State Tax Rulings
Free state tax letter rulings and advisory opinions with plain-English summaries, full citations, and the original source on every page.
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If a company sells 100% of a subsidiary's stock to an unrelated third party, but makes federal tax elections treating the deal as an asset sale followed by a liquidation into another group member, does the subsidiary's Texas franchise tax temporary credit for business loss carryforward stay with the combined group?
No. Selling 100% of a subsidiary's stock to an unrelated third party moves that subsidiary out of the seller's combined group for Texas franchise tax purposes, ending the group's right to use the subs…
Must a New Mexico medical-cannabis producer apply federal Section 280E when computing state corporate income tax for pre-2021 years?
No, under this decision. The Administrative Hearings Office fully abated a $401,126.50 corporate income tax assessment against New Mexicann Natural Medicine for 2010–2016. The Department had applied f…
Where can taxpayers find South Carolina Department of Revenue advisory opinions by tax topic through March 31, 2022?
Use the subject index attached to SC Information Letter #22-7. It organizes South Carolina Department of Revenue advisory opinions issued from 1987 through March 31, 2022 under administrative, alcohol…
How can taxpayers check whether a South Carolina Department of Revenue advisory opinion had been modified, superseded, or made obsolete through March 31, 2022?
Use the citator attached to SC Information Letter #22-6. It lists South Carolina Department of Revenue advisory opinions from 1987 through March 31, 2022 that the Department identifies as modified, mo…
My practice bought several software programs, and the vendor's invoices didn't say how most of them were delivered -- I say it was all electronic download, but the auditor taxed everything without a stated delivery method. Can I still win this on appeal with vendor documentation I gather afterward?
Yes -- if you can get the vendor to confirm, in writing and tied to your specific invoice, that a program was delivered purely by electronic download with no physical medium, that documentation can wi…
As a contractor installing canopies in Virginia, I separately listed an 'estimated use tax' on some customer invoices at their request, but I also remitted the actual use tax I owed to the Department -- do I owe the Department both amounts, or can I get credit for what I already remitted?
You owe the Department the full amount you charged customers as "tax" (since any tax you collect is held in trust for the state and must be remitted regardless of whether the charge was proper), but y…
My online store uses banner ads that Virginia residents might see, and my parent company may have Virginia nexus through its own wholesale business -- does either of those things give MY company Virginia sales tax nexus?
Banner advertising alone does NOT create Virginia sales tax nexus, but whether a parent company's own Virginia presence could create nexus for a subsidiary depends on facts the Department needs and di…
The Department denied my 2017 deduction for carryover contributions to my kids' Virginia 529 prepaid tuition accounts, saying I'd already used up all my carryovers in earlier years -- but I think my math is right. Can the Department go back and recheck years that are now outside the statute of limitations?
The Department can't reach back into years that are now outside the three-year statute of limitations to permanently fix your prior over-claimed deductions -- so it has to calculate what your CURRENT …
Could New Mexico apply federal Section 280E to deny ordinary business deductions to a licensed medical-cannabis producer?
No, under this decision. The Administrative Hearings Office fully abated New Mexico Top Organics' $423,341.34 corporate income tax assessment for 2012–2016 and ordered amounts paid refunded. The produ…
What does Missouri LR 8189 conclude about Computer/Software Purchased by Engineering Firm Headquartered in Missouri?
Yes. Missouri ruled that an architectural/engineering firm whose administrative headquarters for its 20+ integrated offices worldwide is located in Missouri qualifies for the Section 144.030.2(28), RS…
What does Missouri LR 8187 conclude about Marina Boat Space Rental Fees are Subject to Sales Tax?
Yes. Missouri LR 8187 holds that a marina's receipts from renting floating boat dock space are subject to Missouri sales tax, because floating docks are tangible personal property and the marina had n…
What does Missouri LR 8186 conclude about Taxability of Interlock Devices and Interlock Service Fees?
Split answer: Missouri sales tax applies to the monthly rental charge for an ignition interlock device, but it does not apply to separately stated installation, monitoring, and removal service fees ch…
Does Missouri sales tax apply to the charges a self-service car wash imposes on customers who wash their own vehicles?
No. Missouri LR 8185 holds that the charges a self-service car wash imposes on customers to wash their own vehicles are not subject to Missouri sales tax, because washing cars is not one of the taxabl…
Does an out-of-state HVAC/plumbing company have to charge Missouri sales tax on its installation and repair services, and does it owe use tax on the materials it uses?
No and yes: the Applicant should not charge Missouri sales tax to its customers for HVAC/plumbing installation and repair services, but it must pay Missouri consumer's use tax on the cost of parts and…
Was a restaurant's 3.5% non-cash adjustment for customers paying by credit card included in the taxable sales price of meals?
Yes. The 3.5% non-cash adjustment was a seller expense passed to the customer and therefore part of the taxable sales price. In the ruling's example, the taxable price was $100 for cash and $103.50 fo…
What is South Carolina's state per capita income figure for tax-incentive purposes (per SC IL #22-5)?
South Carolina's most recent state per capita personal income figure is $52,074, per SC Information Letter #22-5 (March 24, 2022). Several income, sales and use, and property tax incentives require th…
Can a trust beneficiary assign his share of trust income to his own single-member LLC for Illinois tax reporting purposes?
IDOR did not decide this. Whether a trust beneficiary can assign his beneficial interest to his single-member LLC is a threshold question of trust law (does the trust instrument permit it), which the …
I claimed credit for German tax I paid on my foreign pension, but the Department denied it for two of the three years because it said my proof wasn't good enough -- what documentation actually satisfies this credit?
Copies of the foreign country's own information returns showing tax paid, plus a written explanation from a foreign tax professional showing how the tax was computed, are sufficient proof to claim Vir…
I paid UK tax on income I earned in the United Kingdom -- doesn't the US-UK tax treaty stop Virginia from also taxing that same income? And can penalties and interest be waived because I wasn't sure about the tax rules and COVID delayed things?
No -- the United States-United Kingdom Income Tax Convention only applies to certain FEDERAL taxes, not to state taxes like Virginia's, so there's no treaty-based exemption for UK-source income earned…
My business warehouses and repackages inventory owned by retailers to fulfill their customers' orders -- can I buy boxes, tape, and labels tax-free since the retailers ultimately pay for and resell the packaged goods?
No -- the packaging materials exemption only applies to the actual seller of the goods being packaged, and a third-party fulfillment business that merely stores and repackages OTHER companies' invento…
My utility bought a transformer, and the invoice has separate charges for installation/reassembly, shipping, and offloading at the job site -- which of these charges are subject to Virginia sales tax?
Installation and reassembly charges are taxable, separately stated delivery/transportation charges are exempt, but offloading (unloading) charges are taxable as "handling," not exempt transportation. …
My landscaping business was audited for six years instead of the usual three because I'd never registered for use tax, and the auditor won't remove items I say I already paid tax on, or leased equipment, or downloaded software -- can I fight any of this without documentation?
No -- without documentation, none of these claims (tax already paid, exempt equipment leases, exempt electronically-delivered software) can remove items from your audit, and if you were never register…
If another state already taxed my Social Security or annuity contributions, does Colorado give a subtraction or credit when those benefits are later taxed on my Colorado return?
Not specifically. Colorado has no special break just because another state already taxed your Social Security or annuity contributions. As a Colorado resident you start from federal taxable income, bu…
When a finance company buys heavy trucks and trailers from a dealership to lease to customers under a TRAC (terminal rent adjustment clause) lease, does the dealership charge sales tax on that purchase, and who owes tax on the lease payments?
The dealership owes Retailers' Occupation Tax on its sale of the truck or trailer to the leasing company. If the arrangement is a true lease (no guaranteed/nominal buyout), the lessor is treated as th…
I invested in a qualified business and my Form EDC tax credit application was filed after the April 1 deadline because the company said it would handle the paperwork -- can Virginia make an exception?
No. Virginia enforces the April 1 filing deadline for the Qualified Equity and Subordinated Debt Investments Tax Credit as a hard cutoff with no exceptions, even when a taxpayer misses it because some…
My company got assessed sales tax because we couldn't produce a valid exemption certificate at the time of an audit -- can we still fix it with certificates or invoices we gather afterward?
Partially -- a certificate gathered after the sale can still work if the Department can independently verify the customer was actually entitled to the exemption, but it only covers invoices dated on o…
I claimed vehicle and other business expenses on Schedule C for three years, plus a Form 2106 deduction for one of those years, but the auditor said my repair receipts and bank statements weren't enough proof -- what documentation would have actually worked?
Repair invoices without proof of payment, and bank statements without notes explaining the business purpose, don't satisfy the IRS's heightened substantiation rules for vehicle expenses -- you specifi…
My spouse and I signed a contract to buy a home in another state and took an IRA distribution to fund it before we actually moved out of Virginia -- is that distribution taxed as Virginia income or as income from our new state?
Virginia income -- an intent to move isn't enough by itself; you have to actually be physically present in the new state before your old domicile is legally abandoned. A couple signed a contract to bu…
My business cuts and finishes stone slabs into custom countertops -- does that count as 'manufacturing' for local business license and equipment tax purposes, even though the finished product is still recognizably stone?
Yes. A countertop fabricator that cuts, edges, and polishes raw granite and marble slabs into finished countertops is a "manufacturer" for both BPOL and business tangible personal property tax purpose…
Can an insurance company that changed its mind get Illinois's permission to switch how it sources reinsurance premiums for apportionment purposes?
Yes. The Illinois Department of Revenue granted the taxpayer's request to change its IITA Section 304(b)(2) election for sourcing reinsurance premiums, moving from Method B (each ceding company's in-s…
How do South Carolina pass-through entities and owners report the new entity-level active trade or business income election on 2021 tax forms?
SC Information Letter #22-4 gives filing-season guidance for South Carolina's new entity-level active trade or business income (ATBI) election for tax year 2021. Under Code Section 12-6-545(G), certai…
How should a contractor document exempt purchases for a cooling-tower project qualifying as power-generation machinery?
The plant owner's affidavit documented the exempt project, but the contractor had to issue its own affidavit to vendors and subcontractors and attach the owner's affidavit. Each lower-tier contractor …
I moved out of state for work, leased housing there, and spent more nights there than in Virginia -- but my family, home, driver's license, and voter registration all stayed in Virginia. Am I still a Virginia resident for tax purposes, and does it matter that the Department cleared me in an earlier audit?
Yes, still a Virginia domiciliary resident -- physically spending more nights in another state doesn't abandon Virginia domicile when strong personal ties remain here. A taxpayer took a full-time job …
I work for the U.S. Department of State and moved to Virginia partway through the year for a work assignment based elsewhere -- does Virginia tax my whole year of income, and can I still claim credit for tax I paid to my home state?
No -- Virginia only taxes you as a resident from the date you actually move in, not for the whole year, even if you end up physically present more than 183 days total. A State Department employee leas…
The Department audited my construction business and reclassified my independent contractors as employees, hitting me with a withholding tax assessment -- what factors actually decide whether my workers are really independent contractors?
In this case, independent contractor status held up -- and the ruling lays out exactly which factors decided it. The Department evaluates worker classification using the IRS's three-category common-la…
I run my farm as a sole proprietorship, but the agricultural best-management-practices tax credit certificate was issued under the farm's own employer ID number rather than my Social Security number -- can I still claim it on my personal return?
Yes. A sole proprietor can claim Virginia's agricultural best-management-practices tax credit on his personal income tax return even though the credit certificate was issued under the farm's own feder…
My business didn't keep adequate sales records, so the auditor reconstructed our sales from bank deposits and then added a 25% markup on top for undocumented cash sales -- can they do that, and do I still owe the first-time penalty?
Split result: reconstructing sales from bank statements was proper, but the extra 25% markup on top of that and the standard penalty were both removed. A drone, RC vehicle, and toy retailer couldn't p…
How are South Carolina micro-distillery tours and liquor tastings taxed — the tour charge, the tasting, and giveaways?
After a 2021 law change (effective May 17, 2021), a South Carolina micro-distillery may NOT charge for the liquor consumed at a tasting, but MAY charge for the tour that goes with it. The tour charge …
Could a longstanding Florida consolidated group switch to separate returns after substantial growth and changes in business focus?
Yes. The Department found that the group's substantial growth, acquisitions, expanded product line, and changed business focus were sufficient good cause to discontinue consolidated filing. Permission…
Could an acquired corporation stop filing Florida consolidated returns after its former affiliated group ended and the new parent filed separately?
Yes. The acquisition ended the taxpayer's former affiliated group and nullified its prior consolidated filing election. Because the acquiring parent filed separately and had never made a Florida conso…
Which High-Wage Jobs Tax Credit rules apply when jobs were created before 2017 but the credit application was filed in 2019?
The 2016 rules applied, so the remaining credit was denied. 3D Glass Solutions filed a December 31, 2019 High-Wage Jobs Tax Credit application for five claims tied to jobs and qualifying periods begin…
What is South Carolina's tax interest rate for underpayments and overpayments for the period beginning April 1, 2022 (per SC IL #22-3)?
4%. SC Information Letter #22-3 sets South Carolina's interest rate on tax underpayments and overpayments at 4% for the period April 1, 2022 through June 30, 2022, up from 3% for the prior period (Jul…
What does Missouri LR 8183 conclude about Artwork Sold by Non-profit is Subject to Sales Tax?
Yes -- artwork is tangible personal property, and when artists sell their paintings at a nonprofit art club's event, those sales are subject to Missouri state and local sales tax on the full sales pri…
What does Missouri LR 8182 conclude about Dental Straighteners/Aligners are Subject to Sales Tax?
Yes. Missouri LR 8182 holds that a dental supply distributor's sales of removable clear teeth straighteners/aligners are subject to Missouri sales tax, because they don't qualify as durable medical eq…
What does Missouri LR 8169 conclude about Taxability of Machinery & Equipment for Utility-Scale Solar Farm?
Mixed answer: Missouri ruled that a utility-scale solar farm's solar panels and sun-tracking systems qualify for the manufacturing machinery and equipment sales/use tax exemption, but racking and supp…
What is Illinois General Information Letter IT 22-0003-GIL, and what does it say about corporate income tax nexus?
It isn't a ruling on anyone's tax situation -- it's the Illinois Department of Revenue's completed answers to a private publisher's annual '2022 Survey of State Tax Departments,' covering how Illinois…
Does a landlord who leases shared suite space to two alcoholic-liquor distributors have to register with the Department as a 'warehouseman' and obtain a Certificate of Registration?
Yes, in the situation described. Under Article VII-A of the Liquor Control Act of 1934, anyone who stores alcoholic liquors (including wine) for compensation — even indirectly, such as through rent fr…
Can a corporation that had its federal wage deduction disallowed because it claimed the Employee Retention Credit take an offsetting subtraction on its Illinois income tax return?
Yes. Corporations whose federal wage deduction was disallowed under IRC Section 280C(a) because they claimed the CARES Act Employee Retention Credit may subtract that disallowed amount under IITA Sect…
When were Florida equipment finance leases, purchase-to-own contracts, and assumption agreements subject to documentary stamp tax?
The reviewed finance lease, purchase-to-own contract, finance agreement, and two assumption agreements were taxable. The finance documents contained signed, unconditional obligations to pay a sum cert…
Must New Mexico reduce interest when its scanning error sends the required pre-assessment audit notice to the wrong address?
Yes, for the statutory period. The Department's scanner read a handwritten 4 as a 9 and sent the Callaways' pre-assessment notice to an incorrect Albuquerque address, even though a current Texas addre…
When an out-of-state business leases identification signs (tangible personal property) to Illinois car dealers under a true lease, who owes Illinois sales/use tax, and does it matter whether the signs are treated as real property or as tangible personal property?
The lessor, not the dealer-lessee, owes the tax. Under a true lease, Illinois treats the lessor as the end user of the tangible personal property being leased, so the lessor owes Use Tax on its own co…
I sold stock in a private tech company and claimed Virginia's long-term capital gain subtraction, but the company won't share its revenue figures with me -- can the Department still deny my subtraction just because I can't prove it met the $3 million revenue cap?
Yes -- the taxpayer, not the Department, has the burden of proving a qualifying business met the required revenue threshold, and the Department doesn't have to disprove it on the taxpayer's behalf. A …
My nonprofit is domiciled in Virginia and owns limited-partnership interests that allocate income to other states -- can I exclude that out-of-state income from my Virginia UBTI?
No -- because the Taxpayer is domiciled in Virginia, it can't use its limited-partnership interests' out-of-state income allocations to shrink its Virginia UBTI. Virginia law has no separate-accountin…
I'm a Virginia resident who paid California tax and claimed a credit on my Virginia return -- why did Virginia deny it and tell me to go get the credit from California instead?
Because California is one of a handful of "reverse credit" states (along with Arizona, Oregon, and D.C.), Virginia residents who pay California tax generally must claim their credit on a CALIFORNIA no…
I took a distribution from a 403(b) retirement account, and my contributions to it were taxed by another state when I made them -- can I subtract the ENTIRE distribution from my Virginia income, or only part of it?
Only part of it -- Virginia's retirement income subtraction uses a pro-rata formula, not a full exclusion of the entire distribution. A couple took a distribution from the husband's 403(b) retirement …
My city assessed business personal property tax on equipment that's broken or idle and on a consumable supply item -- do I owe tax on all of it?
It depends on the item, and the taxpayer only partly won. The Tax Commissioner sent one disputed item (equipment the taxpayer claimed was returned to the manufacturer) back to the City for another cha…
We built a clean room inside our leased research facility using pre-fabricated walls -- does that count as tax-exempt research and development equipment, or did it become part of the building (and taxable real property) once installed?
It stayed exempt research-and-development equipment rather than becoming taxable real property -- but only because the taxpayer could show its lease required removing everything at the end of the term…
My airline buys food and beverages from a caterer to serve passengers for free during flights -- does our common-carrier sales tax exemption cover those purchases?
No. Virginia's sales tax exemption for airlines operating as common carriers only covers property used directly in actually transporting passengers -- it doesn't extend to food, snacks, and beverages …
Which equipment used to manufacture soil qualified for Florida's manufacturing exemption, and did the farm-equipment exemption apply?
Equipment integral to manufacturing soil at a fixed Florida location qualified under Fla. Stat. Sec. 212.08(7)(jjj), while repair, equipment-maintenance, and grounds-maintenance items did not. None of…
Does raw material that just sits and ages in a Virginia warehouse before being shipped out of state for manufacturing count as being 'used' in Virginia for corporate income tax apportionment purposes?
No -- the Virginia Supreme Court held that raw leaf tobacco simply stored and naturally aging in a Virginia warehouse, with no active steps taken by the company, is not "used" in Virginia within the m…
How these rulings are useful
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