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NEWS & TIPS
The Sales Tax Institute reviews numerous sales tax publications to monitor state activity on various topics related to sales and use tax. By checking updates routinely, you may be alerted to an impending tax law change critical to your business.
Browse recent and archived news items by searching relevant categories, states or descriptions at right
The information listed here is high-level summary and background material intended to help you stay current in the dynamic area of sales and use tax. Sources include CCH State Tax Day, Sales and Use Tax Alert, Sales Tax Notes, Vertex, Inc. Reference Manuals, Westlaw, and other miscellaneous state tax newsletters and Department of Revenue notices.
Please note that these summaries omit many details and special rules, and cannot be regarded as legal or tax advice. For more information, be sure to contact your tax advisor.
HOT NEWS UPDATES:
Puerto Rico Governor Garcia Padilla signed legislation re-establishing the 6% sales and use tax rate, effective February 1, 2014. A reduction in the tax rate from 6% to 5.5% was originally approved to go into effect on December 1, 2013 and was postponed until February 1, 2014. (Proyecto de la Cámara 1591)
The U.S. Supreme Court has denied requests by Amazon.com and Overstock.com to review a New York Court of Appeals ruling which held that the online retailers failed to demonstrate that a statutory provision that required out-of-state Internet retailers with no physical presence in New York to collect sales and use taxes was facially unconstitutional under either the Commerce Clause or the Due Process Clause. The click-through nexus law created a rebuttable presumption that a retailer solicits business in New York if any in-state entity was compensated for directly or indirectly referring customers to the retailer, whether by a website link or otherwise, and the cumulative gross receipts from these and other New York affiliate referrals exceeded $10,000. Click here to view our previous news item on this ruling. (Overstock.com, LLC v. New York State Department of Taxation and Finance, U.S. Supreme Court, Dkt. 13-252, petition for certiorari denied December 2, 2013; Amazon.com LLC v. New York State Department of Taxation and Finance, U.S. Supreme Court, Dkt. 13-259, petition for certiorari denied December 2, 2013)
The U.S. District Court of Appeals for the 10th Circuit has ruled that a lower federal court overstepped its jurisdiction when it declared unconstitutional and issued a permanent injunction against enforcement of a statute and regulations that impose notice and reporting requirements pertaining to use tax on out-of-state sellers. To view our previous news item on the injunction, click here. The lower court’s decision to impose the permanent injunction was based upon the court’s reasoning that the law placed an undue burden on interstate commerce.The U.S. Court of Appeals remanded the case to the federal district court to dismiss the plaintiff’s claims and to lift the permanent injunction. The court cited the Tax Injunction Act, which states that federal courts should not enjoin, suspend or restrain any state tax assessments or collections if the disputed matter can be resolved by lower courts. The court noted that although its decision was based on the Tax Injunction Act, the doctrine of comity also favored the state. The doctrine of comity is intended to "restrain federal courts from entertaining claims for relief that risk disrupting state tax administration." We will monitor the DMA response and Colorado’s enforcement provisions. At this point, it appears the law is valid and affected sellers should evaluate their requirements to provide the appropriate notice on each invoice due to the significant potential penalties.
UPDATE: On December 13, 2013, a federal district court judge issued an order dissolving the permanent injunction entered against the Colorado Department of Revenue regarding notice and reporting requirements pertaining to use tax on out-of-state sellers. The Colorado Department of Revenue has issued a notice stating that it will not enforce any penalties for failure to comply during the period the injunction was in place. The Department also will not assess penalties for a retailer’s failure to comply with the January 31, 2014 deadline to provide annual purchase summaries to their customers or the March 1, 2014 deadline to provide the annual report to the Department for their 2013 purchases. (Direct Marketing Association v. Brohl, U.S. Court of Appeals, Tenth Circuit, Dkt. 12-1175, August 20, 2013, The Direct Marketing Association v. Huber, U.S. District Court for the District of Colorado, Dkt. No. 10-cv-01546-REB-DBS, December 10, 2013)
UPDATE: A Denver district court judge has granted Direct Marketing Association's motion for a preliminary injunction against Colorado imposing notice and reporting requirements on remote sellers. The court found that the law discriminated against remote sellers who were required to collect sales tax or required to notify customers of use tax obligations. According to the Colorado Department of Revenue, retailers are not required to comply with the remote vendor reporting requirements at this time. However, the court’s decision does not affect a Colorado consumer’s liability for tax on any purchase on which sales tax was not collected. Customers are still required to file a Consumer Use Tax Return and pay the tax due.(Direct Marketing Association v. Department of Revenue, Denver District Court, No. 13CV34855, February 18, 2014, and Release - Internet Sales/Non-Collecting Retailers, Colorado Department of Revenue, February 19, 2014)
UPDATE: The U.S. Supreme Court has been asked to review the decision by the U.S. District Court of Appeals for the 10th Circuit which held that the federal Tax Injunction Act barred the exercise of federal court jurisdiction over the lawsuit challenging the constitutionality of the Colorado law. (Direct Marketing Association v. Brohl, U.S. Supreme Court, Dkt. 13-1032, petition for certiorari filed February 25, 2014)
Vermont has initiated a voluntary self-audit program– “Know What You Owe” - intended to aid taxpayers in complying with use tax remittance. From August 1, 2013 to May 1, 2014, business owners can sign up to participate in the program, conduct a self-audit, and remit the correct amount of use tax due. Under the program, participants will review their business records for the past three years to determine if use tax is owed. The state will allow participants to self-report the tax due and will waive all penalties and 50% of the interest owed for the period reviewed. The look-back period for audits under the program will be limited to three years instead of the possible seven years for businesses not currently registered. Additionally, participants will not have to work through a structured audit. Any tax owed and applicable reduced interest must be paid within 30 days of the date the participant enters the program. Additional interest will accrue if the tax is not paid in this period. Participants may be able to arrange an extended payment plan with the department.(Know What You Owe, Vermont Department of Taxes, August 2013; Publication BR-1015, Vermont Department of Taxes, August 27, 2013)
Louisiana Governor Bobby Jindal has approved the Tax Delinquency Amnesty Act of 2013. The Act requires the Louisiana Department of Revenue (LDR) to implement a tax amnesty program applicable to all taxes administered by the LDR, except for motor fuel taxes and penalties for failure to submit information reports that are not based on an underpayment of tax. There will be three separate time periods during which taxpayers will be able to file for amnesty protection. The first period will run from September 23, 2013 and end November 22, 2013. The remaining two periods will be a period of at least one month occurring between July 1, 2014, and December 31, 2014 and a period of at least one month occurring between July 1, 2015, and December 31, 2015. These dates have not yet been announced. The LDR will be authorized to waive penalties and interest associated with the tax periods for which amnesty is applied as follows: all penalties and 50% of the interest owed if the amnesty application is approved during the 2013 amnesty period; 15% of penalties owed if the amnesty application is approved during the 2014 amnesty period; and 10% of penalties owed if the amnesty application is approved during the 2015 amnesty period. Based on this, affected taxpayers are encouraged to file for amnesty during the 2013 period.
The following taxes are eligible for amnesty: taxes due prior to January 1, 2013, for which the LDR has issued an individual or a business proposed assessment, notice of assessment, bill, notice, or demand for payment not later than May 31, 2013; taxes for taxable periods that began before January 1, 2013; or taxes for which the taxpayer and the department have entered into an agreement to interrupt and suspend the running of prescription until December 31, 2013. Special amnesty provisions apply to matters under examination and in litigation. Amnesty will be granted only for eligible taxpayers who apply for amnesty during one of the amnesty periods and who pay all of the tax, all fees and costs (if applicable), and any interest due upon filing the amnesty application. Amnesty may not be granted to taxpayers who are parties to any criminal investigation or criminal litigation in any state or federal court pending on June 21, 2013, for nonpayment, delinquency, or fraud in relation to any state tax administered by the department. Any taxpayer who delivers or discloses a false or fraudulent application, document, return, or other statement to the department in connection with an amnesty application will be ineligible for amnesty and subject to a fraud penalty or a penalty of $10,000, whichever is greater. Taxpayers that participate in the amnesty program and later fail to comply with any payment and filing provision would be subject to a negligence penalty or a $100 penalty, whichever is greater.
The application for taxpayers involved in field audits or litigation will include all issues and all eligible periods involved in the audit or litigation. All business taxpayers are required to file returns with the amnesty application. The Secretary reserves the right to require individual taxpayers to file tax returns with the amnesty application as well. (Act 421 (H.B. 456), Laws 2013, effective June 21, 2013; Revenue Information Bulletin No. 13-017, Louisiana Department of Revenue, August 1, 2013)