The year 2017 is accelerating to its end and, as usual, I’ve spent a good part of the year looking at everything through the thought-bending prism known as state and local taxes. Hence the reason for my thoughts to turn paranoiac while hearing one of my favorite songs from the band Spoon. I can guarantee that upon hearing “Knock, Knock, Knock” most others would not have the image in their mind of the state taxing authorities knocking on the front door of your home or business with their hand out.
Fortunately, I’ve been assured everything is ok, since paranoia is characterized by delusions of persecution. And based on what has been happening in the world of state and local taxes, there have been no delusions.
Let’s start at the end and work our way forward. Congress at this very moment is battling over the continued deductibility of state and local taxes, including what I always considered to be the ever-sanctimonious American Dream deduction for the excessive real property taxes we pay on our homes. How this will play out, we will just have to wait and see what the big holiday present is that we were promised by POTUS.
As if my feelings weren’t justified by the rejection of our beloved SALT deductions, we are now being forced to tell on our friends. I’ve blogged about the new state tattle tale requirements several times February 29, 2016, October 24, 2016, May 8, 2017, and again on July 24, 2017. Just this week a fellow practitioner asked me for help with a “demand letter” received from the Connecticut Department of Revenue Services. The letter sent late in 2017 demands that its recipient either submit sales records for the years 2014, 2015, and 2016, or
“In lieu of providing these sales records, entering into a voluntary agreement to register and prospectively collect sales tax in Connecticut.”
The letter goes on to say:
“I cannot emphasize enough the seriousness of this communication and the consequences of further non-compliance.”
So the Department is giving the recipient a choice; to either rat out your Connecticut customers for the last three years or register to collect the tax and do so going forward. We are going to have some long and hard conversations as to what to do, but at least now I know when “every day I hear knock, knock, knock”, I’m not hearing things.
If you have questions about these and other SALT issues, contact me at WBerkowitz@BerdonLLP.com or your Berdon advisor.
Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.