Florida: Auto Repair Provided Under Car Manufacturer's Warranty Not Taxable

 

Dep't of Revenue v. General Motors LLC, Fla. Dist. Ct. App. (12/5/12).

 

A Florida Court of Appeal recently held that an auto manufacturer was not subject to state sales/use tax on vehicle parts/repairs made pursuant to its customer warranty because the right to participate in the warranty progam and to receive repairs was part of the consideration that its customers received in exchange for the purchase price of the vehicles.

 

The Court affirmed that the trial court did not err in concluding that the tax due for such repairs was paid as part of the original sales transaction, and that to impose a second round of tax on the transaction would amount to double taxation or “pyramiding of tax” prohibited under Florida law.

The Florida Department of Revenue unsuccessfully argued that the discretionary nature of repairs provided under the Case-By-Case program by dealers distinguished it as taxable relative to the nontaxable repairs provided under the manufacturer’s base warranty program. The Court explained that the substantial repair costs associated with the warranty program furthered the position that such repairs were factored into the original vehicle sales price.

California Mandatory Single Sales Factor Apportionment for Most

California votes cast their ballots in favor or mandatory single sales factor apportioment for most multistate taxpayers. Propostion 39 requires most mulistate taxpayers to use a sales factor-only apportionment formula, combined with market-based sales sourcing for sales other than sales of tangible personal property. The new law is effective for tax years beginning on or after January 1, 2013. California's rules regarding market-based sorucing of sales of other than tangible personal property had previously been applicable only to taxpayers electing to apportion on a sales factor-only basis. The recent change in California's laws to single sales factor apportionment combined with market based sales sourcing for sales other than sales of tangible personal property may have an significant impact on the amount of tax that your company or your client's pay to the State of California.

Oregon Issues Guidance on Protective Claims for Refund

Oregon’s apportionment statutes appear to allow taxpayers to elect to use either Oregon’s single-sales factor for apportioning business income or the Multistate Tax Compact’s equally-weighted three-factor formula. However, the Oregon Department of Revenue (the “Department”) believes that legislation adopted in 1993 prevents taxpayers from making this election. The issue of whether a taxpayer may make the election is the subject of ongoing litigation in the Oregon Tax Court. Pending the resolution of this litigation, the Department has published guidance explaining how taxpayers may submit protective claims to secure the right to a tax refund until the outcome of the Tax Court case is known.

New Jersey: Division Announces "Intangible Asset Nexus" Voluntary Disclosure Initiative"

N.J. Div. of Tax. (9/18/12). “Recognizing that there are companies that have nexus with New Jersey as a result of having derived income from the use of intangible assets in this State that have not fulfilled their tax filing responsibilities,” the department has announced that it will be offering a limited voluntary disclosure initiative that began on September 15, 2012, and will run through January 15, 2013. Under this program, companies that own intangible assets and derived income from the use of those assets in New Jersey will have the opportunity to come forward and voluntarily comply with their state corporation business tax filing requirements.

Got Nexus?

For tax purposes, nexus is defined as: the minimum connection or link necessary, which allows a state to tax you or force you to collect taxes on its behalf. This minimum link can vary from state to state as well as from tax to tax. Some nexus creating activities are obvious, others less so. Nexus is determined differently for income taxes and for sales tax purposes. For Income Tax Purposes In general, nexus is created for income tax purposes if an entity derives income from sources within the state, owns or leases property in the state, employs personnel in the state in activities that exceed "mere solicitation," or has capital or property in the state. The requirements vary from state to state. For Sales Tax Purposes Nexus is determined for sales tax purposes more loosely. Here are Here are some cases in which a business might have a sales tax nexus in a state: •If the business has a physical location in the state •If there are resident employees working in the state •If the business has property in the state •If there are employees who regularly solicit business in the state. The issues relating to whether a business has a nexus in a state and is thus subject to the state's taxing authority is complex and each state views the concept of nexus differently. A nexus for state sales tax purposes has in the past required a physical presence of the taxing business in that state; most recently nexus has also been invoked in relation to affiliates. It is imperative that a company know its nexus footprint. How Can I Determine if I Have Nexus? The best way to determine if you have nexus is by making a list of all your activities in each state and then reviewing the states guidance for whether or not you have nexus on a tax by tax basis. If this task appears daunting, you may consider organizing your list into manageable groups, such as the top five revenue-producing states, and so on. If you prefer you can outsource the process to State and Local Tax Expert who can help you determine where your company has income or sales tax nexus. We have three programs to help you determine your nexus footprint: nexus consultation, nexus review, and a nexus study.

Reminder Kentucky's & Rhode Island Tax Amnesty Programs

Just a reminder Kentucky and Rhode Island are offering tax amnesty programs. Kentucky Kentucky will be held between October 1 and November 30, 2012. The amnesty program will allow people or businesses owing back taxes to pay without fees or penalties. Also, the threat of prosecution will be waived, and only half the interest owed will be due. The program applies to taxes owed to the Kentucky Department of Revenue for eligible tax periods ending after December 1, 2001, and prior to October 1, 2011. Delinquent taxpayers will be receiving mailed notifications stating the known amount of back taxes and will have until November 30 to apply for amnesty and pay their overdue taxes. If taxpayers fail to take advantage of the amnesty program, penalties and interest will increase. An additional 2% interest will be charged on unpaid taxes that are eligible for amnesty. Taxpayers taking advantage of amnesty must remain current for the next three years. Rhode Island Rhode Island’s Tax Amnesty program runs from September 2, 2012 through November 15, 2012 and applies to taxes due for taxable periods ending on or before December 31, 2011. The amnesty includes 2011 Rhode Island personal income tax returns, which were due April 17, 2012. Rhode Island's Tax Amnesty program includes, but is not limited to, the following types of taxes: Corporate income tax, Estate tax, Fiduciary income tax, Personal income tax, Sales tax, Use tax, Cigarette and tobacco products taxes and Employer taxes - unemployment, temporary disability insurance The Tax Amnesty program which will allow certain taxpayers to pay the full amount of overdue taxes plus seventy-five percent of any interest due, without having to pay the remaining interest and any penalty amounts due and without being subject to any other civil or criminal penalties.

New York - Great news! - Shipping Materials Exempt From Tax

On August 16, 2012, New York court overturned Tax Tribunal decision and ruled in the favor of United Parcel Service, Inc. (“UPS”). UPS provided shipping supplies (i.e. envelopes, boxes, stickers and pouches) to its customers free of charge. The supplies which contained the Company’s logo were designed for customers using the Company’s air delivery services and are intended to promote the company’s brand, as well as its share of the air delivery market. The Court ruled the shipping materials that UPS provided to its customers were exempt from tax as promotional materials. For more information on how UPS, Inc. v. Tax Appeals Tribunal of the State of New York (Aug. 16, 2012), impacts your company's operations in the state of New York, please contact Karen Lake at 305.960-1202.

Florida Increases Corporate Income Tax Exemption

Florida increased exemption on corporate income tax, as well as the exemption on Florida’s bank/savings associations franchise tax, from $25,000 to $50,000 of net income. The exemptions are effective Jan. 1, 2013.


The enacted legislation also contains a number of sales/use tax provisions designed to encourage economic development, such as lowering to 5% the productive output increase required to exempt the purchase of machinery and equipment, and declaring an upcoming sales tax holiday period.