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New York: In a largely unprecedented move, state Department of Taxation to share tax information with New York City

If you are delinquent on your taxes owed to New York City and you believe it is unaware, think again. The city that never sleeps will now have another weapon to discover if you are delinquent. On July 31, 2013, New York Governor Andrew Cuomo signed a bill (A. 7557) that enables the New York Department of Taxation (the Department) to share information from a “payment settlement entity” contained in an informational return about its participating payees. Payment settlement entities are essentially payment processors, such as a major credit card company. A participating payee is a person who accepts a payment card, or someone who accepts payment from a third party settlement organization. To cut through the legal jargon, this means that if you are a merchant who accepts payment cards and similar manners of payment, the payment card company (or other settlement organization) is required to divulge information about you to the Department. This is nothing new. The difference is that under the new law, New York City may now receive from the Department the same information about your business that is provided by such payment card companies to the Department. For example, payment processing entities are required to file certain information returns with the Department that contain information about its payees, including such payee’s name, address, tax identification number, and the gross amount of reportable payment transactions. Under the new law, information provided to the Department can be shared with the New York City Commissioner of Finance if the Department determines such information may indicate that your business, as a participating payee, may owe taxes to New York City. Make no mistake, this legislation was passed in order to increase New York City tax compliance.

If you believe your business may have tax liability in New York City, this new law may be the driving force to prompt you to shore up your tax compliance through New York City’s Voluntary Disclosure Program or through the use of various planning opportunities in order to limit your potential tax exposure. If you feel you have exposure in New York City, please contact us to discuss your options.

Click here to read the text of A. 7557.

California: Withholding Voluntary Compliance Program provides benefits to those with past-due taxes

The California Franchise Tax Board (FTB) recently began a program to provide relief to those who qualify with past-due nonwage withholding taxes, called the Withholding Voluntary Compliance Program (WVCP).

Examples of nonwage compensation eligible under the WVCP include:

• Real estate transactions
• Interest and dividends
• Rents and royalties
• Prizes and winnings
• Premiums and annuities
• Compensation for personal services
• Other fixed or determinable annual or periodic gains, profits and income

Under the WVCP (and assuming acceptance by FTB into the program), the look-back period is two years, meaning that the taxes that must be paid will be limited to the past two years. Consequently, the FTB will waive the taxpayer’s taxes related to years prior to the look-back period. As an additional benefit, the penalties relating to such failure to file will be waived under the WVCP. However, the taxpayer will still have to pay interest due on the taxes owed during the look-back period.

All withholding agents are eligible for the program, except those withholding agents who: participated in the 2008 Nonresident Withholding Incentive Program, have been audited by FTB for nonwage withholding, or have ever been assessed a withholding liability or information return penalty for nonwage withholding.

Nonetheless, those with past-due nonwage withholding taxes who qualify for this program should consider this program’s substantial benefits while it is available.

New York: Sales tax applies to the sale of electricity at electric vehicle charging station

The New York Department of Taxation and Finance determined in its July 15, 2013 Advisory Opinion that the electricity sold by the owner of an electric vehicle charging station to its customers is subject to New York sales tax.

The petitioner requested an opinion as to whether it must charge its customers sales tax on the per unit fee (based on kilowatt hours) for electricity transferred to its customers’ electric vehicles. The Department stated that New York imposes sales tax on “the receipts from every sale of electricity and electric service of whatever nature.” The Department noted that although this tax is generally known as the “customer’s utility tax,” the intent of the law is to tax the enumerated sales and services whether or not provided by a regulated utility company. In addition, the words “of whatever nature” indicate that the statute should be interpreted broadly. Therefore, the Department determined that the per unit fee for electricity that the petitioner charges its customers for charging electric vehicles at its station is subject to New York sales tax.

Click here for a copy of the Advisory Opinion.

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

Multistate Tax Services

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.

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