Pivot Strategic Consulting 2024 – Q1 Newsletter

Pennsylvania Sales and Use Tax Issues That Businesses Should Be Aware Of

Recently, there has been an increased number of audits for specific types of sales and use transactions. While Pennsylvania’s statutes and regulations have not recently changed on these transactions, there are three assessments that businesses should familiarize themselves with in regard to state and local tax: sales tax on mixed transactions charged at a gross amount; sales and use tax on computer services; and sales and use tax on inter-company transactions. Read more

Other State and Local Tax Updates


California Attempts to Impose Income Tax on More Online Retailers

Attempts have been made by California to impose its income tax on more online retailers. The Multistate Tax Commission (MTC) provides examples of protected and unprotected activities under Public Law 86-272. These examples were updated with regards to interactions between a business and its customers through the business’ website as previously discussed in last year’s Q1 newsletter. A California trial court ruled against California in regards to applying the new interpretations of Public Law 86-272. It is unlikely that California will back off its position following the updated MTC examples. As an aside, the updated MTC examples are being considered by various states and should be monitored for states in which businesses are taking a Public Law 86-272 position for tax purposes.

Tennessee’s Franchise Tax Calculation

A close eye should be kept on possible changes to the Franchise Tax calculation. Currently, the tax is based on the higher calculation of apportioned net worth to Tennessee or the real and tangible personal property owned within the state. The two methods of measuring the tax gives concern as to the constitutionality of the tax based on discrimination of interstate commerce. Refund claims on this matter have been entered into by taxpayers and the state is looking at a possible remedy for this issue by removing the in state value of property component of the tax calculation.
In addition, Tennessee now taxes customized software services and the purchase of which may not be allocated to out-of-state users, as the software was downloaded by the business within Tennessee prior to any out-of-state users having access to the software based on Revenue Ruling 23-10 on November 17, 2023.

Various State & Local Tax Updates

Indiana – Effective January 1, 2024, Indiana Department Notice #1 provides guidance with regards to personal income tax withholding requirements at the state and county levels with regards to a 30-day bright-line standard to withhold non-resident rates on individuals. 

Kansas – Effective January 1, 2024, the Corporate Net Income Tax rate has been reduced to 3.5% from the previous 4%.

Massachusetts – Effective January 1, 2025,Massachusetts will be moving to a singles sales factor for apportionment of a corporation’s income.

Vermont – Administrative guidance was issued providing that Software as a Service (SaaS) are not subject to Vermont’s sales and use tax, as SaaS is not deemed to be tangible personal property subject to tax. In addition, Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) are also not deemed taxable transactions.

Washington – The state provided that internal sales are included in the calculation of the Business and Occupation (B&O) Tax even when a sales price was not formalized based on Case # 847198. The sales price used by Washington was based on the external sales to unrelated entities.