State Tax Matters The power of knowing. In this issue: Income/Franchise: California : New Law Requires Certain Partnerships to Report Adjustments under Centralized Federal Partnership Audit Regime to FTB within Six Months... 1 Income/Franchise: New Jersey Division of Taxation Revises Announcement: CBT Guidance for Reporting IRC Sec. 965 Income Will be Issued by October 1... 2 Sales/Use/Indirect: Illinois DOR Provides Additional Information on New Law that Imposes Remote Seller Tax Collection & Remittance Responsibilities via Economic Nexus Provisions... 3 Sales/Use/Indirect: Maryland Comptroller Reminds Out-of-State Vendors about Post-Wayfair Administrative Regulation and October 1 Enforcement Date... 4 Sales/Use/Indirect: South Carolina DOR Finalized Post-Wayfair Nexus Guidance for Local Jurisdiction Tax Purposes Provides November 1 Enforcement Date for Remote Sellers... 4 Sales/Use/Indirect: Remember, Washington B&O Taxpayers May Need to File Annual Apportionable Income Reconciliation Statement by October 31 To Avoid Penalties... 5 Multistate Tax Alerts... 6 Income/Franchise: California : New Law Requires Certain Partnerships to Report Adjustments under Centralized Federal Partnership Audit Regime to FTB within Six Months S.B. 274, signed by gov. 9/23/18. Effective immediately, new law requires certain partnerships subject to the new centralized federal partnership audit regime to report federal audit adjustments to the California Franchise Tax Board (FTB) [note: see State Tax Matters, Issue 2018-38, for more information on the new centralized federal partnership State Tax Matters Page 1 of 6 Copyright 2018 Deloitte Development LLC
audit regime, which generally is effective for tax years beginning after December 31, 2017, and any partnership that elects into the regime for taxable years beginning after November 2, 2015 and before January 1, 2018]. Under the legislation, California defaults to the treatment elected at the federal level, where the partnership can elect to pay tax deficiencies at either the partnership level or at the partner level. However, defaulting to the federal treatment is not required: the new rules permit a separate election for California purposes. The California rules require reporting of each federal change to the FTB for the reviewed year within six months after the date of the final federal determination. For more information or questions, please reach out to any of the following individuals listed below. URL: http://leginfo.legislature.ca.gov/faces/billnavclient.xhtml?bill_id=201720180sb274 URL: http://newsletters.usdbriefs.com/2018/tax/stm/180921_2.html Christopher Campbell (Los Angeles) Principal cwcampbell@deloitte.com Keith Gray kegray@deloitte.com Steve West (Los Angeles) stevewest@deloitte.com Shirley Wei (Los Angeles) shiwei@deloitte.com Income/Franchise: New Jersey Division of Taxation Revises Announcement: CBT Guidance for Reporting IRC Sec. 965 Income Will be Issued by October 1 Guidance For The Reporting Of IRC 965 Income By CBT Taxpayers To Be Issued By October 1, 2018, N.J. Div. of Tax. (9/14/18). Regarding the federal Tax Cuts and Jobs Act s (i.e., P.L. 115-97) amendments to Internal Revenue Code (IRC) Sec. 965 involving the deemed repatriation of foreign dividends, the New Jersey Division of Taxation (Division) has announced that it is finalizing procedures for taxpayers to report such income for New Jersey corporation business tax (CBT) purposes for tax year 2017, and that it will issue related guidance no later than October 1, 2018 (previously, the Division had promised such guidance by September 14, 2018). In the meantime, the Division continues to explain for corporate taxpayers that have already filed a 2017 NJ CBT-100 return, and whose federal taxable income or federal adjusted gross income is impacted by the amendments to IRC Sec. 965, an amended NJ CBT return will not be required. Instead, such CBT taxpayers will be required to prepare and mail a hardcopy of Form CBT-DIV 2017 (also being finalized) along with a payment and voucher for any additional CBT liability generated by increased income attributable to IRC Sec. 965. That is, no changes will be required to your 2017 CBT-100. All changes will be taken into account on the new Form CBT-DIV 2017. URL: https://www.state.nj.us/treasury/taxation/irc965.shtml Similarly, for corporate taxpayers that have not yet filed their 2017 NJ CBT-100 returns, the Division explains that such returns should be prepared without taking into account the amendments enacted in December 2017 to IRC Sec. 965, as the impact of those amendments will be fully taken into account and reflected on the new Form CBT-DIV 2017 which must be mailed with a voucher and related payment to the Division following the filing of the corporate taxpayer s NJ CBT-100 return. Please contact us with any related questions. Norm Lobins (Parsippany) nlobins@deloitte.com Mike Bryan (Philadelphia) mibryan@deloitte.com State Tax Matters Page 2 of 6 Copyright 2018 Deloitte Development LLC
Sales/Use/Indirect: Illinois DOR Provides Additional Information on New Law that Imposes Remote Seller Tax Collection & Remittance Responsibilities via Economic Nexus Provisions FAQs re: Illinois Public Act 100-587 and Wayfair, Ill. Dept. of Rev. (9/10/18). Pursuant to recently enacted legislation and other related administrative guidance [H.B. 3342; see State Tax Matters, Issue 2018-23, State Tax Matters, Issue 2018-38, and State Tax Matters, 2018-37, for more details on this new law and related guidance, including new emergency regulations], the Illinois Department of Revenue (Department) has provided answers to some frequently asked questions (FAQs) about new law that imposes remote seller tax collection and remittance responsibilities under specified economic nexus threshold provisions. The guidance reflects that remote sellers with no physical presence in Illinois that meet either of the following annual thresholds must register with the Department to begin collecting and remitting Illinois use tax for sales made to Illinois purchasers on or after October 1, 2018: URL: http://www.tax.illinois.gov/legalinformation/outsiderulings/wayfair/wayfair_faqs.htm URL: http://www.ilga.gov/legislation/billstatus.asp?docnum=3342&gaid=14&doctypeid=hb&legid=105096&sessionid=91&ga=100 URL: http://newsletters.usdbriefs.com/2018/tax/stm/180608_9.html URL: http://newsletters.usdbriefs.com/2018/tax/stm/180921_7.html URL: http://newsletters.usdbriefs.com/2018/tax/stm/180914_9.html The retailer s cumulative gross receipts from sales of tangible personal property to purchasers in Illinois are $100,000 or more; or The retailer enters into 200 or more separate transactions for the sale of tangible personal property to purchasers in Illinois. Accordingly, the guidance explains that out-of-state retailers must review their gross receipts and transactions to purchasers in Illinois for the period from September 1, 2017, through August 31, 2018, to determine whether this new law applies to them as of October 1, 2018. The Department generally explains that, as part of the threshold determination under this new law, remote sellers must exclude the following types of sales: Sales for resale; Sales of tangible personal property that are required to be registered with an Illinois State agency, including motor vehicles, watercraft, aircraft, and trailers, when these sales are made from locations outside Illinois to Illinois purchasers; and Occasional sales. Additionally, for purposes of determining whether a retailer meets the annual 200-transaction threshold requiring it to register with the Department, a separate transaction means sales transactions that are documented on separate invoices, regardless of the manner in which the tangible personal property is delivered to the purchaser. The guidance also makes reference to the US Supreme Court s recent decision overruling Quills physical presence nexus standard [see previously issued Multistate Tax Alert for more details on the Wayfair case]. Please contact us with any questions. URL: https://www2.deloitte.com/us/en/pages/tax/articles/us-supreme-court-issues-wayfairdecision.html?id=us:2em:3na:stm:awa:tax:092818&sfid=7011o000002dnuu Mary Pat Kohberger (Chicago) mkohberger@deloitte.com Dominic Greco (Chicago) dgreco@deloitte.com Anna Marie Alberti Hearn (Chicago) aalbertihearn@deloitte.com State Tax Matters Page 3 of 6 Copyright 2018 Deloitte Development LLC
Sales/Use/Indirect: Maryland Comptroller Reminds Out-of-State Vendors about Post-Wayfair Administrative Regulation and October 1 Enforcement Date Tax Alert Regarding the United States Supreme Court Decision South Dakota v. Wayfair and its Implications for Sales Tax Nexus; Proposed Permanent Regulation COMAR 03.06.01.33, Md. Cmptrlr. (9/14/18). The Maryland Comptroller (Comptroller) explains that the Maryland Joint Committee on Administrative, Executive and Legislative Review (AELR) has approved the Comptroller s submitted post-wayfair emergency regulation [Emergency Regulation Approved by AELR Committee: COMAR 03.06.01.33 Out-of-State Vendor; see State Tax Matters, Issue 2018-36, for more details on this emergency regulation]. Accordingly, out-of-state vendors must collect and remit Maryland sales and use tax on their sales of tangible personal property or taxable services to Maryland customers beginning October 1, 2018, if during the previous or current calendar year, the vendor satisfies either of the following criteria: URL: https://taxes.marylandtaxes.gov/resource_library/tax_publications/tax_alerts/maryland-wayfair-tax%20alert-final- Version%209-14-2018.pdf URL: http://www.dsd.state.md.us/mdr/4519.pdf URL: http://mgaleg.maryland.gov/pubs/committee/aelr/18-214e-regulation.pdf URL: http://newsletters.usdbriefs.com/2018/tax/stm/180907_7.html The person s gross revenue from the sale of tangible personal property or taxable services delivered in Maryland exceeds $100,000; or The person sold tangible personal property or taxable services for delivery into Maryland in 200 or more separate transactions. As such, the Comptroller explains that, beginning October 1, 2018, out-of-state vendors should begin to track gross revenues and sales delivered into Maryland to determine if either of the above criteria is met, and that this tracking requirement does not apply to sales delivered into Maryland prior to October 1, 2018. For the period of October 1, 2018 through December 31, 2018, the Comptroller explains that an out-of-state vendor meeting either of the criteria during that period is required to register with the Comptroller and to remit Maryland sales tax on sales delivered into Maryland as soon as one of the criteria is met. More specifically, such registration with the Comptroller by out-of-state vendors is required by the first day of the following month in which either of the criteria was met. However, out-ofstate vendors may choose to voluntarily register and collect Maryland sales tax prior to the effective date. The Comptroller additionally provides example scenarios to help illustrate planned enforcement of these new requirements. Note that the Comptroller also has proposed a permanent administrative regulation reflecting this new post-wayfair enforcement policy; comments on this proposal are due by October 15, 2018. Please contact us with any questions. Joe Carr (McLean) Tax josecarr@deloitte.com Michael Bryan (Philadelphia) mibryan@deloitte.com Rick Heller (Parsippany) rickheller@deloitte.com Jim McNiff (McLean) jamcniff@deloitte.com Sales/Use/Indirect: South Carolina DOR Finalized Post-Wayfair Nexus Guidance for Local Jurisdiction Tax Purposes Provides November 1 Enforcement Date for Remote Sellers Revenue Ruling No. 18-15, S.C. Dept. of Rev. (9/20/18). In light of the US Supreme Court s recent decision overruling Quill s physical presence nexus standard [see previously issued Multistate Tax Alert for more details on the Wayfair case], the South Carolina Department of Revenue (Department) has finalized another revenue ruling [see State Tax Matters, Issue 2018-38, for details on the Department s other recent revenue ruling regarding the Wayfair decision] State Tax Matters Page 4 of 6 Copyright 2018 Deloitte Development LLC
addressing economic nexus thresholds for remote sellers this latest one provides guidance with respect to the criteria that must be met to require a retailer to remit a South Carolina local jurisdiction s sales and use tax when delivering the product to a purchaser located in another South Carolina local jurisdiction (e.g., counties, municipalities, school districts). It is the Department s position that once a retailer has established nexus with South Carolina for sales and use tax purposes, the retailer has nexus for sales and use tax purposes with every local jurisdiction in South Carolina for which the Department administers and collects a local sales and use tax. As such, the retailer must remit local sales and use taxes for any local jurisdiction into which deliveries are made by, or on behalf of, the retailer. Similar to the Department s other related guidance, this ruling states that the Department s new policies will be implemented on a prospective basis and will only apply to deliveries made on or after November 1, 2018. Please contact us with any questions. URL: https://dor.sc.gov/resources-site/lawandpolicy/advisory%20opinions/rr18-15.pdf URL: https://www2.deloitte.com/us/en/pages/tax/articles/us-supreme-court-issues-wayfairdecision.html?id=us:2em:3na:stm:awa:tax:092818&sfid=7011o000002dnuu URL: http://newsletters.usdbriefs.com/2018/tax/stm/180921_9.html Jeff Corser (Charlotte) jcorser@deloitte.com Michael Bryan (Philadelphia) mibryan@deloitte.com Rick Heller (Parsippany) rickheller@deloitte.com Ryan Trent (Charlotte) rtrent@deloitte.com Sales/Use/Indirect: Remember, Washington B&O Taxpayers May Need to File Annual Apportionable Income Reconciliation Statement by October 31 To Avoid Penalties Apportionment under economic nexus standard; Form: Annual Reconciliation of Apportionable Income, Wash. Dept. of Rev. (3/12/18). Because many businesses must file monthly or quarterly tax returns for state business and occupation (B&O) tax purposes, such taxpayers may have to estimate their current taxable income using a prior year annual receipts factor when filing their respective Washington combined excise tax returns. These taxpayers must reconcile their actual receipts factor on an annual basis to determine whether any underlying tax refunds or tax payments are due. These annual reconciliation statements must be filed with the Washington Department of Revenue (Department) on a prescribed form as soon as you have the information needed to determine the receipts factor for a calendar year. Additionally, to avoid penalties such form must be sent to the Department, along with any tax due, by October 31 of the following year. URL: https://dor.wa.gov/find-taxes-rates/apportionment-under-economic-nexus-standard URL: https://dor.wa.gov/sites/default/files/legacy/docs/forms/misc/annualrecapportionincome.pdf According to the Department, interest will apply if the annual reconciliation results in a refund or an additional amount due; however, penalties will not apply to additional amounts due if the reporting requirements are met and the return is filed timely. The Department will automatically include interest in any refunds and will notify taxpayers of the amount of interest due; interest generally is calculated in the same manner as it is for the underpayment of tax calculated on the annual reconciliation. Note that because Washington s annual reconciliation form is considered a tax return, the Department generally will assert a late payment penalty of up to 29%, if the form is not timely filed. Please contact us with any questions. Robert Wood (Seattle) robwood@deloitte.com Myles Brenner (Seattle) Manager mybrenner@deloitte.com State Tax Matters Page 5 of 6 Copyright 2018 Deloitte Development LLC
Multistate Tax Alerts Throughout the week, we highlight selected developments involving state tax legislative, judicial, and administrative matters. The alerts provide a brief summary of specific multistate developments relevant to taxpayers, tax professionals, and other interested persons. Read the recent alerts below or visit the archive. Archive: http://www2.deloitte.com/us/en/pages/tax/articles/multistate-tax-alert-archive0.html?id=us:2em:3na:stm:awa:tax Texas District Court Apportionment Based on Location of Production Activities and Fair Value of Services Performed in Texas On August 3, 2018, the 261st Travis County Texas District Court held in Sirius XM Radio Inc. v. Glenn Hegar that Sirius XM, a satellite radio subscription service, properly apportioned its subscription receipts for purposes of the Texas franchise tax (commonly referred to as the Texas margin tax) based on the location where Sirius XM produced its satellite subscription services. This Multistate Tax Alert summarizes the District Court s decision as well as offers some taxpayer considerations. [Issued September 19, 2018] URL: https://www2.deloitte.com/us/en/pages/tax/articles/texas-district-court-apportionment-based-on-location-of-productionactivities-and-fair-value-of-services-performed-in-texas.html?id=us:2em:3na:stm:awa:tax:092818&sfid=7011o000002dnuu About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ( DTTL ), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as Deloitte Global ) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the Deloitte name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms. Copyright 2018 Deloitte Development LLC. 36 USC 220506 State Tax Matters Page 6 of 6 Copyright 2018 Deloitte Development LLC