TWIST - September 13, 2021

Welcome to TWIST for the week of September 13, featuring Sarah McGahan from the Washington National Tax State and Local Tax practice.

The Colorado Department of Revenue recently applied the “true object” test and ruled that a taxpayer was selling tangible personal property. The taxpayer provided customers access to an online learning platform offering a streaming video lesson, a written transcript of that lesson, and access to online tutors. While the subscription plans also included service elements, in the Department’s view, the learning plan products were more analogous to the sale of tangible personal property and were subject to state and state-administered sales and use tax.

In West Virginia, the Department of Revenue issued guidance clarifying that streaming services are subject to sales and use tax. Under West Virginia law, all sales of services are subject to sales and use tax unless there is a specific exception or exemption. There is no exemption for streaming services.

In bag tax news, Virginia and Washington recently issued guidance on new taxes and fees imposed on certain types of plastic bags.  As early as January 1, 2021, Virginia localities may impose the Virginia Disposable Plastic Bag Tax by ordinance. The tax is five cents on each disposable plastic bag provided to purchasers by any grocery store, convenience store, or drugstore in each locality that has adopted a bag tax ordinance. The bag tax will be administrated by the Department of Revenue in the same manner as sales and use taxes and retailers that collect the tax will be entitled to a dealer discount. In Washington State, effective October 1, 2021, certain types of plastic bags are banned, and retailers are required to collect an eight-cent charge on every compliant paper and plastic bag provided to customers. The eight-cent charge is retained by the collecting retailer and is subject to retail sales tax.

Finally, there are a few marketplace developments to note. In California, Assembly Bill 1402 would require marketplace facilitators to collect and remit certain fees, in addition to sales and use tax. The bill is pending signature. In Illinois, an emergency regulation addressing the obligations of marketplace facilitators has been suspended. The regulation had provided that food delivery marketplace facilitators were required to collect and remit the Metropolitan Pier and Exposition Authority Retailers' Occupation Tax and the Chicago Home Rule Municipal Soft Drink Tax, as well as sales tax.  Finally, in the Lone Star state, there is a local sourcing change that was scheduled to be effective October 1, 2021 that has been frozen. The Comptroller has agreed to not enforce a revised rule addressing local sales and use tax sourcing pending the outcome of litigation between the City of Round Rock and the Comptroller’s Office. 

Thank you for listening to TWIST and stay well.