TWIST - March 16, 2020

Welcome to TWIST for the week of March 16. This is Sarah McGahan from KPMG’s Washington National Tax state and local tax practice.

First up, several significant tax bills passed the House in Maryland and have moved to the Senate for consideration. On the corporate income tax side, House Bill 473 would adopt mandatory unitary combined reporting and a throwback rule for apportioning sales of tangible personal property. This bill would also allow pass-through entities to elect to pay tax at the entity level with respect to the distributive shares or pro-rata shares of resident members of the pass-through entity. On the sales and use tax side, House Bill 932 would extend the sales tax to sales of certain digital products effective July 1, 2020.  House Bill 1354, would impose sales and use tax on telemarketing bureau and other content center services and lobbying or public relations services. Not all the activity is occurring in the House. Senate Bill 2, which would impose a tax on digital advertising revenues, was recently amended in the Senate and is pending a third reading.  Whether these bills will advance further is unclear, as on Sunday, the legislature announced this year’s regular session would be ending early due to Coronavirus.

On March 13, 2020, legislation was introduced in the New York Senate that would impose a tax on revenues from digital advertising services in New York. This proposal, Senate bill 8056, is very similar to the measure under consideration in Maryland. If enacted, the tax would be effective for tax years beginning on or after January 1, 2021,

This week we are also covering to state tax cases. In the first case from the New York Supreme Court, Appellate Division the court held that intercompany transfers of title to loaner cars constituted a retail sale for sales and use tax purposes. In reaching this decision, the court noted that it was “troubled” by what it considered a technical application of the law that was arguably not consistent with the intent of the law to tax purchases by final consumers.

Finally, in Wisconsin, a circuit court recently affirmed a state Tax Appeals Commission decision holding that cash distributions from a foreign partnership, which had elected to be treated as a corporation for federal income tax purposes, were eligible for the Wisconsin dividends-received deduction.

Please stay tuned to TWIST for future state tax updates.