SALT Select Developments – April 2023 | Baker Donelson

SALT Select Developments – April 2023 | Baker Donelson

State and local taxes impact almost every taxpayer, and developments in any one jurisdiction can be frequent and sometimes confusing. In this newsletter edition, we will briefly summarize certain state and local tax (SALT) developments in several states which may be important to you.

Alabama – Updates Reported

Proposed Property Tax Exemption Rule for Local Government Guidance: On February 28, 2022, Governor Ivey signed the Small Business Relief and Revitalization Act of 2022 into law, which provided immediate tax relief for Alabama small businesses. Among such relief is an exemption of up to $40,000 of market value for the state business personal property tax, which was publicized to effectively exempt 75 percent of Alabama businesses from payment of the state portion of this tax. As a follow-up to that enactment, and in accordance with the Governor’s Executive Order No. 735 dated March 8, 2023, the purpose of which is to reduce Red Tape on citizens and businesses in Alabama, the Alabama Department of Revenue (Department) on March 20, 2023, filed New Rule Number 810-4-1-.14 which, once promulgated, would provide guidance to counties and municipalities with respect to establishing a mirror exemption at the local level to the extent of $40,000 in market value if those local governments elect to do so. A public hearing on this proposed promulgation is scheduled for May 9, 2023, and the Department announced that participation in this public hearing will be conducted via web conference. The Department also provided contact information regarding its Tax Policy and Governmental Affairs Division for those intending to participate in that public hearing. More information can be found here.

District of Columbia – Updates Reported

Sales Tax Applies to Additional Mandatory Charges: On April 16, 2023, the Office of Tax and Revenue (OTR) issued Notice 2023-03 addressing additional mandatory charges that certain employers are imposing on consumers of tangible personal property and taxable services sold within the District. By way of background, in November 2022, the District voters passed Initiative 82 which eliminated the tipped minimum wage for service, bartenders and other tipped workers which was $5.35. To reach the District’s minimum wage, currently at $16.10, the minimum wage difference was made up with gratuities, whether voluntarily given by consumers or required to be paid by consumers. This gratuity is otherwise known as the “tip credit.” However, beginning on May 1, 2023, employers are required to supplement workers’ pay if the worker did not earn enough in tips to reach the District minimum wage. This tipped minimum wage will be phased out according to the Notice by 2027 and replaced with one universal minimum wage. However, the OTC stated in this Notice that it has received inquiries from consumers who have recently noticed an additional line-item mandatory charge on their bills for otherwise taxable purchases, such charges being characterized as “fair wage service charge,” “packaging fee,” “resort fee,” or similar descriptions. This Notice reminds businesses and consumers that, under District law, if the tangible personal property or taxable service being sold is subject to the District sales tax, the business must collect or remit the sales tax on the total sales price, which includes mandatory service charges or fees. The Notice provides contact information if there are questions regarding the taxability of these mandatory charges. More information can be found here.

Florida – Updates Reported

Solid Mineral Tax Rates for 2023: On April 7, 2023, the Florida Department of Revenue (Department) published Tax Information Publication No.: 23B07-01 setting forth the tax rate per ton for phosphate rock producers as well as heavy minerals producers for the tax period beginning January 1 through December 31, 2023. The tax rate for phosphate rock producers for 2023 according to this Publication is $1.61 per ton, and the tax rate for heavy minerals producers is $3.80 per ton. The Publication stated that there is no change in the tax rate for the production of other solid minerals, and such tax remains at eight percent of the taxable value of other solid minerals produced. This Publication provided contact information if there are questions regarding these announcements. More information can be found here.

Georgia – Updates Reported

Ad Valorem Tax Relief: On March 16, 2023, Governor Kemp signed into law House Bill 311, which provides for the possibility of tax relief in the form of reduced appraised values for ad valorem tax purposes. With exceptions for particular political jurisdictions, Georgia property tax values are determined by the Tax Assessor’s Office on the basis of the value of the parcel on January 1 of the year in question, with opportunities for appeal. HB 311 is admittedly responsive to adverse weather in several counties occurring early in the Legislative Session, which was the occasion of a declaration of disaster area by the appropriate government officials. The Georgia Code, as amended, permits local government officials to grant property tax relief in several ways, including the reduction of the millage rate among affected parcels or flat dollar amounts of reduction. The Act is effective with respect to assessments on or after April 1, 2023, which will permit it to apply to assessments for the year 2023. More information can be found here.

Louisiana – Updates Reported

State Sales Tax Rebate for Fencing Materials Purchased By Certain Commercial Farmers: Earlier this year the Louisiana Department of Revenue issued Revenue Information Bulletin No. 23-007 dated February 1, 2023, addressing a certain state sales tax rebate approved in the 2022 Legislature for the purchase of certain agricultural fencing by commercial farmers impacted by Hurricanes Laura, Delta, Zeta, and Ida. According to this Bulletin, the amount of the rebate is equal to the state sales and use tax paid by commercial farmers on the agricultural fencing materials purchased. In that regard, the Bulletin stated that agricultural fencing materials are materials that enclose land used for agricultural purposes in the production of food and fiber; and such agricultural fencing materials are limited to materials used to replace or repair fencing located in federally declared disaster areas, if such fencing was substantially damaged or destroyed by the above-referenced hurricanes. According to this Bulletin, a commercial farmer means only those persons, partnerships, or corporations who are certified as commercial farmers by the Department on or before January 1, 2022. A copy of the commercial farmers’ certificate/card must be attached to the rebate request. The Bulletin also stated that a rebate is not allowed for any portion of the purchase of agricultural fencing materials paid for with insurance proceeds or state or federal funds unless the state or federal funds are reported as taxable income or are structured as repayable loans. The Bulletin also set forth how a commercial farmer can claim the rebate pursuant to the 2022 enactment; and that rebates are only allowed for purchases of agricultural fencing made on or before December 31, 2022, may only be submitted once per calendar year, and that all claims for rebates must be submitted on or before December 31, 2023. More information can be found here.

Maryland – Updates Reported

Taxpayer Advocate Division: On April 11, 2023, the Comptroller of Maryland (Comptroller) published a News Release reviewing certain legislative accomplishments during the 2023 Legislative Session, just one of which being the passage of 2023 HB707/SB660 which establishes a Taxpayer Advocate Division within the Office of the Comptroller. According to the Release, this legislative initiative will be signed into law at a later date; and when enacted, will provide at least six staff members to assist Marylanders with timely resolutions to tax issues and work to identify and address systemic challenges to efficient tax processing and problem resolution for Marylanders. According to the Bills, the legislation when signed into law will be effective July 1, 2023. More information can be found here.

Mississippi – Updates Reported

Updated Guidance on Pass-Through Entity Election: On April 13, 2023, the Mississippi Department of Revenue (Department) published Notice 80-23-002 addressing House Bill 1668 of the 2023 Legislative session that was signed into law on March 27, 2023. According to the Department’s Notice, this legislation amended the method by which a partnership, S corporation or other similar pass-through entity may elect to become an “electing pass-through entity” for state income tax purposes, and provided that additional income tax credits generated by the electing pass-through entity, shall be passed through to the owners on a pro rata basis and that any excess credit may be carried forward as an overpayment or refund. Additionally, the Notice stated that limitations applicable to credits generated by the electing pass-through entity shall apply to the owner, member, partner, or shareholder. This new legislation is effective, according to the Notice, from and after January 1, 2023, and applies to any income tax return with an original due date on or after January 1, 2023. The Notice then addresses various topics such as eligibility for the pass-through entity election; making or revoking the pass-through entity election; filing an electing pass-through entity return; estimated tax payments; composite returns; and pass-through entity credits. More information can be found here.

North Carolina – Updates Reported

New Quarterly Off-Highway Use Refund Claims: On March 31, 2023, the North Carolina Department of Revenue (Department) issued an Important Notice addressing recent legislative changes to the filing frequency for refund claims of tax-paid motor fuel used for off-highway use under North Carolina laws. According to the Notice, the law previously provided for an annual refund claim for tax-paid motor fuel used for off-highway purposes. Effective January 1, 2023, this Notice states that North Carolina law allows a person who purchased and uses motor fuel for a purpose other than to operate a licensed highway vehicle, to file a quarterly refund claim for excise tax paid during the preceding calendar quarter. According to this Notice, the Department has published a new form on its website for filing quarterly off-highway refund claims, and such form can be accessed through the contact information in that Notice. More information can be found here.

South Carolina – Updates Reported

Cigarette and Tobacco Tax Manual: Earlier this year the South Carolina Department of Revenue (Department) published a Cigarette and Tobacco Products Tax Manual so as to provide businesses and tax professionals a central summary of information concerning cigarette and tobacco products tax laws in South Carolina. This Manual references specific authority, including the law, regulations, and the Department’s advisory opinions. The Manual contains a Disclaimer which provides in part that nothing in the Manual supersedes, alters, or otherwise changes provisions of South Carolina law, regulations, or the Department’s advisory opinions. Contact information is provided in the Disclaimer in the event there are comments regarding provisions within the Manual. More information can be found here.

Tennessee – Updates Reported

Franchise and Excise Tax Filing Extensions Through July 31, 2023: The Tennessee Department of Revenue (Department) has recently issued Notice #23-02 entitled Natural Disaster Tax Relief Notice. According to this Notice, and consistent with the IRS’s decision related to the March 31 and April 1 storms to extend federal deadlines for businesses located in a designated disaster area, the Department has extended the franchise and excise tax filing and payment deadlines to July 31, 2023. Those franchise and excise tax extensions apply to all taxpayers located in any disaster area designated by the Federal Emergency Management Agency, which currently includes the ten Tennessee Counties that are referenced in that Notice. This tax relief, according to the Notice, postpones franchise and excise tax filings and payment deadlines that occur starting March 31, 2023, and the Department will automatically apply these extensions to franchise and excise tax accounts of taxpayers with a primary address in the designated disaster area. Penalties and interest will not be applied, according to this Notice, to returns filed and payments made on or before the extended July 31, 2023 date, but such extension will not alter due dates or extend due dates that otherwise fall after July 31, 2023. According to this Notice, these extensions do not apply automatically, but can apply on a case-by-case basis, to extension requests from taxpayers needing extensions as a result of the March 31 and April 1 storms with respect to sales and use tax, business tax, and other taxes. The Notice sets forth information regarding how to seek such an extension for these other taxes. More information can be found here.

Texas – Updates Reported

Emergency Preparation Supplies Sales Tax Holiday: The Comptroller’s Office has recently published an announcement that the 2023 Emergency Preparation Supplies Sales Tax Holiday will begin on April 22, 2023, and end at midnight on April 24, 2023. As referenced in this announcement, emergencies can cause physical damage like hurricanes, flash floods, and wildfires. Taxpayers, according to this announcement, can purchase certain emergency preparation supplies tax free during the sales tax holiday, and there is no limit on the number of qualifying items that can be purchased, nor does the taxpayer need to give an exemption certificate to claim the exemption. This announcement lists the type of emergencies preparation supplies that qualify for the tax exemption, as well as lists the supplies that do not qualify for the tax exemption. More information can be found here.

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