New York State (NYS)

Sales Tax

In a recently issued (May 10, 2012) Administrative Law Judge (ALJ) decision, In the Matter of the Petition of GlobalSpec, Inc., the court held that a publisher’s provision of electronic newsletters to engineering, scientific, technical and industrial professionals, constituted a sales-taxable information service. Since the primary purpose of the newsletter was to furnish information to a group of readers and was not merely incidental to some other non-sales taxable service, it was held to be a sales-taxable information service. The ALJ ruled that although the newsletter was furnished to a smaller group or segment than the general public, it did not meet the sales tax exemption that it was “personal or individual in nature and which was not substantially incorporated in reports furnished to others” under NYS Tax Law Sec. 1105(c)(1). The court held that the newsletter was not a non-taxable consulting service since the subscribers did not request a particular piece of information and the response was not to a particular problem discrete to a subscribing newsletter reader.

In a recently issued (May 24, 2012) ALJ decision, In the Matter of the Petition of ExxonMobil Corporation, the court held certain environmental testing and monitoring services performed at sites where there was a discharge of petroleum and such services were provided upon the discovery of the spill, were subject to NY sales tax under Tax Law Sec. 1105(c)(5) as the “maintenance, service or repair of real property”. Since the services were provided after the Department of Environmental Conservation (DEC) issued a spill number and before the DEC issued its “no further action” letter, the services related to keeping the real property in a condition of fitness, efficiency, readiness or safety and were thus subject to NY sales tax.

In a recently issued (May 16, 2012) tax bulletin, TB-ST-838, the NYS Department of Taxation and Finance (the Dept.) explains how the NY sales tax applies to shipping and handling charges. If the product or service being shipped or delivered is subject to NY sales tax, then the shipping, delivery or handling charge related thereto is subject to NY sales tax. Conversely, if the product or service being shipped is not subject to NY sales tax, then the shipping, delivery or handling charge is not subject to NY sales tax. If there is a sale of product or services, some of which are sales taxable and others are not, the shipping, delivery or handling (SDH) charges must be separately stated for each type of product or service in order for the SDH charges for the non-sales taxable product or service not to be subject to NY sales tax as well.

Third-Quarter Interest Rates

For the period July 1, 2012 through September 30, 2012, the interest rate on certain tax overpayments remails at 2% for inter alia, corporate franchise (income) tax, estate and generation skipping tax, personal income tax, MCTM tax, sales/use tax, real estate transfer tax and withholding tax. The underpayment tax rate for the same period remains at 7.5% for the same taxes, except sales/use tax. The sales/use tax rate for underpayment of such tax remains at 14.5%.

New York State Law Changes Enacted in the 2012-2013 State Budget

Metropolitan Commuter Transportation Mobility Tax (MCTMT): The rates were decreased for certain small business employers. Effective 4/1/12, for employers with a quarterly payroll expense of $312,500 or less, the rate is 0%; for payroll expense of over $312,500 up to $375,000, the rate is 0.11%; for payroll expense over $375,000 up to $437,500, the rate is 0.23% and for payroll expense over $437,500, the rate is 0.34%. Effective 4/1/12, all professional employer organizations (PEOs) are liable for the MCTMT due for each of its clients and for itself. The PEO must calculate the MCTMT separately for its clients and itself to determine the appropriate rate of tax applicable.

Empire State commercial production credit: The credit has been extended to apply to taxable years beginning before 1/1/15.

Low-income housing credit: The dollar amount of tax credits that may be allocated to eligible buildings has been increased from $32 million to $40 million beginning 1/1/12 and will increase to $48 million effective 4/1/13.

Bio-fuel production credit: This tax credit has been extended through 2019 from its sunset date of 12/31/12.

Noncustodial earned income tax credit: The credit is extended two years to tax years beginning before 1/1/15.

Youth jobs tax credit: The application deadline for this credit has been extended to 11/30/12 and the cutoff for employees to begin their jobs under the program has been extended to no later than 12/31/12.

Personal Income Tax and changes to E-File mandate: under recently issued notice, N-12-4 effective for returns filed after 1/1/12, individuals must still e-file their personal income tax returns if: (1) they use software to prepare their returns, (2) the tax software supports e-filing and (3) they have broadband internet access.

The new law eliminated: (1) the $25 penalty that had applied to individuals for failure to e-file their personal income tax returns and (2) the provision that denied individuals interest on any overpayment or refund on a return until the return was properly e-filed. Note, however the penalty for tax preparers for failure to e-file returns when required in 2012 is still applicable.

New York City (NYC)

New York City Fiscal Year 2012-2013 Budget

The executive Budget presented by Mayor Bloomberg on May 3, 2012 effective July 1, 2012 through June 30, 2013, contains no tax increases.

IRS Circular 230 Disclosure

Treasury Regulations require us to inform you that any Federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

© Marks Paneth LLP 2012 MANHATTAN | LONG ISLAND | WESTCHESTER | CAYMAN ISLANDS

About Steven P. Bryde