SALT TALK: What’s Left Behind

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Aug 19, 2019 2:00:00 PM

This blog has taken me months to write. Thoughts kept spinning in and out of my head. Should I write it? Will it serve a purpose?

We lost a member of the Berdon family a few short months ago. Michael Gelbtuch worked directly for me in the SALT Group. We had just promoted Michael to manager and were looking forward to more great things to come — for him and for Berdon.

I cannot even begin to detail all that I learned from Michael. But the most important of those lessons was clearly the patience he taught me to have with everyone. Whether it be a client, another employee at Berdon, an auditor, or one of my partners, Michael made it his business to listen to all and to understand their point of view.

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SALT TALK: Who Let the Dog Out? – Legislation by Administration Leads to Confusion

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Aug 12, 2019 11:30:00 AM

I’ve never been without a pet and have always considered them to be family members, not tangible personal property. Apparently, the New York State Department of Taxation and Finance agreed with me when they held “[d]og walking is not among these enumerated services subject to sales tax[1].” Yet, less than two years later, the Department growled out another Advisory finding that “pet sitting, which includes dog walking, refreshing cat litter boxes, or providing food to the pets is subject to State and local sales and use tax[2].”

The Department reasoned that “. . . maintaining, servicing or repairing tangible personal property . . .” is an enumerated service and the Regulations clearly define animals to be tangible personal property. Why the sudden shift in opinion? I would like to think it was the Department’s desire to administratively broaden the tax base and not due to any bias against cats[3].

I’ve blogged several times about the Department’s fiasco regarding protective and detective services [June 27, 2016 and March 7, 2016]. It took the Tax Appeals Tribunal to reign in the Department and remind them that receptionists are not trained security guards and their services are not subject to sales tax. Yet, the Department can’t keep its paws off this issue, despite the lack of any law change.

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SALT TALK: Who Needs a Vacation When You Can Take a Sales Tax Holiday?

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Aug 5, 2019 11:50:20 AM

There are a countless number of songs about summer holidays; summer vacations, summer romances, the beginning of summer, the end of summer and even rainy summers. Yet I could not find a single song referencing the long awaited once a year sales tax holiday season.

What does a sales tax holiday encompass? Most often the holiday is an annual event occurring just prior to the back to school season, which provides exemptions for popular back to school items such as clothing, school supplies, and the like. While some credit New York for starting the trend back in 1997, the State has jumped off the train some years back and instead lets you “Enjoy a New York State Sales Tax Holiday Every Day on Clothing and Footwear Sold for Less than $110[1].” It should be noted that only New York City and a handful of other counties have opted in, so you might still need to pay a portion of the sales tax.

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SALT TALK: Traps in Transactions: Don’t Stumble Over a Good Deal

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jul 29, 2019 11:30:00 AM

At Berdon, we promote a culture within the Firm and with clients, to be up-to-date regarding what our clients are planning for themselves and their businesses. This ensures we assist in maximizing the efficiency of a given transaction, and safeguards against some common mistakes that can be prevented if addressed upfront, can be prevented.

These common foot faults span the gamut of all types of taxes. What might be a mistake in one state could be the optimum result in another.

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SALT TALK: I Sue You, You Sue Me, They Sue Us, Here We Go Again[1]

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jul 22, 2019 11:30:00 AM

The States of New Jersey, New York, Maryland, and Connecticut say they are challenging “. . . an IRS final rule that undermines state and local programs designed to promote charitable giving through the use of the state and local tax (SALT) credits.” The IRS says, “to be deductible as a charitable contribution under Section 170, a transfer to an entity. . . must be a contribution or gift. A contribution or gift for this purpose is a voluntary transfer of money or property without the receipt of adequate consideration, made with charitable intent.”

We have all watched the battle amongst the blue and red states over the $10,000 cap imposed on the deductibility of state and local taxes. Many states, including New York, New Jersey, and Connecticut have put workarounds in place allowing charitable contributions and corresponding tax credits. The IRS is of the view that these so-called workarounds are a quid pro quo, no different than having to limit the deduction to your favorite charitable organization’s annual dinner dance, by assigning a value to the meal and reducing the contribution accordingly.

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SALT TALK: Somewhat Less Favorable REIT Treatment Confirmed by Appellate Division

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jul 15, 2019 11:30:00 AM

Over two years ago, I discussed an exciting taxpayer victory for New York City Real Estate Investment Trust transfers. (March 13, 2017 post) As my regular readers know, to encourage additional liquidity in the real estate market, both New York State and City have provisions in place that effectively cut the tax rate in half for transfers to real estate investment trusts (REITs). Without the incentive, combined tax rates can reach as high as 3.275% of the “consideration paid” for the property.

In addition to providing a rate reduction, the NYC tax has the added bonus of using the estimated market value (EMV), an amount determined by reference to the NYC real property tax assessment and usually significantly less than the actual fair market value of the property, in determining the consideration subject to the Tax.

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SALT TALK: Life Coaching, GPS, or Tax Planning

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jul 8, 2019 11:30:00 AM

What do these three items have in common? Depending on whom you ask, they can all help you find your way. Not knowing much about life coaching, and as a male being devoid of the gene to ask directions (even from an inanimate object), I tend to be most helpful providing direction in the form of tax planning.

In a previous blog we discussed the trend towards single factor apportionment formulas. Today, we will address its first cousin, market-based or customer-based sourcing. In the old-world manufacturing economy, it was easy to “find your way.” You sent thingamajigs[1] to your customer in Ohio and (very) generally speaking, receipts would be sourced to the thingamajigs’ destination, Ohio. So a New York-based manufacturer would get the benefit of apportioning a percentage of his or her tax base outside of New York and either to Ohio (if there was nexus in Ohio, a topic for at least another 100 posts) or possibly to nowhere.

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SALT TALK: Ruling on Market Based Sourcing Dispenses with Traditional Doctrine - My Customer’s Customers are Not My Customers

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jul 1, 2019 11:30:00 AM

While the issue of whether the enemy of my enemy is my friend has always been controversial, the California Franchise Tax Board (FTB) ended all discourse concerning whether or not your customer’s customers are your customers.

As readers recall, market based sourcing (MBS) endeavors to source the revenue and tax base to the location of the taxpayer’s customers or market base. To help “locate” your customers, some states, such as California, have provided detailed regulations, while other states are just getting up to speed. This is a warning to marketing departments everywhere. Apparently state tax departments can now serve as the primary source of customer location.

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SALT TALK: You Are Forgiven – New Illinois Tax Provisions Include Generous Amnesty

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jun 17, 2019 11:30:00 AM

Readers who are fans of The Who will undoubtedly be aware that Pete Townshend proclaimed to all “You are Forgiven” in their 1966 song, “A Quick One, While He’s Away.” Some fifty-three years later, the State of Illinois wants to forgive you as well.

The amnesty is extremely generous in abating both penalties and interest for tax liabilities generated during the amnesty period. The amnesty period is defined as outstanding tax liabilities arising after June 30, 2011 and before July 1, 2018. The program will begin on October 1, 2019 and will end on November 15, 2019.

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SALT TALK: Secret State and Local Tax Revealed

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jun 11, 2019 9:57:26 AM

Elvis Costello, soon to be recognized as an “Officer of the Order of the British Empire” (“OBE”), summed it up best when he penned the lyrics “She thought that I knew and I thought that she knew.[1]” This is exactly how I felt when colleagues, clients, friends and everyone else would ask me questions about the so-called “Jock Tax.” While I never knew what this super-secret mystery tax consisted of, I always thought I should know or at least my superiors certainly would.

So what is this Jock Tax we speak of? You mean you don’t know. All right, I will let you in on a secret. There is no Jock Tax. What we are referring to is simply the nonresident income tax. The same nonresident income tax that any of us are subject to if we perform services in a state other than our state(s) of tax residence.

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