TWIST - March 2, 2020

Welcome to TWIST for the week of March 2. This is Sarah McGahan from KPMG’s Washington National Tax state and local tax practice. If you are a regular TWIST subscriber, you’ve probably noticed we are trying something new this year. Instead of reading longer summaries of each development, we are doing a round-up of the week’s happenings in our podcast and longer write-ups on the developments we discuss will be available on the TWIST webpage.

On the corporate income tax side, we have developments in Florida and New Jersey. In Florida, the Department of Revenue issued a technical assistance advisement addressing how a technology company should source service revenues. Under Florida law, an income producing activity test is applied to source receipts from other than tangible personal property.  After reviewing holdings from court cases in other states, the Department observed that in those cases receipts from sales of services were sourced to the state in which the taxpayer’s customer resided, on the basis that the direct sale to the customer at the customer’s domicile is where the income producing activity occurred. Accordingly, the Department determined that fees charged for access to the taxpayer’s platform would be presumed to be sourced to the customer’s billing address.

In New Jersey, the Division of Taxation issued TB-96 explaining the eligibility requirements for the Net Deferred Tax Liability Deduction (NDTLD). Recall, New Jersey’s combined reporting provisions allow a deduction to provide relief if a publicly-traded company is adversely affected by the state’s move to combined reporting. The Bulletin answers a number of questions on the deduction and also provides that taxpayers must complete new Form DT-1 on or before July 1, 2020. The form will be available online no later than April 1, 2020.

On the property tax side, the Louisiana Board of Commerce and Industry recently passed a resolution to amend the rules around appealing Industrial Tax Exemption Program (ITEP) exemptions. Under the program, property tax abatements are granted to certain manufacturers. In 2016, Governor Jon Bel Edwards issued an executive order that granted localities the power to approve or deny ITEP projects within their jurisdictions. This, in essence, gave the local governments a voice with respect to which economic development projects occurred in their parishes. The recent Board resolution allows taxpayers that have their ITEP applications denied by a local governing body to appeal the denial directly to the Board.

Finally, the Washington Department of Revenue denied sales tax refunds requested by two taxpayers who sold tickets to 4-D rides. The purchase of the ride tickets were not taxable retail sales and the taxpayers had paid retail sales tax over to the Department. However, despite evidence that customers were not charged sales tax, the refunds were denied because the taxpayers’ shared website indicated that sales tax was included in the sales price of a ticket. That’s all we have for this week. Please stay tuned to TWIST for future state tax updates.