TWIST - April 6, 2020

Welcome to TWIST for the week of April 6.  This is Sarah McGahan from KPMG’s Washington National Tax state and local tax practice.

The first development we are covering today is an appellate court decision from Washington State addressing how an online loan marketplace should source fees derived from referring potential borrowers to various lenders. Under Washington’s B&O tax law, service receipts are attributed to Washington if a “customer received the benefit of the taxpayer’s service” in the state. In this case, the Department of Revenue asserted the fees should be sourced to the location of the potential borrowers. However, the court held that because the taxpayer’s customers were the lenders, the receipts should be sourced to the location where the lenders received and utilized the information in a referral to potentially generate a loan.

In another apportionment case, the New York State Tax Appeals Tribunal  affirmed an ALJ decision holding that a corporate owner of a disregarded single member limited liability company that was an SEC-registered broker-dealer could not source receipts that were derived outside of that SMLLC broker-dealer using the state’s broker-dealer customer sourcing rules. Accordingly, investment advisory service revenues, earned in the pre-2015 years at issue in the litigation, outside of the SMLLC broker-dealer, were to be sourced using the relative costs of performance approach.

On the marketplace facilitator front, we have two developments to cover. First, Tennessee Senate Bill 2182, which was signed into law on April 1, 2020, imposes a sales and use tax collection obligation on a marketplace facilitator that facilitates sales of tangible personal property or taxable services to customers in Tennessee effective October 1, 2020. A collection obligation does not apply to a marketplace facilitator that has $500,000 or less in total sales to Tennessee customers during the previous twelve month period.

In South Carolina, the Department of Revenue ruled that the operator of a peer-to-peer vehicle sharing platform was a marketplace facilitator required to collect and remit sales taxes on peer-to-peer short term motor vehicle rentals.

Finally, states continue to respond to COVID-19.  Last week, the New Jersey Division of Taxation issued guidance stating that it would temporarily waive the impact of a statute providing that having employees working from home in New Jersey creates nexus for Corporation Business Tax purposes. The waiver will apply if employees are working from home solely as the result of closures due to the Coronavirus outbreak and/or the employer’s social distancing policy. In other news, New York’s budget bill, which was signed into law on April 3, 2020, includes provisions decoupling New York State and City from recent federal changes to IRC section 163(j) that were enacted to provide relief to businesses as a result of COVID-19

In addition, a number of states extended upcoming due dates for returns and payments of tax. 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.