State and local tax issues continue to cause confusion and headaches for taxpayers and clients. Here are a few from the past week:
"Bundled Transactions" - when a transaction contains both a taxable and nontaxable item and they are not separately stated. Some states look to what the "true object" of the transaction is to determine taxability.
Sales taxation of computer services, cloud computing, hosted software services and other electronic transactions.
Whether a taxpayer should file a combined or separate income tax return in several jurisdictions.
Whether a repair to real estate is a nontaxable service or a taxable sale of tangible personal property.
Credit and incentives programs create opportunity and confusing "hoops" to "jump" through.
States reach to require taxpayers to disclose more information and be more "transparent."
States find taxpayers create other entities only for "sham transaction" purposes.
States look to reform tax appeals process.
Taxpayers struggle to situs gross receipts and take proper deductions for local gross receipts taxes.
Taxpayers fail to obtain proper sales tax exemption certificates at the time of sale and struggle to prove exempt upon audit.
These are just some of the issues taxpayers are dealing with. There are many more.
States and taxpayers should work together to obtain more clarity in all areas, because state and local taxes are deceptively simple and endlessly complicated.