TWIST - February 1, 2021

Welcome to TWIST for the week of February 1, featuring Sarah McGahan from the Washington National Tax State and Local Tax practice.

First up today is an appeals court case from California in which the court held that a San Francisco voter initiative imposing an additional tax to fund early childcare education did not require a supermajority vote for passage. There has been much confusion— and litigation—in California over whether a special tax that was presented to voters by a citizen’s initiative requires two-thirds majority approval. This is the second decision from the appeals court holding that simple-majority voter approval is sufficient.

In sales and use tax news, an Administrative Law Judge (ALJ) for the New York Division of Tax Appeals recently concluded that a service that examined the effectiveness of a customer’s Internet advertising campaign was a taxable information service. In the ALJ’s view, the service did not qualify for the statutory exception for furnishing information that is personal or individual in nature and which is not or may not be substantially incorporated in reports furnished to others. Under the taxpayer’s contracts with clients, the taxpayer retained the right to copy, distribute, resell, modify and otherwise use the data it collected, as long as it did not identify its client.  Clients also had the ability to publish the information and data furnished by the taxpayer in their own reports.

Recently, the City of Chicago issued a bulletin establishing safe harbor revenue thresholds for the amusement tax and personal property lease transaction tax. The safe harbor,  which is intended to relieve compliance burdens and give certainty with respect to nexus for both taxes, applies effective beginning July 1, 2021 to out-of-state entities that received less than $100,000 in revenue from Chicago customers during the most recent consecutive four calendar quarters.

In other tax news, last year, there were legislative proposals in certain jurisdictions that would have imposed a new tax on revenues from digital advertising or expanded the state sales tax to sales of digital advertisements.  This year, similar bills, as well as new proposals that are aimed at sales of personal data or social media companies, are popping up across the country. This week we are covering recently introduced bills in Connecticut, Indiana, New York, Oregon, and Washington.   

Finally, the New Jersey Division of Taxation has issued yet another Technical Bulletin explaining recent technical corrections to the Corporation Business Tax Act. The most recent bulletin, TB-100, notes that many of the technical corrections were intended to make clear that the New Jersey combined group is treated as one taxpayer. The bulletin provides an overview as to how this one taxpayer treatment affects various aspects of the Corporation Business Tax return. 

Thank you for listening to TWIST and stay well!