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October 16, 2024
2024-1908

State and Local Tax Weekly for September 20 and September 27

Ernst & Young's State and Local Tax Weekly newsletter for September 20 and September 27 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

Massachusetts 60-day tax amnesty program to start November 1, 2024

The Massachusetts Department of Revenue (MA DOR) recently announced that the 60-day tax amnesty program authorized by the FY 2025 budget bill (HB 4800) will run from November 1, 2024 through December 30, 2024. Amnesty applies to tax returns due on or before December 31, 2024.

The commissioner will waive most penalties1 for taxpayers that participate in the amnesty program and come into tax compliance by filing outstanding returns and paying tax and interest owed for the periods covered by the returns. Penalties will not be waived, however, for any period for which taxpayers do not properly file a return by December 30, 2024.

Taxpayers may only submit one amnesty request per account (tax) type but may include multiple tax periods. Separate amnesty requests must be submitted for each account type.

The MA DOR stated it will send amnesty eligibility letters to taxpayers with existing tax liabilities.

Taxes eligible for penalty waiver under the amnesty program include, but are not limited to, the corporate combined excise tax, corporate excise tax, entity level (63D) tax, financial institution excise tax, sales and use tax, fiduciary income tax, life insurance excise tax, partnership income tax, personal income tax, estate tax, inheritance tax, withholding room occupancy tax, satellite service tax, special fuel tax, gasoline fuel tax, aviation gasoline tax, alcoholic beverages excise tax, urban redevelopment excise tax, cigarette tax, cigar tax, marijuana excise tax, motor vehicle excise tax, motor vehicle sales-use tax, meals tax (before July 1, 2024) and meals, food and beverage tax.

Amnesty does not apply to penalties the commissioner does not have the sole authority to waive, such as penalties associated with the fuel taxes administered under the International Fuel Tax Agreement and the local portion of taxes or excise taxes collected for cities, towns or state government authorities. Non-eligible taxes include the deeds excise tax, deeds excise-registry tax, emergency paid sick leave tax, paid family and medical leave tax, jet fuel tax, premium pay tax, public utility excise tax, and vehicular rental surcharge. Amnesty is not available for certain licenses, including those for special fuels, jet fuel, gasoline fuel, cigars and cigarettes.

The commissioner is not authorized to waive interest charges.

In addition to waiving penalties, the tax commissioner is authorized to determine the scope of the amnesty program, including the tax types, the tax periods covered and the applicable look-back periods, not to exceed four years. The MA DOR indicated that eligible non-filers who have not previously been contacted by the DOR may be subject to a three-year limited look-back period. Non-filers will not qualify for limited look-back if (1) they have been contacted by the MA DOR about unfiled returns, (2) they are reporting trustee taxes (e.g., sales, use, meals, withholding) that were collected but not paid, or (3) they are filing an estate tax return.

Taxpayers currently under audit should contact their assigned DOR auditor to discuss amnesty eligibility.

Penalties cannot be waived for taxpayers who are or have been subject to a tax-related criminal investigation or prosecution, who are in active bankruptcy, or who have delivered or disclosed a false or fraudulent application, return, document or other statement. Penalty waiver will not be granted for taxes already paid. Amnesty is not available to taxpayers that received amnesty relief in 2015 or 2016 for the same tax type and period, or to taxpayers seeking a refund of tax or a credit for overpayment.

Taxpayers participating in the amnesty program retain their right to file an amended return or apply for abatement. Returns filed under the amnesty program are subject to audit.

The MA DOR has posted Tax Amnesty 2024 FAQs and indicated that additional information on the program is forthcoming. The FAQs describe how to request amnesty as well as the terms and conditions of the amnesty program, among other topics.

For additional information on this development, see Tax Alert 2024-1819.

Texas Comptroller proposes significant changes to sales and use tax regulations for data processing services

The Texas Comptroller of Public Accounts (Comptroller) has proposed changes to 34 Tex. Admin. Code Section 3.330, which relates to the application of sales and use tax to data processing services. The proposed changes, released on September 13, 2024, are intended to add to and clarify existing definitions, provide examples of taxable and nontaxable services, explain the incidence of the tax, and update provisions on the collection of local sales and use taxes on data processing services.

The Comptroller has stated that the proposed changes are intended to "help online marketplaces understand their responsibilities" with respect to marketplace providers providing data processing to marketplace sellers. The Comptroller explained that online transactions involve two purchasers, two sales contracts, and two taxable transactions. The purchaser of goods and services through a marketplace pays sales tax on the goods or services, and the marketplace seller, which is purchasing data processing services from the marketplace provider, pays sales tax on those services.

The proposed changes would classify search engine optimization (SEO) services, social media marketing, and lead generation as taxable data processing, codifying the Comptroller's opinion that online advertising is taxable data processing. Additionally, cloud computing would be treated as taxable under this proposed regulation.

Texas law exempts 20% of the value of data processing services from sales and use tax, unless the service qualifies as another type of taxable service (other than an information service), in which case the exemption does not apply. "Data processing services" are defined generally as "the processing of information for the purpose of compiling and producing records of transactions, maintaining information, and entering and retrieving information." These services specifically include:

  • Word processing, data entry, data retrieval, data search, information compilation, payroll and business accounting data production, and other computerized data information storage and manipulation
  • The performance of a totalisator service with the use of computational equipment
  • The use of a computer or computer time for data processing, whether the processing is performed by the provider of the computer or computer time or by the purchaser or other beneficiary of the service

The proposed changes would revise this general definition of data processing services to include "the computerized entry, retrieval, search, compilation, manipulation, or storage of data or information." The new definition would specifically exclude internet access services, transcription of medical dictation by a medical transcriptionist, certain advertisements or links on a website owned by another person, certain electronic payment encryption services, and certain electronic payment settlement services.

The proposed changes would also exclude from the definition of "data processing services" data processing that is sold with and ancillary to another service for a single charge and the data processing service does not have a separate value. In such instances, the taxpayer would bear the burden of demonstrating that the data processing service does not have a separate value and is ancillary to the other service being provided.

The proposed changes would clarify that data processing services are sourced to where they are used, and that services provided for concurrent in-state and out-of-state use are taxable only to the extent they are used or consumed within Texas. In those instances, the purchaser could furnish the service provider with a form from the Comptroller, or a similar form, asserting a concurrent multistate business use and representing that the purchaser will report and pay state and local tax on the taxable portion. Any determination of in-state use allocation by the multistate purchaser would be made using any reasonable and consistent method supported by its business records. Any service provider that accepts a multistate-use certificate in good faith would be relieved of responsibility for collecting and remitting Texas state and local sales and use taxes on transactions subject to the certificate.

For local sales and use tax purposes, transactions would be sourced to the jurisdiction where the sale occurs. This could be where (1) the seller receives or fulfills the order, or (2) the service is delivered. Local use tax would also be due in a jurisdiction where a direct or indirect benefit from the service is delivered, provided that the 2.0% local tax cap has not been exceeded.2

For additional information on this development, see Tax Alert 2024-1861.

INCOME/FRANCHISE

Multistate: Tax Alert 2024-1804 provides a summary of the significant legislative, administrative and judicial actions that affected US state and local income/franchise and other business taxes for the third quarter of 2024. These developments are compiled from the EY Indirect/State Tax Weekly and Indirect/State Tax Alerts issued during that period. Highlights include: (1) a summary of legislative developments in District of Columbia, Hawaii, Illinois, Massachusetts, Missouri, New Hampshire, New Jersey, North Carolina, Pennsylvania and South Carolina; (2) a summary of judicial developments in Minnesota and Nebraska; (3) a summary of administrative developments in Hawaii, Idaho, Illinois, Kansas, Missouri, Oklahoma, Tennessee and Texas; and (4) a discussion of state and local tax items to watch in California, Georgia, New York, New York City and Oregon.

Colorado: In response to a ruling request, the Colorado Department of Revenue (CO DOR) determined that a company's receipts from the sale of tangible personal property to the U.S. government that is delivered to government locations outside the state are not in Colorado. The company manufactures the property in Colorado and for an additional charge stores it in the state until the government is ready to receive the property. Final delivery of the property is completed at a government designated location outside the state. Under Colorado law, sales are attributed to the state if they are "delivered or shipped to a purchaser in Colorado." In making this determination, Colorado law "explicitly disregards … the f.o.b. point or other conditions of the sale." Because the tangible personal property is not delivered or shipped to the U.S. government in Colorado, receipts from these sales are not in the state. Further, the company's storage of the tangible personal property at the time of "final inspection" and "unconditional acceptance", in this case in Colorado, does not determine the state to which the sales are sourced. The CO DOR also noted that since the company is taxable in every state in which it deliveries to the government, the throwback rule does not apply to these sales. Colo. Dept. of Rev., PLR 24-003 (Aug. 21, 2024).

District of Columbia: New law (B25-0784) modifies the District of Columbia's combined reporting provisions by moving from the Joyce to the Finnigan apportionment method for tax years beginning after December 31, 2025. As a result, all District of Columbia-sourced receipts of combined group members are generally includable in the receipts factor numerator, regardless of whether the member has nexus with the District of Columbia. Provisions of the bill also repeal D.C. Code Section 47-1817.07a, which imposed a 3% income tax rate on capital gains from the sale or exchange of an investment in a Qualified High Technology Company.3 B25-0784 became law on September 18, 2024.

District of Columbia: New law (B25-0784) requires individuals, trusts and estates to include certain interest on non-District of Columbia obligations in the computation of District gross income. Specifically, for tax years beginning after December 31, 2024, interest on obligations of a state or any political subdivision are included in the computation of District gross income, while interest on obligations of the District or bonds issued by DC Water, the Washington Metropolitan Area Transit Authority, and the District's Housing Finance Agency are not included in the computation. For tax years ending before January 1, 2025, interest on the obligations of the District, a state, a US territory or any political subdivision thereof, is not included in the computation of District gross income. B25-0784 became law on September 18, 2024.

Illinois: A nonbinding statewide advisory question that will be on the November 5, 2024 general election ballot asks voters: "Should the Illinois Constitution be amended to create an additional 3% tax on income greater than $1,000,000 for the purpose of dedicating funds raised to property tax relief?" This nonbinding question is required to be on the ballot by SB 2412. Ill. Laws 2024, Pub. Act 103-0586 (SB 2412), signed by the governor on May 3, 2024.

Indiana: The Indiana Department of Revenue (IN DOR) revised an income tax information bulletin to clarify the proper period for deducting COVID-related employee retention credit wages. The IN DOR explained that the deduction (1) must be reported in the same year the federal wage expense was properly disallowed; (2) is allowable only for tax years that include dates from March 31, 2020 to December 31, 2021, inclusive and (3) generally is not allowable for tax years beginning after December 31, 2021, unless there are unusual circumstances that prevented the deduction from being claimed until 2022 or after. Per the IN DOR, "unusual circumstances are limited to situations where an issue … would have precluded a deduction for an owner." Ind. Dept. of Rev., Income Tax Information Bulletin #119 (Sept. 2024).

Michigan: The Michigan Supreme Court will not review a case upholding the Michigan Attorney General's determination that the reduction of the individual income tax rate to 4.05% was temporary and effective only for the 2023 tax year. In 2015 legislation was enacted to provide a temporary individual income tax rate reduction that starting in 2023 would be effective in any year in which the general fund grew faster than the rate of inflation. In 2022 the general fund grew father than the rate of inflation, resulting in the individual income tax rate being reduced to 4.05% for tax year 2023. In 2023, however, the general fund was down while inflation increased. Because the conditions for the temporary rate reduction were not present in 2023, the individual income tax rate went back to 4.25% for the 2024 tax year. The 4.25% rate for 2024 applies to individuals, fiduciaries and flow-through entities paying the Michigan flow-through entity tax. Mich. Dept. of Treas., Notice: Michigan Supreme Court Allows the Court of Appeals Decision to Stand that Concluded the Reduction to the Income Tax Rate for Tax Year 2023 Was Temporary (Sept. 23, 2024).

SALES & USE

Federal: Senator Maggie Hassan (D-NH) released draft legislative framework that would help address the burdens on small businesses resulting from the U.S. Supreme Court ruling in Wayfair. Senator Hassan's framework calls for an exemption for small remote sellers (i.e., those with gross annual receipts in total remote sales in the U.S. under $10 million), a prohibition on retroactive taxation (i.e., sales occurring before June 21, 2018), fee compliance services, and safe harbors for new and modified sales taxes as well as for third-party errors and those related to exemption certificates. The framework also would require simplification by prohibiting a state or locality from imposing sales tax collection obligations on remote sellers unless the state is a Member State of the Streamlined Sales and Use Tax Agreement or the state meets minimum simplification and compensation requirements for non-streamlined members. The framework lays out minimum simplification requirements for Streamlined states and non-Streamlined states, and it defines select terms. Press Release "ICYMI: Senator Hassan Leads Push for Tax Cuts for Innovative Businesses and Hard-Working Families" (Oct. 3, 2024).

Multistate: The EY Sales and Use Tax Quarterly Update provides a summary of the major legislative, administrative and judicial sales and use tax developments. Highlights of this edition include a review of the most recent developments involving nexus, tax base and exemptions, technology, and compliance and controversy. A copy of the update is available via Tax Alert 2024-1820.

District of Columbia: New law (B25-0784) increases the District's current 6.0% sales and use tax rate to 6.5% beginning on October 1, 2025 and to 7.0% beginning on October 1, 2026. B25-0784 became law on September 18, 2024.

Hawaii: The Hawaii Department of Taxation (HI DOT) issued guidance on the application of the general excise tax (GET) on discounted sales. The HI DOT said that whether a seller is subject to GET on the full price of a discounted item depends on if the seller is reimbursed by a third-party for the discount. For instance, if a third-party pays the discount to the seller, such as the manufacturer reimbursing the seller on the full face-value of a manufacturer's coupon, the GET will be assessed on the full sales price despite the discount. If the seller will not be reimbursed on the discounted sales, such as a discount from a price reduction or a store coupon, then GET is imposed on the actual proceeds received from the customer. The HI DOT further explained that passing on GET from the seller to the customer is a "contractual matter, where the customer implicitly agrees as a condition of their purchase price to also pay any GET that the seller owes to the State on the transaction." Haw. Dept. of Taxn., Tax Information Release No. 2024-03 (Sept. 16, 2024).

Illinois: The Illinois Department of Revenue (IL DOR) issued a bulletin on the increase to Chicago's prepaid wireless E911 surcharge rate from 0% to 9%, effective November 1, 2024. (See Pub. Act 103-781.) The IL DOR explained that the E911 surcharge only applies to receipts from prepaid wireless telecommunications services, and not to other tangible personal property sold in the same transaction such as electronic games or batteries. If the services subject to the E911 surcharge are bundled with other tangible personal property and the changes for these services are not separately stated, or if the taxpayer does not document the separation in its records, the entire sale is subject to the surcharge. Retailers also are required to disclose the surcharge by separately stating the amount on the receipt or invoice. The guidance addresses how to report sales subject to different surcharge rates (e.g., prepaid wireless services subject to both the new and old rates). Chicago's 9% surcharge rate is in effect until July 1, 2029. Ill. Dept. of Rev., Informational Bulletin FY 2025-05 (Sept. 2024) (supersedes in part FY 2025-02 (N-08/24)).

New York: In response to a ruling request, the New York Department of Taxation and Finance said that sales tax is imposed on receipts from sales of prescription medication originally intended for human use but dispensed by a pharmacy for use on an animal. Such sales, however, are exempt when the medication is purchased by a licensed veterinarian or a person predominantly engaged in farming, for use on livestock or poultry used in the production for sale of tangible personal property by farming (the farm production exemption). N.Y. Dept. of Taxn. and Fin., TSB-A-24(35)S (Aug. 20, 2024).

New York: In response to a ruling request, the New York Department of Taxation and Finance (NY DOTF) determined that a taxpayer's receipts from sales related to its web-based, electronic trading system used to trade currencies on the foreign exchange market are subject to sales tax as sales of software. Taxable receipts include those for annual license fees, transaction charges and other charges related to a customer's use of the taxpayer's software. The taxpayer's receipts related to obtaining Secure ID tokens are subject to tax because the tokens are tangible personal property. The NY DOTF further explained that the situs of the sale of software for purposes of determining the proper local sales tax rate and jurisdiction is the location of the customer's employees that use the software. If these employees are in New York and other states, tax is collected based on the portion of receipts attributable to these employees who are in New York. The NY DOTF found that receipts for support services are exempt from sales tax if the charges are reasonable and separately stated on the invoice. Lastly, the taxpayer's charges for providing a monthly report showing how a particular customer compares to other customers on the system is an information service and would be exempt from tax if it is "personal or individual in nature" and "is not or may not be substantially incorporated in reports furnished to other persons" and the charge for this service is separately stated on the invoice. N.Y. Dept. of Taxn. and Fin., TSB-A-24(9)S (July 30, 2024).

New York: In response to a ruling request, the New York Department of Taxation and Finance (NY DOTF) determined that a company's charges for access and use of its web portal — which is used in conjunction with the purchase, lease or refinancing of residential property and allows parties to collaborate simultaneously to complete, submit and process an application and allows reviewing parties to approve, sign and upload documents related to the acceptance or rejection of applications — constitutes the sale of taxable prewritten software. The NY DOTF reasoned that customers through their access to the portal to create and review applications obtained constructive possession of the software and the right to use, control or direct the use of the software. The NY DOTF also found certain optional charges, including those for custom programming services, data entry and training services, are not subject to tax if the charges are reasonable and separately stated on the invoice. The situs of the sale for purposes of determining the proper local sales tax rate is the location associated with the license to use the software, which is the location of the customer's employees that use or direct the use of the software. If these employees are in New York and other states, tax is collected based on the portion of receipts attributable to these employees in New York. N.Y. Dept. of Taxn. and Fin., TSB-A-24(8)S (July 16, 2024).

South Dakota: On November 5, 2024, South Dakota voters will decide whether to approve Ballot Measure No. 28, which would prohibit the state from collecting sales or use tax on anything sold for human consumption. According to the South Dakota Attorney General explanation, this measure would not prohibit the state from collecting sales or use tax on alcoholic beverages or prepared food, or prohibit municipalities from taxing food sold for human consumption. Additional information on the measure is available on the South Dakota Secretary of State website.

BUSINESS INCENTIVES

Arizona: The Arizona Commerce Authority (ACA) adopted Rule 24-04 to provide guidelines for the refundable component of the state's research and development (R&D) tax credit program, which is limited to $100,000 per taxpayer per tax year. (The nonrefundable component of the R&D program is administered by the Arizona Department of Revenue (AZ DOR), while the refundable component is administered by the ACA.) To be eligible for a partial refund of its R&D tax credit, the taxpayer: (1) must meet the statutory eligibility requirements and its current year Arizona R&D tax credit must exceed its current year's tax liability; (2) submit an application to the ACA and receive a qualification certificate before filing an original tax return with the AZ DOR; (3) employ less than 150 full-time employees worldwide on the last day of its tax year; (4) remit a nonrefundable processing fee (the fee equals 1% of the tax credit being refunded); (5) comply with statutory employer requirements; and (6) submit an application to the ACA when sufficient cap is available (the amount of credit the ACA may approve is capped at $5 million per calendar year). The rule describes the refundable R&D tax credit that the ACA can approve, including the specific percentage used to calculate the credit and the calculation of the refundable amount. The ACA will process R&D tax credit refunds on a fist come, first serve basis, based on the date of the application. If there is insufficient credit available when a taxpayer submits its application or the requested amount of credit exceeds an amount that the ACA can approve, the balance of the credit will be irrevocably waived. Taxpayers may submit one application per year. If the taxpayer files its tax return with the AZ DOR before applying for the refund or carries forward its R&D tax credit for the tax year, the taxpayer will no longer be eligible to receive the refundable R&D credit for that tax year. The rule also provides guidance on the process for submitting and prioritizing applications as well as processing applications for a refund. Rule 24-04 took effect September 25, 2024. Ariz. Commerce Auth., Rule 24-04 (adopted Sept. 25, 2024).

Iowa: The Iowa Economic Development Authority adopted new regulations (Iowa Admin. Code 261-67.1(15), to -67.8(15)) to implement the state's Major Economic Growth Attraction (MEGA) program. The MEGA program is intended to attract over $1 billion in investments in the state by advanced manufacturing, bioscience and research businesses. The rules describe MEGA credit eligibility requirements, including those regarding project requirements, community approval and local match, relocations and reductions in operations, determination of comprehensive benefits, and applicant's past or current performance. The new rules define various terms and address the following topics: (1) the application process and review; (2) tax incentives available under the MEGA program; (3) acquisition of agricultural land by foreign businesses; (4) the agreement that must be executed between the company and the economic development authority, compliance requirements and claw-back provisions; (5) what counts as a created job (e.g., base employee level, full-time equivalent positions, contract employees and displaced employees); and (6) the procedure for establishing wage requirements. The new rules were adopted on July 19, 2024 and took effect on July 26, 2024.

PROPERTY TAX

District of Columbia: New law (B25-0784 ) increases the property tax rate on residential real property and imposes a special real property tax rate on residential property with a taxable assessed value over $2.5 million. Starting in 2025, the property tax rate is $0.85 of each $100 of taxable assessed value. A special real property tax rate equal to $1.00 of each $100 of taxable assessed value applies to the portion of taxable assessed value over $2.5 million. Starting in 2026, the mayor will adjust these rates annually. B25-0784 became law on September 18, 2024.

Virginia: In response to a request for an official advisory opinion, the Virginia Attorney General (AG) responded to various questions regarding local property taxation associated with solar energy initiatives. The AG determined that: (1) a locality is required under Va. Code Section 58.1-3660 to provide a property tax exemption for qualifying solar photovoltaic systems; (2) a locality is required under Va. Code Section 58.1-3661 to provide a property tax exemption for types of small-scale solar facilities described in the statute; (3) Under VA Code Section 58.1-2606.1(A) generating equipment remains taxable, however, its full value is not subject to the applicable tax rate — rather, a partial exemption is extended to generating equipment of solar photovoltaic projects with five megawatts or less generating capacity; (4) the definition of "generating equipment" under Va. Code Section 58.1-2606.1(A) refers to all generating equipment within the scope of the statutory provision, regardless of ownership; and (5) local tax on generating equipment under VA Code Section 58.1-2606.1(A) does not extend to generating equipment of the type of small-scale solar facilities exempt from tax (i.e., a facility with a generating capacity of 25 kilowatts or less). The AG further opined that the locality does not have the discretion to limit the duration of the exemption. Va. Atty. Gen., Opinion No. 23-009 (Aug. 14, 2024).

CONTROVERSY

California: New law (SB 1528) allows the California Department of Tax and Fee Administration (CDTFA), which administers various taxes, including sales/use, motor fuel and cigarette and tobacco products, to provide written notice of a tax determination to a taxpayer or feepayer electronically via a secure transmission if either of the following applies: (1) the taxpayer/feepayer requests electronic delivery of such notice or (2) the CDTFA has evidence that the taxpayer/feepayer no longer receives mail at the address of record and the taxpayer previously provided its email address. Electronic service is deemed complete when the CDTFA electronically transmits the notice via the taxpayer's secure web portal, without extension of time. The law also allows the State Board of Equalization to provide written notice for alcoholic beverage tax purpose electronically via a secure transmission, if the same conditions described above are met. Cal. Laws 2024, ch. 499 (SB 1528), signed by the governor on September 22, 2024.

Nevada: The Nevada Tax Commission adopted amendments to its voluntary disclosure regulations, NAC 360.440, NAC 360.444 and NAC 360.446. Amendments to the regulations expand the list of taxes for which a taxpayer may file an application for voluntary disclosure to include the modified business tax, taxes on gross revenue of gold and silver mining businesses, taxes on transportation network companies and other passenger carriers, and taxes on peer-to-peer car sharing programs. Within 90 days after the date on which notice of acceptance of the application is given, the taxpayer must: (1) file any required registration and delinquent tax returns for the period being disclosed; if the period exceeds eight years, than an eight-year lookback period applies; (2) pay the estimated tax for the period being disclosed; and (3) submit any additional information required by the Department of Taxation. The Department may grant up to a 90-day extension to satisfy these requirements. If the Department determines that the taxpayer's tax liability has not been voluntarily disclosed, in addition to assessing penalty and interest, the Department also must notify the taxpayer of its determination and issue a bill for the amount of any tax, penalty or interest owed. The amended regulation took effect September 16, 2024. Nev. Tax Comm., LCB File No. R152-22 (filed on Sept. 16, 2024).

PAYROLL & EMPLOYMENT TAX

Indiana: The Indiana Department of Revenue (Department) issued a ruling confirming that the wages of a Kentucky resident working remotely for an Indiana employer were not subject to Indiana county income tax. In support of its ruling, the Department found that (1) the Taxpayer is a Kentucky resident who is employed by and earns income from an Indiana employer; (2) the Taxpayer's employer provided a notarized statement detailing the time she physically provided services at the Indiana work location; (3) in no year was the Taxpayer in the state of Indiana for her employment more than 19 days; and (4) the Taxpayer established that she received the greatest portion of her gross income outside of Indiana. The Department also found that for purposes of Indiana county income tax, the Taxpayer's principal place of business or employment is her home in Kentucky, where she receives the greatest percentage of her gross income and where she primarily executes her employment duties. Ind. Dept. of Rev., LOF: 01-20232204. For more on this development, Tax Alert 2024-1770.

Louisiana: Governor Jeff Landry signed into law HB 352, which effective August 1, 2024, has expanded the requirements for the payment of employees' final wages. HB 352 adds new subsection E to Louisiana R.S. 23:631 clarifying the rules governing the payment of commissions, incentive pay or bonuses at the time of an employee's separation. Under new subsection E, compensation available in the form of commissions, incentive pay or bonuses must be paid at the time of separation if earned by the employee and not modified by the employer's written policy. For additional information on this development, see Tax Alert 2024-1767.

Nebraska: Governor Jim Pillen signed into law LB 1393 (2024), which lowers the state unemployment insurance (SUI) tax rates for 2025 through 2029 by lowering the average tax rate by 5%. The average tax rate is used in determining the individual SUI tax rates assigned to employers. For 2024, Nebraska's SUI tax rates range from 0% to 5.4%, with individual employer SUI tax rates assigned across 20 rate categories. The average tax rate is assigned to category 12 within the state's 20-category rate schedule. The 2024 average tax rate is 0.48%. The other 19 tax rates, except Category 20, are calculated as a percent of the Category 12 rate determined by multiplying the Category 12 rate by an experience factor statutorily assigned to each category. For more information on this development, see Tax Alert 2024-1720.

New York: The New York Division of Tax Appeals (DTA) ruled that, under the New York State convenience of the employer rule, a New Jersey resident working from home for his New York employer after the start of the COVID-19 emergency owed New York income tax for all wages he was paid in 2020, including those earned for services performed in New Jersey. (Matter of Bryant, DTA No. 830818, Sept. 12, 2024.) For additional information on this development, see Tax Alert 2024-1808.

MISCELLANEOUS TAX

Delaware: New law (HB 324) allows the Director of Revenue to enter or exit an agreement with a county to collect local lodging tax. Del. Laws 2024, HB 324, signed by the governor on August 15, 2024.

GLOBAL TRADE

Federal: On September 13, 2024 the Biden-Harris Administration published a Fact Sheet outlining its intent to publish two Notices of Proposed Rulemaking (NPR) and one Final Rule relating to de minimis shipments. Section 321 of the Tariff Act of 1930 defines the de minimis program, which allows shipments valued at US$800 or less to enter the United States (US) without duties and taxes, and with less stringent import documentation, when imported by one person in one day. According to the Fact Sheet, over the past decade, the number of de minimis shipments has increased from 140m to more than 1b annually, posing significant challenges to US enforcement agencies in terms of trade law compliance, intellectual property rights and consumer safety. The first NPR would exclude from the de minimis exemption all shipments containing products covered by tariffs imposed under Sections 201 or 301 of the Trade Act of 1974 (Section 201 or Section 301), or Section 232 (Section 232) of the Trade Expansion Act of 1962. The second NPR would seek to strengthen information collection requirements, while the Final Rule would require importers of consumer products to electronically file Certificates of Compliance with US Customs and Border Protection and the Consumer Product Safety Commission at the time of entry, including for de minimis shipments. For additional information on this development, see Tax Alert 2024-1723.

VALUE ADDED TAX

International - Ethiopia: The Federal Government of Ethiopia recently introduced new Value Added Tax (VAT) Proclamation No. 1341/2024 (Proclamation), seeking to enhance the legal framework that imposes VAT on the consumption of goods and services. Repealing VAT Proclamation No. 285/2002, the Proclamation seeks to encourage savings and investment and takes into consideration changes that have been made in economic activities, particularly electronic transactions. For more on this development, see Tax Alert 2024-1698.

International - Saudi Arabia: On August 28, 2024, Saudi Arabia's Zakat, Tax and Customs Authority (ZATCA) released a public consultation document, proposing certain amendments (Draft Amendments) to the Value Added Tax (VAT) Implementing Regulations. The Draft Amendments cover changes relating to more than 25 Articles of the VAT Implementing Regulations and provide further clarifications on the respective articles. For additional information on this development, see Tax Alert 2024-1708.

International - Uruguay: Through Decree No. 256/024, the Ministry of Economy and Finance has extended, through April 30, 2025, the 9% VAT reduction for certain tourism activities, provided the payment is made with a credit card, debit card or e-money payment instrument. See Tax Alert 2024-1780.

UPCOMING WEBCASTS

November 7, 2024. 2024 US election impacts on state and local tax policy (Noon-1:00 p.m. ET). Following the November 5 US elections, federal policymakers will turn their attention to other pressing matters, including funding the federal government and contending with expiring Tax Cuts and Jobs Act (TCJA) provisions. State governments and businesses alike will address the results of tax ballot initiatives and react to any new federal tax laws and policies. In addition, some state legislatures may have to confront slowing state and local tax revenue collections. Join our panel as we discuss the election results from a state and local tax perspective and what they mean for business executives. Topics will include: (1) notable 2024 federal, state and local election results; (2) projected election impacts on federal tax provisions affecting state taxes, including TCJA provisions (e.g., SALT deduction cap, "bonus" depreciation; the IRC Section 163(j) interest limitation; and treatment of research and experimental expenditures under IRC Section 174); OECD BEPS 2.0 proposals, campaign proposals (e.g., the income tax exemption for tips); (3) state and local tax-related ballot measures; and (4) state legislative policy considerations, including fiscal conditions. Register.

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 HB 4800 provides that waiver is not authorized for penalties due under Sections 35A ("penalty for underpayment of tax required to be shown on the return"), 35D ("inconsistent position in reporting of income; disclosure") or 35F ("penalty for automated sales suppression device") of Chapter 62C of the General Laws.

2 See 34 Tex. Admin. Code Section 3.334(a)(27).

3 See also, D.C. Office of Tax and Rev., "District of Columbia Tax Changes Take Effect October 1st" (Sept. 9, 2024).