February 2017 SALT Shaker

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In this edition of the SALT SHAKER, we cover important State and Local Tax updates from New Jersey, New York, Tennessee and across the nation for February 2017.

NEW JERSEY

NEW JERSEY REFUNDS

side-img-refundsThe New Jersey Division of Taxation has stated 2016 refunds will be issued beginning on March 1, 2017. The Division is using additional tools to prevent fraud and identity theft for New Jersey taxpayers. Therefore, for returns filed electronically, it may take at least four weeks for the refund to be processed. For paper filed returns, it may take up to twelve weeks to be processed.

NEW YORK

NEW YORK DRIVER’S LICENSE REQUIREMENT

The New York State Department of Taxation and Finance has announced that starting with the 2016 tax filing year, taxpayers must submit a driver’s license number or state-issued ID number with all e-filed returns. This requirement is for New York State residents and nonresidents as well as those with out of state IDs.

NYS DMV Sample Document Photo

The required information includes:

  • License/ID number
  • Issuing State
  • Issue Date
  • Expiration Date

For taxpayers without an ID, there is an option to select that no ID is available. However, this may delay the refund processing if this box is selected even though an ID number is on file with the state.

PENNSYLVANIA

PHILADELPHIA SUPREME COURT DECISION ON FICTITIOUS ASSESSMENTS

side-img-balancelawThe Philadelphia Supreme Court held that the City of Philadelphia was entitled to issue a fictitious assessment to a taxpayer and also be able to collect. In the case City of Philadelphia v. Lerner, No. 26 EAP 2015 (Pa. Nov. 22, 2016), the City imposed a rather large assessment to the taxpayer in order to alert the taxpayer into complying with tax information requests.

The taxpayer did not appeal the assessment. Consequently, the City initiated a collection action, to which the taxpayer did not respond. The City also filed a motion in trial court disallowing the taxpayer from challenging the tax assessment since the taxpayer had failed to respond to any of the information requests.
The trial court held that the taxpayer had failed to exhaust their administrative remedies, referencing Krug v. City of Philadelphia, 152 Pa. Cmwlth. 475, 620 A.2d 46 (1993). Due to the taxpayer expending his administrative rights before proceeding to tax court, the City of Philadelphia was granted the right to collect on these fictitious tax assessments. This was later affirmed by the Philadelphia Supreme Court on appeal.

PHILADELPHIA SODA TAX ENACTED AND UPHELD

side-img-sodaJudge Gary S. Glazer of Philadelphia dismissed a lawsuit filed by the American Beverage Association and other businesses against the City of Philadelphia. The plaintiffs argued against the legality of the Sweetened Beverage Tax (“SBT”), and that there was already a 6% sales tax on these products. Judge Glazer determined that the SBT is different from Pennsylvania’s sales and use tax. He also stated that the tax does not violate the State’s Constitutions Uniformity Clause, which requires all classes of goods to be taxed at the same rate.

The new soda tax of 1.5 cents per ounce was enacted on January, 2017. However, this tax is not solely on soda, but also on zero-calories beverages, energy drinks, sports drinks, most tea and coffee drinks and most juice. This tax applies only to products purchased from distributors after January 1.

Exempt beverages from this tax include and are limited to:

  • Baby formula
  • Products that contain more than 50 percent milk, fresh fruit, or vegetables
  • Unsweetened drinks to which buyer adds sugar

TENNESSEE

TENNESSEE GROSS RECEIPTS TAX

The Tennessee legislature has passed the Revenue Modernization Act (RMA), which has adopted economic nexus for the gross receipts tax called the “business tax.” Previously, it was unclear whether entities were obligated to pay the business tax, if they had only sales, but no property in the state. This new legislation makes it clear that selling goods or services in Tennessee will create nexus and subject many businesses to the business tax, with a threshold of $500,000 in sales or more resulting in a filing obligation. The Tennessee Department of Revenue has announced it will be strictly enforcing the collection of this tax.

MARYLAND

MARYLAND FANTASY SPORTS REGULATION

football_fieldMaryland has issued new regulations with regard to daily online fantasy sports competitions. Game operators are now required to alert players of potential tax obligations. These regulations apply to all fantasy sports operators.

A fantasy sports competition is defined as one that involves:

  • An awarded prize.
  • An entry fee for the participant.
  • Compensation for fantasy sports operators hosting the competition regardless of the outcome.

This does not apply to season-long fantasy leagues hosted by outlets such as Yahoo and ESPN.

FLORIDA

FLORIDA PLANS TO BAN LOCAL UBER TAXES

Two new bills were introduced by the Florida House (S.B. 340 and H.B. 221) in order to regulate ride-sharing companies, such as Uber Technologies Inc. and Lyft Inc. This legislation would block cities, counties, airport authorities, and other entities from assessing taxes on these companies. Another component of this legislation would establish the drivers to be independent contractors, and not employees.

Ask Our Experts

To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

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