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EisnerAmper Blog

An EisnerAmper State And Local Tax Blog

NY Court of Appeals Holds Against Department of Taxation and Finance Position on Statutory Residence

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February 28, 2014

By Stephen Bercovitch


Bercovitch_SteveThe New York Court of Appeals has decided that a taxpayer’s subjective use of the premises is a key inquiry in determining “permanent place of abode” to be considered together with the degree that the taxpayer maintains living arrangements in particular premises.  This decision, in which the Court referred to the “statutory residence” provision of the tax law, is a reversal of the Department of Taxation and Finance’s position that property rights, suitability and unfettered access equate to “permanent place of abode.”   Find out more with our article titled “Major Decision on NY Statutory Residence Issued by Court of Appeals.”

U.S. Supreme Court Declines to Review New York Amazon Click-Through Nexus Case

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Mierzwa_Roger Bingel, GaryDecember 17, 2013

By Gary Bingel, CPA and Roger Mierzwa, CPA 

In our April 1, 2013 State and Local Tax blog, we described the impact of New York’s highest court upholding New York’s Internet affiliate nexus requiring the collection of sales tax even when a retailer has no physical nexus itself in New York.  The taxpayers subsequently appealed to the U.S. Supreme Court. 
 

On December 3, the U.S. Supreme Court denied a request to review the Amazon.com and the Overstock.com challenges to New York’s statutory provisions requiring out-of-state Internet retailers with no physical nexus to collect sales tax.
 

This decision has now exhausted the appellate options for the New York law.   Thus, “click-through” nexus is now the law of the land, at least in New York.  While other states have adopted laws similar to New York’s, not every state’s affiliate nexus law has been upheld.  Specifically, the Illinois Supreme Court decided in October 2013  that the Illinois affiliate nexus statute was invalid and unenforceable because it was preempted by the Federal Internet Tax Freedom Act.

START-UP NY

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Bercovitch_SteveDecember 3, 2013

By Stephen Bercovitch  

The NYS Department of Taxation and Finance has taken the initial step to implement the the ‘SUNY Tax-Free Areas to Revitalize and Transform Upstate New York’ (START-UP NY program) by issuing a technical memorandum summarizing the tax benefits for approved businesses located within a tax-free NY area, and for the employees of these businesses.  The full text of the State’s October 22, 2013 Memorandum can be found here.    

In brief, the START-UP NY program is intended to draw businesses and jobs to New York State, that would not have otherwise located in-state and especially upstate.  New York loses many start-up companies to various states shortly after their formation.  This program is designed to help attract and expand job opportunities that will benefit all residents.  The benefits afforded under the program will apply to tax years beginning on or after January 1, 2014 and to sales tax quarters beginning on or after March 1, 2014.  Businesses must apply for the program by December 31, 2020.

The START-UP NY program is designed to create tax-free communities on currently vacant land or space on the campuses of SUNY schools and community colleges, CUNY campuses, and other eligible New York private college and university campuses.  The initiative is geared toward leveraging higher education institutions with advanced research and development resources for the benefit of new businesses for a synergy of industry experts and research laboratories, to create new jobs and expand opportunities for students and academic researchers in targeted start-up industries.  The intention is to foster business-academic alliances that result in commercially viable technological innovation and the resulting new jobs.  There are a number of requirements to be met:

  • The eligible start-up business must be new to New York – start-ups cannot have been engaged in a line of business that is currently or was previously conducted by the business or a related person in the last five years in New York State, and employees cannot be transferred from employment with another business located in-state through reorganization; 
  • The mission and activities of the business must align with or further the academic mission of the campus, college or university sponsoring the tax-free NY area;
  • The new job must be a full-time job (or two or more part-time jobs that together constitute the equivalent of a full-time job), filled for more than six months during each year for which tax benefits are being granted, and not filled by an individual employed within New York State within the preceding 60 months by a related person.
  • In New York City, Long Island, and Westchester County, new technologies are targeted.  For these downstate areas – in addition to the other requirements -- a business must be in the “formative stage” (not yet in the commercial marketplace); or
    • Engaged in the design, development and introduction of
      • new biotechnology,
      • information technology,
      • remanufacturing,
      • advanced materials processing,
      • engineering or electronic technology products; and/or
      • innovative manufacturing processes.
       
     

Qualified businesses and their employees will enjoy numerous tax benefits such as:

  • Business income tax exemption for ten years, based on presence in the designated campus related area;
  • Employees in participating qualifying companies will pay no state personal income taxes for the first five years on income of $200,000 for a single individual or $300,000 if filing a joint return; 
  • Exemption from sales and use taxes on property and services; and/or 
  • Exemption from real property taxes on property owned by a college or university. 

Much remains to be implemented.  Campuses must submit a plan to be designated as a tax-free community.   A three-member Start-Up Approval Board will designate up to twenty such sites.  Existing academic programs cannot be cancelled and current buildings, such as dorms or classrooms, cannot be razed to make land available for companies seeking tax benefits.   The Governor is also seeking additional ideas to incentivize business.  On October 2, 2013 he established the New York State Tax Relief Commission comprised of former Governor Pataki and Comptroller Carl McCall as well as other highly qualified citizens and business leaders.  This group is to examine new ways to reduce the burdensome tax load on start-up businesses and fuel economic growth.  For more information, please contact your tax professional.

New Massachusetts Computer and Software Tax Repealed

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Mierzwa_Roger Bingel, GaryOctober 17, 2013

By Gary Bingel, CPA and Roger Mierzwa, CPA 

On September 27, 2013, Massachusetts Governor Deval Patrick signed legislation that repealed the imposition of the 6.25% sales and use tax on computer and software services that was originally effective July 31, 2013.  This is an amazing turnaround from just a few months ago when the Governor vetoed the bill to implement the tax on computer services.  Both the Massachusetts Senate and House of Representatives voted on July 25, 2013 to override the Governor’s veto, enacting the law effective July 31, 2013.  The new tax was to be imposed on computer system design services and the modification, integration, or configuration of standard software.  Computer system design services means the planning, consulting, or designing of computer systems that integrate computer hardware, software, or communication technologies and are provided by a vendor or a third party.  The new tax did not apply to data access, data processing, or information management services.

After the veto override, the business community realized the impact of the new tax law and raised a loud outcry which created an immediate reaction in the legislature.  In anticipation of repeal, the Department of Revenue (DOR) initially extended the September 20 filing/payment date for taxes collected July 31 through August 31 to the October 20 filing date.

Now with the repeal, the DOR has issued Technical Information Release 13-17 explaining what vendors need to do to return the tax to their customers if they had already collected and remitted the tax to the state or if they collected the tax but did not yet remit.

Finally, the DOR stated that “longstanding statutory and regulatory rules regarding sales and use tax on standardized or prewritten software and on computer hardware remain in effect.”  Also, the DOR stated that it will issue additional guidance to clarify when a transaction is a taxable sale of standardized or prewritten software and a non-taxable service.

 

“Throw-Out” Rule Modified by New Jersey Tax Court

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EisnerAmper professionals Gary Bingel, CPA and Roger Mierzwa, CPA recently published a Tax Alert on the impact of a New Jersey Tax Court “Order Granting Partial Summary Judgment.” By eliminating the dual nexus standard previously applied by the state, the order clarifies the “throw-out” rule and may have an effect in determining if refunds are available from years within the statute of limitations (four years in the Garden State). To find out more, please click here.

EisnerAmper’s Gary Bingel, CPA, Chairs Institute for Professionals in Taxation’s Annual Income Tax Symposium

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September 30, 2013

If your company is like most, apportionment issues are something that you deal with daily from both an audit standpoint and a planning perspective. This year’s IPT 2013 Income Tax Symposium, November 3-6 in Indian Wells, CA, will focus on apportionment and be chaired by EisnerAmper tax partner Gary Bingel, CPA.  For more information, or to register, please click here.

Economic Opportunity Act of 2013

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 By Gina Giordano 

The Economic Opportunity Act of 2013 is aptly named, as it is expected to make New Jersey a competitor in both the national and global economy.  The Act represents a long awaited modernization of New Jersey’s incentive programs that will allow New Jersey to attract jobs and capital investments.  

The act will consolidate five of New Jersey’s economic incentive programs for businesses into two -- the Grow New Jersey (“Grow NJ”) Assistance Program and the Economic Redevelopment and Growth Grant Program (“ERGG”).  The Business Retention and Relocation Assistance Grant, the Business Employment Incentive and the Urban Transit Hub Tax Credit programs will be phased out.  The two remaining programs will be enhanced by extending incentive eligibility to greater geographical boundaries within New Jersey and by lowering the programs' eligibility thresholds. 

The act is slated to provide tax credits to eligible businesses for an eligibility period not to exceed ten years.  The Grow NJ tax credit, ranging from $500 to $5,000 per job, is mainly tied to the number of jobs created or retained by the project and to the location of the project.  A project must meet minimum capital investment and jobs-created or jobs-retained thresholds in order to be eligible for the tax credit.  However, for projects located in Garden State Growth Zones and in Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Ocean and Salem counties, these thresholds are reduced.  The minimum capital investment required is reduced by one-third in these areas, and the minimum number of new or retained full-time jobs required is reduced by one-quarter in these areas.  A Garden State Growth Zone means the four New Jersey cities with the lowest median family income based on the 2009 American Community Survey from the U.S. Census. 

The ERGG additionally creates a redevelopment incentive of up to 40% of a developer’s total project costs for a project located in a Garden State Growth Zone (as opposed to 30% for a project located outside of this zone).  For those qualified residential projects that have already applied for the Urban Transit Hub Tax Credit, a tax credit of up to 35% of their capital investment or up to 40% of the capital investment for projects in a Garden State Growth Zone can be received.  The definition of what constitutes a capital investment, in a Garden State Growth Zone, is expanded to include any and all redevelopment and relocation costs such as site acquisition (if made within 24 months of application to the authority); engineering, legal, accounting and other professional services; and relocation, environmental remediation and infrastructure improvements for the project area, such as on and off site utility, road, pier, wharf, bulkhead, or sidewalk construction or repair. 

The tax credit will apply dollar for dollar against certain tax liabilities, including the corporation business tax and the premiums tax on domestic and foreign insurers.  It can also be transferred, in lieu of the business being allowed a credit against its tax liability.  It may be sold or assigned, either fully or partially (typically in an amount not less than $100,000), to any other person that may have certain tax liabilities.

Businesses must apply for the tax credit.  The Act would sunset both Grow NJ and ERGG on July 1, 2019, meaning that applications should be submitted on or before June 30, 2019.  

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