TWIST - March 9, 2020

Summary of state tax developments in California, Indiana, North Carolina, Texas and Utah.

Weekly TWIST Podcast Overview

Welcome to TWIST for the week of March 9. 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.

First up, the final application period for the California Competes Tax Credit for the FY ending June 30 will run from March 9 to March 30. There is $71.8 million available for allocation, plus any remaining unallocated amounts from previous application periods. Recall, the California Competes Tax Credit is an income or franchise tax credit available to businesses that want to come or stay and grow in California. Tax credit agreements are negotiated by the Governor's Office of Business and Economic Development- commonly referred to as GO-Biz- and approved by a statutorily-created Committee.

In sales and use tax news, in a recent revenue ruling, the Indiana Department of State Revenue concluded that a print and production company domiciled in Europe was required to register as an Indiana retail merchant under the state’s economic nexus law. Importantly, the Department ruled that transactions whereby title to printed catalogs passed from the company to its customer in Indiana at a printer’s facility constituted Indiana transactions for purposes of the thresholds. However, tax may not be owed if the customer provided the company with direct pay permits or information that the catalogs were being shipped out of state.

In Texas, a Court of Appeals held that a health club that made purchases of gym equipment and certain kids’ club supplies was not entitled to a sale-for-resale exemption on the equipment. In the court’s view, the taxpayer had not transferred possession or control of the gym equipment to its members. However, purchases of stickers and crayons used in the gym kids club were purchased for resale, as members children could take them home. Finally, the Utah Tax Commission recently ruled that convenience and order processing fees associated with taxable sales of admissions made by a third party vendor were not subject to sales tax. Because the fees were charged only when a ticket was sold through a third-party vendor and not when a customer purchased a ticket at the box office, the fees were not amounts paid or charged as admissions.

Finally, the NC Supreme Court affirmed a lower court decision where the key issue was whether dividends, deducted for federal purposes, constituted income not taxable under North Carolina law. The court held that the dividends did constitute income not taxable and that a taxpayer was required to reduce its Net Economic Losses (NELs) to account for the non-taxable dividends.

Please stay tuned to TWIST for future state tax updates.

This Week's Developments

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Featured Speaker

Sarah McGahan

Sarah McGahan

Managing Director, State & Local Tax, KPMG US