State Tax News & Views: Mid-Summer Roundup

June 16, 2023

Welcome to this week's state and local tax roundup. Think of Eide Bailly for your state tax needs, whether you are dealing with income taxes, sales taxes, or business incentives and credits.

IRS statement on California mailing of balance due notices,

The IRS reassures California taxpayers that they continue to have an automatic extension until later this year to file and pay their taxes for those covered by disaster declarations in the state. The current mailings being received by some taxpayers, the IRS Notice CP14, are for taxpayers who have a balance due, and they are sent out as a legal requirement. While the notice received by taxpayers says they need to pay in 21 days, most California taxpayers have until later this year to pay under the disaster declaration. These letters include a special insert that notes the payment date listed in the letter does not apply to those covered by a disaster declaration, and the disaster dates remain in effect.

The IRS apologizes to taxpayers and tax professionals for any confusion as we continue to review the situation. Taxpayers receiving these letters do not need to call the IRS or their tax professional.

Learn more about recent disaster declarations here.

House Tax Bill Racing Toward Floor Vote but Has a SALT Problem - Doug Sword & Cady Stanton, TaxNotes($):

A $200-billion-plus GOP tax bill could reach the House floor as early as the week of June 19, though strife within the Republican caucus could push the vote until after Congress’s July 4 recess.

Between a debt limit imbroglio that consumed the first five months of the year and a long summer recess, negotiating time grows short for those who want a tax bill featuring a return of full research and development expensing attached to must-pass legislation this autumn.

Muddying the picture is a slowdown on the House floor because of a flap within the GOP caucus over the recent debt limit deal. Another hurdle will be to win support from Republicans in high-tax states who want a boost in the $10,000 deduction cap on state and local taxes to be included in the legislation.



Remote Sellers Left Vexed On Meaning Of Undue Burden - Paul Williams, Law360 Tax Authority ($). "The Wayfair decision's omission of a clear constitutional standard for imposing sales and use tax collection obligations on out-of-state businesses continues to flummox remote sellers and state tax administrators nearly five years after the U.S. Supreme Court ruling."

State-by-State News Roundup


Ariz. Marriott Hotel Correctly Taxed For Loyalty Rewards Stays - Michael Nunes, Law360 Tax Authority ($):

An Arizona Marriott-branded hotel was correctly denied a transaction privilege tax refund for free rooms booked through the company's loyalty program, an appeals court ruled, because the hotel was compensated by Marriott for the free stays.

The Arizona Court of Appeals, in an opinion issued Thursday, upheld a state tax court's decision that Dove Mountain, a Marriott-branded hotel, owed tax on free rooms booked by Marriott Rewards Program members from 2012 through 2016. The hotel had claimed a refund for taxes paid, arguing that paying the state's transaction privilege tax on the lodgings was double taxation.


Calif. Leasing Co. Stuck With Added Tax For Security Deposits - Zak Kostro, Law360 Tax Authority ($): "An equipment leasing and sales company failed to establish that security deposits should not have been included in its gross receipts, the California Office of Tax Appeals ruled, upholding an assessment of additional tax by the state Franchise Tax Board." 


Ind. Tax Dept. Says Woman Domiciled In State Despite Move - Michael Nunes, Law360 Tax Authority ($):

An Indiana woman failed to prove she was not domiciled in the state in 2018 and was correctly assessed income tax, the state Department of Revenue said in a letter of finding, noting that her Alabama income tax return should be reviewed.

The Indiana Department of Revenue said in a letter published Wednesday that the woman failed to specify when during 2018 she moved to Alabama and did not provide a copy of her driver's license or vehicle or voter registration, which could be used to determine her domicile.


Ariz. Co.'s Tax Claims Not Mooted, La. Parishes Tell 5th Circ. - Paul Williams, Law360 Tax Authority ($):

Louisiana local sales tax collectors rebutted an Arizona company's claims to the Fifth Circuit that an imminent repeal of the state's 200-transaction threshold for economic nexus purposes will moot the business's constitutional challenge to the state's decentralized sales tax system.

"With the $100,000 de minimis threshold still applicable to appellant, there is an existing case or controversy asserted by appellant," Granier said.

Halstead has argued that it purposefully didn't cross the transaction threshold due to the costs of complying with Louisiana's sales tax system, but it said in a notice Monday that it didn't plead that it could reasonably expect to meet Louisiana's $100,000 monetary threshold, which the new law leaves in place.


Mich. House Bill Seeks Tax Break For EV Charging Stations - Michael Nunes, Law360 Tax Authority (360). "Michigan would exempt electric vehicle charging stations from real and personal property taxes under a bill introduced in the state House."


Minn. Tax Court Denies Exemption For 'Motorcycle Ministry' - Jared Serre, Law360 Tax Authority($):

A self-proclaimed "motorcycle ministry" in Minnesota has not met the burden of proof to qualify for a religious property tax exemption, the state's tax court ruled.

Despite the church's chairman discussing the King James Bible with customers of his motorcycle repair shop, the First Evangelical Christian Church did not sufficiently prove that it was legally a church and that the properties were used in furtherance of church activities, with the tax court ultimately ruling Wednesday that it did not qualify for a religious property tax exemption.

New York

Whole Foods Illegally Taxes Prepared Food, NY Shopper Says - Gina Kim, Law360 Tax Authority ($):

Whole Foods is illegally charging a sales tax on a green bean product that is prepared, packaged and refrigerated in-store to be sold for off-site consumption that should've been tax-exempt, according to one shopper's proposed class action filed Tuesday in New York federal court.

In a 12-page proposed class action, Whole Foods customer Barry Willman accused the grocery chain of improperly charging a New York state-mandated sales tax on its green beans with olives and capers product that he alleges should've been exempt, since it was prepared, packed and refrigerated by the store before it was weighed and sold at its deli counter to be eaten off the premises, in accordance with the state's tax laws.

Prof Looks To Fight Off NY Tax For Telework During Lockdown - Sanjay Talwani, Law360 Tax Authority ($):

New York should not be allowed to tax the income of nonresidents who work remotely, a Connecticut resident who teaches at a New York law school told a state tax appeals tribunal judge Wednesday.

Edward A. Zelinsky, a tax professor at Yeshiva University's Benjamin N. Cardozo School of Law in Manhattan, said in a brief to the New York Tax Appeals Tribunal that the state's own regulations prohibit taxing income he earned while working at home in Connecticut during the COVID-19 pandemic. He also said that even if the state rules allowed it, taxing that income violates the due process clause and dormant commerce clause of the U.S. Constitution.


Philly Council OKs Budget With Cuts To Wage, Biz Tax Rates - Michael Nunes, Law360 Tax Authority ($):

The Philadelphia City Council preliminarily approved a budget Thursday that would reduce wage and business tax rates in fiscal 2024, despite opposition from council members who said the loss in revenue would affect city coffers.

The council, acting as the Committee of the Whole, voted to advance the budget, which would lower the city wage tax rate from 3.79% to 3.75% and reduce the business income and receipts rate from 5.99% to 5.83%.

Pa. House OKs Expanding Of Child, Dependent Care Tax Credit - Zak Kostro, Law 360 Tax Authority ($). "Pa. House OKs Expanding Of Child, Dependent Care Tax Credit Pennsylvania would expand an income tax credit for qualifying child and dependent care under a bill passed by the state House of Representatives."


Vt. Legalizes Sports Betting, Will Tax Winnings - Jaqueline McCool, Law360 Tax Authority ($):

Vermont legalized sports betting and will require winnings to be included in residents' taxable income as well as establish a revenue-sharing agreement that functions as a tax on operators' betting revenue under a bill approved by the governor.
The bill requires wagering winnings to be included in residents' taxable income. Operators will be required to pay a fee of $550,000 once in a three-year period.

Second quarter federal estimated tax payments were due yesterday. Don't forget your state estimates!

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