State and Local Tax
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Pennsylvania — Local Business Privilege Tax
Pennsylvania — Local Earned Income Tax
The Pennsylvania Commonwealth tax to revenues generated within a taxing
Pennsylvania Act 32 of 2008 changed the
Court (Court) recently ruled in the case jurisdiction’s boundaries.
way earned income is calculated. Beginning
of A&L, Inc. v. Township of Rostraver
January 1, 2009, taxpayers that have a loss
and Belle Vernon Area School District, The Court then directed their attention to
resulting from unincorporated business
regarding the assessment of business the application of the office exception. The
income may no longer deduct the loss from
privilege tax. In this case, A&L, Inc. Court determined that the office exception
earned income they receive as an employee.
(A&L) is a construction company with in Township Ordinance 112, § II (f )(5) and
This change should be taken into account
its headquarters in Belle Vernon, an District Business Privilege Resolution § II
when calculating quarterly estimated tax
additional office in McKeesport and other (f )(5) is an exemption and not an exclusion;
locations throughout Pennsylvania. One therefore, the burden of proof rested upon
of the main issues of the case was whether A&L to demonstrate that they were entitled
ohio — Sales Tax vendor compensation
or not A&L was entitled to the office to the exemption and that their other
exception in Township Ordinance 112, § Pennsylvania locations qualify as “an office
On July 1, 2009, the Ohio Department of
II (f )(5) and District Business Privilege or place of business regularly maintained by
Taxation issued Sales and Use Tax Information
Tax Resolution § II (f )(5) regarding the taxpayer.” A&L submitted the testimony
Release ST 2009-01 regarding vendor
gross receipts attributable to its other of their former CFO regarding the activities
compensation. The information release was
Pennsylvania locations. that took place at the other A&L locations.
in response to recent legislation requiring in-
In addition, A&L submitted additional
state vendors who, due to prior law, switched
A&L first argued that the trial court documents that the Court ruled to be very
from origin-based sourcing to destination-
improperly relied upon the Pennsylvania general in nature and did not to correspond
based sourcing and are now required to
Supreme Court decision Gilberti v. City with one another. As a result, the Court
convert back to origin-based sourcing by
of Pittsburgh, 511 Pa. 100, 511 A.2d 1321 ruled that A&L did not meet its burden
January 1, 2010.
(1986) (Gilberti) and failed to consider of proof for the locations to qualify for the
the more recent Pennsylvania Supreme office exemption.
Vendors required to convert back to origin-
Court ruling in V.L. Rendina, Inc. v. City
based sourcing for sales tax may be eligible
of Harrisburg, 595 Pa. 407, 938 A.2d 988 Contractors and other businesses with
for compensation to reduce some of the cost
(2007) (Rendina). The Court disagreed multiple temporary locations should be
of compliance. To qualify, the retailer must
with A&L stating that the Supreme Court aware of the significance of the Pennsylvania
have received temporary compensation for
noted that the two cases address separate Supreme Court’s rulings in Gilberti and
the original switch from origin-based to
issues. Gilberti addresses the issue of when Rendina and the standards applicable to
destination-based sourcing under section
a business privilege tax may be applicable applying the office exemption often found in
5739.123 of the Revised Code. The
to revenues generated outside the taxing local ordinances and resolutions similar to
compensation will be a one-time payment
jurisdiction, while Rendina addresses those of Township Ordinance 112, § II (f )
equal to the actual cost the vendor incurred
the application of the business privilege (5).
capped at $1,000 for vendors who were
required to by law to convert to destination-
Disclaimer: The information presented is general information and is not intended to be relied upon without
based sourcing and $600 for vendors who consulting a tax professional regarding your specific facts and circumstances. This advice is not intended or
written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be
continued imposed, or for promoting, marketing or recommending to another person, any tax-related matter.
InSIghTS TAx UPDATES FRoM SchnEIDER DoWnS Summer 2009
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Ohio Commercial Activity continued
The requirements for the CAT voluntary disclosure agreement are similar to other disclosure
agreements; the taxpayer must register, file all applicable returns and pay all taxes and related
elected to convert to destination-based sourcing interest. In exchange, the Tax Commissioner agrees to waive all associated penalties due related
prior to April 18, 2008. to registration, filing of returns and remittance of tax. It should be noted that as is common
with most VDAs, the Department reserves the right to audit the returns for the period covered
Compensation can be applied for by filing an by the agreement. Additional information can be found on the Ohio Department of Taxation’s
Application for Compensation of Expenses web site at www.tax.ohio.gov.
Incurred for Origin Based Sourcing Tax
Collections (form ST-AR-OBS) with the Ohio
Department of Taxation. TAx AMnESTy PRogRAMS
ohio — commercial Activity Tax (cAT) voluntary Update: Maryland – In May, Maryland July 1, 2001 to January 1, 2009, with some
Disclosure Program Governor Martin O’Malley signed the specific exceptions.
proposed bill authorizing the tax amnesty
The Ohio Department of Taxation program for the period of September 1 The program provides a two-month
(Department) recently issued an information opportunity for taxpayers to settle account
through October 30, 2009. Taxpayers who
release revising the Department’s policy towards
failed to file returns or pay corporate income, balances, overdue audit assessments, and
voluntary disclosure agreements (VDA) for
the Commercial Activity Tax (CAT). Since withholding, personal income, sales and use, certain tax disputes with no penalties and
the CAT has only been in existence since or admission and amusement taxes may apply only one-half of the interest. Taxpayers must
2005, the Department did not previously have within the amnesty period and have penalties file an amnesty application and any applicable
an established voluntary disclosure program. and one-half of the interest waived. The returns; pay any taxes, collection fees and
Under the current policy guidelines, taxpayers program is not applicable to taxpayers who billed notices or demands issued by the
who are interested in becoming compliant with have more than 500 U.S. employees, who Department of Revenue; and remit 50% of
their CAT obligations may enter into a VDA took part in the 2001 amnesty program, or the accrued interest charges.
by contacting the Department in writing and who were eligible to participate in the 2004
providing the following information: vermont has instituted a tax amnesty
Delaware holding company settlement period.
program that will run from July 20 through
• A description of taxpayer’s activities in Ohio;
• How long such activities have been performed Louisiana has announced a tax amnesty August 31, 2009. Similar to other amnesty
by the taxpayer in Ohio; program that will run from September 1 programs, the Vermont Department of
• A brief description regarding the source through October 31, 2009. The Louisiana Taxes will forgive penalties when outstanding
of taxable gross receipts and whether such program is open to all taxpayers except those tax and related interest are paid in full. The
amounts will be greater than one million who are under criminal investigation or for program applies to most Vermont taxes that
dollars; periods for which a civil fraud penalty has were due on or before January 26, 2009. In
• The taxpayer’s type of organization; been asserted. The amnesty program applies addition to applying to unfiled tax returns,
• Description of the taxpayer's organizational to all taxes administered by the Louisiana amnesty will apply to late payment of taxes for
structure including ownership percentages; and which a proper return was filed, but the taxes
Department of Revenue, except for motor
• Any additional pertinent information.
fuel taxes that were due during the period of not paid; to assessments; and to installment
continued plans if all taxes and interest are paid during
the amnesty period.
For more information about any of these tax issues,
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