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The California Office of Tax Appeals (OTA) has adopted emergency regulations regarding appeals of the state’s Franchise Tax Board and the Department of Tax and Fee Administration. The regulations are effective January 1, 2018. As of January 1, 2018, the OTA has jurisdiction over any appeal which has been heard by the State Board of Equalization (BOE) but for which the BOE either failed to issue a decision before January 1, 2018, or issued a decision that was not final before January 1, 2018. In cases where the BOE has issued a decision in an appeal which is not final before January 1, 2018, for which a party had submitted a timely Petition for Rehearing with the BOE before January 1, 2018, the OTA will treat that petition as a Petition for Rehearing. In cases where the BOE has issued a decision for an appeal which is not final before January 1, 2018, before that decision becomes final, any party may submit a petition for rehearing with the OTA. If, prior to January 1, 2018, the BOE has, in writing, established a briefing scheduling providing for briefing to be submitted on or after January 1, 2018, that schedule will remain applicable to the appeal unless otherwise directed by the OTA. For all other appeals for which the OTA gains jurisdiction on January 1, 2018, because, as of that date, the Appeals Bureau had issued its decision and a party made a timely request for an oral hearing by the BOE, the OTA will notify the parties to those appeals as to the next step in their appeals. For the full text of the regulations, click here. To see our previous news item on this topic, click here. (18 CCR, Division 4, California Office of Tax Appeals)


California has extended the end date for the state’s partial sales and use tax exemption for manufacturing from July 1, 2022 to July 1, 2030. The exemption is also expanded to apply to the gross receipts from the sale of, and the storage, use, or other consumption in California of qualified tangible personal property purchased for use by:


  • a contractor purchasing that property for use in the performance of a construction contract for a qualified person that will use the property as an integral part of the generation or production, or storage and distribution, of electric power; and
  • a qualified person to be used primarily in the generation or production, or storage and distribution, of electric power.


The sunset date of the exemption is extended from January 1, 2023 to January 1 2031. Click here for our previous news item on this topic. (Ch. 135 (A.B. 398), Laws 2017, effective July 25, 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.


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)


Beginning July 1, 2017, most of the duties performed by the California State Board of Equalization (BOE) will be transferred to the new California Department of Tax and Fee Administration (CDTFA) and the Office of Tax Appeals. The BOE will continue to administer programs related to property taxes, insurance taxes, and excise taxes on alcohol. Until December 31, 2017, the BOE will continue to hear taxpayer appeals on all types of tax and fee matters. Beginning January 1, 2018, the BOE will only hear appeals related to the programs related to property taxes, insurance taxes, and excise taxes on alcohol. The Office of Tax Appeals will hear appeals on all other tax and fee matters (e.g. franchise and personal income tax, sales and use tax, and other special taxes and fees). Requirements to register, file, and pay taxes and to meet other obligations will be the same as required prior to July 1, 2017. Schedules, forms, and payments will generally be the same during the transition. For more information visit the CDTFA website at change is due to the passage of Assembly Bill 102 – the Taxpayer Transparency and Fairness Act of 2017.  There is a lot of uncertainty as to what this means.  We will continue to monitor and update as information becomes available.  (AB-102, signed by Governor June 27, 2017; Special Notice L-507, California Department of Tax and Fee Administration, July 2017)



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