KPMG reports: Maine, New Mexico, Wyoming, Multiple states

Maine, New Mexico, Wyoming, Multiple states

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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  • Maine: Newly enacted legislation updates the state’s conformity to the Internal Revenue Code. Specifically, for tax years beginning on or after January 1, 2018, the “Code” means the U.S. Internal Revenue Code of 1986 and amendments as of December 31, 2020. Previously, Maine conformed to the Code as of December 31, 2019. Thus, Maine had not adopted any of the tax changes included in the federal coronavirus (COVID-19) relief bills. In addition to updating the conformity date, the legislation decouples from certain federal provisions for corporate taxpayers. Read a March 2021 report
  • New Mexico: An administrative hearings officer determined that demilitarization and munitions disposal services performed in New Mexico were subject to the state’s gross receipts tax. Under New Mexico law, sales of a service to an out-of-state buyer may be deducted from gross receipts, unless the buyer of the service makes initial use of the product of the service in New Mexico or takes delivery of the product of the service in New Mexico. The taxpayer argued that the buyer of the demilitarization services—a government agency—was out-of-state, and therefore that the receipts were to be deducted from the gross receipts tax base. However, because the resulting product of the services performed was demilitarized range sites in New Mexico, the hearing officer concluded the initial use or delivery location of the service was in state. Read a March 2021 report
  • Wyoming:  The State Board of Equalization concluded that a taxpayer was not providing taxable alteration or improvement services with regard to tangible personal property, and reversed the findings of the Department of Revenue. The Department had assessed the taxpayer for sales tax on certain vehicle related services on the basis that the taxpayer was improving or altering vehicles when it jump-started cars, changed flat tires, or unlocked vehicles for locked out customers. In reversing the assessment, the Board concluded that the Department interpreted “alteration” and “improvement” too broadly and did not prove by a preponderance of the evidence that the services were taxable. Read a March 2021 report
  • Multiple states: The recently enacted “American Rescue Plan Act of 2021,” which allocates significant revenues to support states and local governments, includes a measure prohibiting states from using these funds to reduce taxes. State officials have expressed concerns about how this prohibition could affect future state tax cuts and incentive legislation. In response to requests for interpretive guidance, U.S. Treasury Secretary Yellen stated that Congress may place reasonable conditions on how states use federal funding, but that “nothing in the Act prevents states from enacting a broad variety of tax cuts.” According to Secretary Yellen, if states lower certain taxes, but do not use funds under the legislation to offset those cuts, then the limitation in the legislation would not be implicated. Additional guidance is anticipated.  Read a March 2021 report

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