TWIST - March 30, 2020

Welcome to TWIST for the week of March 30, 2020.  This is Sarah McGahan from KPMG’s Washington National Tax state and local tax practice.

We have two developments today from Missouri. The first is an Administrative Hearing Commission decision addressing whether the provision of portable toilets combined with cleaning services was the rental of tangible personal property or the sale of a service.  The taxpayer, Gotts-To-Go, argued that it was providing a non-taxable service. However, the Commission concluded that the true object of the taxpayer’s transactions was for customers to obtain the portable toilets and therefore the transactions were taxable rentals of tangible personal property. In making this determination, the Commission noted that the taxpayer only provided cleaning services when needed and may not have provided any services if the rental period was for a short duration.

The other development is a Missouri Supreme Court decision addressing whether sales of hotel room furnishings from a taxpayer to its parent company were exempt from sales tax under the sale for resale exemption. The taxpayer argued that because the parent company included the cost of room furnishings in the nightly hotel room rate charged to customers, and hotel customers had a “right to use” the room furnishings, the transaction between the parent and the hotel customer met the definition of a “sale at retail.”   The court observed that the taxpayer was applying the use tax definition of a sale at retail, which looked at whether the guests had a right to use the furnishings. In this case, which was a sales tax case, the definition of a sale at retail required transfer of the ownership of or title to tangible personal property. In this case, the hotel customers never obtained title to or ownership of any of the furnishings and the court updated the assessment.

Switching gears and switching states, the next decision we are covering this week is a Florida appeals court decision addressing whether operators of online platforms used to facilitate booking short-term rental accommodations were required to collect and remit Florida’s tourist development tax (TDT). The TDT is imposed and administered by numerous Florida localities. The court held in favor of the operators- they didn’t have control over the short term rental properties and were not “dealers” under the statute that were required to collect the local TDT.

Finally, this week we continued to see a number of jurisdictions respond to COVID-19 and many states and localities have issued guidance for taxpayers on extensions of time to file and pay various types of state and local taxes. In addition, a few states addressed other tax issues stemming from the pandemic. In Indiana, Governor Eric Holcomb signed an Executive Order, which contains a provision for use tax relief on donated items. Specifically, subject to approval by the Indiana Department of Revenue, manufacturers making donations of medicine, medical supplies, or other goods used in fighting COVID-19 will not be subject to Indiana use tax on the items donated. The Mississippi Department of Revenue announced that it will not use any changes in employees’ temporary work locations to impose nexus or alter any income apportionment while those temporary telework requirements are in place. As states continue to issue guidance on important tax issues, or tax relief legislation aimed at businesses, we will of course cover those in TWIST.  Thank you for reading and stay well.

To read about recent state and local tax guidance in response to COVID-19, please click here and bookmark KPMG TaxNewsFlash-United States to stay current as more guidance is regularly released.