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KPMG reports: California, Illinois, Oregon, Multistate

KPMG reports: California, Illinois, Oregon, Multistate

KPMG’s This Week in State Tax—produced weekly by KPMG’s State and Local Tax practice—focuses on recent state and local tax developments.

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  • California: The Office of Tax Appeals addressed whether a taxpayer’s provision of elective prenatal imaging services, which included copies of the images captured on photographs and stored on CDs and DVDs, constituted the sale of tangible personal property. The taxpayer’s website and liability waiver forms stated that the elective ultrasound services were not a replacement for a diagnostic ultrasound performed by a medical provider, and customers were required to have a diagnostic ultrasound prior to receiving the taxpayer’s services. Accordingly, the California Department of Tax and Fee Administration determined that because medical ultrasounds were required prior to visiting the taxpayer, the true object of the taxpayer’s service was the sale of tangible personal property. The fact that the ultrasound was elective and not a medical necessity, and the taxpayer’s focus on the quality of resulting photos evidenced that the true object of the transaction was obtaining the tangible personal property. Read a February 2021 report

  • Illinois: The Department of Revenue issued guidance items addressing the obligations of remote retailers, marketplace sellers, and marketplace facilitators. Under Illinois law, effective January 1, 2021, remote retailers and marketplace facilitators are required to collect and remit state and local retailers’ occupation taxes (ROT) administered by the Illinois Department of Revenue. One guidance item advises remote retailers, marketplace sellers, and marketplace facilitators that they may also be liable for taxes not administered by the Department, including taxes imposed and administered by a “home rule” municipality on food prepared for immediate consumption and on alcoholic beverages. The second guidance item addresses the Metropolitan Pier and Exposition Authority (MPEA) food and beverage retailer’s occupation tax. Restaurants and other food and beverage establishments that are subject to the MPEA food and beverage tax will continue to remit the MPEA tax to the Department for all their sales—including sales made via a marketplace that is a food delivery service. Although they are not required to remit the MPEA tax, marketplace facilitators are required to remit sales tax on sales made over the marketplace on behalf of restaurants and other food and beverage establishments within the MPEA boundaries. Read a February 2021 report

  • Portland, Oregon: Guidance in the form of a set of “frequently asked questions” (FAQs) concerns the new “housing services” income tax. Voters in the Portland, Oregon metro area (Washington, Clackamas, and Multnomah counties) in May 2020 approved a ballot measure imposing a new 1% business profits tax on businesses with gross receipts over $5 million. A new 1% tax is also imposed on married individuals with income over $200,000 (over $125,000 for single individual filers). Both taxes are effective January 1, 2021. The FAQs provide additional guidance because very few details on the taxes were included in the ballot measure. Read a February 2021 report

  • Multistate: Several states in 2021 are considering tax legislation that would impose an excise tax or surtax on certain executive compensation. Some proposals seek to reduce the disparity between the amount paid to an organization’s CEO and the amount earned by average workers. Other proposals would simply limit deductions companies could take related to compensation. Read a February 2021 report

    • Hawaii: Senate Bill 747 would adopt a pay disparity “general excise tax” (GET) surcharge on companies whose top executive earns at least 100 times more than the median income of company employees. The rate of the surcharge would be 0.1% of the company’s GET liability.
    • Iowa: For publicly traded corporations, House File 69 provides that no deduction would be allowed for amounts paid or accrued during the tax year as compensation for the CEO or person acting in this capacity. The Iowa bill would also impose a 1% tax on the compensation paid to the chief executive of an insurance company. For a multistate insurance company, the tax would be applied to the apportioned compensation of the executive.
    • Massachusetts: Senate Draft 114 would impose a surtax on publicly traded utility companies operating in Massachusetts if the CEO-to-median worker compensation ratio is equal to or above 100:1 (that is, 100 to 1). If the ratio is equal to or above 100:1 but less than 250:1, the surtax rate would be 10%. If the ratio is equal to or above 250:1 the surtax rate would be 25%. The draft bill would prohibit such companies from raising utility rates until the company is in compliance with the 100:1 ratio. Other proposed bills would limit compensation deductions generally. 
    • New York: Senate Bill 1813 and Assembly Bill 3691 would establish a 10% surtax on companies that report a “pay ratio” (compensation to the highest paid executive compared to that of the median employee) to the U.S. Securities and Exchange Commission (SEC) of at least 100:1. The surtax would increase to 25% if the reported pay ratio is 250:1 or greater.  
    • Oregon: House Bill 2254 would require an addback for any individual’s compensation in excess of $1 million that is deducted for federal purposes.

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