State Tax Rulings
Free state tax letter rulings and advisory opinions with plain-English summaries, full citations, and the original source on every page.
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Is an Air National Guard member's pay for federal Title 32 homeland-defense duty during the COVID-19 emergency excluded from New York taxable income?
Yes. The pay may be excluded. Although the duty was ordered under Title 32 of the U.S. Code (not Title 10), the member served within New York at the Governor's direction as part of the state's coronav…
If a charitable donation is fully deductible federally but exceeds my lower New York adjusted gross income, can I carry the unused amount to later New York returns?
No. There is no provision in the New York Tax Law allowing a carryover of charitable donations to later years. Because the donation created no federal carryover (it was fully deducted federally), New …
Are a retired federal employee's periodic (non-lump-sum) Thrift Savings Plan distributions exempt from New York State income tax?
Yes. Distributions other than a lump sum from a federal Thrift Savings Plan (TSP) funded by the employee and the federal government qualify for the federal-employee pension subtraction under Tax Law §…
Can New York waive the refund statute of limitations for claims filed more than three years after the returns, based on a tax-treaty competent-authority determination?
No waiver is needed. Although the general limit is three years (Tax Law § 687(a)), a refund claim that is attributable to a federal change or correction gets an extended deadline under Tax Law § 687(c…
Are a nonresident retired partner's payments from a CPA firm's partnership agreement exempt from New York income tax as retirement income or an annuity?
No. The payments are taxable as New York source income. They are not protected 'retirement income' under the federal Pension Source Law (4 USC § 114) because they are not 'substantially equal periodic…
Are IRA distributions exempt from New York income tax when the IRA was funded only by rolling over a retired federal employee's Thrift Savings Plan?
Yes, but only for the portion that represents the rolled-over Thrift Savings Plan (TSP) amount. That portion qualifies for the federal-employee pension subtraction under Tax Law § 612(c)(3)(ii). Gains…
Does a construction contractor owe Illinois Use Tax or Retailers' Occupation Tax on materials, like solar panels, that get permanently installed into real estate?
Construction contractors are treated as end users of the materials they permanently affix to real estate, so they owe Use Tax on the cost price of those materials rather than collecting sales tax from…
Does Illinois sales tax apply to a mandatory service charge or tip added to a restaurant bill?
Mandatory gratuity or service charges that are separately stated on the bill and actually paid over to the service employees as tips (or a substitute for tips) are not subject to Illinois sales tax. B…
I'm taxed by Virginia as a domiciliary resident and by Maryland as an actual resident -- Virginia gives me credit for Maryland's STATE income tax, but why won't it credit the Maryland COUNTY (local) tax I also had to pay?
It doesn't -- Virginia's out-of-state tax credit does not extend to Maryland's local county income tax, only the state-level tax, and the Department has already settled this question against this same…
When a retired NYC police officer rolls exempt SOCA Fund and VSF DROP money into an IRA, do later IRA withdrawals still qualify for New York's public-pension subtraction?
Yes, but only to the extent the withdrawal represents the rolled-over SOCA Fund and VSF DROP amounts. Those qualify for the public-employee pension subtraction under Tax Law § 612(c)(3)(i). Any other …
Are a retired federal employee's Thrift Savings Plan (TSP) distributions taxable in New York, and does the exemption survive a rollover into an IRA?
TSP distributions are not subject to New York income tax; they get the federal-employee pension subtraction under Tax Law § 612(c)(3)(ii). When TSP money is rolled into an IRA, only the portion that r…
If a New York public employee leaves before vesting and gets a refund of his retirement-plan contributions plus earnings, is that refund subject to New York State income tax?
No. The refund is tax-exempt retirement income. Because the petitioner was a public employee (CUNY) who left before vesting, the returned contributions and the earnings on them qualify for the public-…
Can a partnership's New York resident partners subtract their share of payroll expenses that were added back federally under IRC 280C because the firm claimed the research credit?
Yes. When a partnership claims the IRC § 41 research credit, IRC § 280C(c)(1) requires it to reduce (add back) the related wage deductions, which raises federal income. New York gives resident partner…
Is the fee a college-admissions testing company charges students to take its test by computer (instead of paper) — including scoring and sending results to schools — subject to Texas sales tax as a data processing service?
No. Texas ruled that a testing company's fee for administering its college-admissions test by computer — including compiling responses, generating a score, and sending results to a student's chosen sc…
Were the financing business's initial installment agreement and later unsigned conversion agreement subject to Florida documentary stamp tax?
No. The initial agreement did not state a fixed and absolute loan amount when signed, and the later conversion agreement stating the funded amount was not signed by the borrower.
My payroll software said it filed my New Mexico return but it didn't — I paid on time, so can I still be hit with a late-filing penalty?
Yes — the late-filing penalty stands. WPS, Inc., a payroll processor for 145,000 employers, paid New Mexico withholding tax for December 2022 on time electronically, but its payroll software failed to…
Is a rollover of unused South Carolina 529 (Future Scholar) funds into a Roth IRA taxable for South Carolina income tax?
A qualifying rollover of unused Future Scholar (SCCIP) 529 funds into the beneficiary's Roth IRA is not taxable for South Carolina income tax beginning in tax year 2024. Because South Carolina conform…
Can a donor claim Colorado's child care contribution tax credit for a monetary gift to a licensed nonprofit child placement (adoption) agency?
Yes. A monetary contribution to a licensed nonprofit child placement (adoption) agency qualifies for Colorado's child care contribution credit — 50% of the qualifying contribution, capped at $100,000 …
What is South Carolina's most recent state per capita income figure for tax-incentive purposes (per SC IL #24-3)?
South Carolina's most recently available state per capita personal income figure, as published in SC Information Letter #24-3 (April 9, 2024), is $56,123. A number of South Carolina income, sales and …
Does Illinois sales tax apply to a photographer's digital photo files and an optional custom-made photo album sold along with them?
Electronically delivering digital photo files by themselves is generally not subject to Illinois Retailers' Occupation or Use Tax, because transferring data electronically isn't a transfer of tangible…
Is a Managed Services Provider's resale of subscription software licenses (like Microsoft Office 365) and remote tech support to Illinois customers subject to Illinois sales or use tax?
It depends on how the software is delivered and licensed. Cloud-based software that a customer only accesses remotely and never downloads is not taxable. A license of canned (prewritten) software that…
How could the manufacturer calculate income from its qualified project for Florida's Capital Investment Tax Credit?
The Department approved using the manufacturer's separately filed Florida taxable income as project income, with 100% Florida apportionment, because all its operations and Florida activities related t…
My corporation emerged from Chapter 11 bankruptcy before Virginia could have assessed any 2020 corporate income tax, and the Department never filed a proof of claim -- doesn't that mean this later tax assessment is barred?
No -- a tax liability that didn't even exist until AFTER the company emerged from bankruptcy couldn't have been discharged in that bankruptcy, so the Department's failure to file a proof of claim does…
The IRS adjusted my income and I'm actively challenging that adjustment in federal Tax Court, with no decision yet -- does Virginia have to wait for the Tax Court before it can assess tax based on the IRS's number?
No -- Virginia assesses tax based on the IRS's adjustment as it currently stands, even while a taxpayer's Tax Court challenge to that adjustment remains undecided. A taxpayer filed an amended 2019 Vir…
A construction audit reclassified 11 of my subcontractors as employees, but I think several genuinely were independent contractors (and one wasn't even really a worker) -- does the Department analyze each worker individually, or as one group?
Individually -- the Department evaluates each worker's own facts, and here that approach cleared four more of eleven reclassified construction workers. A Virginia construction LLC was audited and told…
A drywall business audit reclassified our subcontractors as employees based only on a general statement that we controlled the work -- is that conclusion enough to support the assessment?
No -- and the Department overturned this drywall business's misclassification assessment for the same reason it has in closely related cases: the audit's conclusion wasn't backed by a genuine factor-b…
What Illinois sales tax rate applies to a powdered drink-mix product marketed as a whole food?
Illinois taxes most retail sales at 6.25%, but food for human consumption to be eaten off the premises where it's sold is taxed at a lower 1% rate unless it's an excluded category (alcohol, cannabis-i…
Do physician-prescribed graduated compression stockings qualify for Illinois's reduced 1% sales tax rate on medical appliances, instead of the general 6.25% rate?
It appears they may qualify for the reduced 1% rate, because graduated compression stockings differ from ordinary support hose in that their graduated compression aids blood flow where leg vein valves…
Once an out-of-state remote retailer drops below Illinois's $100,000/200-transaction economic nexus thresholds and stops collecting tax, does that trailing nexus obligation ever come back, and how often must the retailer check?
Yes, it can come back, and the retailer must keep checking every quarter. Once a remote retailer stops being required to remit Illinois state and local retailers' occupation tax, it must re-test its t…
My manufacturing company had zero Virginia employees until it acquired a facility mid-year and immediately elected the single sales factor apportionment method -- what counts as its 'base year employment,' since it had no prior Virginia presence at all?
Zero -- and that answer works in the taxpayer's favor. A manufacturing corporation with production facilities across the country acquired another company's assets, including a Virginia production faci…
A nonprofit I used to help run years ago still lists me as a contact on its Department tax account, and the Department is trying to hold me personally liable for taxes it never paid -- can they do that just because I never got removed from the paperwork, especially since a nonstock nonprofit doesn't even have 'owners' to transfer things to?
No -- simply being listed as a tax account contact isn't enough evidence to hold someone personally liable, and the Department abated this assessment for lack of proof. A nonprofit organization failed…
I bought prototypes of a medical device along with the software and intellectual property needed to run it, structured as an 'Intellectual Property Purchase Agreement' -- can I argue the tangible prototypes were just an inconsequential part of an intangible IP purchase, so the deal isn't fully taxable?
No -- when the tangible property, software, and intellectual property are all inextricably tied together in a single deal for a physical device, the whole purchase price is taxable. A Virginia IT comp…
My sales tax audit closed before I could submit all my documentation -- can I still get more time to provide records on appeal, and what happens to unrelated bills I discovered separately while reviewing my online account?
A limited second chance, but with firm deadlines and boundaries. A purchasing-agent company that supplied hardware, software, and services to an owner's mobile communications operating companies was a…
My electronics recycling company uses a forklift for both exempt manufacturing work and other non-exempt tasks -- can I still get the sales tax exemption on it if I can show it's used mostly in the exempt process, even if I didn't have that proof during the audit itself?
Yes -- and here, evidence submitted AFTER the audit closed was enough to win the exemption. An electronics dismantling and recycling business was audited for 2013-2019 and assessed sales and use tax o…
Does Virginia's motor vehicle rental tax apply to a long-term, indefinite equipment lease between related companies?
No. Because the lease between the taxpayer and its Parent for mobile and construction equipment was open-ended and had already run more than 10 years at the time of audit -- nowhere close to "a period…
I'm a home builder and bought sand and dirt for my projects -- since dirt and sand come from the ground and are basically real property, shouldn't my purchases of them be exempt from Virginia sales and use tax?
No -- once sand, dirt, or similar material is excavated from the ground, it becomes tangible personal property and is fully subject to Virginia sales and use tax, regardless of its origin as part of t…
I paid royalties to an affiliate and added them back to my Virginia taxable income, but claimed a partial exception because some of the affiliate's income was taxed elsewhere -- can I get a refund for the FULL add-back instead of just that partial exception?
No -- the Virginia Supreme Court's decision in Kohl's Department Stores forecloses a full exception, allowing only the portion of the intangible expense that was actually subject to another state's PO…
Were the wine-storage facility's charges taxable as a rental or license to use Florida real property?
No. The arrangement was a bailment because the facility controlled the stored wine and customers could retrieve it only through employees. Moving, storing, and packing charges were also nontaxable war…
What purchases qualify for South Carolina's Solar Energy Credit, and how much credit can a taxpayer claim?
A taxpayer can claim a nonrefundable South Carolina income tax credit equal to 25% of qualifying purchase and installation costs for an eligible solar energy system, small hydropower system, or geothe…
My client took a Bright Start 529 distribution to pay for his other daughter's private secondary school tuition -- does he have to add that back as income on his Illinois return?
Yes. The Department concluded that private secondary school tuition is not a 'qualified expense' under the Illinois 529 rules (which cover higher-education-related costs, not K-12 tuition), so any amo…
Does a medical device company's implant system and companion surgical tool for treating obstructive sleep apnea qualify for Illinois's reduced 1% sales tax rate as a 'medical appliance,' and how do local taxes apply?
A medical appliance -- an item that directly substitutes for a malfunctioning part of the human body -- is taxed at Illinois's lower 1% state rate instead of the general 6.25% rate, and local taxes (i…
Does an out-of-state mail order pharmacy that fulfills prescription orders through a third-party partner's Illinois warehouse have to register and collect Illinois Service Use Tax or Service Occupation Tax?
Yes, potentially -- an out-of-state serviceman (including a mail order pharmacy) that meets the Service Use Tax Act's definition of "serviceman maintaining a place of business in this State" (35 ILCS …
Does a contractor operating a federal DOE/NNSA facility, and managing a related Missouri construction project, owe Missouri sales/use tax on the tangible personal property and utilities it purchases on the government's behalf?
No. All three categories -- tangible personal property, utilities, and construction-project purchases -- are exempt from Missouri sales/use tax because title and ownership pass directly from the vendo…
If a food-service company operates a school's cafeteria, vending, and catering as the school's agent, are its food purchases and meal sales exempt from Missouri sales tax?
Yes. Both the company's purchases of food and supplies and its meal sales made on behalf of the organizations are exempt from Missouri sales tax, so long as each organization holds a valid Missouri ex…
The Department disallowed our manufacturing parent's single sales factor election by looking only at its Virginia operations, adjusted our sales factor using our own public financial data without explanation, and disallowed our research-expense and jobs-credit subtractions with no stated reason -- can all of that really be upheld?
No to nearly all of it -- three separate audit adjustments were reversed for the same taxpayer. A corporate group filed combined Virginia returns for 2015 and 2016, with the parent using Virginia's mo…
The IRS has determined my federal tax debt is currently uncollectible -- doesn't Virginia's conformity to federal law mean the Department has to stop collecting on my old Virginia assessments too?
No -- an IRS determination that your federal tax debt is uncollectible has no effect on Virginia's own, separate collection authority. An individual with unpaid Virginia income tax assessments spannin…
I factored my accounts receivable to a related entity, which then sold interests in them to unrelated investors to fund my operations -- can I exclude the factoring costs from Virginia's intercompany intangible expense add-back?
No -- none of the three available exceptions applied, and a fourth procedural route was never properly used. A corporation factored its accounts receivable to a related entity (IHC), which then securi…
I'm an active-duty servicemember with a Virginia 'home of record,' but I bought a home, got a driver's license, registered to vote, and registered my vehicles in the state where I was actually stationed -- am I still a Virginia domiciliary resident just because Virginia is listed as my home of record?
No -- 'home of record' and legal domicile are different things, and this servicemember's real, affirmative connections to his duty-station state controlled. A military servicemember had listed Virgini…
Does a company that sells automotive window information labels to car dealers have to charge Tennessee sales tax on them?
No — the labels are exempt. A company that sells auto-window information labels (warranty, fuel-economy, and similar vehicle data) to car dealers does not have to charge Tennessee sales tax on them. T…
My nonprofit's investment partnership interests and other unrelated business activities are mostly in Virginia -- can I use an alternative apportionment method for my unrelated business taxable income (UBTI), and does owning a partnership interest in another state give me nexus there?
Mostly no on the specific method requested, but the taxpayer still gets to apportion (rather than pay tax on 100% of its Virginia-based income). A nonprofit institution asked the Department to reconsi…
I moved out of Virginia for a job years ago and have lived and worked in two other states since, but my spouse, kids, some vehicles, and my driver's license and voter registration stayed in Virginia -- am I still a Virginia resident for income tax purposes?
Still a Virginia domiciliary resident -- because he never fully cut his Virginia ties even after living and working in two other states for years. The Department received IRS information suggesting th…
My county says I'm barred from appealing new tax assessments because I never separately appealed its earlier refund denial on the same issue -- is that right, and does quarrying limestone count as taxable 'processing' or exempt 'mining' equipment?
No to the procedural bar, and yes, quarrying counts as mining. A limestone-quarrying business (which also manufactured chemical quicklime at the same site) filed amended Machinery and Tools (M&T) tax …
My company deducted royalty payments to an affiliated intangible holding company, and I want the full 'subject-to-tax' exception from Virginia's intangible-expense add-back because all the royalty income was taxed somewhere else -- but does a state's 'throw-out' rule (like New Jersey's) affect how much of that exception I actually get?
Yes -- the exception has to be adjusted to reflect the extra income New Jersey's throw-out rule actually taxed. A multistate corporation and its affiliates deducted intercompany royalty payments made …
My county responded to my refund claim by issuing what it called a 'final local determination' -- can I appeal straight to the Department of Taxation, or do I have to go through a local appeal first?
Not yet -- the Department doesn't have jurisdiction to decide the merits until the taxpayer completes a proper local appeal. A limestone-quarrying business filed amended Machinery and Tools (M&T) tax …
Were the purchaser's two prescription-labeled, single-use medical products exempt from Florida sales tax, and how could it recover tax paid in error?
Yes. Both products were exempt because their labels said 'RX' and 'Single Use Only.' The purchaser generally had to obtain the refund from the vendor, or use an assignment to claim it directly if the …
Does South Carolina charge sales tax on digital textbooks (eTextbooks) that students buy or rent for their college courses?
No. The Department ruled that both the SALE and the RENTAL of digital textbooks (eTextbooks) are exempt from South Carolina sales and use tax under the textbook exemption in § 12-36-2120(3)(a) — the s…
My partnership does most of its business outside Illinois but co-owns another partnership that operates entirely inside Illinois, and using the standard single-sales-factor formula makes our Illinois apportionment look much bigger than our actual Illinois activity -- can we use separate accounting instead?
No -- the Department denied this petition because the taxpayer never submitted evidence about the market for its goods or services, or any evidence showing the standard single-sales-factor formula fai…
Can I avoid New Mexico income tax by claiming I never consented to be governed, or by declaring my own W-2s and 1099s invalid?
No — none of it worked. Mary Elizabeth Bonney, a Las Cruces resident who worked as a court reporter for El Paso County, Texas, was assessed $18,325.01 in New Mexico personal income tax, penalty, and i…
My spouse died, then COVID hit, and I had serious health problems -- can those circumstances excuse filing our tax return late enough to still get our refund/credit?
No -- none of those three circumstances extend Virginia's strict 3-year refund deadline. A husband and wife filed their 2017 Virginia return in May 2021 -- about four years late -- reporting an overpa…
The Department assessed me for Virginia income tax based on IRS information, and I told them my husband didn't work in Virginia that year -- isn't that enough to get the assessment corrected?
No -- a domiciliary resident of Virginia owes Virginia tax on all their income regardless of where they actually worked, so simply asserting 'he didn't work in Virginia' doesn't address whether Virgin…
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