TWIST - April 20, 2020

Welcome to TWIST for the week of April 20. This is Sarah McGahan from KPMG’s Washington National Tax state and local tax practice.

The first development we are covering today is a legal opinion from Arkansas addressing whether an out-of-state individual working remotely as a computer programmer for an Arkansas-based company was subject to Arkansas income tax. The employee lived in Arkansas when she began her employment, but later moved to Washington State and continued to perform her same duties remotely. Under Arkansas law, income received by a nonresident is taxable if that person carries on a business, trade or occupation within the state. Although the employee performed her duties in Washington State, those activities impacted computer systems and users in Arkansas. Therefore, the Arkansas legal counsel concluded that the employee was carrying on an occupation in Arkansas, albeit from an out-of-state location, and was required to pay Arkansas individual income tax.

In sales and use tax news, the Colorado Department of Revenue addressed whether gift wrapping was a non-taxable service or the sale of tangible personal property. In the Department’s view, the “ultimate purpose” in paying for gift wrapping is to obtain decorative packaging for a product. The decorative packaging is tangible personal property and therefore charges for the service of having a gift wrapped are taxable sales of TPP.  Finally, the Virginia Department of Taxation addressed whether an individual was subject to the Business, Professional and Occupational License (BPOL) Tax for operating an online food and nutrition blog. Although there is a BPOL exemption for certain types of publications, the Commissioner concluded that the exemption applied only to tangible media and therefore the business activity of operating a blog may be subject to the BPOL tax because a blog is not produced or delivered in a tangible form

Finally, it’s been another week, and state taxing authorities continue to respond to COVID-19. Almost every state has issued guidance of some sort on extensions of time to file returns and pay certain taxes, and this guidance continues to be refined and expanded.  In addition, a number of states have now issued FAQs addressing ancillary questions, such as whether the extension of time to file and pay extends to fiscal-year filers and first and second quarter extension payments. Last week Maryland, New York and Pennsylvania addressed issues associated with obtaining so-called “wet signatures” during the pandemic. Two additional jurisdictions, DC and Minnesota, stated that nexus will not be established due to a company temporarily having employees working at home due to the COVID-19 outbreak. Finally, Assembly Bill 1038, which was signed into law in Wisconsin on April 15, 2020, addresses various issues stemming from COVID-19.  In addition to conforming to certain of the personal income tax changes in the federal CARES Act, Wisconsin now conforms to the provision in the CARES Act that shortens the recovery period for qualified improvement property retroactive to when the change was effective for federal tax purposes.

Thank you for listening 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.