “Hurricane Sandy” at the top of your return. The Department of Taxation will then abate any late-filing or late-payment penalties that would otherwise apply. Tax Bulletin 12-7.

Virginia – Virginia Department of Emergency Management (VDEM) Website Information

Website – http://www.vaemergency.gov/

Vermont- Vermont Emergency Management Website Information

Website – http://vem.vermont.gov/

West Virginia – West Virginia Division of Homeland Security andEmergency Management Website Information

Website – http://www.dhsem.wv.gov/Pages/default.aspx


Welcome to the inaugural newsletter from Sullivan & Associates PC. This newsletter will focus mostly on state and local matters, with other tax news occasionally sprinkled in.

I guess the fall has kicked off in the taxpayers favor. First, a New York court finally deems its inherently unfair, prejudicial, and burdensome Metropolitan Commuter Transportation Mobility Tax unconstitutional, and then three state tax amnesties commence. Not a bad month for state taxpayers. Enjoy the baseball playoffs and have a great October.

California – Corporate Income Tax – Throwback Rules for Sales to Other States and Foreign Jurisdictions Addressed

The California Franchise Tax Board (FTB) has issued a chief counsel ruling that addresses the corporation franchise and income tax apportionment formula’s sales factor throwback rules applied to sales made to purchasers located in foreign jurisdictions and other states. The FTB advises a multistate corporation based in California that it should not throw back gross receipts from sales made to purchasers in a foreign jurisdiction for purposes of determining its California sales factor numerator if there were more than $500,000 of sales transacted in the foreign jurisdiction. Similarly, gross receipts from sales of other than tangible personal property to purchasers in other states made by a member of the taxpayer’s combined reporting group would be excluded from the sales factor numerator. Chief Counsel Ruling 2012-03.

Kentucky – Amnesty Commenced on October 1st

Kentucky’s amnesty program will be held between October 1 and November 30, 2012. The amnesty program will allow individuals or businesses owing back taxes to pay without fees or penalties, and only half the interest owed will be due. The program applies to taxes owed to the Kentucky Department of Revenue for eligible tax periods ending after December 1, 2001, and prior to October 1, 2011.

Delinquent taxpayers will be receiving mailed notifications stating the known amount of back taxes and will have until November 30 to apply for amnesty and pay their overdue taxes. If taxpayers fail to take advantage of the amnesty program, penalties and interest will increase. An additional 2% interest will be charged on unpaid taxes that are eligible for amnesty. Taxpayers taking advantage of amnesty must remain current for the next three years.

New Jersey – Income Tax – Announces “Intangible Asset Nexus” Voluntary Disclosure Initiative

The Department of Revenue has announced that it will be offering a limited voluntary disclosure initiative that began on September 15, 2012, and will run through January 15, 2013 for companies that derive income from the use of intangible assets in the state but that have not filed tax returns. Under this program, companies that own intangible assets and derived income from the use of those assets in New Jersey will have the opportunity to come forward and voluntarily comply with their state corporation business tax filing requirements. The department states that it will have a limited look back period beginning after December 31, 2003, and waive all penalties except that a 5% amnesty penalty will be assessed for all returns due prior to February 1, 2009. Notice: Intangible Asset Nexus Initiative (September 18, 2012).

New York State – Payroll Tax – MTA Payroll Tax Deemed Unconstitutional

The New York Supreme Court recently issued his decision holding that the Metropolitan Commuter Transportation Mobility Tax (“MTA payroll tax”) was unconstitutional. The judge ruled that the MTA payroll tax violated the Home Rule Clause and was unconstitutional; however, he did not enjoin the Department from continuing to administer the tax. Governor Andrew Cuomo has indicated that the State will appeal the decision. Mangano v. Silver, Motion No. 013,014,015,016,017,018, Index No. 14444/10 (N.Y. Sup. Ct. Aug. 22, 2012).

New York – Sales and Use Tax – Taxability of Consulting Services Discussed

A customer’s use of the taxpayer’s directory of consultants and software to facilitate the provision of the taxpayer’s oral consultation services is not subject to New York sales tax. Also, the taxpayer’s written research reports do not constitute a taxable information service so long as the primary function of the taxpayer’s service is obtaining advice and analysis from its experts, the information provided is not derived from any common data source, and that information is not and may not be substantially incorporated into reports furnished to others. TSB-A-12(22)S.

Rhode Island – Amnesty Continues Until November 15th

Rhode Island’s Tax Amnesty program runs from September 2, 2012 through November 15, 2012 and applies to taxes due for taxable periods ending on or before December 31, 2011. The amnesty includes 2011 Rhode Island personal income tax returns, which were due April 17, 2012. The Tax Amnesty program which will allow certain taxpayers to pay the full amount of overdue taxes plus seventy-five percent of any interest due, without having to pay the remaining interest and any penalty amounts due and without being subject to any other civil or criminal penalties.