TWIST - October 4, 2021

Welcome to TWIST for the week of October 4, featuring Sarah McGahan from the Washington National Tax State and Local Tax practice.

First up, in corporate income tax news, an Arkansas ALJ decision addressed a number of contested issues stemming from an MTC audit. Six days following the completion of the MTC audit report, the Department accepted the report and issued proposed corporate income tax assessments to the taxpayer. The taxpayer timely protested the auditor’s adjustments to its sales factor, including sourcing sales to customer billing address, argued it qualified for an exception to the related party addback rules, and disagreed with the auditor’s estimation that five percent of its nontaxable income equated to expenses required to be added back. With the exception of holding that certain amounts were treated as gross receipts included in the taxpayer’s sales factor, the ALJ ruled in the Department’s favor on the rest of the issues.

The Virginia Tax Commissioner concluded that a taxpayer properly waived the NOL carryback period when it checked the box on its pro forma federal Schedule K. The Tax Department had argued that because the taxpayer did not attach a statement to its return, it did not indicate it intended to forego the carryback.

In sales and use tax news, the Mississippi Department of Revenue has issued proposed amendments to an existing regulation addressing the tax treatment of computer equipment, software, and certain related services. If adopted, the proposed amendments would expand the sales and use tax to services delivered via Software as a Service, Platform as a Service, Infrastructure as a Service, and other cloud computing models.

The Massachusetts Department of Revenue, in a news bulletin sent this week, advised taxpayers that it is withdrawing a previously announced change that would have required sales tax filers to separately report in-store sales versus online sales beginning in 2022. It should be noted that the Department did not announce that it was withdrawing the upcoming requirement for meals and room occupancy tax filers to break down cash sales versus credit card sales.

Thank you for listening to TWIST and stay well.