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Texas has enacted legislation that requires the Comptroller of Public Accounts to establish a limited-time tax amnesty program to encourage reporting by delinquent taxpayers who do not have a Texas Sales and Use Tax Permit, or are not registered for a tax or fee administered by the Comptroller’s office; and taxpayers who have a permit, but may have underreported or owe additional taxes or fees. The program will provide for the waiver of penalty or interest or both but will not apply to an established tax liability or to taxpayers currently under audit. The amnesty would include tax due from purchases. The comptroller will provide additional information once dates and program details are established. (S.B. 1, Laws 2017; Tax Policy News, Office of Texas Comptroller, August 2017)

(09/28/2017)

In Texas, a limited liability company (LLC) may claim a partial exemption from Texas sales and use tax on its purchase of taxable items much like a joint venture or partnership. To qualify for the exemption, the LLC must have a medical purpose.

 

Partial exemptions on purchases of taxable items may be granted to an LLC if:

 

  • one or more of its members qualifies for an exemption from sales and use tax under Section 151.310 (Religious, Educational, and Public Service Organizations);
  • the LLC has a medical purpose;
  • the LLC operates similarly to a joint venture;
  • the LLC files as a partnership for federal income tax purposes; and
  • the items purchased relate to the tax-exempt purpose of the exempt member

 

The amount for the partial exemption will equal the percentage of the LLC that is owned by an exempt member or members of the LLC. The tax exemption amount claimed by the LLC is capped and cannot exceed the amount of charity care or government-sponsored indigent health care provided by the LLC. Eligible LLCs that did not claim a sales tax exemption on their qualifying purchases may file a claim for refund for all open periods within the statute of limitations.  (Letter No. 201707003L, (Jul. 7, 2017))

(08/23/2017)

The Multistate Tax Commission (MTC) has announced a sales/use tax and income/franchise tax amnesty program for online sellers that will run from August 17 to November 1, 2017 (previously October 17, 2017). Qualified online sellers with potential tax liability may be able to use the MTC's voluntary disclosure agreement (VDA) to negotiate a settlement during the amnesty period if they meet certain eligibility requirements. Taxpayers that have not been contacted by any of the states participating in the amnesty program will be able to apply to start remitting sales tax on future sales without penalty or liability for unpaid, prior accumulated sales tax in the participating states. 25 MTC member states have agreed to participate in the amnesty program. The participating states include: 

 

  • Alabama
  • Arkansas
  • Colorado (sales/use tax only)
  • Connecticut
  • District of Columbia (may not waive all prior periods)
  • Florida
  • Idaho
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Massachusetts (special provisions apply)
  • Minnesota (special provisions apply)
  • Missouri
  • Nebraska (may not waive all prior periods)
  • New Jersey
  • North Carolina
  • Oklahoma
  • Rhode Island
  • South Dakota
  • Tennessee
  • Texas 
  • Utah
  • Vermont
  • Wisconsin (will require payment of back tax and interest for a lookback period commencing January 1, 2015 for sales/use tax, and including the prior tax years of 2015 and 2016 for income/franchise tax)

 

Some of the additional states may require a limited look-back period for prior tax liabilities. Sellers who wish to participate in the program will need to file the voluntary disclosure program paperwork during the program dates. The MTC will route the paperwork for each participating state for which the seller is seeking amnesty protection. For more details visit the MTC website.

 

UPDATE: The Multistate Tax Commission's online seller amnesty program is now over. If you didn't take advantage of this program but realize you need to evaluate your activities, you can contact us here.

(11/07/2017)

On June 12, 2017, Rep. Jim Sensenbrenner (R-WI) and House Judiciary Chairman Bob Goodlatte (R-VA) introduced the No Regulation Without Representation Act of 2017. A previous version of this bill had been introduced in 2016 and failed to pass. Under the proposed bill, a State may tax or regulate a person’s activity in interstate commerce only when such person is physically present in the State during the period in which the tax or regulation is imposed. Under the proposed bill, the physical presencerequirement would apply to sales and use taxand net income and other business activities taxes, as well as the states’ ability to regulateinterstate commerce. “Physical presence” in a state includes:

 

  • maintaining a commercial or legal domicile in the state;
  • owning, holding a leasehold interest in, or maintaining real property such as an office, retail store, warehouse, distribution center, manufacturing operation, or assembly facility in the state;
  • leasing or owning tangible personal property (other than computer software) of more than de minimis value in the state;
  • having one or more employees, agents or independent contractors present in the state who provide on-site design, installation, or repair services on behalf of the remote seller;
  • having one or more employees, exclusive agents or exclusive independent contractors present in the state who engage in activities that substantially assist the person to establish or maintain a market in the state; or
  • regularly employing in the state three or more employees for any purpose.

 

“Physical presence” in a state would not include:

 

  • entering into an agreement under which a person, for a commission or other consideration, directly or indirectly refers potential purchasers to a person outside the state, whether by an Internet-based link or platform, Internet Web site or otherwise;
  • any presence in a state for less than 15 days in a taxable year (or a greater number of days if provided by state law);
  • product placement, setup or other services offered in connection with delivery of products by an interstate or in-state carrier or other service provider;
  • Internet advertising services provided by in-state residents which are not exclusively directed towards, or do not solicit exclusively, in-state customers;
  • ownership by a person outside the state of an interest in a limited liability company or similar entity organized or with a physical presence in the state;
  • the furnishing of information to customers or affiliates in such state, or the coverage of events or other gathering of information in such state by such person, or his representative, which information is used or disseminated from a point outside the state; or
  • business activities directly relating to such person's potential or actual purchase of goods or services within the State if the final decision to purchase is made outside the state.

 

In addition, the bill prohibits the imposition or assessment of a sales, use or other similar tax or a reporting requirement unless the purchaser or seller has physical presence in the state.  This would prohibit all the remote seller legislation (click through, affiliate, economic, marketplace and reporting/notification). If enacted, the legislation would apply with respect to calendar quarters beginning on or after January 1, 2018. (No Regulation Without Representation Act of 2017)

(07/12/2017)

Effective January 1, 2018, insurance services performed by a certified public accountancy (CPA) firm are not subject to Texas sales tax if less than 1% of the firm's total revenue in the prior calendar year is from services in Texas that would otherwise constitute taxable insurance services. Taxable insurance services include: Insurance loss or damage appraisal; insurance inspection; insurance investigation; insurance actuarial analysis or research; insurance claims adjustment or claims processing and insurance loss prevention service. Charges for expenses including travel costs are taxable if related to a taxable insurance service. Insurance services performed on behalf of a CPA firm by an owner of the firm or a member of the firm's affiliated group are not subject to Texas sales tax if less than 1% of the owner's or member's total revenue in the prior calendar year is from services in Texasthat would otherwise constitute taxable insurance services. This does not affect tax liability accruing before January 1, 2018.(S.B. 1083, Laws 2017)

(06/19/2017)

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