New York State Department of Taxation and Finance
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NYS Tax Department Relaxes Investment Income Identification Rules

The New York State Department of Taxation and Finance has announced that it would extend the time for certain taxpayers to identify stocks as being held for investment so that income from those stocks would be tax-exempt [TSB M-15(4.1)C, (5.1)I]. Instead of having to make the identification on the date on which the stock is purchased, many corporations will now have a 90-day grace period to make the identification. This relaxation of the identification rules will come as a major relief to many companies that otherwise may have been ambushed by New York’s new rules, particularly out-of-state corporations that start doing business in New York after acquiring investment securities. The announced change is effective immediately. Under corporate tax reform legislation enacted in 2015, corporations—to treat income from stock held as an investment as tax-exempt investment income—must identify the stock on the date of purchase as being held for investment and follow...

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NYS Tax Department Revised Sales Tax Publication Answers Some Questions but Not Others

The New York State Department of Taxation and Finance (Department) has just revised its Guide to Sales Tax in New York State, Publication 750. The Guide will be particularly useful for companies that are just starting to do business in New York State. It provides a well-organized and easy-to-read outline of the steps that should be taken to register as a vendor selling products that are subject to the sales tax and to collecting and remitting taxes. Small businesses and their advisors will find the Guide particularly useful. The Guide confirms the State’s required adherence to the United States Supreme Court decision in Quill Corp. v. North Dakota (a case in which the taxpayer was represented by McDermott Will & Emery) to the effect that an out-of-state company must have a physical presence in New York to be required to collect use tax on sales to New York customers. It confirms that a company need not collect use tax on sales to New York buyers if its...

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New York State Tax Department Releases Guidance on Tax Reform Legislation

The New York State Department of Taxation and Finance (the Department) has been issuing guidance explaining the 2014 corporate tax reform legislation (generally effective on January 1, 2015) through a series of questions and answers (known as FAQs), recognizing that providing guidance through regulations is cumbersome and takes a long time.  On April 1, the Department issued a new set of FAQs explaining some aspects of the legislation.  Some of the highlights are discussed below. Under the new law, related corporations may, and may be compelled to, file combined returns if they are engaged in a unitary business.  The old requirement that separate filing distort the incomes of the companies, which led to much controversy, has been repealed.  An issue that has been highlighted by the legislation is whether a newly acquired subsidiary can be considered to be instantly unitary with the parent so that the corporations can file combined returns beginning on the...

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NYS Tax Department Reverses Position on Statutory Residence Rule

The New York State Department of Taxation and Finance (the Department) has backed off from an aggressive position that it has been taking in cases involving New York residence issues. Under New York law, a person who is not domiciled in the state can be treated as a resident for income tax purposes (and, hence, taxed on all of his or her worldwide income) for a taxable year if the person maintains a “permanent place of abode” in the state and is in the state for more than 183 days during the year.  This is known as the statutory residence rule.  New York City has an identical rule for purposes of taxing individuals as city residents. The Department has historically taken the position that a house or apartment is a “permanent place of abode” if it is capable of being lived in as a regular residence even though the taxpayer does not so use it.  This has presented a significant problem for people who live in the Connecticut and New Jersey suburbs of New York...

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In Case We Didn’t Know the Difference Between “Big” and “Little” Cigars, the New York State Tax Department Tells Us What it is

The New York State Department of Taxation and Finance has addressed one of the major issues in tax administration:  defining the difference between “big” and “little” cigars.  Tax Bulletin TP-530 (August 28, 2014).  First, the Department has defined “cigar.”  A cigar is any roll of tobacco wrapped in leaf tobacco or in any substance containing tobacco.  A “little” cigar is a cigar that has all of the following characteristics:  (1) it is a “roll” for smoking made with any amount of tobacco, (2) the cigar wrapper contains some amount or form of tobacco that is not “natural leaf tobacco,” and (3) the product must either weigh four pounds or less per 1,000 cigars or have a filter made of cellulose acetate (i.e., a cigarette-type filter) or any other integrated filter.  A “natural leaf tobacco wrapper” that can prevent a cigar from being classified as being “little” is any wrapper made from one or more natural tobacco leaves.  An example of a substance commonly...

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New York State Department of Taxation and Finance Releases Guidance on the Taxability of Computer Software

The New York State Department of Taxation and Finance has just released a Tax Bulletin addressing how the state’s sales tax applies to sales of computer software and related services. The Tax Bulletin does not broach new ground, but it does offer a formal expression of the Department’s position—previously articulated in advisory opinions—that the provision of remote access to prewritten software is subject to sales tax. However, that position does not comport with New York authorities, including a recent administrative law judge determination that is directly on point. Read the full article.

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New York Releases Corporate Tax Reform FAQs

Earlier this year, New York enacted sweeping corporate tax reform, generally effective for tax years beginning on or after January 1, 2015, including a new economic nexus standard, changes to New York’s combined reporting regime, changes to the tax base and traditional New York income classifications, changes to the receipts factor computation, and changes to the net operating loss calculation and certain tax credits and incentives.  (For a more detailed discussion of these changes, see our Special Report. While this corporate reform is quite comprehensive, a number of open issues remain so taxpayers and practitioners have been eagerly awaiting additional guidance from the Department of Taxation and Finance.  As a first step in providing that much-needed guidance, the Department has released its first set of responses to frequently asked questions on a new “Corporate Tax Reform FAQs” section of its website.  Most notably, the responses clarify that the...

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