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The Pennsylvania Supreme Court has agreed to hear arguments on the legality of Philadelphia’s sweetened beverage tax. The Court granted the petition for allowance of appeal of January 30, 2018. The Court will hear arguments regarding whether the beverage tax is in violation of the Sterling Act, which prohibits Pennsylvania from imposing a tax on a transaction that the Commonwealth already taxes. Philadelphia’s sweetened beverage tax – which is 1.5 cents per ounce – was approved by the Philadelphia City Council on June 16, 2016 and became effective January 1, 2017. Shortly after the beverage tax was approved, Philadelphia was sued by a group including the American Beverage Association, claiming that the tax violates the Sterling Act. These beverages are also subject to the state and local sales & use tax. On June 14, 2017, the Commonwealth Court of Pennsylvania upheld the constitutionality of the beverage tax. (No. 321 EAL 2017, Petition for Allowance of Appeal from the Order of the Commonwealth Court)

(02/15/2018)

The Colorado Department of Revenue has announced that beginning with sales tax returns filed in February 2018 for all sales after January 1, 2018, all Colorado sales and use taxes must be reported and paid to the penny, regardless of filing format. Whole dollar reporting is no longer accepted. The Colorado Sales Tax Return (DR 0100) no longer has “00” entered in the cents column. Instead, there is space to enter this information. Previously, for sales that occurred through December 31, 2017, Colorado sales tax returns allowed taxpayers to report and pay taxes by rounding to the nearest dollar or to the penny, depending on the filing format. (2018 Colorado Sales Tax Rounding Change, Colorado Department of Revenue, February 1, 2018)

(02/15/2018)

A 2017 case of a New Mexico taxpayer highlights the importance of keeping up to date with registration requirements when changing business types and with the corresponding tax obligations. A trucking business owner became personally liable for New Mexico gross receipts tax after failing to update his business registration when he decided to change the business from a sole proprietorship to an LLC. In 2016, the taxpayer was issued a tax lien from the New Mexico Department of Revenue for unpaid tax, penalty, and interest. The liability had previously been assessed under an audit which was protested and later negotiated to an agreed upon amount.  The taxpayer ceased doing business which triggered the issuance of the lien. The lien was issued to the individual rather than the company, as the taxpayer was listed as a sole proprietorship with the Department. The taxpayer argued that the lien should not have been in his name because the company was operating as an LLC for the time in question, and that he should not be personally liable for the gross receipts tax owed. The taxpayerwas unable to demonstrate that any assets, rights, obligations, liabilities, or tax reporting responsibilities had been taken on by the LLC. The Department found that the taxpayer never formally updated his business registration in response to converting the business to an LLC. As a result, the lien was deemed properly assessed to the sole owner and the taxpayer was held liable for the gross receipts tax. (In the Matter of the Protest of Casias,New Mexico Taxation and Revenue Department, (May 30, 2017)

(02/15/2018)

A South Carolina Court did not grant a request for injunction filed by the South Carolina Department of Revenue (DOR) to make Amazon collect South Carolina tax on FBA (Fulfillment by Amazon) sales. On November 8, 2017 the DOR had filed the motion to request that Amazon begin collecting sales tax on sales by third party sellers using Amazon’s platform within 10 days and remit these collected taxes to a trust fund to be held until the case is decided.  The South Carolina Department of Revenue argued that the ultimate tax due could exceed $500 million and the risk to the Department for collection or if it is determined that the tax is owed by the 3rd Party Sellers is so significant that the injunction should be granted.  The case premise is that Amazon has an obligation to collect tax on all sales executed through its platform including sales by 3rd party independent sellers. The case is scheduled to be heard in early November 2018.  Until then, the uncertainty regarding who has the obligation to collect tax on sales to customers in South Carolina remains. We will continue to monitor for developments. 

(02/14/2018)

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