Ohio Tax Regional Update Tax Advice for Companies Doing Business - - PDF document
27th Annual Tuesday & Wednesday, January 2324, 2018 Hya Regency Columbus, Columbus, Ohio Workshop Q Ohio Tax Regional Update Tax Advice for Companies Doing Business in Michigan and Pennsylvania Tuesday, January 23, 2018 3 p.m.
27th Annual
Tuesday & Wednesday, January 23‐24, 2018
Hya Regency Columbus, Columbus, Ohio
Regional Update … Tax Advice for Companies Doing Business in Michigan and Pennsylvania
Tuesday, January 23, 2018 3 p.m. to 4 p.m.
Biographical Information
Gregory Gursky, Deputy Treasurer for Tax Policy, Michigan Dept. of Treasury 430 W. Allegan St, Lansing, MI 48922 Gregory E. Gursky was appointed Deputy State Treasurer for Tax Policy on January 20, 2016. Previously, he was a Director in PricewaterhouseCoopers’ State and Local Tax Group, where he was responsible for the management and oversight of all indirect state and local tax issues for the Greater Michigan Market. Prior to joining PricewaterhouseCoopers, Gursky spent more than 30 years with General Motors Corporation, concluding his work as the automaker’s Director of Property and Non- Income Taxes.As Deputy Treasurer for Tax Policy, Gursky will oversee Legislative Affairs, the Bureau
Michigan University and a Masters of Taxation from Walsh College. Timothy D. Adams, Shareholder State and Local Tax, Schneider Downs & Co., Inc. One PPG Place, Suite 1700, Pittsburgh, PA 15222 (412) 697-5250 Fax (412) 261-4876 tadams@schneiderdowns.com Tim has more than 20 years of experience in public accounting, including more than 10 years with a national accounting firm. His focus is in state and local tax matters, including multi-state income and franchise tax, sales and use tax, gross receipts tax, incentives/credits and unclaimed property. Tim has successfully represented or assisted clients in state and local tax matters in nearly every state across the country, including audit representation and appeals, refund reviews, and multi-state consulting and planning that have yielded significant value to his clients. Executive Committee Member – PICPA Pittsburgh Chapter Member- PICPA State Tax Committee The Ohio Society of CPAs - Ohio Tax Reform Task Force Past Chair – Western Pennsylvania Tax Conference Committee Member – American and Pennsylvania Institutes of Certified Public Accountants Board Member – National Aviary Past President – Economic Club of Pittsburgh Tim is a graduate of Grove City College with a B.S. in Accounting. Emery (Jack) Stewart, Senior Manager State & Local Tax, Schneider Downs & Co., Inc. One PPG Place, Suite 1700, Pittsburgh, PA 15222 (412) 697-5443 Fax (412) 261-4876 estewart@schneiderdowns.com Jack began his sales and use tax career with Chartwell Advisory Group in 1998 specializing in sales and use tax refund reviews for construction projects with exempt entities in Pennsylvania. In 2001 Jack joined the state and local tax practice of PricewaterhouseCoopers in Pittsburgh, where he specialized in sales and use taxes providing services such as refund reviews, audit defense, taxability matrixes, managed audits, managed compliance agreements, and various tax appeals before various state
Pennsylvania in 2005. Jack continues to specialize in sales and use tax matters for a wide range of industries including construction, manufacturing, gas and oil as well as transportation. Jack is a graduate of Rollins College with a B.A. in History and received a Post Baccalaureate in Accounting from Robert Morris University in Pittsburgh, Pennsylvania.
Biographical Information
June Summers Haas, Partner Honigman Miller Schwartz and Cohn LLP 222 North Washington Square, Lansing,MI 488933 jhaas@honigman.com 517.377.0734 Fax 517.365.9534 June Summers Haas is a partner with Honigman Miller Schwartz and Cohn LLP in Lansing, Michigan where she specializes in advising clients on a nationwide basis on multistate tax strategies, resolving tax disputes and litigating state tax cases. She is a nationally recognized expert on nexus issues and has been in the forefront of litigation defining the parameters of the resale exemption, establishing the applicability of the unitary business principle to Michigan taxes, establishing Michigan’s casual transaction exclusion, and distinguishing between sales of services and sales of tangible property. In addition, Ms. Haas spearheaded efforts to enact procedural reform for Michigan tax administration and has been a consultant to the Michigan Chamber of Commerce and the Legislature in drafting the Michigan Business Tax and the Corporate Income Tax. She was a consultant to the California Commission on the 21st Century Economy. Prior to joining Honigman Miller Schwartz and Cohn LLP, Ms. Haas was Michigan’s Commissioner of Revenue, administering 23 taxes, managing an 800 person tax revenue operation and advising the Governor and Treasurer on tax policy. Ms. Haas served for three years as Director of the Multistate Tax Commission’s National Nexus Program. Ms. Haas also has over twenty years of private law practice experience, including extensive state tax litigation and appellate work. She is a member of the BNA State Tax Advisory Board and the Hartman State and Local Tax Forum Advisory Board. Ms Haas has been selected for inclusion in Best Lawyers in America and Michigan Super Lawyers since 2007. She is a frequent speaker and author on state tax topics throughout the country. She was named to “The All-Decade State Tax Team” by State Tax Notes in January 2010. She is the author of the chapter on Jurisdiction to Tax in the new IPT book, State Business Income Taxation. June Summers Haas is a graduate of the University of Virginia Law School and received a bachelor’s degree with distinction in economics from George Mason University in Virginia. She is an adjunct professor in Thomas M. Cooley Law School LLM in Taxation Program.
DEPUTY TREASURER GREG GURSKY, MICHIGAN JUNE SUMMERS HAAS, HONIGMAN
Any tax advice in this communication is not intended or written to be used, and cannot be used by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing
and based
authorities that are subject to change. Applicability to specific situations is to be determined through consultation with your tax advisor.
AGENDA
Treasury’s Guiding Principles for Change
Culture of Taxpayer Service Continuous Improvement Engaged Employees
How we get there
In all we do, we keep these 5 core values in mind:
Always consider the IMPACT ON TAXPAYERS Goal is FAIR AND EFFICIENT ADMINISTRATION of the tax system Be METRIC DRIVEN Think outside the Department – use benchmarks and best-in-class to help
find INNOVATIVE SOLUTIONS
COMMUNICATE and CELEBRATE SUCCESS
Becoming the State’s THOUGHT LEADER requires:
Innovative solutions to complex problems Accurate forecasting of the state’s economy and revenues A deep understanding of all proposed legislation
Our path towards best operated
Newly appointed Treasurer Khouri gathers his
leadership team to identify and agree on the;
ASPIRATION BUILDING BLOCKS KEY
VALUES
From this point forward, all Treasury projects and
initiatives would have to align with these guiding principles
Our path towards best operated
Identify and implement the RIGHT
ORGANIZATIONAL STRUCTURE and leaders
Our path towards best operated
Implement regular and recurring
COMMUNICATION of our aspiration, three building blocks and five core values
INTERNAL: Help Treasury’s 1,500 employees connect
their work to our “Best Operated” vision through town hall presentations, staff meetings, one-on-one discussions, news postings/intranet
EXTERNAL: Share updates and successes with taxpayer
associations, legislative groups and other external stakeholders
Our path towards best operated
Dedicate resources to implementing a
CONTINUOUS IMPROVEMENT (CI) support team within Treasury to;
Facilitate and support the execution of specific
Operated” projects
Create and support a platform and process for
Treasury teams to identify, track and adjust agreed upon metrics related to CI projects
Embed in all Treasury employees the perpetual
aspect of CI as a core operating principle of the Department
Our path towards best operated
Solicit internal and external INPUT and
FEEDBACK to determine which Continuous Improvement projects and Treasury Initiatives we need to focus on to make the greatest impact moving us toward becoming “Best Operated”
Continuously and consistently EVALUATE the
PROGRESS of Continuous Improvement projects and other Treasury Initiatives to determine if intended progress/success is being achieved and course correct as necessary
Treasury Projects and Initiatives
Implemented Treasury legislative review process to
analyze all relevant tax and revenue bills by:
Preparing a robust fiscal analysis with
calculations, rationale and underlying assumptions
Preparing and distributing to external
stakeholders a “Position Memo” on each relevant bill that includes a summary and discussion of the following key principles:
Efficiency, Fairness, Simplicity, Diversification Continue to build Treasury’s economic forecasting
“muscle” with attention to resources and data Recognized Thought Leaders
CONTINUOUS IMPROVEMENT ~ CULTURE OF SERVICE ~ EMPLOYEE ENGAGEMENT
Treasury Projects and Initiatives
Instill an attitude of transparency in our actions and
decisions with taxpayers; communicate timely and consistently
Tax Administration –
Implemented ongoing project in conjunction with various
2,500 + correspondence messages
T
half revised to improve clarity and completeness of
MBT/CIT/FTW, Discovery, Audit and most of SUW.
MORE TO DO - IIT in process now with other areas
targeted
Taxpayer Communications
CONTINUOUS IMPROVEMENT ~ CULTURE OF SERVICE ~ EMPLOYEE ENGAGEMENT
Treasury Projects and Initiatives
Taxpayer Outreach Sessions
Conducting sessions across the State in libraries,
universities, and other non-state facilities. Wherever it makes sense
Have held 16 sessions to date in 2017. Sessions last
about 2 hours. T
MTO and motor vehicle dealership sale/use tax
Navigating your new business sessions planned for
and UIA
MORE TO DO – 60 sessions planned for 2018. Evaluate
possibility of webinar based delivery. Solicit topics of interest from target audiences
Taxpayer Communications
CONTINUOUS IMPROVEMENT ~ CULTURE OF SERVICE ~ EMPLOYEE ENGAGEMENT
Treasury Projects and Initiatives
95% of IIT/CIT/MBT taxpayer correspondence responded to within 60 days (improved from 365+ days in 2016)
SUW has reduced its backlog 79% in 7 months from 85,000 (55,000 SUW and 30,000 Marcs) to 18,000
MORE TO DO – 95% of SUW correspondence is responded
to within 120 days, but only 60% within the 60 day goal
MORE TO DO - SUW contact center addressing multiple
issues and action items to improve customer service
MILESTONE SUCCESS - First time ever! In 2016 all current year IIT (clean) returns were processed in the year they were
IIT/Business contact centers – first time phone call resolution average is 80%
Soon to implement MTO system enhancements including homepage redesign, bulk e-file, fast pay ability for CIT & MBT
Tax Processing
CONTINUOUS IMPROVEMENT ~ CULTURE OF SERVICE ~ EMPLOYEE ENGAGEMENT
Resources for You
Michigan Treasury Online (MTO)
Register a business Discontinue a business File Power of Attorney
(Form 151)
CONTINUOUS IMPROVEMENT ~ CULTURE OF SERVICE ~ EMPLOYEE ENGAGEMENT
Treasury Projects and Initiatives
Informal Conference – Complete all cases within 6
months of filing
81% of cases completed within 6 month objective
during most recent 6 month period (4/17 – 9/17)
Approximately 32% of cases completed within 6
months prior to 2015
MORE TO DO – Understand reasons goal of
100% case completion within 6 months is not being achieved. In past 6 months all cases completed averaged less than 182 days.
As of 9/17 only 583 open dockets remain, with only
37 filed prior to 2017, versus 1,335 open dockets as
MORE TO DO – Develop and implement process
for administration of the Informal Conference Resolution Process upon expected enactment
Tax Policy
CONTINUOUS IMPROVEMENT ~ CULTURE OF SERVICE ~ EMPLOYEE ENGAGEMENT
Treasury Projects and Initiatives
Policy Guidance – Increase amount and frequency of
issuing written guidance. Goal to publish 10 substantive RAB’s per year
On track to issue 30 plus RAB’s from 2015 through
RAB’s were issued per year
During same period, approximately 36 additional
forms of written guidance issued, including LR’s, TAL’s, IPD’s and Notices
Began publishing quarterly Tax Policy newsletter in
Advising taxpayers via the Newsletter when
Treasury will acquiesce in a non binding court decision
MORE TO DO – Complete outdated/obsolete
guidance review project, including Administrative Code rules, Revenue Rulings, etc.
Tax Policy
CONTINUOUS IMPROVEMENT ~ CULTURE OF SERVICE ~ EMPLOYEE ENGAGEMENT
Treasury Projects and Initiatives
All new taxpayer contacts and cases acknowledged
within 3 days. Goal 100%. 2017 YTD date 98.9%
94.6% of contacts and cases are resolved within 30
days, and 50% within 3 days.
MORE TO DO – Analyze cases for repeating issues to
determine if systemic and address root causes within Treasury more broadly
Improved contact channels to reach advocate office including more outreach and contact points
MORE TO DO – Finish implementation of Advocate
Office webpage on Treasury Website
Made enhancements to case matter tracking system
enabling more efficient resolution of pending cases Taxpayer Advocate
CONTINUOUS IMPROVEMENT ~ CULTURE OF SERVICE ~ EMPLOYEE ENGAGEMENT
Treasury Projects and Initiatives
TAXPAYER SERVICE ~ Developing an end-to-end proactive approach to taxpayer service; breaking down internal silos to benefit the taxpayer and achieve first-call resolution whenever possible.
TAXPAYER COMMUNICATION ~ Improve call center systems and processes as well as the processing on taxpayer correspondence.
DATA MANAGEMENT ~ Improve access to data, analytics, governance and promote paperless environment (online resources, electronic communication).
TAX PROCESSING ~ Consider offering option for installment agreements prior to turning accounts over to Collections.
TRAINING (INTERNAL) ~ Provide more robust, consistent training programs for Treasury employees so they can better assist taxpayers.
Looking ahead to 2018
CONTINUOUS IMPROVEMENT ~ CULTURE OF SERVICE ~ EMPLOYEE ENGAGEMENT
RE CE NT L E GI SL AT I ON
A 215 – Se ttle me nt a utho rity to T re a sury in the c o nte xt o f a n info rma l c o nfe re nc e .
his b ill g ive s T re a sury the a utho rity to se ttle issue s o r c a se s tha t a re in info rma l c o nfe re nc e .
pre se nt a writte n re q ue st fo r se ttle me nt sta ting i) le g a l issue s, ii) a mo unt o f se ttle me nt o ffe r, a nd iii) fa c tua l a nd le g a l suppo rt fo r o ffe r.
re a sury will b e re q uire d to re po rt g e ne ra l de ta ils re g a rding se ttle me nts re a c he d.
L I T I GAT I ON OVE R 2014 CHANGE T O ST AT UT E OF L I MI T AT I ONS
“no tic e ” sta te fo r sta tute
limita tio ns purpo se s. T ha t is, upo n no tic e o f a sta te ta x a udit, the 4-ye a r sta tute o f limita tio ns o f MCL205.27a wa s “suspe nde d.”
e g isla ture pa sse d 2014 P.A. No . 3 (“Pub lic Ac t 3”), whic h to o k imme dia te e ffe c t o n F e b rua ry 6,
he SOLis o nly suspe nde d b e yo nd 4 ye a rs fo r a fe de ra l ta x a udit
e b rua ry 6, 2014 with a sse ssme nts issue d a fte r tha t da te ? Ha s the sta tute o f limita tio ns e xpire d?
SAL E S AND USE T AX – ST AT UT E OF L I MI T AT I ONS
r e asur y, unpub lishe d o pinio n pe r c uria m o f
the Co urt o f Appe a ls, issue d Ja nua ry 17, 2017 (Do c ke t No . 329213).
he T a xpa ye r wa s a udite d fo r sa le s a nd use ta x b y the De pa rtme nt a nd pre limina ry a udit wo rkpa pe rs sho wing a ta x de fic ie nc y we re issue d to the T a xpa ye r. T he T a xpa ye r c he c ke d the b o x tha t it “Ag re e d” with the wo rkpa pe rs a nd se nt a c he c k to pa y the de fic ie nc y.
he T a xpa ye r sub se q ue ntly re a lize d tha t, pursua nt to 2014 PA 3, so me o f the ta x pe rio ds unde r a udit ma y ha ve b e e n o utside the sta tute o f limita tio ns fo r ta x a sse ssme nts a nd sue d fo r a re fund.
W SOUL E & CO V DEP’T OF T REASURY
he Co urt o f Cla ims rule d a g a inst the T a xpa ye r b e c a use its re fund c la im wa s o utside the sta tute o f limita tio ns impo se d b y 2014 PA 3.
he Co urt o f Appe a ls a ffirme d, ho lding tha t the sta tute
limita tio ns impo se d b y MCL 205.27a wa s a limit
ta x
asse ssme nts
a nd the T a xpa ye r wa s ne ve r issue d a ta x a sse ssme nt, o nly pre limina ry a udit wo rkpa pe rs. T he Co urt o f Appe a ls he ld tha t the T a xpa ye r vo lunta rily pa id the ta x de fic ie nc y it o we d.
Audit De te rmina tio ns o r F ina l Audit De te rmina tio ns vo lunta ry?
L itig a tio n o ve r 2014 c ha ng e to sta tute o f limita tio ns
nc . v De p’ t o f T re asury and Old Orc hard Brands L L C v. De p’ t o f T re asury, No . 16-000114 (Mic h. Ct. o f Cl. F e b . 3, 2017).
Bo th ta xpa ye rs c la ime d tha t the De pa rtme nt’ s a sse ssme nts we re issue d b e yo nd the 4 ye a r sta tute o f limita tio ns whic h e xpire d o n e ffe c tive da te
he De pa rtme nt c la ime d tha t the prio r la w wa s still in e ffe c t fo r a udits sta rte d prio r to the c ha ng e in the la w. T he Co urt o f Cla ims rule d in fa vo r
re a sury.
he Co urt o f Cla ims he ld tha t the sta rt o f the a udit suspe nde d the sta tute o f limita tio ns, whic h re ma ine d suspe nde d.
his c a se ha s b e e n a ppe a le d to the Co urt o f Appe a ls.
SAL E S AND USE T AX CASE S
unt Asso c iate s, Inc . v De p’t o f T r e asur y, 318 Mic h App 449 (2017).
he ta xpa ye r, Brunt Asso c ia te s (the “T a xpa ye r”) pro duc e d a nd insta lle d c usto m
T he T a xpa ye r fa b ric a te d a ll the furnishing s a t its sho p and the n insta lle d the m a t its c usto me rs’ lo c a tio ns. T he furnishing s we re g e ne ra lly a ffixe d with b o lts, sc re ws o r c lips b ut so me o f the m, suc h a s wo rksta tio ns, we re he ld in pla c e o nly b y the ir we ig ht, a nd a ll c o uld b e re mo ve d witho ut da ma g ing the c usto me r’ s b uilding .
re a sury a udite d the T a xpa ye r a nd de te rmine d tha t it wa s a ma nufa c ture r/ c o ntra c to r, no t a ma nufa c ture r/ re ta ile r, b e c a use it a ffixe d its pro duc ts to re a l e sta te a nd wa s the re fo re lia b le fo r use ta x o n the inve nto ry va lue
its pro duc ts, inc luding la b o r. T he T a xpa ye r c la ime d it wa s a ma nufa c ture r/ re ta ile r tha t wa s lia b le fo r sa le s ta x o n the pric e pa id b y the c usto me r a nd wa s e ntitle d to the industria l pro c e ssing e xe mptio n.
BRUNT ASSOCIAT ES, INC. V DEP’T OF T REASURY
he Co urt o f Appe a ls a ffirme d the T a x T rib una l’ s c o nc lusio n tha t the T a xpa ye r wa s a c o ntra c to r tha t wa s lia b le fo r use ta x a nd no t e ntitle d to the industria l pro c e ssing e xe mptio n b e c a use it did no t se ll its pro duc ts a t re ta il.
he Co urt he ld tha t the T a xpa ye r’ s pro duc ts we re a ffixe d to re a l e sta te , e ve n tho ug h so me ite ms tha t we re no t a tta c he d to the b uilding b e c a me e ve n tho se ite ms we re “c o nstruc tive ly” a ffixe d.
f a de sk is c o nstruc tive ly a ffixe d to the b uilding b y its o wn we ig ht, wha t isn’ t?
s this a b a c k do o r to ta xing se rvic e pro vide rs a s “c o ntra c to rs”?
SAL E S AND USE T AX CASE S
fie ld Mar t Inc v De p’t o f T r e asur y,__Mic h App__ ; __NW2d__
(2017) (Do c ke t No . 333094, Aug ust 8, 2017). Applic a tio n fo r L e a ve to Appe a l file d 10/ 25/ 2017.
he T a xpa ye r o pe ra te d a c o nve nie nc e sto re a nd so ld pre pa id wire le ss c a lling a rra ng e me nts, so me o f whic h re q uire d a PI N a nd
he De pa rtme nt a udite d the T a xpa ye r a nd to o k the po sitio n tha t the sa le s we re ta xa b le unde r MCL 205.52(2)(b ), whic h pro vide s tha t sa le s ta x a pplie s to the sa le o f “pre pa id te le pho ne c a lling c a rds” a nd “pre pa id a utho riza tio n numb e rs fo r te le pho ne use .” T he T a x T rib una l a g re e d with the De pa rtme nt a nd he ld tha t b o th type s o f tra nsa c tio ns we re e sse ntia lly a fo rm
c a lling c a rd a nd a pre pa id a utho riza tio n numb e r.
GARF IEL D MART INC V DEP’T OF T REASURY
he Co urt o f Appe a ls disa g re e d with the T rib una l tha t the tra nsa c tio ns we re a fo rm o f pre pa id c a rd. T he Co urt o f Appe a ls use d dic tio na ry de finitio ns to de te rmine tha t a pre pa id te le pho ne c a lling c a rd wa s a c re dit-c a rd type pla stic c a rd. Ne ve rthe le ss, the Co urt he ld tha t the tra nsa c tio ns tha t use d a PI N we re ta xa b le sa le s o f pre pa id a utho riza tio n numb e rs fo r te le pho ne use . T he pre pa id minute s tha t did no t use a PI N, ho we ve r, we re he ld no t to b e ta xa b le .
n Sa le s & Use ta x, mo re tha n a ny o the r ta x, fo rm ma tte rs. Do yo ur do c ume nts a c tua lly re fle c t the fo rm
the tra nsa c tio ns?
GARF IEL D MART INC V DEP’T OF T REASURY
he T a xpa ye r a lso c o nte ste d the a udito r’ s use o f a n a lte rna tive a udit me tho d b e c a use the T a xpa ye r did no t ke e p da ily sa le s ta pe s. T he a udito r e stima te d the T a xpa ye r’ s sa le s b y lo o king a t the a mo unt
purc ha se s.
dig ita l fo rma t a n a c c ura te a nd c o mple te b e g inning a nd a nnua l inve nto ry a nd purc ha se re c o rds o f a dditio ns to inve nto ry, c o mple te da ily sa le s re c o rds, re c e ipts, invo ic e s, b ills o f la ding , a nd a ll pe rtine nt do c ume nts in a fo rm the de pa rtme nt re q uire s.”
he Co urt he ld tha t, ha ving fa ile d to ke e p pro pe r re c o rds, the T a xpa ye r ha d no rig ht to insist o n a c e rta in a udit me tho do lo g y.
SAL E S AND USE T AX CASE S
inanc ial e t al. v De p’t o f T r e asur y, 317 Mic h App 316
(2016). Applic a tio n fo r L e a ve to Appe a l file d 11/ 29/ 16.
he Co urt o f Appe a ls he ld tha t fina nc ing c o mpa nie s tha t ha d writte n o ff b a d de b ts o n a uto mo b ile lo a ns we re no t e ntitle d to a re fund o f sa le s ta xe s b e c a use the b a d de b t de duc tio n spe c ific a lly e xc lude d “re po sse sse d pro pe rty.” T he Co urt a lso to o k issue with Ally F ina nc ia l’ s e le c tio n fo rms with re ta ile rs, ho lding tha t the fo rms did no t c o ve r the tra nsa c tio ns a t issue . T he Co urt a lso uphe ld the De pa rtme nt’ s a b ility to re q uire e ntitie s c la iming a b a d de b t de duc tio n to sub mit RD-108 fo rms a s pro o f tha t ta xe s ha d b e e n pa id.
ALLY FINANCIAL ET AL. V DEP’T OF TREASURY
whe the r to g ra nt the Applic a tio n a nd dire c te d the pa rtie s to file supple me nta l b rie fs a ddre ssing :
inc lude re po sse sse d pro pe rty;
whe the r the Co urt o f Appe a ls e rre d in g iving the De pa rtme nt o f T re a sury’ s inte rpre ta tio n o f MCL 205.54i re spe c tful c o nside ra tio n in lig ht o f MCL 24.232(5) (“A g uide line ,
b ulle tin, inte rpre tive sta te me nt,
with instruc tio ns is no t e nfo rc e a b le b y a n a g e nc y, is c o nside re d me re ly a dviso ry, a nd sha ll no t b e g ive n the fo rc e a nd e ffe c t o f la w.”);
pursua nt to MCL 205.54i(4) a nd, unde r tha t sta nda rd, whe the r the de c isio n wa s a ppro pria te ; a nd
ina nc ia l’ s e le c tio n fo rms did no t a pply to a c c o unts writte n o ff prio rto the re ta ile rs’ e xe c utio n o f the fo rms.
I NDI VI DUAL I NCOME T AX – ST AT UT E OF L I MI T AT I ON F OR COL L E CT I ONS
r e asur y, unpub lishe d o pinio n pe r c uria m o f the Co urt
Re q ue st fo r Pub lic a tio n de nie d Se pte mb e r 14, 2017. Applic a tio n fo r L e a ve to Appe a l file d Oc to b e r 16, 2017.
he De pa rtme nt o f T re a sury issue d individua l inc o me ta x a sse ssme nts to the ta xpa ye r fo r his 2004, 2006, 2007 a nd 2009 ye a rs. T ho se a sse ssme nts we re issue d b e twe e n 2007 a nd 2010.
due to the T a xpa ye r a nd re c o rde d lie ns a g a inst the ta xpa ye r’ s re a l pro pe rty.
he T a xpa ye r file d suit in Circ uit Co urt to ha ve the lie ns re mo ve d a nd re c o ve r the inte rc e pte d pa yme nts, re lying upo n the 6-ye a r c o lle c tio n sta tute o f limita tio ns in MCL600.5813 to file a c o lle c tio n a c tio n.
I NDI VI DUAL I NCOME T AX – ST AT UT E OF L I MI T AT I ON F OR COL L E CT I ONS
he Circ uit Co urt he ld tha t the sta tute wa s a limita tio n
filing a c o lle c tio n suit a nd did no t pre ve nt T re a sury’ s filing o f lie ns o r inte rc e pting pa yme nts.
he Co urt o f Appe a ls a g re e d.
n sho rt, the re is no time limit fo r T re a sury to a tte mpt to c o lle c t o n a n a sse ssme nt thro ug h the use o f lie ns o r se t-o ffs.
re a sury c o uld issue a wa rra nt a nd se ize a ta xpa ye r’ s pro pe rty, inc luding b a nk a c c o unts. E xpe c t T re a sury to a pply this to o the r ta xe s.
Mic hig a n Busine ss T a x a nd Co rpo ra te I nc o me T a x Ca se s
MBT CASE S - L I T I GAT I ON RE GARDI NG T HE “MAT E RI AL S AND SUPPL I E S” DE DUCT I ON
he Mo difie d Gro ss Re c e ipts T a x c o mpo ne nt o f the MBT a llo ws a de duc tio n fo r “purc ha se s fro m o the r firms,” whic h is de fine d to inc lude “[t]o the e xte nt no t inc lude d in inve nto ry o r de pre c ia b le pro pe rty, ma te ria ls a nd supplie s, inc luding re pa ir pa rts a nd fue l.” MCL 208.1203(2) a nd 208.1113(6).
he Mic hig a n De pa rtme nt o f T re a sury inte rpre te d the “ma te ria ls a nd supplie s” de duc tio n to e nc o mpa ss o nly ta ng ib le pe rso na l pro pe rty use d o r c o nsume d in – a nd dire c tly c o nne c te d to – the pro duc tio n o r ma na g e me nt o f inve nto ry o r c a pita l a sse ts. Se e MBTF AQ M4.
n e ve ry c a se de c ide d o n this issue , the Co urts a nd T a x T rib una l ha ve he ld tha t the De pa rtme nt’ s limita tio n o f this de duc tio n wa s impro pe r. Se e , e .g ., L ightho use , I nc . v De p’ t o f T re asury (Mic hig a n T a x T rib una l Do c ke t No . 14-000304, Se pte mb e r 11, 2015); Plastic S urge ry Asso c iate s v De p’ t o f T re asury, (Mic hig a n T a x T rib una l Do c ke t No . 16-00011, No ve mb e r 15, 2016); a nd Andrie , I nc . v De p’ t o f T re asury, (Mic hig a n Co urt o f Cla ims Do c ke t No . 15-000153- MT , Ja nua ry 24, 2017).
MBT CASE S - L I T I GAT I ON RE GARDI NG T HE “MAT E RI AL S AND SUPPL I E S” DE DUCT I ON
he Mic hig a n De pa rtme nt o f T re a sury a nno unc e d o n June 9, 2017 tha t it is “a c q uie sc ing ” to the se de c isio ns. On June 9, 2017, the De pa rtme nt
re a sury issue d g uida nc e to ta xpa ye rs re g a rding its a c q uie sc e nc e to two unpub lishe d ta xpa ye r vic to rie s re g a rding the “ma te ria ls a nd supplie s” de duc tio n fro m mo difie d g ro ss re c e ipts ta x b a se .
re a sury’ s g uida nc e is a va ila b le a t: http:/ / www.mic hig a n.g o v/ do c ume nts/ tre a sury/ No tic e _- _Ma te ria ls_a nd_Supplie s_573328_7.pdf
MBT / CI T CASE S
abe lle Manage me nt, Inc , L L C v De p't o f T r e asur y, 315 Mic h App 23 (2016).
Applic a tio n fo r L e a ve to Appe a l de nie d 1/ 24/ 17.
de te rmina tio n o f a unita ry g ro up.
nc o me T a x a nd the Mic hig a n Busine ss T a x (“MBT ”), c o rpo ra tio ns must me e t a c o ntro l te st de mo nstra ting dire c t o r indire c t
le a st o ne o the r e ntity to b e pa rt o f a unita ry g ro up.
he De pa rtme nt issue d g uida nc e utilizing fe de ra l “c o nstruc tive o wne rship” rule s to de te rmine whe n indire c t
in Mic hig a n Re ve nue Administra tive Bulle tins 2010-1 a nd 2013-1.
n this c a se , e ntitie s we re o wne d b y two b ro the rs a nd the ir c hildre n.
L ABEL L E MANAGEMENT , INC, L L C V DEP'T OF T REASURY
he Co urt o f Appe a ls re je c te d the De pa rtme nt o f T re a sury’ s a tte mpte d re lia nc e upo n 26 USC §958, whic h de fine s b o th “dire c t,” “indire c t,” a nd “c o nstruc tive ” o wne rship fo r purpo se s o f de te rmining a “c o ntro lle d fo re ig n c o rpo ra tio n” fo rfe de ra l inc o me ta x.
he Co urt o f Appe a ls fo und tha t indire c t o wne rship a nd c o nstruc tive o wne rship a re se pa ra te c o nc e pts. T he Co urt c o nsulte d dic tio na ry de finitio ns a nd de te rmine d tha t the de finitio n “no t do ne dire c tly; c o nduc te d thro ug h inte rme dia rie s” a nd “po sse ssio n o f a thing thro ug h so me o ne e lse , suc h a s a n a g e nt.” Co nsiste nt with the se de finitio ns, the Co urt he ld “tha t indire c t o wne rship in MCL 208.1117(6) me a ns o wne rship thro ug h a n inte rme dia ry, no t o wne rship b y o pe ra tio n o f le g a l fic tio n, a s [the De pa rtme nt] urg e s.” T he re fo re , the Co urt rule d in fa vo r o f the ta xpa ye r a nd fo und tha t the e ntitie s a t issue did no t c o nstitute a unita ry b usine ss g ro up fo r MBTpurpo se s.
he Co urt o f Appe a ls de c isio n in L abe lle Manage me nt wa s pub lishe d a nd the re fo re pre c e de ntia l. Altho ug h this c a se a ddre sse d o nly the MBT , it sho uld b e e q ua lly a pplic a b le to Mic hig a n’ s Co rpo ra te I nc o me T a x b e c a use the de finitio n o f a “unita ry b usine ss g ro up” is virtua lly ide ntic a l fo r b o th ta xe s.
e b rua ry 28, 2017, the De pa rtme nt o f T re a sury issue d g uida nc e to ta xpa ye rs re g a rding the e ffe c t o f L abe lle Manage me nt. T re a sury’ s g uida nc e is a va ila b le a t: http:/ / www.mic hig a n.g o v/ do c ume nts/ tre a sury/ No tic e _re _L a Be lle _2-28-17_553102_7.pdf
MBT CASE S
so ns Albio n Ethano l, L L C v De p’t o f T r e asur y, 317 Mic h App 208 (2016).
Applic a tio n fo r L e a ve to Appe a l de nie d 6/ 7/ 17.
n this o pinio n, the Co urt o f Appe a ls wre stle d with ho w to de a l with a n a ppo rtio nme nt fa c to r tha t wa s ze ro divide d b y ze ro . Spe c ific a lly, the MBT ’ s re na issa nc e zo ne c re dit wa s a ppo rtio ne d b a se d o n a two -fa c to r fo rmula using pro pe rty a nd pa yro ll. T he a ppo rtio nme nt fo rmula use d the pa yro ll fa c to r plus the pro pe rty fa c to r divide d b y two .
he ta xpa ye r, ho we ve r, ha d no pa yro ll in the nume ra to r o r de no mina to r o f the pa yro ll fa c to r, re sulting in ze ro divide d b y ze ro , whic h the Co urt he ld to b e “inde te rmina te .”
he ta xpa ye r’ s pro po se d so lutio n wa s to thro w o ut the pa yro ll fa c to r a nd use
he De pa rtme nt o f T re a sury urg e d the Co urt to tre a t the inde te rmina te fa c to r a s ze ro a nd, the re fo re , use the pro pe rty fa c to r divide d b y two .
ANDERSONS AL BION ET HANOL , L L C V DEP’T OF T REASURY
he Co urt side d with the De pa rtme nt b e c a use its c o nstruc tio n wa s no t inc o nsiste nt with the sta tute a nd wa s mo re re a so na b le .
he Co urt no te d tha t, if it a do pte d the ta xpa ye r’ s c o nstruc tio n, a ta xpa ye r wo uld b e tre a te d wo rse fo r ha ving so me pa yro ll in the re na issa nc e zo ne tha n if it ha d no ne , whic h is a t o dds with the purpo se o f the c re dit.
t re ma ins to b e se e n whe the r this ho lding will b e a pplie d to o the r insta nc e s whe n a n a ppo rtio nme nt fa c to r is ze ro divide d b y ze ro .
MBT CASE S - RE T ROACT I VI T Y
c ial Ope r atio ns No r th Ame r ic a & Subsidiar ie s v De p’t o f T r e asur y, Applic a tio n fo r L
e a ve de nie d b y Mic hig a n Supre me Co urt o n June 24, 2016. Pe titio ns fo r a Writ o f Ce rtio ra ri de nie d Ma y 22, 2017.
nt’ l Bus Mac hine s v De p’ t o f T re asury, 496 Mic h 642; 852 NW2d 865 (2014) (“I BM”). A ma jo rity o f the Co urt he ld tha t the ta xpa ye r wa s e ntitle d to use the thre e -fa c to r a ppo rtio nme nt fo rmula unde r Multista te T a x Co mpa c t (the “Co mpa c t”) fo r its 2008 MBT .
n re spo nse to I BM, o n Se pte mb e r 12, 2014, Go ve rno r Snyde r sig ne d 2014 PA 282 (“Pub lic Ac t 282”) into la w. Pub lic Ac t 282 re tro a c tive ly re pe a le d Mic hig a n’ s a do ptio n o f the Co mpa c t a s o f Ja nua ry 1, 2008.
he Co urt o f Cla ims c o nc lude d tha t Pub lic Ac t 282 wa s la wful a nd pre c lude d the va rio us ta xpa ye rs fro m using the Co mpa c t’ s a ppo rtio nme nt fo rmula .
MBT CASE S - RE T ROACT I VI T Y
de c isio n.
he Co urt o f Appe a ls c o nc lude d tha t the L e g isla ture ’ s re tro a c tive re pe a l o f the Co mpa c t did no t vio la te the Co ntra c t Cla use , Due Pro c e ss Cla use s, o r o the r pro visio ns o f the Mic hig a n a nd Unite d Sta te s c o nstitutio ns. No ta b ly, the Co urt o f Appe a ls de te rmine d tha t (a ) the Co mpa c t wa s no t a binding c o ntra c t tha t g a ve the ta xpa ye rs c o ntra c tua l rig hts; (b ) the ta xpa ye rs did no t ha ve a ve ste d rig ht in using the Co mpa c t’ s thre e -fa c to r a ppo rtio nme nt fo rmula ; (c ) the L e g isla ture ha d a le g itima te purpo se fo r re tro a c tive ly re pe a ling the Co mpa c t; a nd (d) the a ppro xima te ly six a nd
pe rio d wa s “suffic ie ntly mo de st” re la tive to time fra me s o f o the r re tro a c tive le g isla tio n uphe ld b y sta te a nd fe de ra l c o urts.
n re c e nt ye a rs, we ’ ve se e n ma ny insta nc e s o f re tro a c tive c ha ng e s to ta x le g isla tio n.
t do e s no t a ppe a r the re a re a ny limits to suc h re tro a c tivity.
MBT CASE S
L C v De pt’ o f T r e asur y, unpub lishe d
(Do c ke t No . 332639). Appro ve d fo r pub lic a tio n Aug ust 1, 2017.
he ta xpa ye r so ug ht a n MBT sma ll b usine ss a lte rna tive c re dit fo r 2008.
re a sury a rg ue d tha t the ta xpa ye r wa s ine lig ib le due to the $180,000 c o mpe nsa tio n limit.
n 2008, the ta xpa ye r pa id a n o ffic e r $163,996 in sa la ry plus a $30,000 b o nus. T he ta xpa ye r, ho we ve r, wa s o n a n a c c rua l b a sis a nd de duc te d the b o nus in 2007 a nd a rg ue d tha t the b o nus sho uld the re fo re no t c o unt a s 2008 c o mpe nsa tio n.
F OUR ZERO ONE ASSOCIAT ES L L C V DEPT ’ OF T REASURY
he Co urt o f Appe a ls a ffirme d the T a x T rib una l’ s de c isio n in fa vo r o f T re a sury.
he sta tuto ry de finitio n o f “c o mpe nsa tio n” in the MBT Ac t pro vide s tha t a ta xpa ye r’ s me tho d o f a c c o unting sha ll b e fo llo we d fo r purpo se s o f de te rmining whe n pa yme nts ma de to pe nsio ns, re tire me nt o r pro fit sha ring pla ns b ut do e s no t c o nta in suc h la ng ua g e re g a rding b o nuse s.
he sta tute c le a rly pro vide s tha t c o mpe nsa tio n inc lude s “a ll . . . b o nuse s . . . ma de in the ta x ye a r. . . .”
RECENT MICHIGAN ADMINISTRATIVE AND PROCEDURAL ISSUES
APPE AL OF T AX ASSE SSME NT S
r e asur y, unpub lishe d o pinio n pe r c uria m o f the
Co urt o f Appe a ls, issue d June 15, 2017 (Do c ke t No . 332787).
he ta xpa ye r wa s the pre side nt o f Je nks Plumb ing a nd He a ting , whic h did no t pa y c e rta in withho lding ta xe s. Asse ssme nts we re issue d a g a inst the ta xpa ye r pe rso na lly a s a re spo nsib le pe rso n unde r MCL205.27a . T he se a sse ssme nts we re no t a ppe a le d. T he ta xpa ye r the n pa id the a sse ssme nts a nd sub mitte d c la ims fo r re fund. T he ta xpa ye r the n a tte mpte d to a ppe a l the de nia l o f its re fund c la ims.
he Co urt o f Appe a ls a ffirme d the T a x T rib una l’ s de c isio n tha t this wa s a n impe rmissib le c o lla te ra l a tta c k o n the a sse ssme nts.
MT TPROCE DURE – F I L I NG DAT E
bo r Cr
L C v Muske go n T wp, unpub lishe d o pinio n
pe r c uria m o f the Co urt o f Appe a ls, issue d Oc to b e r 26, 2017 (Do c ke t No . 334318).
he T a xpa ye r file d its Pe titio n with the T a x T rib una l b y ma il. T he e nve lo pe b o re a me te r po stma rk o f Ma y 31 b ut the USPS po stma rk sho we d June 1, 2016. T he T rib una l he ld tha t the UPSP po stma rk wa s the da te o f filing a nd dismisse d the Pe titio n a s untime ly.
he Co urt o f Appe a ls a ffirme d. MCL 205.735a (7)(a ) pro vide s tha t a “pe titio n is c o nside re d file d
the [filing de a dline ] . . . if [t]he pe titio n is po stma rke d b y the Unite d Sta te s po sta l se rvic e o n o r b e fo re the [filing de a dline ].
MT TPROCE DURE – DI SMI SSAL OF CASE S
L C v City o f So uthfie ld, unpub lishe d o pinio n pe r c uria m o f
the Co urt o f Appe a ls, issue d Ma rc h 23, 2017 (Do c ke t No . 329699).
he ta xpa ye r’ s a tto rne y re c e ive d the T rib una l’ s
sc he duling a pre he a ring b ut e rro ne o usly e nte re d it o nto the wro ng da te o n his c a le nda r a nd misse d it. T he T rib una l dismisse d the a c tio n. T he ta xpa ye r mo ve d to se t a side the dismissa l. T he T rib una l c o nside re d the ta xpa ye r’ s mo tio n a s a Mo tio n fo r Re c o nside ra tio n, whic h it de nie d. On a ppe a l, the Co urt o f Appe a ls a ffirme d the T rib una l’ s dismissa l o f the a c tio n.
he ta xpa ye r a rg ue d tha t the T rib una l e rre d in dismissing its a ppe a l, a s its fa ilure to a ppe a r wa s no t willful, a nd the T rib una l sho uld ha ve c o nside re d le ss dra stic a c tio n. T he ta xpa ye r a lso a rg ue d tha t the T rib una l impro pe rly c o nside re d the ta xpa ye r’ s mo tio n to se t a side the dismissa l a s a mo tio n fo r re c o nside ra tio n.
MT TPROCE DURE – DI SMI SSAL OF CASE S
L C v City o f So uthfie ld, c o ntinue d
rib una l did no t a b use its disc re tio n in dismissing the a ppe a l b e c a use T T R 247 spe c ific a lly g ra nts it a utho rity to dismiss fo r fa ilure to a ppe a r a t a pre he a ring c o nfe re nc e . T he re wa s no de fa ult o r finding o f pre judic e , a s suc h, the T rib una l ha d no o b lig a tio n to c o nside r a le ss dra stic a c tio n.
he Co urt o f Appe a ls a lso he ld tha t the T rib una l did no t e rr in tre a ting Pe titio ne r’ s mo tio n to se t a side the dismissa l a s a mo tio n fo r re c o nside ra tio n. T he Co urt re a so ne d tha t while T T R 231 a llo ws the T rib una l to se t a side a n o rde r o f dismissa l b a se d o n “re a so ns it c o nside rs suffic ie nt,” a nd T T R 257 a llo ws the T rib una l to re c o nside r a de c isio n b a se d o n pa lpa b le e rro r, Pe titio ne r’ s a rg ume nts we re c o nside re d a nd re je c te d b y the T rib una l.
MT TPROCE DURE – DI SMI SSAL OF CASE S
ge so n v No r ve ll T wp, unpub lishe d o pinio n pe r c uria m o f the
Co urt o f Appe a ls, issue d June 14, 2017 (Do c ke t No . 332721.
he ta xpa ye r file d a n a ppe a l o f his ho me ’ s pro pe rty ta xe s a t the T rib una l. T he T rib una l sc he dule d a he a ring fo r F e b rua ry 18, 2016. T he ta xpa ye r re q ue ste d a diffe re nt he a ring da te due to a pre -pa id va c a tio n b ut fa ile d to pa y a mo tio n fe e with the re q ue st. T he T rib una l no tifie d the ta xpa ye r o n De c e mb e r 30, 2015 tha t the mo tio n wa s no t pe nding b e c a use no mo tio n fe e ha d b e e n pa id. Afte r the ta xpa ye r did no t a ppe a r a t the F e b rua ry 18 he a ring , the T rib una l dismisse d the c a se .
MT TPROCE DURE – DI SMI SSAL OF CASE S
ge so n v No r ve ll T wp c o ntinue d
he Co urt o f Appe a ls re ve rse d, finding tha t the T rib una l c o mmitte d a n a b use
disc re tio n in dismissing the T a xpa ye r’ s pe titio n witho ut e va lua ting o the r sa nc tio n o ptio ns o r c o nside ring the fa c to rs a nno unc e d in Vic e nc io v Ramire z, 211 Mic h. App. 501 (1995).
ho se fa c to rs a re : (1) whe the r the vio la tio n wa s willful o r a c c ide nta l; (2) the pa rty's histo ry o f re fusing to c o mply with pre vio us c o urt o rde rs; (3) the pre judic e to the o ppo sing pa rty; (4) whe the r the re e xists a histo ry o f de lib e ra te de la y; (5) the de g re e o f c o mplia nc e with o the r pa rts o f the c o urt's o rde rs; (6) a tte mpts to c ure the de fe c t; a nd (7) whe the r a le sse r sa nc tio n wo uld b e tte r se rve the inte re sts o f justic e .
MT TPROCE DURE – DI SMI SSAL OF CASE S
r e e Ass’n L L C v He nr ie tta T wp, unpub lishe d o pinio n pe r c uria m o f the
Co urt o f Appe a ls, issue d July 20, 2017 (Do c ke t No . 333180)
it b e c a use the e -ma il wa s a uto ma tic a lly sto re d in a fo lde r la b e le d “c lutte r.” Whe n the a tto rne y did no t a ppe a r a t the he a ring , the T rib una l’ s dismisse d the c a se .
he Co urt o f Appe a ls re ve rse d the dismissa l, ho lding tha t, prio r to dismissing the c a se , the T rib una l sho uld c o nside r the Vic e nc io fa c to rs. T he Co urt c o nc lude d tha t the fa ilure to a ppe a r wa s a c c ide nta l a nd tha t a le sse r sa nc tio n (suc h a s the impo sitio n o f c o sts) wo uld suffic ie ntly se rve the inte re sts o f justic e , b ut le ft it up to the T rib una l to de te rmine the a ppro pria te sa nc tio n o n re ma nd.
Regional Update…..Tax Advice for Companies Doing Business in Pennsylvania
Ohio Tax Conference Tuesday, January 23, 2018
–
57
Recent Developments - H.B. 542
Finance and Revenue
– Petitions for reassessment are due 60 days after the date on the notice. – Petitions for review of tax adjustments are due 60 days after the date on the notice. – Petitions for review to the Board of Finance and Revenue are due 60 days after Board of Appeals decision mailing date. – Effective December 29, 2017
58
Recent Developments - H.B. 542
– Technical Support Services
subjected certain support services to sales/use tax
support services to canned software are not subject to tax if separately stated
59
Recent Developments - H.B. 542
– Legislation added an exemption for beer kegs as a packaging material – Consumer fireworks are legal in the Commonwealth and subject to a 12% consumer fireworks tax, in addition to the state and local sales tax
60
Recent Developments - H.B. 542
– Remote Seller, Marketplace Facilitator, Referrer Reporting Requirements Enacted
prior calendar year are required to: – Collect and remit sales tax, or – Comply with notice and reporting requirements
61
Recent Developments - H.B. 542
– A remote seller is a person who does not maintain a place of business in PA, but who makes retail sales of tangible personal property subject to sales/use tax – Remote seller must make election by March 1, 2018 (June 1 in subsequent years) – If an election is not made, it is presumed that the seller is complying with the notice and reporting requirements
62
Recent Developments – H.B. 542
– Post notice on forum (website) that sales/use tax may be due on purchases – PA may require the consumer to file a use tax return – State that notice is required by PA statute – Provide written notice, on invoice or order forms, to purchaser at time of sale that sales tax is not being collected – Inform purchaser that it may be required to remit use tax directly to PA – Provide instructions so purchaser can obtain information
63
Recent Changes - H.B. 542
– By January 31st of each year provide a written report to each purchaser including the following information:
may owe use tax
product
to PA DOR including purchaser’s name and total purchases
64
Recent Developments - H.B. 542
– By January 31st of each year provide a written report to PA DOR including the following information:
65
Recent Developments - H.B. 542
– Remote sellers who do not comply with the law are subject to a penalty of the lesser of $20,000 or 20% of total sales in Pennsylvania
66
Recent Developments - H.B. 542
– $5 million cap removed – For taxable years after December 31, 2017, 35% of taxable income – For taxable years after December 31, 2018, 40% of taxable income
67
Recent Developments - H.B. 542
– Contributions to an ABLE account are now deductible
from PIT
– Certain charitable checkoff funds are made permanent (Wild Resource Conservation Fund, Organ and Tissue Donation Awareness Fund, etc.)
68
Recent Developments - H.B. 542
– Entities making rent and royalty payments on PA property to a nonresident of over $5,000 must withhold PIT on payments – Businesses that use out-of-state independent contactors in PA for work over $5,000 must withhold PIT – Electronic filing of 1099-MISC forms for all employees and classes required of PA businesses
69
Sales & Use Tax Bulletin 2017-01
Requests
– Large refund requests will be referred for field audit by the Department – Audit will cover at least the same periods in the refund petition – Referral to field audit at discretion of PA DOR – Refunds of $100,000 or more at risk
70
Sales, Use, Hotel Occupancy Tax Desk Review Program
Pass Through Business Office (PTBO) a Sales, Use and Hotel Occupancy Tax Desk Review Unit.
non-registrants and under reporters.
questionnaire which needs to be completed and returned within 30 days. They are also provided with information regarding registration and filing returns.
71
Sales, Use, Hotel Occupancy Tax Desk Review Program
information from various sources including the IRS, other state agencies and third party commercial data.
and net taxable sales as reported on the PA-3 with an estimate of gross sales and net taxable sales as calculated by the Department based upon third party data.
sales compared to total credit card sales as reported on federal form 1099-K based on an industry average
72
SUT-17-002 Information Retrieval
ruling stating that certain information retrieval products are subject to tax.
– Taxpayer sold subscriptions to internet based research services i.e. CCH, Lexus Nexus, etc. – PA DOR determined that information retrieval products were taxable since they included: a license to electronically access and use canned computer software; and the right to access tangible personal property – The enforcement date of this letter ruling is August 3, 2017
73
Sales, Use, Hotel Occupancy Tax Desk Review Program
returns and to respond to the Department within 30 days.
asking the taxpayer to respond within an additional 10 days, failure to respond to the second notice results in an estimated assessment.
the Department’s analysis they must explain why.
accounts receivable journal, cash receipts journal, or sales journal, a general ledger, income statement for the year under review and chart of accounts in order to substantiate sales.
74
Pennsylvania Tax Update
– Pennsylvania Supreme Court issued decision Nextel v. Commonwealth
taxable income or $3 million (for 2007 tax year).
could reduce their taxable income to $0 through the NOL deduction and; those with taxable income in excess of the cap that could not reduce their taxable income to $0.
cap was retained.
75
Pennsylvania Tax Update
– Beginning with amended reports filed after December 31, 2016, taxpayers will have three years from the due date of the original corporate tax report to file an amended report. The Department will have one year from the date the amended report is filed to notify the taxpayer if the changes are accepted. If the taxpayer is not notified within one year, the report is deemed accepted.
76
Pennsylvania Tax Update
– No significant changes in personal income tax law, but the following may be of interest:
agree with Medicare wages, the Department may request a reconciliation of the difference.
PA-40 does not equal 3.07% of taxable wages.
expenses, if Departments determines that the deduction is significant in comparison to the taxpayer’s gross compensation.
77
Pennsylvania Tax Update
– Follow-up inquiries or denial of expenses reported on Schedule C for:
78
79
Contact Information
Timothy D. Adams Shareholder Schneider Downs & Co., Inc. tadams@schneiderdowns.com (614) 586-7023 (412) 697-5250 Emery (Jack) Stewart Senior Manager Schneider Downs & Co., Inc. estewart@schneiderdowns.com (412) 697-5443
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