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July 2019 SALT Shaker

In this edition of the SALT SHAKER, we cover important State and Local Tax updates from Arizona, Connecticut, Illinois, Iowa,  Minnesota,  New Jersey, Oregon, Vermont and Virginia for July 2019.

Final Regulations Are Out, Blocking State Itemized Deduction Workarounds
Under the final regulations, a taxpayer making payments to an entity eligible to receive tax-deductible contributions must reduce the federal charitable contribution deduction by the amount of any state or local tax credit that the taxpayer receives or expects to receive in return. Taking effect on August 12, 2019, the final regulations will apply to contributions made after August 27, 2018. An exception is provided for credits of no more than 15% of the payment amount or 15% of the fair market value of the property transferred.

Arizona

Remote Sellers and Marketplace Facilitators
Remote sellers are required to pay privilege tax on sales of tangible personal property if they surpass a certain threshold. The gross income threshold is set at $200,000 for 2019, $150,000 for 2020 and $100,000 for 2021 and on. Marketplace facilitators are to use $100,000 threshold for sales to determine filing requirements.

Connecticut

Corporate and Pass-through entities
Beginning January 1, 2020 the bi-annual business entity tax will be eliminated. The pass-through entity tax credit will be reduced to 87.5% from 93.01%. The filing fee for pass-through entities will go up to $80 from $20 beginning July 1, 2020.

Sales and Use Tax
The threshold for economic nexus has been reduced to $100,000 in gross receipts and 200 transactions, down from the $250,000 threshold. This will be in effect July 1, 2019.

Illinois

Marketplace Facilitator – Sales Tax Requirements
Beginning January 1, 2020, marketplace facilitators are now required to collect and remit sales tax if sales total $100,000 or more or have more than 200 sales in the state.

Graduated Income Tax Rate System
Effective January 1, 2021 a plan to implement a graduated income tax rate system is in place. Individuals, trusts and estates will now follow a tiered tax rate structure

Proposed Tax on Video Streaming and its Potential Effects.
Illinois has proposed two new state-wide taxes, the “Video Service Tax Modernization Act” and the “Entertainment Tax Fairness Act”. Both targeted at web streaming subscription services such as Netflix, Hulu, etc… Withum has a full writeup with details here (require link to article)

Amnesty
Illinois will be offering a Tax Amnesty program from October 1 through November 15, 2019 for all tax types. Periods covered under the program includes periods ending after June 30, 2011 through prior to July 1, 2018. The Department will abate all interest and penalties related to the delinquent periods.

Iowa

Updated Sales Tax Requirements
Effective July 1, 2019, sellers in Iowa are required to collect and remit sales tax if it has $100,00 in sales for the past or current year. The 200 transaction threshold has been repealed.

Minnesota

IRC Conformity
Effective May 31, 2019, federal changes are effective retroactively for corporate franchise and individuals income tax from December 16, 2016 through December 31, 2018.

State Starting Point Change
For tax years beginning after 2018 the starting point for the state return has been changed to Federal Adjusted Gross Income (FAGI) from Federal Taxable Income (FTI).

Marketplace Facilitator – Sales Tax Requirements
Beginning September 30, 2019, marketplace facilitators are now required to collect and remit sales tax if sales total $100,000 or more or have more than 200 sales in the state. This has been reduced from $250,000 per year.

New Jersey

Combined Reporting Methods
For tax years on and after July 31, 2019, combined reporting becomes mandatory in New Jersey. The taxpayer must use the water’s edge group method unless electing to use a world-wide group return or an affiliated group return.

Penalties Waiver
If the penalty for underpayment is less than $1,000 for an individual or corporate franchise tax in the tax year 2017 and 2018 the taxpayer can apply for a special waiver it was due to tax planning uncertainty due to the federal changes.

Oregon

New CAT Tax
Effective for tax years January 1, 2020 and on, a new commercial activity tax (CAT) has been enacted in Oregon. This new tax applies to various taxpayers including corporations, individuals, partnerships, limited liability companies, federally disregarded entities, and ‘any other entities.’ Unitary groups register, file, and pay the tax as a single taxpayer. Once “Substantial Nexus” has been established then the taxpayer is required to file. More guidance is to come in the future.

Vermont

Updated Corporate Tax Change
IRC Conformity Date – Applicable for tax years beginning January 1, 2018 and on, Vermont has adopted the federal income tax laws. This is effective January 1, 2019
Sourcing Rules – Vermont has updated its sourcing rule to market based sourcing for intangibles

Marketplace Facilitator – Sales Tax Requirements
Beginning June 1, 2019, marketplace facilitators are now required to collect and remit sales tax if sales total $100,000 or more or have more than 200 sales in the state.

Virginia

Updated Sales Tax Requirements
Beginning July 1, 2019, marketplace facilitators are now required to collect and remit sales tax if sales total $100,000 or more or have more than 200 sales in the state.

Authors: Jason Rosenberg, CPA, CGMA, EA, MST  |   jrosenberg@withum.com  and Zhoudi Tang, CPA  |   ztang@withum.com

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