TWIST - June 22, 2020

Summary of state tax developments in Alabama, Arkansas, California, and Multistate responses to COVID-19 and legislative updates.

Weekly TWIST Podcast Overview

This Week's Developments

Welcome to TWIST for the week of June 22nd.  This is Sarah McGahan from KPMG’s Washington National Tax state and local tax practice.

I hope everyone had a great weekend. First up today, the Alabama Tax Tribunal recently held that amounts paid by a taxpayer to a related company for services performed by workers employed by the related company were not includable in the taxpayer’s own payroll factor. In reaching this conclusion, the Tribunal declined to follow prior ALJ rulings from the now defunct Administrative Law Division holding that amounts paid for services of workers that were not employees of the taxpayers were nevertheless included in the taxpayers’ payroll factors. The Tribunal rejected the Department’s position that it was required to follow the Administrative Law Division rulings from years before the Tribunal came into existence.

In other news, the California Office of Tax Appeals or OTA recently released conflicting decisions in two cases involving partnerships seeking relief from per-partner late filing penalties. In the first, a non-precedential decision, the OTA determined that California conformed to the relief available under federal Revenue Procedure 84-35 and abated the penalty for both years. In the second decision, which was precedential, the OTA held that California does not conform to the relief available in Revenue Procedure 84-35.

We have a few developments related to marketplace facilitator statutes. On June 11, 2020, Louisiana Governor Jon Bel Edwards signed Senate Bill 138, which requires marketplace facilitators (as defined) to collect sales and use tax effective July 1, 2020. In addition, the Mississippi House and Senate recently adopted a conference committee report that codifies the state’s economic nexus regulation for remote sellers and adopts new collection requirements for marketplace facilitators. The legislation has not yet been signed into law. In other marketplace facilitator news, in Colorado there are efforts underway in certain home-rule jurisdictions to require marketplace facilitators to collect home rule sales and use taxes.  Currently marketplace facilitators with Colorado nexus collect state sales and use taxes and local taxes that are administered by the Department of Revenue. The Colorado Municipal League has worked with home-rule municipal tax professionals and the business community to develop a draft economic nexus and marketplace facilitator model ordinance. The Municipal League cautions that only home rule cities that intend to join the “single point of filing” being administered by the Colorado Department of Revenue should incorporate the model economic nexus and marketplace provisions. Finally, the Arkansas Department of Finance and Administration recently determined that although commissions received from restaurants by a food delivery service provider were not taxable, the provider was required to collect and remit tax on sales of food ordered through its online platform because it was considered a marketplace facilitator under Arkansas law.

Finally, there is pending legislation in Colorado and Iowa that would address certain aspects of the federal CARES Act and the Tax Cuts and Jobs Act. Further, in New York legislation was signed by Governor Cuomo that decouples a number of New York City taxes from relevant changes to IRC sections 163(j) and 172 made by the Federal CARES Act.

Thank you for listening and stay well. 

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Featured Speaker

Sarah McGahan

Sarah McGahan

Managing Director, State & Local Tax, KPMG US