News & Publications
In Case You Missed It: Last Week in Allyn Tax News (March 21-25)
New York – Sales & Use Tax Applicability on Leases of Paintings
The Tax Appeals Tribunal has determined that "temporary possession is the essence of a lease transaction and a purchase for the purpose of leasing is a purchase for resale under Tax Law." In the case that was under question, the taxpayer purchased a one-half share of a Pablo Picasso painting for $3.6 million and paid sales tax on that amount. The painting was then leased to the party who owned the other half of the painting, and the lease renewed annually. The intent at the time of purchase determines whether a sale is for resale. The Tribunal determined that the taxpayer qualified for resale since he showed a valid lease agreement with no evidence of a taxable use. While the taxpayer could take back possession of the leased piece of art, there is no evidence determining this was the intent at the time of purchase. However, if any possession did occur, the taxpayer would owe use tax.
Red Flags that Lead to IRS Audits
To paraphrase Franklin Roosevelt, the only thing we have to fear is an audit. The most important thing to know about audits is that there is no guaranteed way to prevent one. Therefore, it should be no surprise that the most trusted way to prevent an audit is to ensure that your tax returns are filed timely, accurately, with integrity, and in accordance with sound accounting principles. Everything you do that causes your business to stand out increases your risk.
To learn more about the red flags that lead to an IRS audit read our tax specialist’s article here: https://www.allynintl.com/en/news-publications/entry/red-flags-that-lead-to-irs-audits
South Dakota: Youth Sport Coaches are Exempt from SUT
Effective July 1, 2022, new South Dakota law will exempt from sales and use tax any person coaching a youth sport whose gross receipts from coaching are less than $4,000 in any calendar year.
For more information please visit: https://dor.sd.gov/media/jasd4akq/2022-1-sales-use-tax-guide.pdf
New Jersey Sales & Use Tax Implications on Virtual Currency
The New Jersey Division of Taxation has clarified sales and use tax implications for virtual currency. When convertible virtual currency is purchased for investment purposes, it is treated as the purchase of intangible property and is therefore not subject to sales tax. On the other hand, when convertible virtual currency is used as payment for the purchase of taxable goods or services, New Jersey sales tax applies. When a retailer accepts convertible virtual currency, several responsibilities follow. The retailer must determine the fair market value in U.S. dollars, as of the date of payment, and charge the customer the correct sales tax on the transaction. The retailer’s books and records must also be kept up to date with the correct value stated of virtual currency converted to U.S. dollars, and the correct value of sales tax collected must be documented.
Michigan to Enact Exemption for Qualified Heavy Equipment Rental Personal Property
Effective 12/31/2022, Michigan will exempt qualified heavy equipment rental personal property from the collection of tax under the General Property Tax Act. "Qualified heavy equipment rental personal property means any construction, earthmoving, or industrial equipment that is mobile and rented to customers by a qualified renter, including attachments or other ancillary equipment for that equipment. Qualified heavy equipment rental personal property does not include handheld tools or equipment solely designed for industry-specific uses in oil and gas exploration, mining, or forestry. Equipment is mobile if it is not intended to be permanently affixed to real property for its intended use and can be moved among worksites”. An exemption statement will need to be filed by February 20 in order to qualify.
Virginia – PPE Sales Tax Exemption Expires
Effective March 24th, 2022, Virginia’s temporary sales and use tax exemption for qualifying business purchases of personal protective equipment, (PPE), related to the COVID-19 pandemic will expire, as stated in a new Virginia Department of Taxation bulletin. This exemption was set in place with the intention of expiring following the last executive order issued related to the pandemic and the termination of the COVID-19 Emergency Temporary Standard. Since Governor Ralph Northam has declared that Virginia is no longer under a statewide emergency order, applicable permanent COVID-19 regulations were repealed March 23, 2022. Therefore, any purchase made after March 23, 2022, is no longer eligible for the PPE exemption.
For more information please visit: https://www.tax.virginia.gov/sites/default/files/inline-files/tb-22-5-personal-protective-equipment-exemption-expiration.pdf
Connecticut Gas Tax Suspension
In the face of skyrocketing gas prices across the United States, Connecticut has become the next state to suspend its gas tax. The pause begins on April 1st, but it is no joke. The $0.25 per gallon tax will not be collected for a three-month period. Any sellers who do not lower prices to reflect the suspension are considered to be using a deceptive trade practice. While some economists disagree that a gas tax suspension is the best legislative maneuver given the historic level of inflation facing the nation, consumers will see a brief relief on their tightening budgets for the time being.
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For More Information
If you are interested in learning more about this topic or other tax topics, please visit our Tax Publications under News & Publications at www.allynintl.com.
Contributor: Eileen Contrucci
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