Throwback Rules for Sales to Other States and Foreign Jurisdictions Addressed

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.

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