It’s That Time of Year Again! The Property Tax Rolls Are Open For 2023 (2024 For Orleans Parish)

It is time for Louisiana assessors to open their rolls for taxpayer review! Many assessors began the two-week exposure period on August 15th, but the dates vary by parish. As such, if you want to review the fair market value placed on your property by an assessor in a particular parish, you can find the open book dates on the Louisiana Tax Commission’s website.

Below is a brief refresher on the basics of appealing the assessed value of a property:

  • Visit the assessor’s office during the open book dates and provide any data that supports your opinion of the property’s value, including any evidence of functional or economic obsolescence.
  • If no resolution with the assessor is possible, file an appeal with the local Board of Review (typically, the Police Jury or Parish Counsel) using the provided form 3101. The form can be found on the Commission’s website.
  • Attend the Board of Review hearing, again the dates of the hearing in each Parish vary and can be found on the Commission’s website.
  • Upon receipt of the Board of Review’s decision, if still unsatisfied, file an appeal with the Commission on the provided form 3102. The form can be found on the Commission’s website.
  • Once docketed at the Commission, a taxpayer can set the matter for hearing, or conduct any necessary pre-hearing discovery that it believes is necessary prior to a hearing.

One very important practice tip relates to La. R.S. 47:1989, the statutory basis for review of appeals by the Commission. The statute has been revised to require taxpayers to provide all “evidence” that the taxpayer intends to present at a “correctness” challenge before the Commission to the assessor prior to the close of the deadline for filing an appeal with the local Board of Review. The Commission can allow additional evidence if the Commission concludes that the additional evidence is material and there was good reason for the taxpayer’s failure to present it to the assessor (i.e., it was not available at the deadline). If a taxpayer decides to hire an appraiser or other expert to provide an appraisal or other report, that work does not have to be completed by the Board of Review deadline. The statute directs that good reason for the failure to timely present the expert’s work product “shall be” presumed, if any report or appraisal is provided to the assessor within thirty (30) days of the taxpayer’s receipt of the expert report, and at least twenty-five (25) days prior to any hearing before the Commission. In addition, the statute lists other types of publicly available evidence that is considered to always be admissible. See La. R.S. 47:1989(c)(2)(a)(xi).

Because an appeal of the assessment must be lodged with the local Board of Review seven (7) days prior to the public hearing, a taxpayer does not have a large window of opportunity to provide evidence to the assessor as required by the above-referenced statutes. If you believe that a correctness challenge is possible for 2022, it is imperative that any evidence that will support your opinion of the fair market value of the property be gathered as soon as possible for submission to the assessor.

Should you have any questions regarding the foregoing, please contact Jay Adams, 504-582-8364 or via email at jadams@joneswalker.com.

New York Formally, and Finally, Proposes Regulations Concerning 2015 Corporate Tax Reform

The New York State Department of Taxation and Finance has formally proposed its 2015 corporate tax reform regulations under the State Administrative Procedure Act (SAPA). The regulations have been submitted for publication in the August 9, 2023 edition of the State Register

These regulations have a long history. There were several iterations of the draft regulations over the past eight years, each version tweaked based, in part, on taxpayer comments. The “draft” nature of the regulations caused uncertainty; it was unclear to what extent taxpayers could rely on the guidance in the regulations as they were merely draft regulations and subject to change. While taxpayers will not agree with the substance of every regulation in the formally proposed version, if the regulations are ultimately promulgated it should, at least, provide a level of certainty regarding the Department’s interpretation of the Tax Law on a going forward basis. 

While taxpayers have had the chance over the past eight years to comment on the draft regulations, they will again have the opportunity to comment on the formally proposed version. The State Administrative Procedure Act requires the Department to provide comment period of at least 60 days after a notice of proposed rule-making is published in the State Register before it can adopt a proposed rule. Thus, taxpayers that wish to comment on these formally proposed regulations must do so by October 10, 2023. The comments should be submitted to Kathleen D. Chase, Office of Counsel, Department of Taxation and Finance, W.A. Harriman Campus, Building 9, Room 200, Albany, NY  12227.

Please contact Katie Quinn, Alysse McLoughlin, or a member of our SALT team if you have any questions concerning the Department’s regulations or the promulgation process.

Jones Walker SALT Team Members to Present at COST Workshop for Technology Companies – Register Now!

Join Jones Walker state and local tax partners Andre BurvantKatie Quinn, and Christopher Lutz as they discuss taxing digital products, remote workers, and state transfer pricing audits at the COST Tech Industry Conference August 16-17.

Click here to learn more and register.

Jones Walker SALT Team Members to Present at COST Property Tax Workshop – Register Now!

Jones Walker SALT team members Jay Adams and Bill Backstrom will discuss national property tax legislation and tips to mitigating negative press with property tax appeals.

This two and a half day Workshop will cover the latest property tax issues and trends companies are dealing with in 2023 and will deal with in the future – including an in-depth review of the latest developments in property tax legislation and litigation throughout the U.S.  Presenters will be leading experts in the property tax field. Only employees of COST member and non-COST member companies are invited to attend. Click here to register for this property tax workshop!

Register now for the COST Southwest-West Regional State Tax Seminar in Denver

Jones Walker SALT team members Bill Backstrom, Alysse McLoughlin, Katie Quinn, Chris Lutz, and Cami Fergus will discuss state tax cases, issues, and policy matters to watch. Additionally, the team will cover internal reorganization and looking beyond due diligence, deal documents, and closing.

Council on State Taxation (COST) Southeast Regional State Tax Seminar

Date: Tuesday, July 19, 2023

Location: Lumen Offices | 1025 Eldorado Boulevard | Broomfield, CO 80021

Click here to register.

Mississippi’s New Software Direct Pay Permit Now Available Online

Mississippi’s new direct pay permit for purchases of computer software and computer software services is now available on the Department of Revenue’s website.  The Mississippi Legislature authorized this new permit earlier this year as part of the state’s comprehensive legislation on the taxation of remote software and services (see prior coverage here), which went into effect July 1. 

This new and unique permit allows software consumers to remove vendors from the sales and use tax collection process and instead handle those accruals and remittances internally.  This will be very important when unbundling payments covering both taxable and nontaxable items, and also when attributing taxable payments to multiple user locations within and without the state.  That direct remittance process also should help streamline the recovery of any mistaken tax overpayments since the consumer – rather than the vendor – would be the direct “taxpayer” when using the permit. 

Taxpayers already possessing a direct pay permit (e.g., manufacturers, economic development programs, etc.) should not need this additional software permit as they should be able to use their existing permit for these types of transactions. 

To obtain the new software permit, taxpayers will need to access their online TAP account (https://tap.dor.ms.gov/_/) and will need to have an active use tax registration.  The application link may not be visible on the Department’s website until those credentials and the use tax account have been established.

Taxpayers should be able to access and submit an online permit application by following these steps (note that the Department indicated it may modify the system to simplify this process as it finalizes the guidance noted below):

  • Once logged into their online use tax account via the TAP page, taxpayers should see a link to apply for direct pay permits.
  • Select an appropriate start date, but that should not be prior to July 1, 2023, the effective date of the new legislation.
  • There should be seven (7) categories of qualified industries to select from; choose the economic incentives option.
  • Several “reasons” should appear once that option is selected; select the last category which should be for a “computer software exemption.”
  • The instructions from that point forward should be self-explanatory.

The Department has stated informally that a purchaser should be able to provide this permit to any vendor who is in the business of selling, licensing, or providing computer software or computer software services (as defined in the new law), thereby relieving those vendors from their collection responsibilities.  This permit should not be provided to or accepted by vendors of computer equipment who are not also in the business of providing computer software or computer software services.

It will be very important to fully understand the definitions and examples of taxable and nontaxable items and services contained in the new legislation.  One example provided of a qualifying use is for a vendor that provides both software and hardware items.  That vendor should be allowed to accept the permit for all transactions with that customer, even if a particular transaction did not encompass software or computer software services.  On the other hand, a vendor that sells only computer hardware and is not in the business of providing computer software or computer software services should not accept the permit for any transactions. 

The Department has indicated that it is finalizing and plans to publish on its website additional guidance and instructions for obtaining and using this permit.  Jones Walker will forward any additional guidance on this topic as it becomes available. 

In the meantime, any taxpayers having questions can contact the Department’s general sales tax help line at (601) 923-7015 or attorneys at Jones Walker for additional clarification. 

Louisiana Franchise Tax Phase-Out Vetoed by Governor

Louisiana Senate Bill 1 of the 2023 Regular Session, which provides for a phase-out of the Louisiana corporation franchise tax, has been vetoed by Governor Edwards. SB 1 by Senator Allain would have reduced the franchise tax by 25% per year, provided certain benchmarks for deposits into the Revenue Stabilization Trust Fund were met until the franchise tax is reduced to 0%.

In addition to the franchise tax rate reduction provided in SB 1, La. R.S. 47:601.2, which was enacted in 2021, provides for additional franchise tax rate reductions in the event certain “triggers” are met. The rate reductions provided in SB 1 and La. R.S. 47:601.2 would have worked in tandem,

SB 6 of the 2023 Regular Session also passed by the Legislature and was enacted to help pay for the phase-out of the franchise tax by reducing the sales tax and project facility rebates in the Quality Jobs (“QJ”) program by 50% of any percentage reduction in the franchise tax rate, whether such reduction is required by SB 1 or La. R.S. 47:601.2, or other future franchise tax reduction measures. If the franchise tax is repealed, the QJ rebates will be reduced by 50%.

Although SB 6 was not vetoed and will become effective January 1, 2024, its impact will be curtailed without the enactment of the franchise tax reductions in SB 1. 

In a veto message directed to the Legislature, the governor stated that his veto of SB 1 was based on the uncertainty of the impact that the phase-out would have on revenues when coupled with other recent tax reform. The governor is seemingly of the opinion that the franchise tax should be reformed or repealed, referring to the franchise tax as “antiquated.” However, the governor pointed to the other reforms to the Louisiana tax code that were enacted in 2021, including reductions to the corporate and individual income tax rates, as well as the franchise tax rate reductions provided in La. R.S. 47:601.2, and noted that the extent of the fiscal impact from these changes will not be known until after 2022 tax filings and collections are received and analyzed, in either late 2023 or early 2024. Therefore, the governor felt that, “it is unwise to create a second franchise tax reduction trigger at this time.”

The governor also called on future policymakers to reconcile the elimination of the franchise tax with recent reductions to the corporate income tax, as well as the sunset of the 0.45% sales tax, the return of previously suspended sales tax exemptions, and existing and new dedications of certain taxes to the Transportation Trust Fund and Revenue Stabilization Trust Fund.

It is possible that SB 1 could still be passed by the Legislature via a veto session or revived in a future session. As explained above, because SB 6 will become law, it could be triggered by future franchise tax reductions that ultimately go into effect.

If you have any questions about the bills noted in this post, please reach out to a member of our Jones Walker LLP State & Local Tax team.

Thinking About Wayfair on its Five Year Anniversary

With the fifth anniversary of Wayfair last week, the fallout from that case has been a hot topic recently. One day before the anniversary, the U.S. Supreme Court issued an order denying cert in Quad Graphics Inc. v. North Carolina Department of Revenue, signaling what will likely be a long hiatus for the Supreme Court to revisit state tax nexus questions. That’s a shame, as there are still many open questions and many state nexus rules are very clearly not within the four corners of Justice Kennedy’s 2018 opinion.

After Wayfair, states rushed to adopt their own economic nexus thresholds that were superficially similar to South Dakota’s. Today, every state with a sales tax has both an economic nexus threshold for remote sellers and has marketplace facilitator rules. These state rules almost uniformly impose a tax collection obligation on remote sellers solely based on the seller exceeding a certain receipts threshold in sales into the state (Connecticut still requires sellers to exceed $100,000 and 200 transactions, but no other state requires both a receipts and transaction amount to be met). Thus, despite the Wayfair decision’s repudiation of a bright line nexus standard, states have simply traded one bright line rule (physical presence) for another (gross receipts in sales into the state).

The problem here is that Wayfair anticipated additional clarification regarding state tax nexus. The decision’s penultimate paragraph begins:

The question remains whether some other principle in the Court’s Commerce Clause doctrine might invalidate the Act. Because the Quill physical presence rule was an obvious barrier to the Act’s validity, these issues have not yet been litigated or briefed, and so the Court need not resolve them here.

The Court went on to note various factors in South Dakota’s law that “appear[ed] designed to prevent discrimination against or undue burdens upon interstate commerce.” First, the underlying current throughout the decision is that “the continuous and pervasive virtual presence of retailers today is, under Quill, simply irrelevant. This Court should not maintain a rule that ignores these substantial virtual connections to the State.” The taxpayers at issue in Wayfair were “large, national companies that undoubtedly maintain an extensive virtual presence.” Moreover, South Dakota’s law applied a safe harbor to those who transact only limited business in South Dakota. The state’s law was not retroactive. Finally, the decision emphasizes South Dakota’s membership in the Streamlined Sales and Use Tax Agreement. The Court noted:

The system standardizes taxes to reduce administrative and compliance costs: it requires a single, state level tax administration, uniform definitions of products and services, simplified rate structures, and other uniform rules. It also provides sellers access to sales tax administration software paid by the State. Sellers who choose to use such software are immune from audit liability.

Despite this language, not a single state requires a “continuous and pervasive virtual presence” in imposing a tax obligation on a remote seller. South Dakota is the fifth smallest state by population, yet the threshold for determining whether a company is conducting “limited business” in the state ($100,000) has been adopted as a bright line rule in states far larger and for which $100,000 in sales could easily be characterized as “limited business.” And although only 23 states are full members of the Streamlined Sales and Use Tax Agreement, the remaining states nonetheless have adopted the same economic nexus rules.

States’ bright-line treatment of their jurisdiction to tax will continue to encroach on interstate commerce and raise due process concerns. We often joke that discussions related to nexus are a waste of time today; everyone has nexus everywhere. But Wayfair explicitly makes it clear that this is not the case. Five years after Wayfair, taxpayers should continue to think critically about the totality of their contacts with a particular state. While the impulse to simply look at the amount of sales made into the state may be strong, Wayfair does not support such a simplistic analysis.

Mississippi’s New Comprehensive Software Sales Tax Laws – What You Need to Know

The Mississippi Legislature recently enacted SB 2449 (effective July 1, 2023) to address longstanding issues related to how the state taxes remote software and computer services.  What began in 2021 with an effort by the Mississippi Department of Revenue to update and modernize its sales tax regulations (albeit with a significant expansion of the tax base), culminated with comprehensive legislation this year address numerous complexities associated with the delivery and use of computer software in the modern technological era.  The following is a brief summary of some of the key points taxpayers should be aware of as they conform their compliance processes to the new law. 

What is and is not taxable?

  • Computer software is tangible personal property and is taxable if it is “physically or electronically delivered or located within this state.”
  • Computer software maintained on a server located outside the state and accessible for use only via the internet is not a taxable retail sale. 
    • This codifies the identical rule that has been contained in the Department’s regulations for several decades, so cloud-based and other remote software is not taxable unless it is actually downloaded into the state.
    • This means traditional SaaS and items such as enterprise software maintained on a company’s servers outside the state should remain nontaxable.
  • Computer software services are taxable when they are “actually performed within this state.”
  • When a taxpayer performs computer software services both within and without the state’s borders,  the taxpayer may utilize “any reasonable formulae” of apportionment to determine that portion of the services which are taxable here.
    • Previously, the law only authorized the Department to make this determination, and no guidance was ever issued.
    • This effectively codifies the historic location-based approach to sourcing computer software services when determining which services are subject to the state’s sales tax.

What is taxable “computer software”?

  • Computer software is defined as “any computer program or routine, or any set of one or more programs or routines, which are used or intended to cause one or more computers, pieces of computer-related peripheral equipment, automatic processing equipment, or any combination thereof, to perform a task or set of tasks.”
    • It explicitly does NOT include charges for the use of or right to use physical computer equipment, infrastructure, servers, platforms and other tangible computer devices, including, but not limited to, items commonly referred to as “platform as a service” or “infrastructure as a service.”

What are taxable “computer software services”?

  • Computer software service is defined as “technical design and programming of computer software and includes installing, configuring, debugging, modifying, testing, or troubleshooting computer hardware, networks, programs or computer software.”
    • It explicitly does NOT include the following non-exclusive list of services:
      • the use of or right to use physical computer equipment, infrastructure, servers, platforms and other tangible computer devices, including, but not limited to, items commonly referred to as “platform as a service” or “infrastructure as a service”;
      • information and data processing services;
      • services that use a computer, computer equipment, or computer software as a tool to perform or complete that service;
      • internet access services or charges;
      • payment processing or banking services;
      • real estate listing or pricing services;
      • electronic advertising and marketing services; and
      • social media services

What are nontaxable “information and data processing services”?

  • This term includes, but is not limited to, automated or nonautomated services where the primary object of the service is the systematic performance of operations by the service provider to enter, store, sort, analyze, aggregate, classify, manipulate, convert, retrieve, extract and/or compile the required information into an appropriate form, usable information, or report.
    • This category of nontaxable services explicitly includes the following non-exclusive list of examples:
      • check or payment processing services;
      • image processing services;
      • form processing services;
      • billing services;
      • transcription services;
      • word processing services;
      • survey processing services;
      • payroll processing services;
      • claim processing services;
      • research database services; and
      • accounting and tax compliance services
    • Because this provision is not an exemption but rather a limitation on the scope of the sales tax, any future ambiguities should be construed in favor of the taxpayer and against taxation.

Direct pay permit

  • The new law directs the Department to make available a special certificate, much like a direct pay permit, to allow business consumers to self-accrue taxes on these items and services.
    • This takes the vendor out of the equation, which will be important when unbundling transactions, determining which portion of a transaction occurred inside Mississippi versus elsewhere, what rate applies, etc.
    • It also should give taxpayers a direct right to recover overpaid taxes rather than have to go back through their vendor.
  • Taxpayers are not required to use this certificate; it will be optional at the taxpayer’s discretion.
  • That form should be available from the Department later in June.

Bundled transactions

  • The new law authorizes consumers to “unbundle” payments that represent a combination of taxable and nontaxable items or services.
  • Taxpayers may do this “based on a reasonable allocation of the payment to each separately identifiable item or service encompassed by the fee or payment, if properly supported by the books and records of the seller, service provider, user, or consumer.”
    • If the consumer cannot get that information from its vendor, it may make that determination “based on the best information available to the user or consumer if properly supported by the books and records of the user or consumer.”
      • The law explicitly states that no presumption arises that the entire fee or payment is taxable merely because it encompasses both taxable and nontaxable elements.
    • The Department is authorized to review that determination on audit, but if it challenges that method it must establish by a preponderance of the evidence:
      • (1) that the allocation method utilized by the seller, service provider, user, or consumer was not a reasonable method of allocation, and
      • (2) that the allocation method proposed by the commissioner is the most reasonable of all available or alternative methods.

Multistate use

  • The new law authorizes taxpayers to determine that portion of a multistate license fee or payment attributable to computer software located within the state or to computer software services which are actually performed within the state.
    • It provides several specific “safe harbor” methods taxpayers can use in making this allocation.
      • If none of the above safe harbor allocation methods fairly reflect the allocation of these items to the state, the taxpayer may make such allocation based on the best information available to such person if properly supported by the books and records of the seller, service provider, user or consumer.
    • The Department is authorized to review that determination on audit, but if it challenges that method it must establish by a preponderance of the evidence:
      • (1) that the allocation method utilized by the seller, service provider, user, or consumer was not a reasonable method of allocation, and
      • (2) that the allocation method proposed by the commissioner is the most reasonable of all available or alternative methods.

Intercompany exemption

  • The law contains an important exemption for intercompany services or charges that might include software or related support services.
    • Computer software or computer software services provided by one legal entity to another commonly owned, related or affiliated entity shall be treated as nontaxable transfers between different segments of one (1) legal entity, with proper credit allowed for Mississippi sales or use tax paid and/or credit for sales or use tax paid to another state as provided in this section or in the use tax code, regardless of which affiliated entity paid the sales or use tax for which credit is taken.
      • This is intended to protect centralized internal corporate IT and technical support groups from triggering a sales tax liability.
    • This provision does not exclude from taxation the purchase or payment by such organization to a third party seller or provider for any computer software or computer software services that are otherwise taxable.

Credit for taxes paid to other states

  • The law establishes a credit mechanism for sales taxes paid to other states on these items.
    • This is similar to the use tax credit that has always existed, but no comparable credit was contained in the sales tax code.
    • The credit encompasses taxes paid at both the state and local levels in other jurisdictions.

Transition provisions

  • These changes are prospective only, and do not impact any assessment, refund, etc. proceedings applicable to periods prior to the July 1, 2023 effective date.

This legislation should be very beneficial to local businesses and should resolve numerous issues that commonly arise in sales and use tax audits, especially in the context of SaaS and other modern remote software and service applications. 

Special credit goes out to several local organizations that helped craft and shepherd this through the Legislative process, including BIPEC (the Business and Industry Political Education Committee), the Mississippi Manufacturer’s Association, the Mississippi Economic Council, the Mississippi Bankers Association, and the Mississippi Realtors Association.

If you have any questions regarding Mississippi’s New Comprehensive Software Sales Tax Laws, please contact our Jones Walker SALT Team partner, John F. Fletcher.

Recent Obstacles to New Chicago Mayor’s Campaign Budget Proposals will likely Increase the Temperature on the Transaction Tax

The very first “courtroom” I ever entered as a newly minted lawyer was at the Chicago Administration Hearings Department at 400 W. Superior Street. That case, if I recall correctly, was about the city’s Real Property Transfer Tax and what portion of the sales price in a particular transaction was attributable to the transfer of real property. Exciting stuff, I know.

A few years later, the city promulgated Personal Property Lease Transaction Tax Ruling #12 and, for a brief moment, the eyes of the state and local tax world were on Chicago. While purporting to clarify existing law, the Chicago Department of Finance explained that if a particular sale was not subject to another tax and was for a nonpossessory computer lease, that payment was taxable under the Personal Property Lease Transaction Tax (“Transaction Tax”). The City went on to explain that if a “lessee (commonly referred to as ‘customer’) pays a lessor (commonly referred to as ‘provider’) primarily for the ability to use the provider’s computer to input, modify or retrieve data or information, the charge is primarily for the customer’s use or control of the provider’s computer and is taxable.” This, by itself, was not exactly groundbreaking. Case law from the 1980s and early 2000s had already touched on this issue. Where Ruling #12 really made news was its clarification that the tax also applied to “cloud computing, cloud services, hosted environment, software as a service, platform as a service, or infrastructure as a service.”

The Transaction Tax has since adopted the moniker of “Cloud Tax” or “SaaS Tax” for good reason. Software vendors that had never even heard of the tax were audited as were end-users of software in the city. Audit activity with respect to the tax has steadily increased while leniency with respect to its administration has decreased. In 2015, when the ruling was first issued, the City quickly attempted to address the taxpayer community’s concerns, dropping the applicable rate from 9% to 5.25% for cloud products and pushed back the effective date to January 1, 2016. It also offered a voluntary disclosure program specifically aimed to lessen the effects of its policy change.

Since 2015, however, the city has slowly walked back its original walk back. In 2020, the applicable tax rate was increased to 7.25% and in 2021, it was again increased to 9%. Moreover, while the line between cloud/SaaS products and professional services that may contain a digital element has become increasingly nuanced, the city has not issued any further substantive clarification since its 2015 Information Bulletin. The only other development with respect to the Transaction Tax came in January 2021, when the City issued an Information Bulletin providing that remote software vendors would be subject to a “safe harbor” (i.e. not be subject to tax) if their receipts derived from Chicago customers did not exceed $100,000 during the most recent consecutive four calendar quarters.

With the recent election of Mayor Brandon Johnson, it is hard to imagine that enforcement activity of this somewhat nebulous tax will not continue to increase. Johnson’s calls for a Big Banks Securities and Speculation Tax appear to have found little support at the state level (Illinois law specifically preempts local home rule governments from levying “any tax on stock, commodity or options transactions”), and the Transaction Tax has proven an opportunity for the city to tax indirectly what it may not tax directly. As the city audits vendors and customers concurrently, even transactions that are likely not taxable will probably get caught up in the fray, potentially twice. 

If you have any question regarding this post, please contact Jones Walker LLP SALT Team partner Chris Lutz.

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