State Tax Rulings

What reporting and payment changes applied to Kansas agricultural ethyl alcohol producer incentives under the revised regulations?

Kansas changed the agricultural ethyl alcohol producer incentive from quarterly payments to one annual payment on a July 1-June 30 fiscal-year basis. Revised K.A.R. 92-26-4 clarified that every ethano…

Were monthly charges for a repair plan covering an existing connected residential water heater subject to South Carolina sales tax?

No. The connected water heater was treated as real property, while South Carolina taxed the described warranty and maintenance contracts only when they covered tangible personal property.

Are a web-hosted exemption-certificate portal and an online sales/use tax-return preparation service subject to Colorado sales or use tax?

Not taxable. Two web-hosted products—an online portal where customers fill out, print, and submit sales-tax exemption certificates, and a service that prepares and files a client's sales/use tax retur…

Will an out-of-state company owe Colorado corporate income tax if it lets one overhead employee work from a home office in Colorado, even though he generates no revenue?

Likely yes. A company with an employee residing and working in Colorado will generally have nexus for Colorado income tax — even if that employee is purely overhead and generates no revenue. Service i…

When are South Carolina hotel stays for government, diplomatic, nonprofit, or Red Cross travelers exempt from sales tax?

Exemption depended on the purchaser and payment method. Direct federal, qualifying diplomat, federal-credit-union, Red Cross, and one narrow hospital category could qualify; most employee-paid and sta…

When is a purchase made with a federal government credit card exempt from South Carolina sales and use tax?

A purchase was exempt when the U.S. government was billed and paid directly. It was taxable when the federal employee was personally billed and later reimbursed.

How did Florida allocate taxable rent between exempt guest areas and taxable hotel-use areas under a ground lease and operating lease?

Using the taxpayer's unverified square-footage figures, Florida accepted a mixed-use allocation. For the ground lease, 83,641 taxable square feet divided by 1,374,318 total square feet produced a 6.08…

Are retail sales of enteral feeding pumps subject to Colorado sales tax?

Taxable. Retail sales of enteral feeding pumps are subject to Colorado sales tax. Colorado taxes retail sales of tangible personal property, and while several medical-equipment exemptions exist, the D…

Could Virginia residents defeat assessments based on IRS changes when they filed no timely state amendments and supplied no proof the federal data was wrong?

No. The 2003 appeal was filed after the cited 90-day deadline. For 2004 and 2005, the residents had not timely reported the IRS changes and offered no evidence that the federal information or Virginia…

Could a nonprofit allocate only Virginia-source partnership income to Virginia and place all other unrelated business income outside the state?

No. The nonprofit did not provide clear and cogent evidence that Virginia's statutory formula was unconstitutional or caused Virginia-attributable double taxation. It also filed original returns using…

What does Virginia Ruling of the Tax Commissioner P.D. 09-23 conclude about Restaurant mandatory gratuity?

A mandatory gratuity or service charge up to 20% of the meal price was excluded from taxable sales price. Only the portion above 20% was taxable. Virginia said its website reflected the 2006 law chang…

Could a nonprofit corporate shareholder claim a refundable musical-and-theatrical infrastructure credit, and which project-eligibility questions belonged to Economic Development?

Yes. The nonprofit sole shareholder qualified as a company or financier and could claim certified excess credit as an overpayment. But expenditure timing, project eligibility, and multiple-use-facilit…

How did Virginia's move to December 31, 2008 federal conformity affect 2008 income-tax returns?

Virginia conformed to the Internal Revenue Code as of December 31, 2008 for tax years beginning in 2008, except it continued to disallow most listed bonus depreciation and five-year carrybacks for 200…

Are an early lease-termination payment and a capital-cost-reduction payment on a replacement vehicle lease subject to Kansas sales tax?

Yes. The $27,000 paid to terminate the first operating lease was the final taxable payment under that lease, and the $26,000 applied to reduce the new lease's capitalized cost was also taxable, as wer…

Is a former Merrill Lynch employee's reinstated restricted stock and stock option income, given in exchange for signing a noncompetition agreement, taxable by New York once he becomes a nonresident?

No. The Department concluded that the reinstated nonqualified RSUs and stock option units were consideration solely for the nonresident's noncompetition agreement, not compensation for work performed …

How are South Carolina counties ranked for the job tax credit for 2009, and which counties qualify for the fee-in-lieu and tax moratorium (per SC IL #09-1)?

What does Virginia Ruling of the Tax Commissioner P.D. 09-22 conclude about Aircraft is tangible personal property; extraction of natural gas (mining)?

No. Virginia treated natural-gas extraction as mining and said the aircraft was not mining machinery and tools because it carried employees, not extracted materials. More importantly, the separate aff…

Does an investment in a certified Qualified Emerging Technology Company made in the form of convertible debt qualify for New York's QETC tax credit, and if so, in which tax year is the credit claimed?

No - not until the note converts to stock. A convertible note is a loan, not a contribution of property or ownership interest, so it isn't a 'qualified investment' under Tax Law § 606(r)(1)(C) when it…

What does Virginia Ruling of the Tax Commissioner P.D. 09-9 conclude about Military wages resulting from combat duty or extended active duty?

No. Combat pay already excluded from federal adjusted gross income could not receive Virginia's combat-pay subtraction. The extended-active-duty subtraction was also reduced dollar for dollar when bas…

How much refund could a taxpayer receive after filing a part-year return beyond the normal three-year deadline?

Only one payment qualified. The late part-year return was outside the normal three-year refund period, and no IRS change supported the separate 60-day federal-adjustment rule. Virginia could refund as…

What does Virginia Ruling of the Tax Commissioner P.D. 09-7 conclude about A registered dealer that failed to collect the sales tax on taxable transactions?

No. The supplier had an independent duty to collect, report, and remit sales tax on taxable sales to the consuming contractor. The contractor's separate use-tax obligation did not erase the dealer's l…

Were a medical practice's bulk purchases of knee viscosupplementation devices, splints, and other durable medical equipment exempt from Virginia sales tax?

No. Virginia treated the knee viscosupplementation products as medical devices rather than drugs, and none of the bulk purchases qualified as equipment bought on behalf of identified individual patien…

Was a Virginia consumer use-tax appeal timely when the letter was dated one day after the 90-day deadline?

No. The June 18, 2008 assessment had to be appealed by September 16 under the 90-day period quoted in the ruling, but the appeal letter was dated September 17. Virginia treated the protest as time-bar…

What does Virginia Ruling of the Tax Commissioner P.D. 09-4 conclude about Manufacturer of permanent aesthetic injectable implants does not meet exemption qualifications?

No. Although the prescription implant was an FDA Class III medical device administered by physicians, it treated facial wrinkles for cosmetic purposes. It did not replace a missing body part or body f…

What does Virginia Ruling of the Tax Commissioner P.D. 09-3 conclude about Taxpayer prepares direct mail advertising materials?

No, on the stated facts. Customers took title and possession at the producer's out-of-state dock, assumed risk of loss before delivery to the U.S. Postal Service, and exercised no ownership right over…

Could a biodiesel or green-diesel producer claim Virginia's credit after it had already been producing fuel for three years before 2008?

No. Virginia interpreted the credit as available only during a producer's first three years of biodiesel or green-diesel production. A producer already operating for at least three years before Januar…

Did Virginia pass-through withholding apply to a disregarded single-member LLC or to Virginia-source income allocated to a U.S. Virgin Islands resident?

No in both situations described. A single-member LLC disregarded for federal income-tax purposes was also disregarded for Virginia income tax and did not pay PTE withholding. A qualifying U.S. Virgin …

What does Virginia Ruling of the Tax Commissioner P.D. 09-2 conclude about Lease payments and capital purchases included in the lease payments.?

The real-property portion was not taxable, but the furniture-and-fixtures portion was. The lessor had to support an allocation between tangible personal property and realty; otherwise the full lease p…

Could an irrevocable non-grantor trust qualify for Virginia's Land Preservation Tax Credit and use it against fiduciary income tax?

Yes, if the donation met every applicable requirement. A non-grantor trust counted as a landowner and taxpayer and could claim the credit against fiduciary income tax. The easement still had to satisf…

Could a municipality use sales-tax revenue from a 10,000-square-foot public-facility expansion to repay newly issued bonds?

No. The proposed 10,000-square-foot addition to a 63,000-square-foot facility was below the statute's 50% expansion threshold. The planned bonds also would be issued after June 30, 2007, outside the l…

What does Virginia Ruling of the Tax Commissioner P.D. 09-17 conclude about Salary related to prior employment does not affect Taxpayer's right to subtraction?

Yes. Federal law treated the retiree as an employee and reported the taxable value of excess group-term life-insurance coverage as Form W-2 wages. Because his total W-2 income for 2006 was below $15,0…

Was a museum and trade-show exhibit fabricator a retailer, a real-property contractor, or an industrial manufacturer for Virginia sales tax?

Mostly a retailer, but with project-level exceptions. Exhibits, traveling displays, furniture, graphics, and signs generally remained tangible personal property, so component materials transferred to …

What does Virginia Ruling of the Tax Commissioner P.D. 09-15 conclude about Tax applies to the charges for the fabrication of tangible personal property?

Yes. Cutting contractor-owned bricks into different shapes so they fit masonry arches changed their form and was taxable fabrication. The contractors were users and consumers of the bricks and purchas…

Did franchisee royalty payments passed through a restaurant corporation let its related trademark subsidiary qualify for Virginia's unrelated-party add-back exception?

No. Although the corporation passed most franchise royalties to its related intangible holding company, the franchise agreements licensed trademarks from the corporation itself. Because the subsidiary…

Could a city impose its grandfathered telephone-company BPOL rate or service receipts tax on a cellular provider with a local retail kiosk?

Not on the cellular-service receipts. The city's ordinance used a narrow telephone-company definition that did not cover the PCS provider, and its service was directed and controlled from headquarters…

What does Virginia Ruling of the Tax Commissioner P.D. 09-12 conclude about Qualified Settlement Funds?

Yes. The trustee elected to treat the disputed-claims reserves as disputed ownership funds, and their cash-only assets made them qualified settlement funds for federal tax. Because federal rules treat…

Did a California shareholder owe Virginia nonresident tax on pass-through income from an S corporation with a Virginia office?

Yes. The S corporation's Virginia-source income remained Virginia-source income when passed through to the nonresident shareholder, even though he worked only in California. Because he filed no Virgin…

What does Virginia Ruling of the Tax Commissioner P.D. 09-10 conclude about Taxpayers failed to pay the tax due reported on the return?

Yes. Virginia taxed the pension distributions because the couple received them after becoming Virginia residents, even though the employment and pension accrual occurred in another state. Virginia did…

Were the reviewed over-the-counter weight-loss capsules exempt from Florida sales tax as a common household remedy?

Yes. The Department treated the specific FDA-approved, over-the-counter weight-loss capsule described in the request as an exempt common household remedy under section 212.08(2). The product was a low…

My platform helps buyers and sellers complete two types of syndicated loan trades over the Internet, sometimes letting the seller input their own data directly instead of us doing it — is either product a taxable information service or software sale in New York?

Split result. Neither of a financial platform's two loan-settlement products is a taxable information service, because converting a subscriber's own data into contract form isn't furnishing new inform…

We're building a multi-million-dollar custom steam pipeline on our own land to supply a long-term industrial customer — does this construction qualify as an exempt capital improvement, or is it a taxable installation?

Exempt as a capital improvement. A custom-engineered, above-ground steam pipeline that a facility owner builds on its own land to supply an adjacent industrial customer qualifies as an exempt capital …

We built software for one airline, then repurposed it as the base for a licensed product we now customize and sell to many different airlines — is that taxable prewritten software, or exempt custom software?

Taxable. Software originally custom-built for one airline becomes taxable prewritten computer software once it's reused as the base product licensed and re-customized for other airline customers, beca…

Is firewood sold to Florida households for heating, lighting, or cooking exempt from sales tax?

Yes. Firewood sold for residential household use as fuel for heating, lighting, or cooking qualified for Florida's household-fuel exemption. Because the exemption depended on use, the seller had to do…

My company provides automated voice-calling services to airlines, banks, and other businesses using proprietary software we keep entirely in-house — is our calling-service fee or our own software subject to New York sales or use tax?

Not taxable. An automated voice-message provider's fees for placing calls to customer-designated recipients aren't subject to New York sales tax, because the service isn't among the enumerated taxable…

My regulatory-compliance and investigative firm offers 15 different service lines (AML, OFAC, fraud reviews, forensic technology, background checks, training, and more) — which of these count as taxable 'detective services' in New York, and which are untaxed advisory work?

Split by activity, not by service line. A regulatory-compliance firm's advice-and-training work (reviewing policies, developing programs, training staff) is untaxed consulting, but the moment the firm…

We license IT and business-skills e-learning courseware, a searchable reference library, an optional mentoring add-on, and live instructor-led virtual classroom sessions — which of these are subject to New York sales tax, and how do we source tax when our customers' employees are spread across multiple states?

Split result. SkillSoft's hosted e-learning courseware is taxable prewritten software (license fees taxed based on where each licensed user is located, even without any download), its Referenceware se…

When did Kansas resume the environmental assurance fee in 2009?

Kansas resumed the Environmental Assurance Fee of $0.01 per gallon on all petroleum products effective March 1, 2009, until further notice. K.S.A. 65-34,117 placed the fee on the manufacturer, importe…

Was a distributor's separately stated flat fuel surcharge exempt from Florida sales tax when taxable products were delivered?

No. Separately stating the flat fuel surcharge did not make it exempt. The distributor produced no documentation showing that customers could truly avoid delivery through their own decision, and its b…

Could a city directly purchase materials tax-exempt for a nature park and storm-water public works project?

Yes, if the reviewed direct-purchase terms were incorporated into the final contract without conflicts. The city would issue purchase orders with its exemption number, receive invoices, pay vendors di…

Was Kansas's new retail dealer incentive for renewable fuels and biodiesel funded for fiscal years 2009 and 2010?

The incentive existed, but its fund had received no money. House Bill 2145 created the Kansas retail dealer incentive for renewable fuels and biodiesel effective January 1, 2009. By January 26, 2009, …

When did Kansas resume the $.01-per-gallon petroleum environmental assurance fee in 2009, and who pays it?

Effective March 1, 2009, Kansas resumed the environmental assurance fee of $.01 per gallon on all petroleum products, until further notice. Under K.S.A. 65-34,117 the fee is paid by the manufacturer, …

How does an estate or trust recompute the 2008 federal credit for prior year minimum tax to determine the Nebraska minimum tax credit on a 2008 fiduciary income tax return?

Estates and trusts recompute the federal prior-year minimum tax credit for Nebraska, then take 29.6% of it. Revenue Ruling 23-08-2 tells 2008 fiduciary filers to recalculate the federal credit for pri…

How does an estate or trust recompute the 2008 federal alternative minimum tax to determine the Nebraska minimum tax on a 2008 fiduciary income tax return?

Estates and trusts recompute the federal AMT using Nebraska's adjustments, then run it through the Nebraska worksheet. Revenue Ruling 23-08-1 tells 2008 fiduciary filers to recalculate the alternative…

How is the 2008 federal credit for prior year minimum tax recomputed to determine the Nebraska minimum tax credit on a 2008 individual income tax return?

Recompute the federal prior-year minimum tax credit for Nebraska, then take 29.6% of it. Revenue Ruling 22-08-2 tells 2008 individual filers to recalculate the federal credit for prior year minimum ta…

How is the 2008 federal alternative minimum tax recomputed to determine the Nebraska minimum tax on a 2008 individual income tax return?

Recompute the federal AMT using Nebraska's adjustments, then run it through the Nebraska worksheet. Revenue Ruling 22-08-1 tells 2008 individual filers to recalculate the alternative minimum tax (AMT)…

We sell interactive online e-learning courses, plus separate add-on charges for a reference library, a live mentoring service, and a course-planning consultation — which of these are subject to New York sales tax?

Mixed result. Highly interactive online e-learning courses are taxable as a sale of prewritten computer software (whether accessed online or downloaded), and a reference-library add-on is a taxable in…

Where were a petroleum wholesaler's purchases sitused for BPOL when fuel was delivered from terminals outside its city office?

Purchases were sitused at the definite place from which goods were delivered to customers, not the city sales office or customer location. Fuel delivered from outside terminals could not be thrown bac…

Does Texas motor vehicle tax apply when a limited partnership converts into an LLC under an approved statutory conversion plan?

No. Under an approved Texas statutory conversion, the limited partnership continued as an LLC and its vehicles remained owned by the converted entity without a transfer or assignment, so retitling and…

Were utility charges for a homeowners association's separately metered entryway, clubhouse, pools, and cabana exempt from Florida sales tax?

Yes. The separately metered entryway, clubhouse, pools, tennis and shuffleboard areas, and cabana were residential common areas used for residents' needs, restricted to owners, residents, and guests, …

Was a mobile launch platform built for NASA tangible personal property, allowing resale purchases and an exempt direct federal sale?

Yes. The platform was tangible personal property, not a real-property fixture, because it merely rested on columns under its own weight and a crawler routinely lifted and moved it. The builder could p…