TWIST - March 1, 2021

Summary of state tax developments in Maine, Massachusetts, New York, Tennessee and Wisconsin.

Weekly TWIST Podcast Overview

This Week's Developments

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

The Maine Supreme Judicial Court recently held that a taxpayer was required to remit sales tax on the regular purchase price of a cell phone, rather than the discounted amount paid by customers who entered into wireless contracts with a third party carrier at the time of the purchase. The taxpayer’s contract with the wireless carriers required that it be paid back the amount of the discount. The court concluded that because the taxpayer expected to recoup its profits through payments made by the carriers, the payments were reimbursements, not nontaxable discounts. Accordingly, the taxpayer owed sales tax on the regular purchase price of the phones.

In other sales and use tax news, the New York Department of Taxation and Finance rejected a taxpayer’s argument that it purchased one-half an interest in a Picasso painting for subsequent lease to others and was therefore entitled to a refund of the sales taxes paid. Although the taxpayer leased its interest in the painting, it also acquired the painting to enhance its art collection, and therefore its sole purpose for the acquisition was not for resale or re-lease . In Tennessee, the Department of Revenue ruled that dues paid for memberships to a professional organization were not subject to sales and use tax, despite the fact that members received certain taxable items as part of the membership.

In corporate income tax news, the Wisconsin Court of Appeals determined that the Department of Revenue was prohibited from advancing a position that was contrary to its published guidance. As such, the court upheld a Tax Appeals Commission decision holding that cash distributions from a foreign partnership, which had elected to be treated as a corporation for federal income tax purposes, were eligible for the Wisconsin dividends-received deduction.

Finally, there are several proposals circulating in the Massachusetts General Assembly that would impose new taxes on revenues from digital advertising services. Another bill would create a commission to conduct a comprehensive study relative to generating revenue from digital advertising that is displayed inside of Massachusetts.  As such, Massachusetts has joined the other states that are considering new taxes on digital advertising.


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Featured Speaker

Sarah McGahan

Sarah McGahan

Managing Director, State & Local Tax, KPMG US