Multistate: More States Respond to COVID-19 and the CARES Act

Listen to a brief overview of state tax developments this week, including a Multistate update on COVID-19

Detailed Multistate Development

The Maryland Comptroller recently issued an Alert (Tax Alert 07-20) addressing the state’s conformity to the federal CARES Act. Maryland is a rolling conformity state that generally conforms to federal income tax laws except for instances in which the Maryland Legislature has enacted decoupling legislation. However, Maryland law has a unique quirk providing that if the revenue impact of an IRC amendment for a taxable year that begins in the calendar year in which the amendment is enacted is greater than $5 million, the amendment does not affect the determination of Maryland taxable income for that tax year. In June 2020, the Comptroller had issued an estimate indicating that each of the key provisions of the CARES Act would have an impact of greater than $5 million. As a result, Maryland is automatically decoupled from the CARES Act provisions affecting tax year 2020, but conforms to CARES Act provisions affecting tax years 2018 and 2019. The Alert addresses how each key tax change in the CARES Act will apply given Maryland’s unique conformity.

The Oregon Department of Revenue recently announced that for purposes of Oregon corporate excise/income tax, the presence of teleworking employees of the corporation in Oregon between March 8, 2020 and November 1, 2020 won’t be treated by the department as a relevant factor when making a nexus determination if the employee(s) in question are regularly based outside Oregon.

The New Jersey Division of Taxation issued guidance on the sales tax treatment of surcharges added to a customer’s invoice for COVID-19 precautions and prevention costs (e.g., COVID-19 Fee, Coronavirus Fee, PPE Fee, Sanitation Fee, Cleaning Fee, etc.). In the Division’s view, a separately stated surcharge to cover the cost of COVID-19 precautions is an expense that a seller incurs allowing it to perform a service or sell a product. As the surcharge is part of the sales price, the taxability of a COVID-19 surcharge depends on the taxability of the service provided or the product sold. Thus, if a service or product is not subject to sales tax, then the COVID-19-related surcharge will not be subject to sales tax. If the transaction is for a service or product that is subject to sales tax, then the COVID-19-related surcharge is subject to tax. Please stay tuned to TWIST for additional state tax guidance on COVID-19 related issues and the CARES Act. 

This Week's Developments

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Featured Speaker

Sarah McGahan

Sarah McGahan

Managing Director, State & Local Tax, KPMG US