TWIST - This Week in State Tax

Welcome to TWIST for the week of October 25th, featuring Sarah McGahan from the Washington National Tax State and Local Tax practice.

On November 13, 2021, Louisiana voters will be deciding on several proposed constitutional amendments, including two that address state and local taxes. Proposed Amendment 1 would authorize the legislature to create a new eight-member commission—the State and Local Streamlined Sales and Use Tax Commission—in charge of creating a streamlined system for electronically filing, remitting, and collecting sales and use taxes levied within Louisiana. The amendment would eventually replace the current Remote Sellers Commission and the Uniform Local Sales Tax Board. Amendment 2 asks voters to approve constitutional changes that would then permit the Legislature to enact legislation revising Louisiana’s corporate and individual income tax regimes. If approved, the amendment would remove the state constitutional provision that permits corporate and individual taxpayers to deduct federal income taxes paid from their state taxable income. However, the Legislature would be authorized by law to allow for a federal income tax deduction.

In other news, the Illinois Department of Revenue recently issued two compliance alerts addressing a marketplace facilitator’s tax obligation in Illinois. These compliance alerts generally replace earlier alerts issued in February 2021. Under the first Alert, the Department provides that, beginning on October 1, 2021, a marketplace facilitator that makes sales on behalf of restaurants and other food and beverage establishments is required to collect and remit the Metropolitan Pier and Exposition Authority Food and Beverage Retailers’ Occupation Tax. In its second Alert, the Department clarifies a marketplace facilitator’s obligation with regard to several taxes and fees imposed by Illinois and its localities. 

Thank you for listening to TWIST and stay well.

Illinois: Revised Compliance Alert Addresses Obligations of Marketplace Facilitators

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The Illinois Department of Revenue recently issued two compliance alerts addressing a marketplace facilitator’s tax obligation in Illinois. These compliance alerts generally replace earlier alerts issued in February 2021. Under the first Alert, the Department provides that, beginning on October 1, 2021, a marketplace facilitator that makes sales on behalf of restaurants and other food and beverage establishment is required to collect and remit the Metropolitan Pier and Exposition Authority (MPEA) Food and Beverage Retailers’ Occupation Tax. A marketplace facilitator (which may include a food delivery service company) must collect and remit the MPEA Food and Beverage Tax in addition to other applicable State and local Retailers’ Occupation Tax (ROT) on the same transaction. Note that the MPEA Food and Beverage tax is imposed on sales made by food and beverage establishments located within MPEA boundaries and uses origin-based sourcing rules instead of destination-based rules.

In its second Alert, the Department clarifies a marketplace facilitator’s obligation with regard to several taxes and fees imposed by Illinois and its localities. The Alert provides that, effective October 1, 2021, a marketplace facilitator is required to collect and remit the Chicago Home Rule Municipal Soft Drink Retailers’ Occupation Tax (Chicago Soft Drink ROT) on sales of included beverages that it facilitates for delivery into Chicago. The Alert further notes that a marketplace facilitator is only required to collect the Prepaid Wireless E911 surcharge and Illinois Telecommunications Access Corporation (ITAC) Assessment when making sales of tangible personal property on its own behalf. A marketplace facilitator is not required to remit the E911 Surcharge and the ITAC Assessment on sales facilitated on behalf of a marketplace seller because those fees are not identified in the statutes establishing marketplace obligations. To reduce burdens and promote compliance, the Alert encourages marketplace sellers to contract with the marketplace facilitator to collect the E911 Surcharge and the ITAC Assessment and to send them to the seller, who would then be responsible for remitting the surcharges and assessments to the Department. For more information, please contact Drew Olson.

Louisiana: Voters to Decide Fate of SALT Constitutional Amendments

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On November 13, 2021, Louisiana voters will be deciding on several proposed constitutional amendments, including two that address state and local taxes. Proposed Amendment 1 would authorize the legislature to create a new eight-member commission—the State and Local Streamlined Sales and Use Tax Commission—in charge of creating a streamlined system for electronic filing, remitting, and collecting sales and use taxes levied within Louisiana. The amendment would eventually replace the current Remote Sellers Commission and the Uniform Local Sales Tax Board. If the amendment is approved, the legislature would be required to enact legislation, with a two-third majority vote, to establish and outline the powers and duties of the Commission. The proposed amendment would authorize the new Commission to issue policy advice relating to sales and use taxes levied by all taxing authorities within the state and develop rules, regulations, and guidance to simplify and streamline the audit process for sales and use taxpayers.

Amendment 2 asks voters to approve constitutional changes that would then permit the Legislature to adopt legislation revising Louisiana’s corporate and individual income tax regimes. If approved, the amendment would remove the state constitutional provision that permits corporate and individual taxpayers to deduct federal income taxes paid from their state taxable income. The amendment would allow the Legislature to authorize by law a deduction for federal income taxes paid. In addition, the amendment, if approved, would repeal a personal income tax rate structure that is enshrined in the constitution and replace it with a limit on the maximum individual income tax rate of 4.75 percent. If Amendment 2 is approved, the Legislature has proposed several bills it would pursue, including across-the-board cuts in the corporate income tax rate, corporate franchise tax rates, and individual income tax rates. Please stay tuned to TWIST for updates on the fate of these measures.