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Ernst & Young's State and Local Tax Weekly newsletter for October 7 and October 14 is now available. Prepared by Ernst & Young's State and Local Taxation group, this weekly update summarizes important news, cases, and other developments in U.S. state and local taxation.

TOP STORIES

Texas Supreme Court lets stand mineral extraction case involving sales and use tax exemption for manufacturing- lower court ruling creates potential refund opportunities

On Sept. 30, 2022, the Texas Supreme Court denied review in Hegar v. Texas Westmoreland Coal Co.,¹ in which the Third Court of Appeals (Appeals Court) held that a mining company was entitled to a refund of sales and use tax paid on the lease of three excavators, which the company used to extract and break apart lignite coal ore.

The company argued that the sales and use tax manufacturing exemption in Tex. Tax Code § 151.318(a)(2)(A) applied because the excavators were used in processing lignite coal. The Texas Comptroller of Public Accounts (Comptroller) disagreed arguing that the lignite coal extracted from the ground was real property, not tangible personal property. The Comptroller also asserted that "processing" did not encompass extracting minerals from the ground.

The Appeals Court rejected the Comptroller's arguments, holding that Section 151.318(a)(2)(A) does not require raw materials or inputs in the manufacturing process to be tangible personal property, only that the output at the end of the process differ from one or more inputs along the way. Additionally, the Appeals Court held that the excavators undeniably made physical changes to the lignite coal by extracting it from the ground.

For more on this development, including the ruling's implications, see Tax Alert 2022-1564.

INCOME/FRANCHISE

Colorado: In response to a ruling request, the Colorado Department of Revenue determined that wages which were disallowed as a deduction for federal income tax purposes under IRC §3134(e) because the taxpayer claimed the employee retention credit, may be subtracted from federal taxable income for Colorado income tax purposes. Colo. Dept. of Rev., Private Letter Ruling PLR 22-006 (Sept. 30, 2022).

Colorado: The Colorado Department of Revenue (CO DOR) is seeking interested party input on draft rules for (1) Colorado net operating losses (NOL) for corporate taxpayers and (2) the foreign source income exclusion. Initial discussion drafts were issued Dec. 7, 2021 and May 18, 2022, respectively. Based on input from interested parties, the CO DOR revised the draft rules. Revisions to the draft NOL rule: (1) clarify NOLs of affiliated groups filing combined, consolidated, combined-consolidated or separate returns; (2) clarify nonapportionable income provisions; (3) add new provisions that address NOLs arising before 2019; (4) clarify NOL carryforwards and the tax years to which they can be applied; (5) add new provisions that make clear that the NOL deduction is limited to Colorado taxable income before deduction (in addition to other limitations) as well as provisions regarding the application of the SRYL limitation to Colorado NOLs; and (6) clarify the application of the IRC §860E to Colorado NOLs; among other clarifying modifications. Revisions to the foreign source income exclusion: (1) clarify the exclusions allowed on combined, consolidated and combined-consolidated returns; (2) list additional types of foreign source income; (3) clarify the separate calculation of exclusion for income categories required for the separate calculation of the foreign tax credit; (4) add a formula for the calculation of the exclusion; and (5) clarify redeterminations under IRC §905(c); among other minor clarifying edits. The CO DOR said that it does not plan to hold another workgroup meeting before the formal rulemaking for either rule, but will take comments on both draft rules through Nov. 4, 2022.

Louisiana: A limited liability company in the business of creating different software platforms that are accessed by customers over the internet, properly apportioned its taxable capital using the apportionment formula that applies to manufacturers under La. R.S. 47:606(A)(3)(b) — i.e., a single sales factor formula. Citing South Central Bell Telephone Co.,² the Louisiana Board of Tax Appeals (BTA) explained that software "by its nature" is tangible personal property and "[t]he import of that pronouncement necessarily extends to all software unless a particular item is shown to be of a distinct nature … ." In rejecting the Louisiana Department of Revenue's argument that the software at issue is distinguishable from that in Bell because the software was accessed over the internet, the BTA noted that a component of the software in Bell was delivered over the phone lines, which the BTA found to be "an analogous precursor to the modern internet." Moreover, the Court in Bell expressed that the form of delivery of the software was "of no relevance." The BTA further determined that even if the software is not delivered to the customers and stored on their computers it nevertheless would still be stored in, and exist on, the company's servers. Lastly, the BTA rejected the Department's assertion that the production of software cannot meet the definition of manufacturing since the company does not transform raw material into a finished product for resale. The BTA reasoned that if the baseline arrangements of electrons before being turned into software is viewed as raw material, the company rearranges and transform them into a finished tangible personal property for sale (i.e., the software program). Cervey, LLC (FKA New-Tech Computer Systems LLC) v. Louisiana Dept. of Rev., B.T.A. Dkt. No. 12272D (La. Bd. Tax App. Sept. 8, 2022).

Missouri: New law (SB 3) reduces the top individual income tax rate to 4.95% (from 5.3%), effective for tax years that being on or after Jan. 1, 2023, with additional, future reductions contingent on revenue thresholds being met. The law repeals previously enacted contingent rate reductions and reduces the number of, and adjusts the thresholds of, the tax brackets. Beginning with calendar year 2024, the top individual income tax rate could be reduced by 0.15% to 4.8%, if the net general revenue collected in the prior fiscal year exceeds the highest amount of net general revenue collected in any of the three fiscal years prior to such fiscal year by $175 million. Beginning with the calendar year that follows this rate reduction, the top individual income tax rate can be phased down to 4.5%, allowing three additional 0.1% reduction in the rate if the following thresholds are met: (1) if the net general revenue collected in the prior fiscal year exceeds the highest amount of net general revenue collected in any of the three fiscal years prior to such fiscal year by $200 million, and (2) the amount of net general revenue collected in the prior fiscal year exceeds the amount of net general revenue collected the fiscal year five years prior, adjusted annually for inflation. Modifications to the rate would apply to tax years that begin on or after the modification takes effect. Also effective for tax years beginning on or after Jan. 1, 2023, no tax is due on taxable income of $1,000 or less. Mo. Laws 2022 (1st Spec. Sess.), SB 3, signed by the governor on Oct. 5, 2022.

North Carolina: A bill enacted June 29, 2022 (HB 83) includes provisions affecting various taxes, including the calculation of the North Carolina franchise tax. Before the Bill's amendments, N.C.G.S. §105-122(b)(2) required a corporation to increase the net worth tax base by affiliated indebtedness that "creates net interest expense" that is not "qualified interest expense" for income tax purposes. As the law was originally written, taxpayers could potentially avoid the addition modification for affiliated indebtedness by borrowing from affiliates on an interest-free basis since such indebtedness would not create net interest expense. N.C.G.S. § 105-122(b)(2), as revised by the Bill, requires an addition modification to the net worth tax base for affiliated indebtedness owed to a parent, subsidiary, affiliate, or a greater than 50%-owned noncorporate entity, unless the affiliated indebtedness creates qualified interest expense for income tax purposes. If the affiliated indebtedness creates qualified interest expense for income tax purposes, taxpayers do not have to make the addition modification to the net worth tax base for the indebtedness. For income tax purposes, qualified interest expense is the net interest expense paid or accrued to a related member, limited to the proportionate share of the affiliated lender's interest expense paid or accrued to an unrelated party. The limitation does not apply under the exceptions listed in the statute, which generally include interest paid to an affiliate that is subject to income tax by North Carolina, another state as part of a separate company filing, or a United States treaty partner. Therefore, if the interest expense meets one or more of the exceptions, the interest is qualified interest expense. Given that this clarification is effective June 29, 2022, it affects 2022 franchise taxes reported on 2021 income tax returns, which are filed after that date. For more on this development, see Tax Alert 2022-1492.

Ohio: On Sept. 26, 2022, the Cuyahoga County Court of Common Pleas ordered the City of Cleveland to refund 2020 income tax it collected from an individual who worked remotely in Pennsylvania during the COVID-19 pandemic. The individual argued that Cleveland lacked jurisdiction to impose income tax on her earnings from remote work and that Section 29 of HB 197 — which deemed employees to be performing personal services at their principal place of work even though their employer required them to perform those services at another location, such as their home, because of the COVID-19 emergency — was unconstitutional under both the Ohio and US Constitutions. The court did not hold that Section 29 of HB 197 was unconstitutional on its face, reasoning that it was not clearly incompatible with the Ohio constitutional authority of the legislature to address the COVID-19 pandemic and to pass laws limiting the power of municipalities to impose income taxes. However, the court concluded that Section 29 could not, as a matter of due process, confer jurisdiction to levy a tax on the income of a person who is not an Ohio resident earned for work performed outside Ohio. The court observed that due process relies on a fiscal relation with individual enjoying services and protections provided by the taxing jurisdiction. An employee physically present in the taxing jurisdiction enjoys these protections, but the mere ability of a remote worker to communicate virtually with the home office does not. For additional information on this development, see Tax Alert 2022-1504.

SALES & USE

Multistate: The latest edition of the EY Sales and Use Tax Quarterly Update, which provides a summary of the major legislative, administrative and judicial sales and use tax developments, is now available. Highlights of this edition, available via Tax Alert 2022-1514, include a review of the most recent developments involving nexus, tax base and exemptions, technology, and compliance and controversy.

Colorado: In response to a ruling request, the Colorado Department of Revenue (CO DOR) determined that state and state-administered sales tax does not apply to (1) a company's sales of credits that can be used on its internet-based platform (platform credits) on which viewers can watch streaming videos or (2) to the redemption of these credits by viewers, both with and without third-party enhancements. The CO DOR found the platform credit is akin to gift cards, "which evidence the issuer's agreement to provide goods and services when redeemed", and as such sales of the credit are not subject to tax. Redemption of the platform credits also is not taxable because the credits are not being used to acquire taxable tangible personal property or services. Rather, when a viewer redeems the credit the viewer is purchasing special recognition of earning badges or having their chat messages emphasized to the streamer or other viewers on the platform. These enhancements, the CO DOR said, are not taxable services. Colo. Dept. of Rev., PLR 22-005 (July 22, 2022).

Colorado: The Colorado Department of Revenue (CO DOR) released for public comment draft rule on the state's new retail delivery fee — new Rule 43-4-218 "Retail Delivery Fee". The general rule, as described by the draft retail delivery fee rule is that on or after July 1, 2022, retailers making retail delivers must impose, collect and remit the retail delivery fee. The fee is added to the price of the retail delivery. These requirements do not apply to retailers not doing business in Colorado. The draft rule provides guidance on (1) imposition of the fee and how it is sourced, with focused discussions on (a) subscriptions, recurring purchase programs, leases and installment sales; (b) delivery by a motor vehicle; and (c) determining delivery location; (2) deliveries of tangible personal property not subject to, or exempt from, the retail delivery fee, with specific guidance on wholesale sales, drop shipments, complimentary tangible personal property, discounts, and burden of proof; (3) contractors and repair services (e.g., time and materials contractor, lump-sum contractor, suppliers to contractors); (4) deliveries of marijuana; (5) registration; (6) collection of the retail delivery fee, with specific guidance on displaying retail delivery fees on an invoice, failure to collect the fee, retail sales made through an online marketplace, and direct payment permit holders; (7) filing and remitting the retail delivery fee; (8) refunds and credits, including claims for refund, credit for refunded fees collected in error, disputes, returned retail deliveries, canceled retail deliveries, bad debts charged-off; and (9) penalties and interest, statute of limitations, power of collection and enforcement, and calculation and publication of the retail delivery fee. The CO DOR is accepting comments, and will hold a public rulemaking hearing, on the draft rule on Nov. 3, 2022.

Mississippi: On Oct. 1, 2022, the Mississippi Taxation of Remote and Internet-Based Computer Software Products and Services Study Committee (Committee) submitted its report to the Mississippi Legislature. The Committee's general recommendations regarding sales and use taxation of software and related services are to exclude from sales and use tax: (1) all sales of software to business consumers and used as a business input, and (2) all software-related services to business consumers and used as a business input. The Committee did not make any recommendations related to sales of software and related services to non-business consumers. The Committee also did not propose specific language to codify regarding definitions and examples of taxable and nontaxable items; however, the Committee reasoned that consensus on the following topics could be reached during the legislative process: (1) define "computer software" and "computer software sales and services"; (2) exclude from the definition of "computer software" data or databases, apps or similar programs, platform-as-a-service or infrastructure-as-a-service; (3) exclude from the definition of "computer software sales and services" data processing services; (4) include a non-exclusive list of non-taxable items such as research databases, credit reports, real estate listings, rating reports and services, title abstracts, wire services, consumer banking; and (5) include a general statement that if there any ambiguities or uncertainties as to whether an item, service or transaction is taxable or nontaxable it is presumed nontaxable unless the legislature acts to clarify the statute. A copy of the report and exhibits are available here.

Mississippi: A company's sales of photography services and copyrights to digital still images are not subject to Mississippi sales tax because capturing and selling digital images is neither the sale of taxable tangible personal property nor a taxable business activity. In so holding, the Mississippi Supreme Court (Court) found that photography is not a taxable service and still digital images do not fall within the definition of taxable digital product. Further, since the company only used digital photography it is not providing taxable film development activities. The Court also rejected the Mississippi Department of Revenue's alternative argument that the company engaged in the taxable business activity of photo finishing, reasoning that while the Legislature has amended certain provisions in the tax code "to reflect the digital revolution", it has not amended Miss. Code § 27-65-23 to specifically include the editing of purely digital images. Accordingly, the Court vacated the sales tax assessment against the company. Mississippi Dept. of Rev. v. EKB, Inc., No. 2021-SA-00441-SCT (Miss. S.Ct. Oct. 6, 2022).³

Nevada: Adopted regulation (R052-21) provides guidance on taxation of peer-to-peer car (P2P) sharing program. If requested by the Nevada Department of Taxation (NV DOT), a person operating a P2P car sharing program must submit proof that the person has obtained or attempted to obtain from each shared vehicle owner who places a vehicle on the digital network or software application of the P2P car share program the required electronic certification for each shared vehicle. (The regulation list the information that must be included in the electronic certification.) Shared vehicles owners that have paid sales and use tax on the purchase of a shared vehicle must retain documentation showing proof of the payment. (The regulation list what the documentation must set forth.) Persons operating a P2P car sharing program on a quarterly basis must submit to the NV DOT a report that includes information on each shared vehicle placed on the P2P car sharing program's digital network or software application during the prior calendar quarter. (The regulation list what information must be included in the report.) The regulation also provides P2P car sharing program record retention guidance. Nev. Tax Comm. LCB File No. R052-21 (filed Sept. 28, 2022).

BUSINESS INCENTIVES

Federal: The IRS has released (Notice 2022-38, IRM 2022-39) the inflation adjustment factor for the IRC § 45Q carbon sequestration credit for calendar year 2022. This factor applies to credits for carbon oxide captured by equipment originally placed in service before enactment of the Bipartisan Budget Act of 2018. For additional information on this development, see Tax Alert 2022-1503.

Federal: In temporary and final regulations (TD 9967) under IRC § 42, the IRS and Treasury Department modified the average income test for purposes of the low-income housing credit (LIHC) so the test applies to rent-restricted units collectively instead of individually. Accompanying proposed regulations (REG-113068-22) address recordkeeping and reporting requirements for the average income test for purposes of the LIHC, reflecting the temporary regulations in the final rule. Separately, the IRS extended by one year the compliance (often called placed-in-service) deadlines (Notice 2022-52) for most qualified low-income housing projects to comply with IRC §42 requirements. For additional information on this development, see Tax Alert 2022-1546.

COMPLIANCE & REPORTING

California: The California Franchise Tax Board (FTB) is providing tax relief for taxpayers and business affected by Hurricane Ian in Florida, North Carolina and South Carolina. The FTB is granting affected taxpayers, i.e., those is presidentially declared disaster areas, an extension to Feb. 15, 2023 to file California income tax returns on 2021 income and make any tax payment that would have been due between Sept. 23, 2022 and Feb. 15, 2023. The FTB noted that while taxpayers who had an automatic extension to file their 2021 returns by Oct. 17, 2022 will now have until Feb. 15, 2023 to file their return, the tax relief does not extend the tax payment for the 2021 return, which was due on April 18, 2022. Cal. FTB, "California grants tax relief for Hurricane Ian victims" (last updated Oct. 6, 2022).

Colorado: The Colorado Department of Revenue (CO DOR) announced that it will mirror the IRS relief for those affected by Hurricane Ian that reside or have a business in Florida. Accordingly, Colorado taxpayers have until Feb. 15, 2023 to file various individual and business tax returns and make payments that were due on or after Sept. 23, 2022 and before Feb. 15, 2023. The CO DOR noted, that while taxpayers who had an automatic extension to file their 2021 returns by Oct. 17, 2022 will now have until Feb. 15, 2023 to file their return, the extension does not extend the tax payment for the 2021 return, which was due on April 18, 2022. Colo. Dept. of Rev., "CDOR to Mirror IRS Relief for Hurricane Ian Victims in Florida" (Oct. 12, 2022).

Florida: The Florida Department of Revenue announced that the due dates and extensions periods for filing Florida corporate income and franchise tax returns are suspended until March 2, 2023. In addition, the due date for paying tentative tax as well as the due dates for making estimated corporate income tax and franchise tax payments are suspended until March 2, 2023. Fla. Dept. of Rev. Off. of Exe. Dir., Order of Emergency Waiver/Deviation #22-002 (Corporate Income Tax) (Oct. 5, 2022).

Georgia: The Georgia Department of Revenue (GA DOR) announced that it is postponing until Feb. 15, 2023 certain filing and payment deadlines for taxpayers affected by Hurricane Ian who are individuals who reside, and businesses whose records needed for tax compliance are located in, the disaster area. The extension also applies other time-sensitive acts that have been specified by the IRS. The GA DOR noted that while taxpayers who had an automatic extension to file their 2021 returns by Oct. 17, 2022 will now have until Feb. 15, 2023 to file their return, the tax relief does not extend the tax payment for the 2021 return, which was due on April 18, 2022. The relief also applies to quarterly estimated tax payments due Jan. 16, 2023 as wells as quarterly payroll and excise tax returns due on Oct. 31, 2022 and on Jan. 31, 2023. Ga. Dept. of Rev., "Georgia Department of Revenue Extends Filing Deadline for Hurricane Ian Victims" (Oct. 13, 2022).

Illinois: On Oct. 11, 2022, the Illinois Department of Revenue (IL DOR) announced that it was automatically extending to Nov. 15, 2022, from Oct. 17, 2022, the extended due date for filing the Illinois corporate income tax return, Form IL-1120, for calendar year 2021. This extension only applies to the filing due date and does not extend the time to pay. The IL DOR explained that a 2016 change to the due date for the federal corporate income return has caused the federal and Illinois extended due dates to coincide. A proposed amendment to 86 Ill. Admin. Code 100.5020 would permanently restore the extended due date for filing the Illinois corporate income tax return to one month after the federal automatic extended due date. The automatic seven-month extension to file the Illinois corporate income tax return would retroactively apply to tax years ending on or after Dec. 31, 2021. For more on this development, see Tax Alert 2022-1548.

Maryland: The Maryland Comptroller announced that the state will follow the IRS guidelines extending filing and payment deadlines for various Maryland non-resident individual and business tax returns until Feb. 15, 2023. The extension applies to affected taxpayers of either Hurricanes Fiona and Ian located in a Federal Emergency Management Agency declared emergency zone in Puerto Rico, Florida, North Carolina or South Carolina. Md. Comp., News Release: Comptroller Franchot Extends Tax Deadlines for Fiona and Ian Victims (Oct. 13, 2022).

Michigan: The Michigan Department of Treasury (MI DOT) is providing tax relief to individuals and households affected by Hurricane Ian that reside or have a business anywhere in the states of Florida, North Carolina or South Carolina. Affected taxpayers can request additional time to file Michigan tax returns and pay Michigan tax bills, with the MI DOT waiving penalties and interest. Instructions on how to apply for this relief is available on the MI DOT's website. Mich. Dept. of Treas., New Release: Tax Relief for Disaster Survivors of Hurricane Ian in Florida, North Carolina and South Carolina (Oct. 13, 2022).

North Carolina: The North Carolina Department of Revenue (NC DOR) announced tax relief available to taxpayers affected by Hurricane Ian. The NC DOR will waive any penalties for failure to obtain a license, failure to file a return and failure to pay tax when due (collectively, late action penalty) assessed against an affected taxpayer (as described in the NC DOR's guidance) from Sept. 28, 2022 through Feb. 15, 2023, if the license is obtained, the return is filed and the tax due is paid by Feb. 15, 2023. Non-affected taxpayers (i.e., taxpayers not located in a disaster county) can request a waiver of late action penalties within three months of the date of the disaster; the request must include documentation supporting the taxpayer's claim that Hurricane Ian was the reason for the late action penalty. The NC DOR noted that it cannot waive interest and that penalties will not be waived for payments related to the 2021 state income tax return that were due on April 15, 2022. Further, under North Carolina the liability for failure to timely make estimated income tax payments is the imposition of interest, which cannot be waived. Thus, estimated payments due between Sept. 28, 2022 and Feb. 15, 2023 are due on the statutorily prescribed due date. N.C. Dept. of Rev., Important Notice: Tax Relief for Victims of Hurricane Ian (Oct. 7, 2022).

Pennsylvania: The Pennsylvania Department of Revenue (PA DOR) announced tax relief for Pennsylvania taxpayers affected by Hurricane Ian. The PA DOR has extended the due dates for file various individual and business Pennsylvania tax returns for taxpayers located in an area designated by FEMA as qualifying for assistance, which currently includes Florida, North Carolina and South Carolina. The PA DOR made clear that this extension does not extend the time to pay tax due. The PA DOR website includes a chart that lists the new due dates for affected taxpayers. For instance, the extended due date for trusts/estates and individuals is Feb. 15, 2023 and for corporations it is March 15, 2023. Pa. Dept. of Rev., News Release: Pennsylvania Taxpayers Affected By Hurricane Ian Have More Time To File Tax Returns (Oct. 6, 2022).

South Carolina: The South Carolina Department of Revenue (SC DOR) announced that is providing the same tax relief as provided by the IRS to individuals and businesses in South Carolina that have been affected by Hurricane Ian; those whose tax records are, or returns are prepared by tax professions, in South Carolina; and relief workers. The SC DOR is providing the same relief period provided by the IRS, and is postponing deadlines for South Carolina 2021 income tax returns (individua, corporate, trust) falling on or after Sept. 25, 2022 through Feb. 15, 2023. The extension also applies to quarterly estimated tax payments due Dec. 15, 2022 (for corporations) and Jan. 17, 2023 (non-corporations). The SC DOR said interest and penalties related to this tax relief will be waived. The SC DOR noted that it may grant additional relief on a case-by-cases basis, depending on a taxpayer's circumstances. S.C. Dept. of Rev., Information Letter #22-19 "Hurricane Ian Tax Relief for Persons and Businesses in South Carolina" (Oct. 10, 2022).

PAYROLL & EMPLOYMENT TAX

Federal: The Social Security wage base will increase from $147,000 to $160,200 in 2023, higher than the $155,100 high-cost and low-cost estimate published in the June 2022 Annual Report of the Board of Trustees. The Medicare tax rate for 2022 remains at 1.45% of all covered earnings for employers and employees. The Additional Medicare Tax of 0.9% applies to earned income of more than $200,000 for single filers (additional thresholds apply to other filing status types). While employers are required to withhold the additional 0.9% on covered wages over $200,000, there is no corresponding employer tax. For more on this development, see Tax Alert 2022-1560.

Arkansas: The Arkansas Department of Revenue has released the revised withholding tax formula reflecting the changes made by SB 1 (Act 2), enacted on Aug. 11, 2022. Retroactive to Jan. 1, 2022, SB 1 lowers the top marginal income tax rate from 5.5% to 4.9% and increases the income level at which the highest tax rate applies. SB 1 accelerates the tax cuts that were signed into law in December 2021 and is anticipated to save taxpayers over $400 million. The revised withholding formula is effective with wages paid on after Oct. 1, 2022. The Department also revised its Withholding Tax, Employer's Instructions. For more on this development, see Tax Alert 2022-1487.

Puerto Rico: The Puerto Rico Treasury Department has issued guidance (Circular Letter (CL) 22-13) on special disaster distributions from retirement plans and IRA accounts because of the state emergency declared by the Governor of Puerto Rico due to Hurricane Fiona. Payments or distributions in cash from a retirement plan or IRA requested by the eligible individual from Oct. 6, 2022 to Dec. 31, 2022, to cover eligible expenses will qualify as special disaster distributions. To receive a special disaster distribution, the eligible individual must submit to the employer that maintains the retirement plan or the service provider that administers the plan (for IRAs, the financial institution or insurance carrier that maintains the account) a certification signed under penalties of perjury that includes the information detailed in CL 22-13. An eligible individual is an individual who is considered a resident of Puerto Rico during calendar year 2022. Eligible expenses are those an individual incurs to cover losses, damages and extraordinary and unforeseen expenses for basic necessities resulting from a disaster. For more on this development, see Tax Alert 2022-1525.

South Carolina: On June 18, 2022, South Carolina Governor Henry McMaster signed into law SB 1087, which lowers the state's top marginal tax rate from 7% to 6.5% retroactive to Jan. 1, 2022. Beginning with Tax Year 2023, and each year thereafter until the top marginal rate equals 6%, the top marginal rate must decrease by 0.1% if general fund revenues are projected to increase by at least 5% in the fiscal year that begins during the tax year. The 2022 South Carolina income tax withholding tables continue to reflect the highest marginal tax rate of 7%. For more on this development, see Tax Alert 2022-1499.

Virginia: The Virginia Department of Taxation (DOT) has released updated wage bracket and withholding formulas, which are effective with wages paid on or after Oct. 1, 2022. The updated tables and formulas reflect an increase in the standard deduction effective Jan. 1, 2022, as enacted under HB 30 and approved on June 22, 2022. For more on this development, see Tax Alert 2022-1509.

MISCELLANEOUS TAX

Georgia: Governor Brian Kemp extended the suspension of fuel taxes through Nov. 11, 2022 (from the extended date of Oct. 12, 2022). The suspension applies to motor fuel and diesel fuel taxes under Ga. Code §48-9-3 and to sales taxes on locomotive fuel required by Ga. Code § 48-8-30. Ga. Gov., Executive Order 10.03.22.02 (Oct. 3, 2022).

GLOBAL TRADE

Multi-jurisdiction: EY's TradeWatch, Issue 2, 2022 outlines key legislative and administrative developments for customs and trade featuring insights and tax alerts from our network of Global Trade professionals trade around the world. This issue looks at a wide range of trade topics and developments around the world including supply chain resilience, the impact on business of some key US and EU court rulings on business, the outcome of the WTO's 12th Ministerial Conference, as well the gender disparity gap in trade.

Because the matters covered herein are complicated, State and Local Tax Weekly should not be regarded as offering a complete explanation and should not be used for making decisions. Any decision concerning matters covered herein should be reviewed with a qualified tax advisor.

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ENDNOTES

¹ 636 S.W.3d 61 (Tex. App. 2021), review denied (Tex. S.Ct. Sept. 30, 2022).

² Citing South Central Bell Telephone Co. v. Barthelemy, 94-0499 (La. S.Ct. Oct. 17, 1994) (the Louisiana Supreme Court held that software is tangible personal property and rejected the canned v. custom distinction noting that the software is the same regardless of whether it is custom or canned).

³ The Mississippi Supreme Court noted that "this Court abandoned its 'old standard of review giving deference to agency interpretations of statutes' and established that we now will conduct a de novo review without giving such deference." HWCC-Tunica, Inc. v. Miss. Dept. of Rev., 296 So. 3d 668, 673 (Miss. 2020), (quoting King v. Mississippi Military Dept., 245 So. 3d 404, 407-08 (Miss. 2018)).