Local Tax
Subscribe to Local Tax's Posts

New York Issues Much-Anticipated Guidance on Taxation of Telecommuting Employees

Since the outset of the COVID-19 pandemic and work-from-home mandates, New York employers and their nonresident employees have been waiting for the Department of Taxation and Finance to address the million-dollar question: Do wages earned by a nonresident who typically works in a New York office but is now telecommuting from another state due to the pandemic constitute New York source income? New York has historical guidance concerning the application of its "convenience of the employee/necessity of the employer" test, the test used to determine whether a telecommuting nonresident's wages are sourced to New York, but until recently the Department had been silent as to whether or how such rule applied under the unprecedented circumstances of the COVID-19 pandemic. As many expected, in a recent update to the residency FAQs, the Department clearly stated its position that a nonresident whose primary office is in New York State is considered to be working in New...

Continue Reading

Washington Surtax on “Big Banks” Struck Down as Unconstitutional

On May 8, Washington’s 1.2% surtax on “specified financial institutions” (banks with at least $1 billion a year in net revenue) was struck down by a King County Superior Court judge. Judge Marshall Ferguson ruled that the tax, which is imposed on top of all other taxes, violates the Commerce Clause of the US Constitution by discriminating against out-of-state banks in both purpose and effect. In their briefs, attorneys for the Washington Bankers Association and American Bankers Association explained that an out-of-state bank would pay a much higher tax rate (and be at a competitive disadvantage) compared to an in-state bank because its global revenue is sufficient to trigger owing the surtax. The associations presented evidence that every bank meeting the definition of “specified financial institution” was an out-of-state bank, and that no in-state bank met the definition. Further, they pointed to statements by legislators appearing to show an intent to...

Continue Reading

Taxes, Like Temperatures, Going Up: California COVID-19 Budget “Revenue Solutions”

Yesterday Governor Gavin Newsom turned to a familiar gambit from California’s playbook to help tackle the budgetary hole wrought by COVID-19. In January, the Governor proposed his budget for the 2020-2021 fiscal year, which projected a $5.6 billion surplus. Indeed, revenues through March are reported as having run $1.35 billion above projections. But, as the Governor says in his May Revision to his January Budget, “[t]he COVID-19 pandemic and the resulting recession has changed the fiscal landscape significantly.” Without the various changes proposed by the May Revision, which includes the “revenue solutions” described below, the Governor’s Budget projects a $54 billion deficit. The May Revision proposes two significant changes to business taxation. The Governor proposes suspending net operating losses for 2020, 2021, and 2022 for medium and large businesses. The Governor also proposes limiting business incentive tax credits from offsetting more than $5...

Continue Reading

Last Minute Relief for Filers of Business Property Statements

Once again, San Francisco has shown leadership in addressing property tax relief during the COVID-19 pandemic. On Monday, May 4, 2020, the San Francisco County Assessor announced that she was moving the deadline for businesses to file their Business Property Statements (Form 571-L) to June 1 of this year, due to physical office closure of the San Francisco Office of Assessor-Recorder. Normally, under state law, a 10 percent penalty automatically attaches when a taxpayer’s business property statement is filed after May 7. But, if May 7 falls on a Saturday, Sunday or legal holiday, then a property statement that is mailed and postmarked on the next business day is deemed to have been timely filed. Under the applicable statue, legal holidays include days when the county’s offices are closed for the entire day. As a practical matter, most, if not all, county assessor offices across the state are closed. Yet, most assessors have been reluctant to go on the record...

Continue Reading

Tax Commissioners: Please Drop Unnecessary or Dangerous Tax Administration Requirements

This week we wrote a letter to state tax administrators, sharing five key suggestions for relieving undue tax administration burdens in the wake of this difficult COVID-19 situation. As explained, “at a time when many people are working from home and should not or cannot go to post offices or banks, a business-as-usual attitude for tax administration would be inexcusable.” The five suggestions: Postpone deadlines for tax filing and payment. The federal government and many states have already taken this needed step. When many Americans, including business tax professionals and tax administrators and their staffs, are fearing for their own health and unable, prohibited or unadvised to leave their own house, this is not the time for pulling records and preparing tax filings. Waive requirements to file hard copy, notarized, and/or wet-signature documents. Waive requirements to mail documents by certified mail. Allow automated-clearing-house (ACH) electronic...

Continue Reading

Cities Providing Local Tax Relief Efforts for Small Businesses Impacted by COVID-19

From coast to coast, both state and local tax authorities are rapidly responding to the Coronavirus (COVID-19). And while many of the relief efforts are appropriately aimed at supporting individuals who have been impacted by COVID-19, recent pronouncements from local leaders demonstrate that cities are also eager to implement measures supporting small businesses within their communities. San Francisco – Tax and Fee Deferrals for Small Businesses At the local level in San Francisco, Mayor London Breed was quick to announce relief efforts intended to help small business owners who are experiencing a slowdown in business as a result of COVID-19. In addition to providing a moratorium on commercial evictions for small and medium-sized businesses located in San Francisco, the City has implemented the following business tax and fee deferral measures: Deferred Business Taxes for Small Businesses: “Quarterly estimated tax payments of the Gross Receipts Tax, Payroll...

Continue Reading

BREAKING NEWS: New York Considers 5% Gross Receipts Tax on Almost Every Corporation

On January 21, A. 9112 was introduced in the New York Assembly. An identical Senate companion bill, S. 6102, has been referred to the Senate Budget & Revenues Committee after being introduced in May 2019. The bills would impose an additional 5% tax on the gross income of “every corporation which derives income from the data individuals of this state share with such corporations.” The bills do not provide further detail or limitation on the scope of the proposed new imposition language. The bills would also establish a six-member Data Fund Board, to invest the tax revenue collected and distribute net earnings “to each taxpayer of the state” in a manner determined by the Board. If enacted without amendment, the bills would take effect 180 days after being signed into law. As written, the proposed New York tax would unconstitutionally apply to all income worldwide earned by a company deriving income from data from New Yorkers. A state tax on a multistate...

Continue Reading

Gross Receipts Taxes Face Policy and Legal Challenges

“Generally, the only places with gross receipts taxes today are U.S. states and developing countries.” –Professor Richard Pomp, University of Connecticut As the economy shifts to a digital one, we are finding that states are turning toward unconventional revenue options. One trend we’re seeing is the surprising comeback of the gross receipts tax (GRT): Oregon’s new Commercial Activity Tax (CAT) takes effect January 1, 2020. Oregon officials are currently writing rules to implement it. Portland, Oregon also adopted a 1% gross receipts tax, imposed only on big businesses, starting January 1, 2019. San Francisco voters imposed an additional gross receipts tax on businesses with receipts of more than $50 million beginning January 1, 2019. This is on top of the gross receipts tax that was phased in from 2014 to 2018 to replace the city’s payroll tax. Nevada’s Commerce Tax took effect July 1, 2015, imposing differing tax rates on 26 categories of business with over...

Continue Reading

An Uneven Playing Field: Judicial Deference to State Tax Administrator Interpretations

Judicial deference to state tax agencies puts taxpayers at a steep disadvantage and wastes time and resources on costly tax disputes. A united advocacy effort can help promote passage of state-level legislation that takes the tax administrator’s thumb off the scales of justice in administrative and judicial review of tax determinations. Access the full article. Learn more here about the Deference Coalition and how McDermott can help.

Continue Reading

QHTC You Later: DC Bids Farewell to Historic QHTC Certification Process

The District of Columbia (DC) Office of Tax & Revenue (OTR) implemented sweeping changes to the Qualified High Technology Company (QHTC) certification process this year. As you may remember, beginning last year, OTR implemented a new online QHTC self-certification process for companies to obtain exempt purchase certificates. This year, OTR is expanding the scope of this online self-certification requirement to all QHTC benefits—including exempt sales as a QHTC and other non-sales tax benefits available to a QHTC (summarized here). This change was accomplished through amendments to the QHTC certification regulation (DC Mun. Regs. tit. 9, § 1101) that were proposed by OTR in November 2018 and became final on January 4, 2019. The changes apply to all tax returns due on or after January 1, 2019. So What Changed? Historically, the relevant OTR regulation provided that to claim a credit or other benefit, a QHTC was required to attach a form prescribed by OTR...

Continue Reading

STAY CONNECTED

TOPICS

ARCHIVES