State and Local Tax Update: Nexus Standards, Remote Sellers and NOL Carryovers

By Freed Maxick Tax Team on January, 5 2018
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Freed Maxick Tax Team

january-2018-salt-update-large-249706-edited.jpgThe latest Freed Maxick State and Local Tax Update contains a number of must-read items from around the country.

Mississippi economic nexus standard: The Mississippi Department of Revenue has adopted an economic nexus standard for sales and use tax purposes, effective Dec. 1, 2017. Sellers who lack a physical presence in the state will be required to collect and remit use tax on sales of tangible personal property and digital goods if those sellers have a substantial economic presence in in the state. Substantial economic presence exists if a remote seller “purposefully or systematically exploits the Mississippi market” and made sales into the state exceeding $250,000 during the prior twelve months.

California sales factor throwback rule: The state’s Franchise Tax Board has provided guidance with an example of how the state’s sales factor “throwback” rule is applied to a California located taxpayer selling tangible personal property in multiple states, including states the company is filing gross receipts or franchise tax returns. Sales are subject to throwback if the property is shipped from a location in California and the purchaser is the U.S. government or the taxpayer is not taxable in the purchaser’s state. A taxpayer is considered taxable in another state if subject to net income tax, franchise tax measured by net income, franchise tax for the privilege of doing business or a corporate stock tax. 

Pennsylvania NOL carryovers, remote seller rules, nonresident withholding:

Pennsylvania removed the $5 million cap on net operating loss (NOL) deductions and increased the percentage to 35% of taxable income in 2018 and 40% for 2019 and beyond. The state also made a rule effective March 1 that marketplace sellers, facilitators or referrers and certain remote sellers with aggregate Pennsylvania sales of $10,000 or more in the previous calendar year must elect to collect and remit Pennsylvania sales tax or comply with new notice and reporting requirements. Finally, effective Jan. 1, 2018, the state requires entities making rent and royalty payments on Pennsylvania property to nonresidents and payments to out-of-state independent contractors working in Pennsylvania which exceed $5,000 to withhold personal income tax on those payments.

New York MTA surcharge rate: New York Business Corporation Franchise Tax Regulations were amended to set the Article 9-A Metropolitan Transportation Business Tax Surcharge (MTA surcharge) rate for tax years beginning on or after Jan. 1, 2018, and before Jan. 1, 2019. The rate has increased to 28.6%. 

California sale of a business: A corporation could exclude the sale of its U.S. business in the California sales apportionment factor of its California return. If a sale is deemed to be substantial and occasional in nature, a corporation generally does not include asset sales in its apportionment factor.

Montana apportionment rules: The Montana Department of Revenue has adjusted their rules regarding the calculation of apportionment for unitary combined groups. The new Finnigan Rule states that a taxpayer must include the payroll, property and receipts from all unitary group members if one member has nexus.

Connecticut Fresh Start: The CT Fresh Start program, which runs from Oct. 31, 2017, through Nov. 30, 2018, allows eligible taxpayers to pay only the tax due and half the interest at the time of the application filing. All remaining interest and penalties will be waived, and no returns are actually required to be filed.

Amnesty reminders: Ohio and Rhode Island tax amnesty programs end Feb. 15. Both programs waive all filing penalties; participants will only be required to pay 50% (Ohio) or 75% (Rhode Island) of the interest accrued on late filings.

Download our SALT updates here or contact a member of the Freed Maxick State and Local Tax Services (SALT) Team for a no cost consultation.

 

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