State and local taxes impact almost every taxpayer, and developments in any one jurisdiction can be frequent and sometimes confusing. ln this newsletter edition, we will briefly summarize selected state and local tax (SALT) developments in several states which may be important to you.
Alabama
2024 Back-to-School Sales Tax Holiday: The Alabama Department of Revenue (Department) has recently posted a publication regarding the back-to-school sales tax holiday for the 2024 year. According to this publication, the 19th annual back-to-school sales tax holiday will begin Friday, July 19, and end Sunday, July 21. Also according to the publication, this event gives shoppers the opportunity to purchase certain school supplies, computers, and clothing free of state sales tax, although local sales tax may still apply. Set forth in this publication is a listing of types of clothing, school supplies, and books that are eligible for the sales tax holiday; as well as a listing of items that are not eligible. The publication also sets forth contacts within the Department for additional information. More information can be found here.
District of Columbia
Notice Regarding Taxation of Leasehold Assignments: The Office of Tax and Revenue (OTR) recently published Tax Notice 2024-02 addressing the taxation of leasehold assignments. According to this Notice, the assignment of a lease is taxable in the same manner as a newly created lease for purposes of the recordation and transfer tax. The OTR states in this Notice that the District of Columbia Court of Appeals has ruled that a lease assignment may also transfer other real property interests, such as buildings or other leasehold improvements, and that such other interests are separately taxable from the lease assignment even if the conveyance of all of these interests is accomplished by a single deed. The Notice then provides a general overview of the imposition of the transfer and recordation taxes, stating that such taxes are imposed on the transfer of a lease or ground rent with a term of at least 30 years (including renewals) and that taxes are imposed on each transfer of such lease. Further, the OTR states in this Notice that in order to accurately capture the taxable value associated with a lease, District law looks to the rent due under the lease (which is the consideration for the lease), plus any other additional considerations paid besides the rent. The OTR then addressed the taxation of lease assignments and provided examples to assist in understanding such taxation. The OTR also references that the transfer and recordation taxes imposed on the assignment of the lease as well as the conveyance of all other interests in real property are reported on the tax return (FP7-C) filed with respect to the document entitled Assignment of Lease. The Notice then sets forth contact information for questions or comments related to the Notice. More information can be found here.
Florida
New Sales Tax Exclusion for Certain Motor Vehicle Leases/Rentals: The Florida Department of Revenue (Department) has recently issued Tax Information Publication No: 24A01-08 regarding a new sales and use tax exclusion for certain motor vehicle leases or rentals. As referenced by the Department in this Publication, and effective July 1, 2024, sales and use tax does not apply to the lease or rental of certain motor vehicles for use in the trade or established business of the lessee or rentee when the lessor has paid the sales or use tax on the purchase price of a motor vehicle, and the lease or rental period is for 12 months or more. This exclusion also applies, according to the Department, to renewals of such leases or rentals. The term "motor vehicle" for these purposes means a self-propelled vehicle not operated on rails or a guideway; and does not include any bicycle, electric bicycle, motorized scooter, electric personal assistance mobility device, mobile carrier, personal delivery device, swamp buggy, or moped. The Department in this Publication also notes that when the lessor purchases a motor vehicle in another state, a credit against the Florida use tax and any discretionary sales surtax due when the motor vehicle is titled, registered, or licensed in Florida will be allowed for a similar tax lawfully imposed and paid to the other state. This Publication also sets forth contact information regarding questions pertaining to this new exclusion. More information can be found here.
Georgia
Employer's Withholding Tax Guide 2024 Revisions: The Georgia Department of Revenue (Department) has recently revised its Employer's Withholding Tax Guide so as to contain information regarding withholding tax filing requirements based on the tax laws as of January 1, 2024. This revised Guide includes applicable withholding tax tables, basic definitions, answers to frequently asked questions, and references to applicable sections of Georgia law governing withholding tax requirements. The Guide also contains contact information for additional information concerning withholding tax questions. More information can be found here.
Louisiana
Protect Records and Financial Documents During Hurricane Season: The Louisiana Department of Revenue (Department) has recently published a News Release addressing the need for taxpayers to protect tax records and financial documents during weather-related threats. The Department in this Release addresses methods by which the taxpayer can keep paper documents secure, tips regarding the use of paperless media and cloud storage, and recommendations regarding document valuables and business equipment during the 2024 Atlantic Hurricane Season that started June 1, 2024. Inquiries regarding the protection of records and other documents can be addressed to the contact information set forth in this Release. More information can be found here.
Maryland
Whistleblower Reward Program Updated: The Comptroller of Maryland (Comptroller) recently published Technical Bulletin No. 45 regarding the Maryland Whistleblower Reward Program (Program), which was previously addressed in the Comptroller's Tax Alert from September 2021. According to the Comptroller, the earlier publication has been renamed "Technical Bulletin No. 45 Whistleblower Reward Program," and the content has been updated. According to Bulletin No. 45, the purpose of the Program is to offer financial incentives for whistleblowers who provide original information leading to the assessment of a significant Maryland tax liability. This Bulletin describes eligibility for the Program, the method for filing claims, and the criteria used to determine the amount of any award issued to a qualifying whistleblower. This Bulletin also addresses definitions regarding the Program and other topics pertinent to the administration and implementation of the Program. Contact information is also included in this Bulletin for purposes of inquiries. More information can be found here.
Mississippi
Sales Tax Holiday Beginning July 12, 2024: The Mississippi Department of Revenue (Department) recently published an Official Guide to the Sales Tax Holiday that begins July 12, 2024, and ends July 14, 2024. The Department states in this Guide that sales tax is not due during the holiday on clothing, footwear, or school supplies if the sales price of a single item is less than $100. The Guide provides definitions for "clothing," "footwear," and "school supplies" as well as provides examples of eligible and non-eligible items for the sales tax holiday. With respect to the $100 threshold, the Department states in the Guide that the holiday applies to each eligible item selling for less than $100 regardless of how many items are sold at the same time; but that items priced at $100 or more are subject to the sales tax at the regular retail rate of seven percent. The Department also gives an example with respect to the application of that $100 threshold. More information can be found here.
North Carolina
Sales/Use Tax Exemption for Mill Machinery and Parts/Accessories: The North Carolina Department of Revenue (Department) recently issued a Private Letter Ruling pertaining to whether certain items are considered exempt from the sales and use tax as mill machinery or mill machinery parts or accessories. In this redacted Ruling, the Department was asked to determine the exempt status with respect to a contractor who was under contract to construct a facility and provide certain equipment to a taxpayer which in turn would utilize the facility as a manufacturing plant for the assembly and sale at the facility of certain products. The items to be purchased by the contractor and provided to the taxpayer included electrical equipment, a compressed air system, electrical power distribution equipment, and HVAC equipment. In this Ruling, the Department describes how those items would be used in the manufacturing plant pursuant to information provided by the taxpayer. For the reason set forth in this Ruling, the Department determined that the contractor may purchase mill machinery or mill machinery parts or accessories for use in the performance of the construction contract with the taxpayer exempt from the sales and use tax. The Department further determined in this Ruling that the compressed air system and the HVAC equipment qualified for such mill machinery or mill machinery parts or accessories exemption, but the electrical equipment and the electrical power distribution equipment did not qualify, all for the reasons set forth in that Ruling. More information can be found here.
South Carolina
Sales Tax-Free Weekend Begins August 2, 2024: The South Carolina Department of Revenue (Department) recently issued a News Release reminding shoppers that computers, clothes, school supplies, and a variety of other school-year essentials can be purchased without paying sales tax during the tax-free weekend starting August 2, 2024, and ending August 4, 2024. The Department notes in this Release that eligible items can be purchased online and in-store without paying the State's six percent sales tax and any applicable local taxes during that weekend. Further, the Department notes in this Release that tax-free items include computers, printers, diapers, earbuds and headphones, purses, shoes, and certain bed and bath items. Further, the Department noted that eligible items can be new or used and are eligible regardless of price. However, certain items are not exempt from the tax, including digital cameras, smartphones, jewelry, cosmetics, eyewear, wallets, watches, and furniture. A detailed list of tax-free items is available through this Release. More information can be found here.
Tennessee
Application of Sales Tax to Window Labels Sold to Auto Dealers: The Tennessee Department of Revenue (Department) recently issued Revenue Ruling #24-02 which addresses the question of whether labels sold to auto dealers are exempt from the sales and use tax. According to the facts in this Ruling, the taxpayer sells information labels to automobile dealers, and the label is placed in the car in one of the rear windows and shows various information sometimes as required by law. The information shown on the label includes the warranty, if any, fuel economy figures, and other information related to the vehicle. According to the Ruling, the label is either sold with the car or removed by the dealer and discarded according to customer preference. In reaching the conclusion that the sale of labels under these circumstances is exempt from the tax, the Department noted that the label sold by the taxpayer meets the definition of tangible personal property and will be subject to sales and use tax unless an exemption applies. The Department then notes that an exemption from the tax is provided for materials, containers, labels, sacks, bags, or bottles used for packaging tangible personal property when the property is either sold in the containers, sacks, bags, or bottles directly to consumers or when such use is incidental to the sale of the property for resale. The Department noted in this Ruling that the statute expressly references "labels" used for packaging and that the dictionary defines a "label" as a slip of paper inscribed and affixed to something for identification or description, or written or printed matter accompanying an article to furnish identification or other information. The Department concluded that the stickers at issue clearly meet this definition and are attached to tangible personal property sold to consumers; and, under these facts, the labels are exempt from the sales and use tax. More information can be found here.
Texas
Beginning SOL Date for Franchise Tax Assessments/Refund Claims: The Comptroller's office recently published guidance as to the beginning date for the statute of limitations for purposes of assessing franchise tax, and for purposes of filing refund claims as to such tax, under situations both where the taxpayer is not required to make tax payments by electronic funds transfer (EFT) and where the taxpayer is required to make tax payments by EFT. In general, the Texas Tax Code provides that no tax may be assessed, and no refund may be requested, after four years from the date a tax becomes due and payable. In determining the beginning date for a period of limitation, the date a tax is due and payable is the day after the last day on which a payment is required. As a result, because annual franchise tax reports and payments of the franchise tax are due on or before May 15 of each year, the beginning date of the statute of limitations is May 16 for a taxpayer that is not granted an extension of time to file its franchise tax report.
In issuing guidance, the Comptroller addresses the limitations period in situations where the taxpayer has been granted a valid extension under one of two methods to determine the amount of tax the entity must remit to receive that valid extension. According to this guidance, as to a taxpayer that is a non-EFT taxpayer (i.e., a taxpayer not required to make payments via EFT) which chooses to obtain an extension by filing an extension request by May 15 and paying 100 percent of the tax due in the prior reporting year, the remaining tax is due on or before November 15, such that the beginning date for the statute of limitations under that method for such taxable year is November 16. Further, the Comptroller provides that if a non-EFT taxpayer obtains an extension by (i) filing an extension request by May 15, (ii) remitting with the extension request at least 90 percent of the tax due for such reporting year, and (iii) subsequently filing its franchise tax report on or before the November 15 deadline, then the statute of limitations would likewise begin on November 16. However, if any of the preceding three requirements are not satisfied, the taxpayer requesting an extension based on the "90 percent of tax due" method would not have met the requirements for a valid extension, in which case the statute of limitations for such taxable period would begin on May 16.
With respect to a taxpayer required to make payments by EFT, if such taxpayer files an extension request by May 15 and pays 100 percent of the tax due in the prior reporting year, then the taxpayer would obtain a valid first extension, and the report and any remaining tax would be due on August 15, with the beginning date for the statute of limitations being August 16. With respect to a taxpayer required to make payments by EFT, and which obtains an extension by filing an extension request by May 15 and remitting with the extension request at least 90 percent of the tax due for such reporting year, and which either (A) subsequently files its franchise tax report on or before the August 15 deadline or (B) requests a second extension request on or before the August 15 deadline (with which the taxpayer must remit the difference between the amount remitted when filing the first extension request and the amount of tax eventually reported as due on the report) and subsequently files the report on or before November 15, then the statute of limitations would likewise begin on August 16. However, if any of the preceding requirements are not satisfied, the taxpayer would not have met the requirements for a valid extension, in which case the statute of limitations for such taxable period would begin on May 16.
The Comptroller also addresses in this guidance other circumstances pertaining to EFT taxpayers. More information can be found here.
Virginia
Sales Tax Holiday Begins August 2, 2024: The Virginia Department of Taxation (Department) recently published information regarding the upcoming sales tax holiday beginning August 2, 2024, and ending August 4, 2024. According to that published information, during the sales tax holiday the purchase of qualifying school supplies, clothing, footwear, hurricane and emergency preparedness items, and Energy Star and WaterSense products may be made without paying the sales tax. Qualified school supplies are limited to $20 or less per item, and qualified clothing and footwear are limited to $100 or less per item. Certain purchase price limitations also apply to hurricane and emergency preparedness products, as well as to Energy Star and WaterSense products. A detailed list of qualifying items and more information through this publication. More information can be found here.
