Tax Headlines

1827

Nebraska ~ Sales and Use Tax: Purchases by Contractor Not Entitled to Manufacturing Exemption

A manufacturer’s request for a refund of Nebraska sales tax on machinery and equipment used in the construction of an ethanol production plant was properly denied because the manufacturing machinery and equipment was purchased not by the manufacturer, but by its option 3 contractor. The exemption for such machinery and equipment is only available when the purchases are made by a person engaged in manufacturing for use in manufacturing.

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Montana ~ Personal Income Tax: State Supreme Court Upholds Lower Court’s Finding That Tax Rebate Referendum Was Unconstitutional

The Montana Supreme Court issued an order affirming the lower district court’s finding that a proposed personal income tax rebate initiative referendum for the November 2012 ballot (LR-123) was an unconstitutional delegation of the Montana’s Legislature’s power to the legislative fiscal analyst. If approved by the voters, the referendum would have provided a credit against Montana personal income tax to individual income and property taxpayers if the state general fund budget surplus reached specified thresholds.

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Michigan ~ Personal Income Tax: Prepayment Requirement Did Not Violate Due Process

The appellate court has concluded that a Michigan personal income taxpayer’s due process rights were not violated by the statute that required prepayment of the uncontested portion of the tax assessment. The applicable statute governing the appeals of tax assessments required that the uncontested portion of the assessment be paid as a prerequisite to the appeal.

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Arizona ~ Utilities Tax: Imposition of 911 Tax on Wireless Provider Affirmed

A provider of prepaid wireless services was required to pay the Arizona 911 telecommunication services excise tax that finances emergency telecommunication services. The provider asserted, among other things, that it was a “wireless” provider, which was not specified in the statute. In addition, the provider asserted that it did not bill its customers on a monthly basis and, therefore, its wireless services fell outside the scope of §42-5252(A).

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IRS’s Position that Wages from Employment at Foreign Embassies Were Taxable Was Substantially Justified; Costs Denied (Da Silva, TCM)

Foreign citizens were not entitled to litigation and administrative costs under Code Sec. 7430 , despite the IRS conceding that their wages from employment at foreign embassies in the U.S. were exempt from taxation, because the IRS’s initial position that their wages were not exempt under Code Sec. 893(b) was substantially justified within the meaning of Code Sec. 7430(c)(4)(B) . One of the conditions for the Code Sec. 893 exclusion of wages from taxable compensation is that the country from which such wage earners are citizens must also provide that exempt treatment for employees of the United States performing similar services in that country.

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S Corporation Liable for Employment Taxes; Workers Were Employees, Not Contractors; Penalties Imposed (Atlantic Coast Masonry, Inc., TCM)

Masons and laborers who performed services for an S corporation were employees, rather than independent contractors, and the S corporation was liable for employment taxes and penalties. The S corporation acted as a subcontractor providing masonry services using the services of numerous workers. Following the reclassification of the workers, the IRS determined deficiencies and imposed additions to tax for failure to timely file returns and failure to timely pay taxes, and penalties for failure to deposit employment taxes.

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Vermont ~ Sales and Use Tax: Dismissal of Appeal for Failure to Post Security Upheld

The Vermont Supreme Court upheld a superior court’s dismissal of an appeal of a sales and use tax assessment on golf tournament entry fees because the taxpayer failed to post security for the appeal. The taxpayer’s offer of a security interest in its assets was insufficient to satisfy the requirement to post security. Security could be posted by paying the deficiency; depositing the amount of the deficiency with the Commissioner of Taxes; or filing a bond in the amount of the portion of the deficiency in respect of which review was sought, and all costs and charges. The supreme court found that a 1998 amendment to the appeals statute was made for the purpose of clarifying existing law, which constituted a “pay to play” statute. In addition, the court found that the appeal could not go forward based on the taxpayer’s post-audit remittance of taxes under protest.

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Nevada ~ Property Tax: Named Taxpayers Required for Jurisdiction

A Nevada property tax equalization appeal between a local county board of equalization and a local county assessor was dismissed for a lack of jurisdiction because the potentially impacted taxpayers were not named as parties to the proceedings. Moreover, since the taxpayers were not properly named within the statutory time limit, the jurisdiction defect could not be cured.

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California ~ Corporate Income Tax: Unitary Partner’s Gain From Sale of Partnership Interest Ineligible for Intercompany Transaction Deferment

In response to a question submitted by a related group of corporations, limited liability companies (LLCs), and partnerships that were undergoing a series of restructurings for non-California corporation franchise and income tax purposes, the Franchise Tax Board (FTB) has issued a chief counsel ruling in which it has taken the position that the gain from the sale of a partnership interest to a corporation by an LLC that is owned by another partnership would not qualify for the combined reporting intercompany transaction deferment, even though all of the entities were unitary and would be included in the combined reporting group if all the entities were corporations.

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