Last Week in Tax News (June 12-16)

Ensuring Eligibility

Oklahoma amends the sales and use tax exemption for sales of tangible personal property or services to unremarried surviving spouses of certain disabled veterans, effective 7/1/2023. Specifically, it clarifies that an unremarried surviving spouse may still claim the exemption if the disability determination that would have been made while the disabled veteran was still living was not made final until after the disabled veteran's death. 

One Man’s Trash is Another Man’s Treasure

The Florida Department of Revenue has announced that the definition of “secondhand goods” has been revised for purposes of applying sales and use tax. The term “secondhand goods” is defined as personal property previously owned or used, which is not regulated metals property, and is purchased, consigned, or traded as used property. The term excludes: office furniture; pianos; books; clothing; organs; coins; motor vehicles; costume jewelry; indoor cardio and strength training equipment; and secondhand sports equipment. Effective July 1, 2023, the definition of “secondhand goods” is revised to also exclude: gold bullion; silver bullion; platinum bullion; palladium bullion; and rhodium bullion that has been assayed and is properly marked as to its weight and fitness.

Growing Plants, Growing Tax

The Virginia Tax Commissioner noted that the application of the agricultural exemption to hydroponic-related property was an issue of first impression, and applied a three-prong test law finding that certain water treatment systems could be eligible for the exemption based on playing an integral part in making the plants more marketable. A controlled environment agriculture farm that grows plants in an indoor, hydroponic environment cannot claim the agricultural exemption for property that is incorporated into real estate, such as specially designed windows and doors, integrated plumbing, electrical, lighting, and HVAC systems. Certain tangible personal property, such as refrigerated trailers and refrigerated storage sea cans, also may be exempt if it is necessary for use in agricultural production for market. However, maintenance machinery and equipment are ineligible because they are not used to produce agricultural products. Grow room sensors and cameras are ineligible because they are not used directly in the cultivation of produce for market.

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The Suite Life

An administrative law judge for the Tennessee State Board of Equalization (SBE) has ruled that the SBE could not reduce the valuation of a hotel for the 2021 tax year solely based on the significant reduction in the income generated by the property in 2020. While income producing properties, such as hotels and restaurants, were undoubtedly affected by the COVID-19 pandemic, particularly in 2020, as of the valuation date, the long-term effect of the pandemic on the hotel industry was unknown. While the judge is not without sympathy that valuing an income-producing property as of January 1, 2021, was particularly difficult because of the pandemic, the taxpayer's application of the 2020 actual numbers to 2021 is questionable. The taxpayer's proof essentially took the lowest year of operating income and applied a high cap rate in an attempt to project the 2021 value. Therefore, no adjustment to the assessed valuation was made.

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