Tax Clearance Now Required for Louisiana State Sales Tax Resale Certificates and Approval of Certain State Procurement Contracts

The Louisiana Department of Revenue has now issued formal guidance regarding the new requirement that taxpayers receive a Louisiana state tax clearance in order to obtain: (i) a new or renew an existing Louisiana state sales tax resale certificates; and (ii) approval of certain Louisiana state procurement contracts.

Specifically, the Department has issued the following new Revenue Information Bulletins (RIBs):

Tax Clearance Required for State Sales Tax Resale Certificates  –  RIB 17-020:

Effective June 14, 2017, Act 211 (HB 307) of the 2017 Regular Session of the Louisiana Legislature enacted La. R.S. 47:1678 to require an applicant applying for issuance or renewal of a Louisiana state sales tax resale certificate to be current in filing all tax returns and reports and in payment of all taxes, interest, penalties, and fees owed to the state and collected by the Department.

As of October 1, 2017, the Department will not issue or renew a state resale certificate for any taxpayer unless the taxpayer has obtained a tax clearance, which is achieved when the taxpayer has:

  •  filed all tax returns and reports due, and
  • paid all taxes, interest, penalties, and fees owed to the state.

Excluded are items under formal appeal pursuant to applicable statutes or being paid in compliance with the terms of an installment agreement with the Department.

This tax clearance requirement applies to all state taxes, including sales, income, withholding, excise, severance, tobacco, and automobile rental tax.

Tax Clearance Required for State Procurement Contracts  –  RIB 17-021:

Effective June 14, 2017, Act 211 (HB 307) of the 2017 Regular Session of the Louisiana Legislature enacted R.S. 39:1624(A)(10) and 47:1678 to require a tax clearance for approval of certain state contracts.

As of October 1, 2017, all state contracts that require the review and approval of the central purchasing agency of the Louisiana Office of State Procurement (the “Procurement Office”) for the procurement of personal, professional, consulting, or social services will be approved only after the Procurement Office has obtained a tax clearance from the Department on behalf of the contracting taxpayer.

A tax clearance will only be granted by the Department if the proposed contractor is current in filing all tax returns and reports and payment of all taxes, interest, penalties, and fees owed to the state and collected by the Department.

Excluded are items under formal appeal pursuant to applicable statutes or being paid in compliance with the terms of an installment agreement with the Department.

A tax clearance is not required in order to bid on or solicit a procurement contract.

If a proposed contractor is subject to a final assessment that is collectible by distraint and sale, the proposed contractor cannot be approved for a procurement contract until the contractor has filed all returns and reports due, paid, or made arrangements with the Department to pay the delinquent tax liability, and the Department has notified the Procurement Office of the payment or arrangement to pay.

Mississippi Takes Next Step Toward Finalizing Remote Use Tax Collection Regulation

Files Questionable Economic Impact Statement with Secretary of State

On Tuesday, the Mississippi Department of Revenue filed an economic impact statement with the Secretary of State addressing its proposed regulation adopting use tax economic nexus standards and remote seller collection obligations. Readers may recall the Department issued the proposed regulation in January and held a public hearing in February, only to have a similar legislative proposal die after Lieutenant Governor Tate Reeves publicly stated that he considered the proposal unconstitutional. See prior detailed coverage of these proposals and events on the blog here and here and here.

To recap, the proposed regulation would define “substantial economic presence” to exist when sales into the state exceed $250,000 per year based on the previous calendar year’s sales. Out-of-state sellers who lack a Mississippi physical presence but who are making retail sales of tangible personal property into the state and have a substantial economic presence for sales and use tax purposes would be required under the proposal to register for a license with the Department in order to collect and remit use tax. The Department would apply the regulation prospectively to those who voluntarily register to collect use tax on their sales into Mississippi by July 1, 2017, but would assess those who have not voluntarily registered to comply with the regulation retroactively. No statute of limitations will be used in determining the total tax liability for such non-registering taxpayers under the proposal.

The economic impact statement contains several interesting claims that reveal the Department’s reasoning and view of the regulations’ impact on multistate sellers:

  • In summarizing the benefits of the regulation, the Department states that it will provide “greater clarity and guidance concerning the taxability of out-of-state sales and an increase in tax revenue and uniformly applied laws.” No mention is made of the almost certain unenforceability of its provisions, even though the Commissioner was quoted in a February 2017 Associated Press news story acknowledging that the regulation directly contradicts Quill and is likely unconstitutional, stating, “What we’re doing is probably unconstitutional, but we’ve got to do it to get another hearing.”
  • The Department claims the state is losing an estimated $150,000,000 in use tax revenue due to out-of-state vendors who do not collect the tax. These figures reportedly are based on an estimate of lost revenue provided by 21st Century Retail (www.efairness.org), which was created from data using the National Conference of State Legislators 2015 data.
  • The Department claims “the law does not provide any other methods to collect and remit tax.” Interestingly, there is no mention of the fact that, under existing law, local consumers are required to self-report these taxable interstate transactions, or that the Department actively enforces the use tax laws against Mississippi businesses.
  • In defining the need for the regulation, the Department states that it “sees a need to properly define ‘purposefully and systematically exploiting the consumer market’ in order to have clear meaning.” The statement does not explain how the regulation’s unqualified $250,000 sales threshold equates to “purposefully” or “systematically” exploiting the local market, especially considering the Department previously acknowledged that a single unsolicited transaction could meet this requirement.
  • Instead, the explanation for the regulation focuses solely on purported lost revenue. “Sales originating from out of state have steadily increased over the years attributing to the erosion of the tax base for sales and use taxes for the State of Mississippi resulting in lower sales and use tax collections. This provides an unfair advantage to out-of-state businesses selling from outside Mississippi. The DOR is attempting to ensure that the laws of the state are uniformly applied to persons doing business in this state.”
  • The Department estimates it will not cost the agency or other state entities anything to implement the proposed regulation. Litigation costs apparently did not enter this equation. Similarly, the Department reports “minimal” estimated costs and/or economic benefits to persons directly affected by the proposed rule.
  • The statement also purports the regulation to have “minimal” estimated impact on small businesses, but the explanation clearly states that the Department had no data upon which to base that statement. “The DOR could not determine with any accuracy or reliability the total number of businesses in the U.S. that have gross sales or revenue less than $10,000,000 or how many of those businesses are making sales of $250,000 or more in this state.” It goes further to state that compliance costs will have “minimal impact” on small businesses because “many companies already have filing requirements in other states and already have the necessary recordkeeping and reporting mechanisms in place.” No mention is made of the complete lack of uniformity across the country’s thousands of sales and use tax jurisdictions on issues such as nexus, sales tax base, rates, exemptions, exclusions, procedure, etc., all of which undeniably create substantial burdens on interstate sellers and especially those small businesses lacking the extensive internal resources of many larger organizations.
  • The statement claims the benefits of adopting the rule are “substantially more than” that compared to not adopting the rule. It is unclear whether the Department was referring to costs/benefits to the State itself or to the impacted taxpayers. It also claimed there are no “less costly or less intrusive methods” for achieving the purpose of the proposed rule.

Interested parties may submit written comments to the economic impact statement at any time prior to October 30, 2017, but no public hearing appears to have been scheduled at this time.

Taxpayers should keep a close eye on Mississippi’s proposed regulation, especially considering the Department claims it has authority (and, presumably intent) to move forward with the regulation even in the absence of any further legislative support.

Downstream Consequences Coming Into Focus A Year After Mississippi’s AT&T Dividend Decision

In October 2016, the Mississippi Supreme Court issued its long-awaited decision in Mississippi Department of Revenue v. AT&T Corporation, concluding the state’s dividend exclusion statute violated the Commerce Clause of the United States Constitution. The statute, Miss. Code Ann. Section 27-7-15(4)(i), unconstitutionally discriminated against interstate commerce by excluding from Mississippi gross income any dividends received from subsidiaries doing business and filing income tax returns in the state, while taxing identical dividends received from “non-nexus” subsidiaries having no Mississippi presence.

Following the AT&T decision, effectively no dividends remain taxable for Mississippi corporate income tax purposes. Longstanding Department of Revenue regulations classify dividends from foreign subsidiaries as non-business income, so the Court’s decision expanding the Section 27-7-15(4)(i) exclusion to encompass non-nexus dividends now renders virtually all domestic dividends exempt.

That practically universal dividend exclusion, however, has produced several important downstream consequences over the past year that could reduce the benefit from that decision, in many recent cases having resulted in material income and franchise tax audit adjustments.

  • Income Tax Apportionment – On its corporate audit schedules, the Department now routinely includes all dividends – domestic and foreign – in nonbusiness income. In computing the sales factor, all nonbusiness income is removed from gross receipts when calculating both the numerator and denominator of that ratio. Because very few multistate corporate taxpayers would have had any dividends sourced to Mississippi, this removal serves almost exclusively to reduce the denominator, thereby inflating the sales factor. In some egregious cases, this could double or even triple a company’s Mississippi sales factor. In a single sales factor scenario this could materially reduce the benefit received from the exclusion of those dividends from gross income.
  • Franchise Tax Apportionment – Several years ago, the Mississippi Legislature amended the franchise tax statutes to provide that the gross receipts for franchise tax apportionment purposes would be the same as those calculated for income tax. Mississippi’s franchise tax apportionment ratio consists of a modified two-factor formula that adds together the in-state tangible real and personal property (often narrower than the income tax property factor) to the Mississippi gross receipts, and then divides that total by the similarly computed worldwide combined factors. In other words, there is one combined numerator divided by a single combined denominator, rather than two separately calculated factors added together and divided by two. The removal of these “non-business” domestic dividends from the income tax sales denominator will have a similar – and often more material – impact on the franchise tax side. This can be a significant adjustment for companies having large amounts of passive income but not meeting the rigid statutory requirements of the franchise tax holding company exemption. Because the franchise tax statutes contain no direct alternative apportionment authority as do the income tax laws, defending this “flow-over” adjustment is often more challenging.
  • Interest Expense – Acquisition Debt. Mississippi does not permit the deduction of “interest upon indebtedness for the purchase of . . . stocks, the dividends from which are nontaxable under the provisions of this article.” Miss. Code Ann. Section 27-7-17(1)(b). There is no business purpose exception to this disallowance as there is for interest on debt used to purchase treasury stock or pay dividends. Since all dividends are now considered “nontaxable under the provisions of [the income tax] article” the Department recently has begun to look more closely at the origin of corporate obligations and has been aggressively disallowing the interest expense deduction if there is any reference within the company’s annual reports, press releases, or other sources to suggest third-party debt was used to purchase another corporation’s stock. It should be noted that acquisitions of entities other than corporations, such as partnerships and limited liability companies, do not appear to fall within this disallowance since those types of earnings are not statutorily exempt like dividends. This position is still in its infancy, and it is yet to be seen whether or to what extent the auditors will grant taxpayers any leeway in cases where debt was used for acquisitions as well multiple other non-acquisition purposes. There may be multiple ways, however, to address these issues depending on a company’s particular facts and circumstances.
  • Interest Expense – Nonbusiness Asset Ratio. Mississippi utilizes a “non-business asset ratio” to calculate that portion of a company’s overall interest expense purportedly attributable to the generation of non-business income, and the Department has been very aggressive on audit in using that formula to disallow otherwise ordinary and necessary interest deductions. Historically, investments in foreign subsidiaries have been included in the numerator of that ratio since the income tax regulations classify foreign dividends as nonbusiness income (queue a Foreign Commerce Clause challenge). Unitary domestic dividends, however, technically do not constitute nonbusiness income, so the investments in those domestic subsidiaries arguably should not enter that equation. The authors have seen domestic investments included in that formula on a few preliminary audit workpapers, so taxpayers should diligently review any proposed adjustments to determine if that inclusion is being made.
  • Could Some Dividends Remain Taxable? The Court relied on the internal consistency test from Maryland v. Wynne to isolate and quantify the discriminatory effect of the exclusion statute in double taxing a non-nexus subsidiary’s earnings. In theory, however, a subsidiary could earn 100% of its income in a state not imposing an income tax, in which case Mississippi’s taxation of those domestic dividends would not result in the double taxation of the non-nexus subsidiary’s earnings found offensive by the Court since no state would have taxed those earnings at the operational level. In that rare case, application of the statute may not produce an unconstitutional result, although it still would be constitutionally suspect under a facial discrimination analysis, which the Court did not reach in AT&T. The authors have not seen this hypothetical fact pattern arise in any cases so far, and are unaware of the Department making such inquiries on audit given the rarity of such a scenario.

The Department was very concerned about the fiscal impact of the AT&T decision, especially given Mississippi’s already dubious budget situation, and unsuccessful attempts were made earlier this year to amend the statute in a way that many taxpayers and observers feared was a surreptitious attempt to legislatively negate the ruling. It is equally clear that the Department intends to aggressively audit companies and assert these and potentially other novel positions in an attempt to minimize the impact of that newly expanded exemption to corporate taxpayers. Taxpayers should review closely their facts and circumstances in light of these new positions when preparing returns or defending an audit.

Louisiana and Other States Provide Tax Relief for Hurricane Victims

In response to the impact of Hurricanes Harvey and Irma, parts of the United States have been declared as major disaster areas by the federal government. As a result, numerous states have enacted delayed filing and payment periods for individuals and businesses located in these major disaster areas. Louisiana has joined this growing list with the Department of Revenue’s release of Revenue Information Bulletin No. 17-015.

The Bulletin provides that the Department will grant filing extensions to taxpayers whose homes, principal places of business, or critical tax records are located in any of the disaster areas declared as disaster areas by the president as a result of Hurricane Harvey. The due date for qualifying tax returns has been extended to January 31, 2018 for individual income, corporate income and franchise, fiduciary, partnership, and partnership composite taxes with original or extended due dates on or after August 23, 2017, and on or before December 31, 2017. Taxpayers requesting such relief should identify their returns by writing “Hurricane Harvey” in black ink on top of the form.

Other pertinent state relief:

Alabama

  • Alabama Department of Revenue, Press Releases: August 29, August 31, September 12, 2017
  • Alabama taxpayers residing in Texas or Florida counties designated as disaster areas by the federal government have until Jan. 31, 2018, to file tax returns due on or after Sept. 1 (Sept. 15 for Hurricane Irma victims), 2017, and before Jan. 31, 2018.
  • Penalty relief will be provided during the extension period.
  • Taxpayers seeking this tax relief should write “Texas Flood 2017” or “Irma Relief – 2017” in red ink on any state paper return/report which relies on this filing extension relief.
  • The relief applies to individual income tax, corporate income tax, pass-through entities, sales and use tax, withholding tax, and business excise tax.
  • IRP/IFTA requirements for vehicles are temporarily suspended for vehicles engaged in disaster relief efforts.

Florida

  • Florida Department of Revenue, Current Topics – Hurricane Tax Relief
  • The Florida Department of Revenue will follow the tax relief granted by Internal Revenue Service regarding postponement of return due dates.
  • Florida corporate income tax returns, as well as Florida corporate income tax installment payments, with original due dates or extended due dates between Sept. 4, 2017 and Jan. 31, 2018 will now be due Feb. 15, 2018.
  • Sales and use tax returns filed by 5:00 p.m. on Sept. 28, 2017 will be deemed timely filed.
  • Taxes on fuel trucks entering the state are waived to expedite fuel delivery.
  • Penalties for the sale of dyed diesel field are waived to any person who sells or uses dyed diesel fuel for highway use.

Georgia

  • Georgia Department of Revenue, Press Releases: September 5, September 12, September 14, 2017
  • The Department is postponing until January 31, 2018, certain deadlines for individuals who reside, and businesses whose principal place of business is located, in the disaster areas specified by the IRS.
  • This extension now applies to all counties in Georgia as a result of Hurricane Irma
  • The postponement also includes return filing, tax payment, and other time-sensitive acts related to Georgia tax types such as Georgia sales and use tax but does not apply to International Fuel Tax Agreement interest. This includes monthly sales tax returns originally due September 20, 2017, October 20, 2017, November 20, 2017, December 20, 2017, and January 22, 2018. It also includes quarterly sales tax returns due October 20, 2017, and January 22, 2018, as well as annual sales tax returns due January 22, 2018.
  • Affected taxpayers filing paper returns should write: “2017 Texas, Hurricane Harvey” or “2017 Hurricane Irma” across the top of any forms submitted to the Department.
  • IRP/IFTA requirements for vehicles engaged in disaster relief efforts are temporarily suspended.

Mississippi

  • Mississippi Department of Revenue, Notice 80-17-002 (September 25, 2017)
  • Taxpayers who reside in the counties designated as federally declared disaster areas have until January 31, 2018 to file individual income, corporate income and pass-through entity tax returns due on or after August 23, 2017, for Hurricane Harvey and September 4, 2017, for Hurricane Irma and before January 31, 2018.
  • The Department of Revenue automatically provides interest and penalty relief on original or extended filing and payment due dates, including extended filing or payment due dates, that fall within the postponed period.

Texas

  • Texas Comptroller, Declared Natural Disasters and Emergencies Tax Help
  • Taxpayers in declared disaster areas affected by Hurricane Harvey can contact the Comptroller’s office and request up to a 30-day extension to file and pay certain monthly and quarterly state taxes.
  • For the 2017 franchise tax reports with valid extensions to Nov. 15, the Comptroller’s office is granting an automatic extension to Jan. 5, 2018, to businesses located in the federally declared disaster area in Texas. Businesses located in these counties do not need to request an extension for their franchise tax reports. Service providers who file franchise tax reports on behalf of other taxpayers can request a franchise tax extension if the provider is affected by Hurricane Harvey.
  • The Comptroller’s office is granting businesses located in the federally declared disaster areas in Texas that are not required to file electronically, an automatic 30‐day extension to complete August monthly reports due Sept. 20 and quarterly reports due Oct. 20.
  • In addition to allowing the Comptroller to extend tax-filing deadlines, Texas law exempts certain recovery-related expenses from sales tax, including:
    • (i) the cost of labor to repair storm-damaged, nonresidential property, including office buildings and stores. Labor charges must be separately stated on the repair bill. Texas also does not impose sales tax on labor for residential repairs;
    • (ii) services used to restore storm-damaged tangible personal property, including dry cleaning of clothing and draperies, rug and carpet cleaning, and appliance repairs regardless of whether the property is residential or nonresidential.
  • All laws authorizing or requiring the collection of state or local hotel or motel occupancy taxes from the victims of Hurricane Harvey or personnel participating in relief operations are suspended beginning August 23, 2017, and ending October 23, 2017.
  • Temporary waiver of the International Fuel Tax Agreement (IFTA), which will suspend requirements that trucking firms track and pay tax on the amount of fuel used in Texas when delivering needed relief supplies and fuel into the state.

As hurricane season continues to bring devastation to parts of the U.S., states will continue to extend relief to these declared disaster areas.

In order to help track these developments, the Jones Walker SALT team has compiled and summarized the provided relief of all participating states in the J.W. Disaster Prep and Recovery blog post, State Tax Relief for Hurricane Victims. Our team will continue to monitor for further state and local tax related disaster relief announcements and update the linked post accordingly.

 

 

Mississippi Authorizes Contingent-Fee Tax Head Hunters

Department of Revenue Now Authorized to Hire Auditors and Expert Witnesses on Contingency Fees

$1,000,000 Appropriation to Fund Contingency Contracts

RFPs Quickly Issued for Transfer Pricing Audits and Underreported Cash Sales

The Mississippi Legislature recently authorized the Department of Revenue to hire third party tax auditors and expert witnesses and to pay them contingency fees based on revenue generated from audits they identify and bring to the Department. This new authority was not included in the original Senate Bill 2973 passed by the Senate or the amended bill passed by the House of Representatives, but appears to have been slipped in quietly during the conference committee process before final passage. While it is possible many legislators voting on the final appropriations bill were unaware of this new authority to hire contingent-fee auditors, the bill appropriated up to $1,000,000 to fund those contingency contracts for the current fiscal year. The Legislature’s website contains copies of the final bill and the conference report reflecting the insertion of this contingent fee authority.

The Governor signed the bill on April 18, and the new provisions became effective on July 1, 2017. Wasting no time, in May the Department issued requests for proposals targeting transfer pricing and underreported cash sales audits. The Department reissued the transfer pricing RFP in August in substantially the same form, and while the contract was supposed to have been awarded on August 31, the Department does not appear to have awarded it at this point. The Department appears to have abandoned the underreported cash sales initiative, at least for now.

Transfer Pricing

The original Transfer Pricing Analysis request (RFP 2017-02) was reissued in August in substantially the same form as RFP 2017-05, and specifies that the contractor “will provide Intercompany Transfer Pricing Analysis and Transfer Pricing Analysis Reports prepared consistent with the provisions of the Internal Revenue Code Section 482 and the regulations promulgated thereunder.” The Department claims to need these reports to identify profit shifting via intercompany transactions, and the contract will require the vendor to provide training to the Department’s staff and any expert witnesses for Board of Tax Appeal hearings and litigation in the event of a lawsuit. The RFP further defines the scope of those services as follows:

  • To “provide audit leads” and rank those targets from highest to lowest based on the size of the recommended Section 482 adjustments;
  • To perform audit and legal analysis, which will include the initial basis for the potential adjustments for those taxpayers selected from the target list;
  • Drafting information document requests to be issued to the targeted taxpayers and analyzing information received in response;
  • Preparation of formal transfer pricing reports, to be in a form sufficient for submission as evidence in administrative and judicial proceedings;
  • Providing expert witnesses at the Board of Tax Appeals and court, and providing other audit and litigation support (all within the scope of the contingency fee); and
  • Training Department employees on transfer pricing methods and providing support in responding to taxpayers’ studies and reports.

At least one group is believed to have submitted questions seeking clarification of the scope and terms of the original RFP, but it is unknown if they or any others ultimately submitted proposals to that first RFP. This development suggests the Department is investing heavily in the transfer pricing arena, and adds a new dynamic to recent reports of Mississippi’s active participation in the Multistate Tax Commission’s transfer pricing initiatives.

The state’s new use of contingent fee auditors – and especially contingent fee expert witnesses – could significantly alter the nature of audits and the Department’s litigation of any intercompany pricing adjustments. The authors have seen a noticeable increase in the number and complexity of Mississippi transfer pricing audits, and the Legislature’s blessing and funding of these contingent fee arrangements suggest this trend is likely to increase in the near future.

Underreported Cash Sales

The Department verbally stated that the Department decided not to proceed with the underreported cash sales request (RFP 2017-01), and the authors have been unable to obtain a copy of that proposal so the exact scope and terms of the request are currently unknown. Based on questions submitted by unidentified potential bidders, however, these arrangements also would have been contingency-based and likely were similar to the transfer pricing contracts described above.

The questions submitted suggest that the Department was seeking a “turnkey solution” and that the contractor would have been responsible for targeting unregistered taxpayers and underreported transactions, but also stated that the Department did not expect the contractor to perform actual audits or site visits. Rather, it sought “information that will lead to the recovery of unpaid taxes” which the Department staff would then presumably handle through field audits, investigations and other normal processes. The project would have included information matching as the questions specifically referenced federal Forms 1099K which taxpayers use to report payment card and third party network transactions (i.e., prepaid cards such as gift cards).

Considering the Department’s recent activities directed toward remote internet sellers, it is plausible that the Department intended this project to target non-resident sellers who might fall within the Department’s recently proposed economic nexus standards. Although this initiative appears to be on hold at least temporarily, we will continue to monitor this area in the event a revised RFP is issued.

Jones Walker will continue to monitor and report on these developments, and welcomes any questions or comments as well as any taxpayer’s experiences with these new contingent fee audits.

SAVE THE DATE! The JW SALT Team will be back in Houston, Texas on October 5th!

2017 Jones Walker LLP State & Local Tax Seminar

Thursday, October 5, 2017 | Hilton Americas-Houston

It’s that time of year again! The Jones Walker State & Local Tax Team will be back in Houston, Texas, for our annual State & Local Tax Seminar on Thursday, October 5, 2017.

The Jones Walker LLP SALT Team will be “Cooking with SALT,” presenting a day-long program covering the most important Louisiana and Mississippi state and local tax issues currently facing taxpayers, as well as Louisiana and Mississippi legislative updates.

Secretary of the Louisiana Department of Revenue and former Jones Walker LLP State & Local Tax Partner, Kimberly Lewis Robinson, will once again join the program as the featured luncheon speaker.

This program is intended for industry tax professionals and will be recommended for Texas CPE credit.

Full brochure coming soon.

Mississippi’s Sales Tax Regulatory Smorgasbord Continues—Internet Sellers and Commercial Contractors on the Menu!

UPDATE:  On October 17, 2017, the Department filed a notice formally withdrawing this proposed amendment to the contractor’s tax regulation.  No explanation was given for the withdrawal, and we will monitor future filings in the event a new amendment proposal is made.

The Mississippi Department of Revenue’s recent flurry of regulatory activity continues unabated with a number of proposals and developments, primarily in the sales and use tax arena. With its most recent filings, the Department appears to take aim at remote internet sellers who have not voluntarily registered with the Department under its widely publicized “economic nexus” use tax proposals. Commercial construction contractors also have numerous substantive changes to consider, including a new 10 percent penalty regime that could apply even if all taxes are timely paid and even in some tax overpayment situations.

Newly Proposed Amendments

  • Contractor’s Tax Rules and Penalties. On June 21, 2017, the Department issued a notice that it intended to amend Reg. 35.IV.10.01 concerning application of the contractor’s tax and penalties for failing to prequalify a taxable contract. A public hearing will be held on Wednesday, July 26, 2017, at 2:30 p.m. Continue reading >

Economic Impact Statements

The Department has come under sharp public criticism recently over the fact that it has never issued an economic impact statement for any of its proposed regulations or amendments, in spite of the fact that such statements are explicitly required under Mississippi’s Administrative Procedures Act. In response to this criticism, the Department has begun issuing those statements, but, as seen below, so far it has concluded none of its amendments and new regulations pose any additional economic burden on taxpayers.

  • Airbnb, VRBO, etc. – Economic Impact Statement. On March 24, 2017, the Department proposed to amend Reg. 35.IV.5.01 addressing the short-term rental of homes and other dwelling facilities for purposes of levying the state’s sales tax on “hotels.” A public hearing was held on that regulation on April 26, 2017. Under that proposed amendment, offering a room or home for rent on a short-term basis renders it taxable if the facility is “known to the trade” as a hotel or motel. The regulation now provides that advertising the room or home by the owner or through a third party would render it “known to the trade” for purposes of rendering that rental taxable. Continue reading >
  • Prepared foodsEconomic Impact Statement. On March 24, 2017, the Department proposed to amend Reg. 35.IV.9.02 attempting to define what constitutes “prepared foods” for purposes of local sales taxes on those items, as that term was not previously defined in the statutes or regulations. A public hearing was held on that regulation on April 26, 2017. Under that proposed amendment, prepared foods include (a) food made to order upon the customer’s request; (b) food sold in a heated state or heated by the seller; (c) two or more food ingredients mixed or combined by the seller for sale as a single item, but not including food that is only cut, repackaged, or pasteurized by the seller, and eggs, fish, meat, poultry, and foods containing these raw animal foods requiring cooking by the consumer as recommended by the Food and Drug Administration in Chapter 3, part 401.11, of its Food Code so as to prevent food-borne illnesses; or (d) food sold with eating utensils “provided by the seller,” including plates, knives, forks, spoons, glasses, cups, napkins, or straws. Continue reading >
  • Printing industryEconomic Impact Statement. On March 24, 2017, the Department proposed to amend Reg. 35.IV.4.05 addressing customer use of printing equipment and printed products delivered out of state. A public hearing was held on that regulation on April 26, 2017. Under that proposed amendment, the term “Printer” includes publishers and other producers or reproducers of lettering or images of any kind on paper, printing plates, or other material. Providing copiers, printers, or other machinery in the owner’s place of business for use by customers who make their own printed material for a fee does not fall under the term “Printer.” The regulation also clarified that printed products that are delivered outside of this state are exempt from sales tax; specified that computers, digital equipment, and software used in the printing process is subject to the reduced 1.5 percent tax rate; and that electric power and other fuels used in the process are fully exempt in accordance with recent statutory changes. New language in the regulation specified that other forms of printing equipment such as inserters or mail sorting equipment, as well as purchases of copiers and other equipment provided for use by customers who make their own printed material, are taxable at the regular retail rate of tax. Continue reading >

Other Pending Actions

Final action remains to be taken on numerous other previously issued regulatory amendments for which public hearings have already been held. Those proposals include the following… Continue reading >

Any taxpayer who has questions or concerns about these or any other regulatory actions is encouraged to attend the public hearings and/or submit written comments to the Department. Members of the Jones Walker Tax & Estates Practice Group are available to answer questions about that process or to assist any taxpayers in assessing the impact or likely application of these proposals to taxpayers’ particular circumstances.

JW SALT Team Summer Recipe Series – Part 1

What better food to make in the middle of the summer than tacos! Below is the recipe for my favorite summertime indulgence, Tacos Al Pastor!

Meat Needed
• 2 pounds pork shoulder, preferably boneless

Ingredients for Marinade
• 2 tablespoons achiote paste
• 1 tablespoons guajillo chili powder
• ½ tablespoon garlic powder
• ½ tablespoon oregano
• ½ tablespoon cumin
• ½ tablespoon salt
• ½ tablespoon pepper
• ½ cup white vinegar
• ½ cup pineapple juice

Ingredients for Cooking
• 1 pineapple, skinned and sliced into 1 inch rounds

Ingredients for Dressing
• 1 white onion, finely chopped
• 1 cup cilantro, finely chopped
• 1 cup salsa of your choice
• some lime

Step 1: Slice the pork shoulder in ¼ inch slices to prepare the pork for the marinade.

Step 2: Mix all marinade ingredients in a bowl. Adding the pineapple juice may cause the marinade to curdle so ensure that the marinade is smooth and consistent.

Step 3: Add the marinade to the pork, mix well, and put it in an airtight container. Ideally, let the pork marinate for 4-8 hours.

Step 4: Line a baking dish with parchment paper and place 3 pineapple rounds on the sheet. Secure the pineapple rounds with a skewer. Layer the pork on top of the pineapple rounds. Once all the pork is layered, put 3 pineapple rounds on top of the pork. Ensure that the skewer is in the middle of the pineapple rounds and the pork.

Step 5: Bake the meat in an oven at 325 degrees for about 1 ½ hours or until the internal temperature is about 185 degrees. Let the pork sit for about 15 minutes, then carve thin slices of the pork and the pineapple rounds.

Step 6: Mix the chopped onion and cilantro in a bowl and add lime to assemble the dressing.

Step 7: To serve, assemble the pork on the tortillas, followed by a few pieces of pineapple, dressing, lime, and salsa.

Jones Walker SALT Team Presents at SEATA

Jones Walker SALT Team members Jay Adams and Matt Mantle presented at the 67th annual Southeastern Association of Tax Administrators Conference July 9-12 in New Orleans, LA. Jay co-presented on property tax issues while Matt co-presented on sales tax nexus for online purchases.

Fellow team members Bill Backstrom and John Fletcher were able to catch up with former SALT Team member, current Louisiana Secretary of Revenue, and SEATA President, Kimberly Lewis Robinson.

“Secretary Robinson and the entire team at the Louisiana Department of Revenue put on a great program in New Orleans for the 2017 SEATA Conference. The substantive panels were first class and Louisiana put on a great show for all of the attendees. Jones Walker was proud to be a sponsor of the 2017 SEATA Conference. Nashville, get ready for 2018!” – Bill Backstrom

Jones Walker Tax Team Members to Speak at NYU Summer Institute in Taxation

Jones Walker LLP Tax Team members Bill Backstrom and Hugh Seligman will speak at the NYU 2017 Summer Institute in Taxation Conference July 17-28, 2017.

Bill will speak on corporate and other business activity taxes including allocation and apportionment, UDITPA, return filings, NOLs, and credits. Hugh’s session entitled “Post-Mortem Income Tax Planning for Closely-Held Companies” will focus on on the income tax issues that arise from a decedent owning an interest in a partnership or S corporation at death. The topics addressed include elections to mitigate income tax, funding of bequests, utilization of losses accrued prior to death, post-death sales of company interests and application of the net investment income tax.

The intensive tax conferences are ideal for the new professional who wants a solid foundation in a specialized area of law or tax practice. Those attorneys and accountants already practicing attend to refresh their knowledge and to learn about new developments in legislation and regulations. Attend the introductory conferences and acquire critical new skills and practical knowledge you can use immediately. Attend the intermediate/advanced conferences and receive a high-level update and an in-depth analysis of the latest developments. CLE, CPE, and CE credits also are available.

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