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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The Department denied our FDC subtraction because we didn't take a matching FDC addition in an earlier year -- but we only bought into these S corporations in 2015. Do we still qualify?
Yes -- the subtraction was allowed, and the assessment abated. A couple properly claimed fixed date conformity (FDC) subtractions passed through to them from two S corporations the husband owned an in…
My company's cost-tracking system can't reliably show where subcontracted work was actually performed or controlled -- can I use payroll apportionment instead, and how do I calculate the out-of-state deduction if so?
Yes -- when a business's own accounting system can't reliably determine where services were actually performed or controlled, especially for subcontracted and multi-location fixed-price work, payroll …
My company sells and installs security equipment from a local office, but the actual monitoring happens at out-of-state centers -- can the county tax the monitoring revenue as if it happened locally?
No -- a locality can't situs a security company's monitoring-service revenue to its local sales/installation office when the company itself performs the monitoring at out-of-state centers. A security …
The county charged recordation tax based on the property's assessed value, which was higher than what I actually paid -- shouldn't the purchase price control instead?
Not automatically -- Virginia's recordation tax is based on the GREATER of the actual consideration paid or the property's actual (fair market) value, and the county's tax assessment carries a strong …
Could New Mexico apportion Apache's foreign dividends, Subpart F income, and check-the-box income, and what method corrected distortion from decades of accumulated income?
Mostly yes, but the original assessment was distortive. The Administrative Hearings Office held Apache was unitary with 14 wholly owned foreign subsidiaries and that their dividends, Subpart F income,…
Were reusable plastic pallet rentals and related fees exempt as one-time packaging, and could the lessor buy the pallets for resale tax-free?
The rentals were taxable. The one-time packaging exemption did not apply because the pallets were tracked, returned, and reused. Sales tax applied to the total rental consideration, including related …
How could a company calculate and prorate Florida Capital Investment Tax Credits for two separately accountable projects?
Florida approved a separate pro forma return and location-specific apportionment calculation for the new project. The annual credits from the two projects were then combined and prorated according to …
If I trusted my accountant to file and pay my taxes and they didn't, am I still on the hook for the late penalty and interest?
No. Arthur Trujillo owed $1,781 in New Mexico personal income tax for 2019. He prepared a check in June 2020 and expected his accountant to file the return and pay, but the return was never filed and …
If a company buys equipment from an Illinois vendor and has a freight forwarder pick it up in Illinois and ship it to the company's own warehouse in a foreign country, is that sale exempt from Illinois Retailers' Occupation Tax as interstate/foreign commerce?
It depends on the facts, and the Department could not decide this specific case in a GIL. Illinois Retailers' Occupation Tax generally does not apply when a seller ships goods by carrier or mail, unde…
How should a wedding photographer/videographer in Illinois charge sales tax on custom photo albums and video packages sold to clients?
Photographers and videographers who sell physical products (like custom albums or USB drives) incident to their services are generally servicemen subject to Service Occupation Tax, not Retailers' Occu…
If the IRS adjusts my income or audits a partnership I'm invested in, how and when do I have to report that change to Virginia?
Generally, you (or, for a partnership-level federal audit, the partnership itself) must report a federal tax adjustment to Virginia within one year of its 'final determination date.' These Department …
If I file my New Mexico income tax return just a few days late, do I still owe a penalty, or is there a grace period?
No. Orville Whyte mailed his 2018 New Mexico personal income tax return and $2,270 payment on April 18, 2019 - three days after the April 15 deadline - and the Department assessed a $45.40 penalty and…
The Department assessed me based on IRS 1099 information because I never filed a Virginia return, and the tax due looks way too high -- what can I do?
File the missing Virginia return (with any corrected 1099s) within the Department's deadline -- an assessment based on IRS-supplied information isn't automatically wrong just because it looks high, bu…
I bought used restaurant equipment for less than what the city says it's worth for tax purposes -- shouldn't the price I actually paid control the value used to tax it?
No -- for most business tangible personal property, Virginia law requires localities to determine fair market value using a percentage of the property's ORIGINAL cost (what the FIRST purchaser paid a …
My pass-through entity applied for the R&D tax credit and told me my share, but the Department cut my claimed credit down -- can I still claim the full amount I was told to expect?
No -- you can only claim the prorated amount the Department actually grants, not the larger amount your pass-through entity originally requested. Virginia's Research and Development Expenses Tax Credi…
The Department disallowed my itemized medical and charitable deductions because I couldn't produce enough documentation -- and one of my charitable receipts was for a donation to a church I personally run. Does that matter?
Yes -- without proper documentation, itemized medical and charitable deductions can be disallowed, and a donation receipt you write to yourself (as when you run the recipient charity) needs ADDITIONAL…
My restaurant's sales tax audit doesn't match our internal records, and I couldn't get the auditor all the documentation they wanted -- can the assessment still stand?
Yes -- when a taxpayer doesn't provide the records needed to verify its reported sales, the Department may finalize the audit using the best information reasonably available, and that assessment carri…
A defense contractor split its business between offices in different Virginia localities. When apportioning BPOL gross receipts by payroll, must ALL employees' payroll count, and can research-and-development receipts get special treatment?
Yes -- when a business's BPOL gross receipts are sitused using payroll apportionment, its ENTIRE payroll (including administrative staff) must be counted, not just the employees who directly generated…
If someone fraudulently obtained unemployment benefits in my name, do I owe Kansas income tax on it?
Kansas Notice 21-20 explains that an individual whose identity was fraudulently used to obtain unemployment compensation -- or other compensation -- that the individual never received does not have to…
How does the Kansas first-time home buyer savings account work and what is the tax benefit?
Kansas Notice 21-06 explains that 2021 House Bill 2187 established the First-Time Home Buyer Savings Account Act and amended K.S.A. 79-32,117 to add income tax modifications for these accounts, effect…
What does Illinois GIL ST 21-0042-GIL say about sales tax nexus, marketplace facilitators, and various exemptions?
This GIL is the Department's response to a national multistate tax survey and covers several unrelated topics: out-of-state sellers with any physical presence in Illinois (including a remote employee)…
How does Nebraska tax an LLC and its resident individual members, and how does that differ from a partnership and its partners?
An LLC is taxed in Nebraska according to its federal classification: taxed as a partnership it files Form 1065N, taxed as a corporation it files Form 1120N, and a single-member LLC that is a disregard…
Is a kombucha-based beverage with added fruit juice and no more than 5% juice content taxed as a 'soft drink' at Illinois's 6.25% sales tax rate?
Likely yes. Based on the ingredient information provided, the Illinois Department of Revenue concluded that the kombucha beverages described (containing kombucha culture, tea, and added fruit juice us…
If I book a hotel through an online travel site like Expedia or Airbnb, is Virginia sales tax now charged on the full price I pay, including the site's service fee?
Yes -- beginning September 1, 2021, Virginia's Retail Sales and Use Tax on accommodations (hotels, short-term rentals, etc.) is computed on the FULL price the customer actually pays, including any ser…
Do a private developer's construction and design/build contracts to build a municipal hotel and convention center for a city's development district qualify as tax-exempt construction contracts?
Yes. Development management and design/build contracts to construct a hotel and convention center for a municipal development district (a special district created by a city under Local Government Code…
If an out-of-state seller ships goods into Illinois but the Illinois customer arranges the freight and title passes outside Illinois, who owes Illinois tax and at what rate?
It depends on whether the remote seller meets Illinois's economic nexus thresholds ($100,000 in sales or 200+ transactions in the trailing four quarters). If it does, and it is listed as consignor/shi…
When does an out-of-state partnership that provides investment-advisory services to mutual funds have Colorado income-tax nexus?
Colorado uses the same nexus standards for partnerships and other pass-through entities as for corporations. The partnership measures its sales, property, and payroll at the entity level, and exceedin…
Does Illinois Retailers' Occupation (sales) Tax apply to farm machinery and equipment bought for use in production agriculture or federal/state agricultural programs?
No. Illinois Retailers' Occupation Tax does not apply to farm machinery and equipment that is used or leased for use primarily (over 50% of the time) in production agriculture or in state or federal a…
When a drop-shipped sale touches Illinois, whose sales count toward Illinois's $100,000/200-transaction economic nexus threshold for remote retailers?
It depends on who is selling at retail into Illinois. A sale for resale (the wholesale leg of a drop shipment) does not count toward either party's Illinois economic nexus threshold, but the retail sa…
Can I itemize on my Kansas return without itemizing federally, and what is the new standard deduction?
Kansas Notice 21-02 explains two individual-deduction changes made by 2021 Senate Bill 50, effective for tax year 2021 and after. First, Section 9 amended K.S.A. 79-32,119 to raise the standard deduct…
Could a Florida capital project use an equally weighted new-jobs and project-property factor to calculate project income?
Yes. Florida approved an equally weighted factor combining the project's new Florida jobs divided by all Florida professionals and the project's property divided by total Florida property. The factor …
When does a marketplace facilitator have to register and collect Illinois state and local sales tax on behalf of its marketplace sellers?
Once a marketplace facilitator's and its sellers' combined Illinois sales hit $100,000 or 200 separate transactions in a year, the facilitator (not the individual sellers) must register with the Illin…
Does Illinois Rental Purchase Agreement Occupation and Use Tax, Use Tax, or Retailers' Occupation Tax apply to an out-of-state company's subscription-based "try before you buy" merchandise service?
It depends on the arrangement. Illinois taxes subscription-style rent-to-try programs under the Rental Purchase Agreement Occupation and Use Tax (6.25% of subscription receipts) rather than sales tax,…
My company operated a contracting business in Virginia and a farm in another state. When the farm passed to an heir under the owner's will, can I allocate that gain entirely to the other state instead of apportioning it under Virginia's standard formula?
No -- the Tax Commissioner denied the request both because the taxpayer skipped the mandatory procedure for requesting an alternative apportionment method, and because the gain didn't qualify as separ…
I live in another state and pay tax there on all my income, but I own a share of an S corporation that does business in Virginia -- do I still owe Virginia tax, and can I be penalized for not making Virginia estimated payments?
Yes -- if your S corporation's income is apportioned to Virginia, your share of that income is Virginia-source income taxable to you as a nonresident, even if you paid tax on the same income to your h…
The Department built my sales tax audit from third-party alcohol board records because I wouldn't turn over my own -- can I still challenge the estimate, and are the fraud and amnesty penalties fair?
Not easily -- once you refuse to provide your own sales records, the Department can lawfully reconstruct your liability from third-party data (like state alcohol board records), and merely asserting t…
My partnership owns rental properties in Virginia and three other states, and I can calculate each property's actual income separately -- can I use that separate accounting instead of Virginia's standard apportionment formula?
No -- knowing each rental property's actual separate income isn't enough by itself; the taxpayer must also follow the required procedure and prove the statutory apportionment method is inequitable, an…
If the IRS increases your income after the fact, how long does New Mexico have to bill you for the extra state tax, and can you avoid the penalty and interest?
No. After the IRS corrected David and Raya Kovensky's federal adjusted gross income for 2014 and 2015 - raising it from $44,425 to $72,482 and from $36,988 to $65,578 - New Mexico assessed $3,449 in a…
Are subscriptions to an online learning platform — streaming video courses bundled with tutoring and advising — subject to Colorado sales tax, and is the platform's internet advertising revenue taxable?
Two answers. (1) Yes — the online learning subscriptions (all six plan tiers) ARE subject to Colorado sales tax. Even though they're delivered by streaming and bundle in tutoring and advising, the tru…
The Department disallowed my itemized deductions and applied the standard deduction instead because I never sent in documentation -- can I still get them reinstated?
Only by actually providing the substantiating documentation -- the Department gave the taxpayer one final 30-day window to do so, but simply disagreeing with the assessment isn't enough. A taxpayer cl…
I asked the Department to reconsider its ruling on my sales tax audit and submitted more documents -- do I automatically get a second look just because I disagree with the result?
No -- a request for reconsideration must actually meet one of four specific legal grounds (misstated facts, a change in law, misapplied policy, or genuinely new evidence unavailable during the origina…
I'm a subcontractor who fabricates and installs steel stairs and railings into buildings. I bought my raw materials tax-exempt on a resale certificate and figured the general contractor would remit sales tax on the finished work -- can the state still assess ME use tax on the materials?
Yes -- a contractor that fabricates tangible personal property (like steel stairs, gates, and railings) and then installs it into real property is a "consuming contractor" under Virginia law, personal…
The IRS told Virginia I underreported income, and Virginia assessed me for two years based on that. Can I fight the assessment by arguing the IRS was wrong, and does it matter that I appealed one of the years late?
No on both counts -- an appeal filed after the 90-day deadline fails regardless of its merits, and even for the year that WAS appealed on time, Virginia generally won't look behind the IRS's own final…
My shop's internal accounting system calculates sales tax on materials and labor separately, but our printed customer invoices just show one lump-sum charge -- does that lump-sum invoice still make the ENTIRE charge, including labor, taxable?
Yes -- Virginia's labor exemption from sales tax applies only when labor and materials are separately stated on the actual invoice given to the customer; calculating them separately in your internal a…
What changes did Kansas make to the Angel Investor Tax Credit in 2021?
Kansas Notice 21-13 explains that 2021 Senate Bill 66 revised the Kansas Angel Investor Tax Credit Act. It (1) amended definitions -- changing which debt instruments count as 'qualified securities' (d…
What did Kansas change about the High Performance Incentive Program (HPIP) investment tax credit in 2021?
Kansas Notice 21-12 explains that 2021 Senate Bill 65 (Section 2) amended K.S.A. 79-32,160a to make two changes to the High Performance Incentive Program (HPIP) investment tax credit. First, it remove…
Can Kansas employers keep withholding based on an employee's primary work location while they telework?
Kansas Notice 21-03 explains that 2021 Senate Bill 47 (New Section 9) gives employers an option for income tax withholding on teleworkers during tax years 2021 and 2022. For wages paid January 1, 2021…
Could a parent corporation end a Florida consolidated filing election by arguing years later that it mistakenly lacked nexus when it elected?
No. Although the parent may not have had nexus when it made the election, Florida would not retrospectively nullify the longstanding consolidated filing election on that basis. The group had to contin…
Does Tennessee sales or use tax apply to an out-of-state seller's goods that pass through a Tennessee transload facility — offloaded and reloaded onto other trucks or railcars — when title passed to the buyer outside Tennessee?
Not taxable. The Department ruled that an out-of-state manufacturer's wholesale sales aren't subject to Tennessee sales or use tax when title and possession pass to the buyer outside Tennessee and the…
My cigarette shop's assessment is overstated because records and inventory were stolen -- does claiming a burglary excuse me from having to document that the assessment is wrong?
No -- an unverified claim of theft, even with extra time to gather supporting documentation, doesn't shift or reduce the taxpayer's burden of proving an assessment is wrong. A cigarette retailer was a…
A distributor's records show my business bought cigarettes tax-exempt for resale, but I claim a former business partner used my information to open a fraudulent account -- am I still on the hook for the sales tax assessment?
Yes -- absent documentation proving otherwise, the Department holds the purchaser of record (as shown on the distributor's own sales documentation) responsible for the sales tax, and a claim of busine…
A scammer posing as a potential employer used my personal information to set up a fraudulent cigarette business under my name -- can I get the resulting sales tax assessment abated?
No, without supporting documentation -- being named as the purchaser of record on a distributor's own sales records is generally controlling absent contrary proof, and a fraud allegation alone (even o…
The IRS adjusted our itemized deductions years ago, and Virginia only just assessed us for it -- shouldn't there be a time limit on how long Virginia can wait before catching a mismatch like this?
No -- there's no statute of limitations at all for the Department to assess additional tax when a taxpayer's federal income was adjusted and no amended Virginia return was ever filed to report it, reg…
Our timeshare condominium's owner's association owns and furnishes every unit -- can the association claim the household goods exemption from business tangible personal property tax since individual owners actually use the furniture as their vacation home?
No -- Virginia's household goods exemption from business tangible personal property (BTPP) tax requires the property to be OWNED (not just used) by an individual or family incident to maintaining an a…
I co-founded a tech startup, invested cash over several years (some before Virginia's subtraction window opened, some during it, with a distribution along the way), and sold my stake for a big gain -- how much of that gain actually qualifies for Virginia's long-term capital gain subtraction?
Only the portion of your gain attributable to NET investments actually made during the statutory window (April 1, 2010 through June 30, 2020) qualifies -- and if you also took distributions exceeding …
A distributor's records show untaxed cigarette purchases under my business's name, but I deny ever making them or opening any account, and I've filed a complaint with the FTC -- is that enough to stop the assessment?
No -- filing a complaint with a federal agency like the FTC doesn't itself constitute evidence that overcomes a distributor's sales records naming the taxpayer as the purchaser, and the Department has…
A cigarette sales tax assessment was converted from my company to me personally as its officer. I signed the paperwork setting up the company, but claim my former employer tricked me into it and ran the fraudulent purchases -- am I still personally liable?
Yes, on these facts -- signing the documents that actually set up the business (a lease, a federal ID number application, a wholesale account) made her the purchaser of record, and a claim that a form…
Why did Kansas update its income tax withholding tables for 2021, and what are the new standard deduction amounts?
Kansas Notice 21-22 announces that, because 2021 Senate Bill 50 (Section 9) amended K.S.A. 79-32,119 to raise the Kansas standard deduction, the Department updated its income tax withholding tables ef…
What does the Kansas Taxpayer Protection Act require of paid income tax return preparers?
Kansas Notice 21-21 explains the Kansas Taxpayer Protection Act, created by 2021 Senate Bill 47 (New Sections 1-6) and effective on and after January 1, 2022. It applies to 'paid tax return preparers'…
What privilege tax deduction did Kansas add for interest on agricultural and single-family residence loans?
Kansas Notice 21-18 explains that 2021 Senate Bill 15 (Section 10) amended K.S.A. 79-1109 to add a new deduction from net income for privilege tax purposes, available for all tax years commencing afte…
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