TWIST - September 21, 2020

Welcome to TWIST for the week of September 21, featuring Sarah McGahan from the Washington National Tax State and Local Tax practice.

The first development today is a use tax case from the Oregon Tax Court. Oregon does not impose a traditional sales and use tax. However, motor vehicle use tax is imposed on the use in Oregon of motor vehicles purchased at retail. The taxpayer at issue, a rental car company, argued that its purchases of cars for use in Oregon were not purchases at retail and therefore it did not owe motor vehicle use tax. The Tax Court disagreed, holding that the legislature intended the phrase “vehicles purchased at retail” to mean vehicles purchased by a purchaser other than for resale. In this instance, the taxpayer’s purchases were not for resale; the taxpayer purchased the vehicles to rent to customers. The Tax Court concluded that the taxpayer was liable for motor vehicle use tax.

In other news, the Pennsylvania Department of Revenue updated a Bulletin issued last year that adopted an economic nexus standard for corporate net income tax purposes. As revised, the Bulletin adds interest and other intangible receipts to the list of types of receipts that count towards the $500,000 economic nexus threshold. The revised Bulletin also addresses the application of the economic nexus standard to corporate partners.

We have two multistate updates today. The first summarizes recent marketplace facilitator guidance. In Colorado and Illinois, regulations interpreting the states’ marketplace facilitator statutes were finalized. The Mississippi Department of Revenue issued a Notice addressing the treatment of sales of food made through a food delivery company’s website or app.  The second multistate update covers recent state responses to COVID-19. The California Franchise Tax Board posted a FAQ confirming that California will not treat an out-of-state corporation whose only connection to California is the presence of an employee who is currently teleworking in California due the stay at home order as being actively engaged in a transaction for the purposes of financial or pecuniary gain or profit. The Rhode Island Division of Taxation extended a rule providing that the income of employees who are nonresidents temporarily working outside of Rhode Island solely due to COVID-19 will continue to be treated as Rhode Island-source income for Rhode Island withholding tax purposes. Finally, the Massachusetts Department of Revenue issued emergency regulations addressing sales and use, meals, and room tax relief for certain small businesses.  Thank you for listening to TWIST and stay well!