View Page As PDF
Share Button
Tweet Button

National: Senate shows support for Marketplace Fairness Act of 2013

On March 22, 2013, Senators voted 75-to-24 in favor of the principal idea inherent in the Marketplace Fairness Act of 2013, which would require remote sellers to collect state sales taxes. The vote is not of substance and does not change current law regarding remote sellers and whether they must collect sales tax. The vote was merely an amendment to the 2014 Budget Resolution. However, this vote is some indication of the broad support in the Senate for the Marketplace Fairness Act of 2013. The Marketplace Fairness Act of 2013 still faces a significant uphill battle in order to become law. Nonetheless, the approval of the amendment to the 2014 Budget Resolution is perhaps the largest backing of a law that would permit states to require remote sellers to collect and remit sales taxes for remote sales occurring in the respective state. This bill boasts a long list of big box retail supporters including Wal-Mart, Best Buy, Sears and, yes, even Amazon. We will continue to keep you updated as the Marketplace Fairness Act of 2013 continues to make its way through Congress. 

Click here to read a previous Multistate Tax Alert on the Marketplace Fairness Act of 2013.

Virginia: Marketing services including tangible personal property exempt from use tax

On February 20, 2013, the Virginia Tax Commissioner (the “Commissioner”) determined that a taxpayer’s purchase of customized marketing services, which included providing such taxpayer with certain tangible personal property, was a nontaxable service and exempt from use tax. The Tax Code of Virginia provides an exemption from the retail sales and use tax for “[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made…” A “true object” test is used to determine whether a particular transaction involving both the rendering of a service and the provision of tangible personal property is an exempt service or a taxable retail sale. If the object of the transaction is to perform services and the tangible personal property provided to the customer is not critical to the transaction, then the transaction may be an exempt service. However, if the object of the transaction is to obtain the tangible personal property produced by the service, then the entire charge for such property and service is taxable.

The Commissioner determined that based on the language contained in the taxpayer’s contract, the “true object” of the contract was to develop a customized marketing strategy to enable the taxpayer to retain and attract new members to its athletic facility, and that the tangible personal property included in the purchase price of such marketing package, including DVDs, CDS, booklets, and a DVD player, was not critical to the transaction. Therefore, the Commissioner concluded that the taxpayer purchased a nontaxable service from its vendor and was not subject to use tax on the charge for such service.

Illinois: Bill allows payers of disputed property tax to pay on only the undisputed amount

Recently introduced in the Illinois Senate, SB 1403 has the potential to make disputed property tax assessments more equitable until a final resolution is made. As introduced, SB 1403 would limit the amount payable to the taxpayer’s claimed property value until the dispute is resolved. If enacted, this legislation would make application of property tax assessments more equitable and less likely for taxpayers to be forced to pay taxes on property that they believe is not fairly assessed. This legislation would not make such treatment automatic or significantly change the dispute process; a tax objection complaint would still need to be filed in compliance with law. However, if a dispute is in excess of 25 percent of the assessed value of the property, the taxpayer would be liable to pay taxes on 75 percent of the original assessed value while the dispute is pending. If the final resolution of the dispute results in a tax assessment that is in excess of that which the taxpayer paid, the taxpayer would be liable for such excess tax plus interest on that amount. 

Click here to read SB 1403 and here to read Amendment 1 to SB 1403.

Utah: Legislation will repeal (and reenact) the Multistate Tax Compact

In an effort to avoid potential lawsuits similar to those initiated in California, which, like Utah, is a member state of the Multistate Tax Compact (“MTC”), the Utah Legislature has passed SB 247. This legislation has been sent to Governor Gary Herbert and is expected to be signed into law. If enacted, the law would repeal the MTC and reenact it while omitting certain provisions. The articles of the MTC that SB 247 does not reenact are 3, 4 and 10, each of which involve the appropriation of income. In the case in California, Gillette Company v. Franchise Tax Board, 147 Cal.Rptr.3d 603 (Ct. App. 1 Dist. 2012), cert. granted, 151 Cal.Rptr.3d 106 (Cal. Jan. 16, 2013), the court ruled that California must allow the taxpayers to apportion their multistate income based on a formula in the MTC that tax administrators argued was repealed in 1993. If this ruling is upheld by the California Supreme Court, California could stand to lose $750 million in revenue to taxpayers through refund claims. Utah made this legislative maneuver preemptively in an effort to avoid similar litigation. 

Click here to read SB 247.

For additional information regarding these subjects or any other multistate tax issues, please contact:

David M. Kall
216.348.5812
dkall@mcdonaldhopkins.com

Susan Millradt McGlone
216.430.2022
smcglone@mcdonaldhopkins.com

Jeremy J. Schirra
216.348.5444
jschirra@mcdonaldhopkins.com

Businesses must be vigilant and careful in managing their state and local tax liabilities and exposures. We understand this can be a daunting task. McDonald Hopkins Multistate Tax Services provides a broad range of state and local tax services including tax controversy, tax evaluation, tax planning, and tax policy. With professionals who have worked both inside and outside government agencies, our multistate tax team leverages its knowledge and experience to help clients control their complex multistate taxes.

COMMENT
+