VA: Corp President not held liable for unpaid sales

The 20% owner of a tire shop who performed the duties of shop foreman was relieved of personal liability for unpaid sales taxes because he proved that, despite his standing as the President of the corp, he did not meet the VA definition of a corp officer. He did not have enough ownership/authority to control business affairs. He had no actual knowledge that the taxes were not being paid. The duty of reporting and remitting sales taxes fell to others. These factors were taken into consideration and the VA commissioner ruled in his favor. Each state will look at different criteria and apply varying weights to items of evidence but this case provides some insight on who responsible parties might be in cases of unpaid sales taxes.

State Tax Reciprocal Agreements example

From January 2010. These may not always stay the same so please confirm before depending on the info! (DE has no reciprocal agreements of this nature.)

State States with State Tax Reciprocal Agreements Exemption Form


District of Columbia All non-residents who work in DC can claim exemption from withholding for the DC income tax. D-4A

Illinois Iowa, Kentucky, Michigan, Wisconsin IL-W-5-NR

Indiana Kentucky, Michigan, Ohio, Pennsylvania, Wisconsin WH-47

Iowa Illinois 44-016

Kentucky Illinois, Indiana, Michigan, Ohio, West Virginia, Wisconsin, Virginia 42A809

Maryland District of Columbia, Pennsylvania, Virginia, West Virginia MW 507

Michigan Illinois, Indiana, Kentucky, Minnesota, Ohio, Wisconsin - Employers may create their own exemption form or use the line on MI-W4 for claiming exemption from withholding. Employee should write "Reciprocal Agreement" and the state name on that line. MI-W4

Minnesota Michigan, North Dakota MWR

Montana North Dakota NR-2

New Jersey Pennsylvania NJ-165

North Dakota Minnesota, Montana NDW-R

Ohio Indiana, Kentucky, Michigan, Pennsylvania, West Virginia IT-4NR

Pennsylvania Indiana, Maryland, New Jersey, Ohio, Virginia, West Virginia REV-420

Virginia Kentucky, Maryland, District of Columbia, Pennsylvania, West Virginia VA-4

West Virginia Kentucky, Maryland, Ohio, Pennsylvania, Virginia WV/IT-104

Wisconsin Illinois, Indiana, Kentucky, Michigan W-220

Virginia: No deduction for taxes paid to MD in error

If you live in one state but work in another, your employer will generally withhold and remit taxes to the state where you are working - not where you are living. However, you will owe tax to your state of residence on all the income you earn, regardless of where you earned the income. Your home state will probably give you a credit for taxes paid to other states so you will only wind up paying tax to one state. For example, if you are a resident of DE working in MD:

• if you paid $150 to MD but DE would have charged you $100 on that income you will receive a $100 credit.

• if you paid MD $80 but DE would have charged you $100 on that income you will receive an $80 credit.

Some states will not give you the credit at all so you do wind up double paying. Some adjacent states have adopted reciprocity agreements. In these cases, your employer may withhold and remit only the tax for your home state. VA ruled that since reciprocity with MD is available if it is not taken advantage of (i.e. a VA resident working in MD still withholds and remits MD tax) VA will not offer a credit for the taxes paid in error. Hopefully the taxpayer in this case was able to obtain a full refund from MD!

Maryland renews and expands Enterprise Zones

Enterprise Zone Tax Credits

Real property tax credits – Ten-year credit against local real property taxes on a portion of real property improvements. Credit is 80% the first five years, and decreases 10% annually to 30 percent in the tenth and final year.

• Income tax credits – the one-time $1,000 credit per new worker. For economically disadvantaged employees, the credit is $6,000 per employee over three years.

 

Focus Area Tax Credits

Businesses in Baltimore City or Prince George’s County enterprise zones may be eligible for the following tax credits:

• Real property tax credits – Ten-year, 80% credit against local real property taxes on a portion of real property improvements. (does not decline as it does with the standard benefit).
• Personal property tax credits – Ten-year, 80% credit against local personal property taxes on new investment in personal property within a focus area.
• Income tax credits – a one-time $1,500 credit per new employee. For economically disadvantaged employees, the credit is $9,000 per employee over three years.

Here are some links to additional info:

http://www.choosemaryland.org/businessresources/Documents/Enterprise%20Zones/enterprisezones061512.pdf

http://www.choosemaryland.org/businessresources/Documents/Writeable%20Forms/EZQAProperty2011.pdf

http://www.choosemaryland.org/businessresources/Documents/Writeable%20Forms/EZQAIncome2010.pdf

 

NJ Nexus news - part 7

The Director of NJ Division of Taxation may, when necessary, regard a salesperson, representative, independent contractor, solicitor, trucker, peddler or canvasser operating in New Jersey as an agent of the dealer, distributor, supervisor, employer or person under whom the agent operates or from whom the agent obtains the tangible personal property sold by the agent, regardless of whether the agent is making sales on the agent’s behalf or on behalf of such dealer, distributor, supervisor, employer, or person, and that the director may so regard the agent and may regard the dealer, distributor, supervisor, employer, or person as a seller for purposes of the sales and use tax.

NJ Nexus news - part 6

NJ nexus news: Persons who is engaged in the business of selling tangible personal property, directly or through a subsidiary or other related entity, to purchasers in New Jersey by mail, telephone, the Internet or any other media, and who has a contractual relationship with an entity to provide and perform delivery, installation, assembly, or maintenance services for that person’s purchasers within New Jersey will be deemed sellers for purposes of being required to register to do business in New Jersey and collect/remit sales tax.

NJ Nexus News - Part 5

Persons who are engaged in the business of selling tangible personal property, specified digital products, or services, the use of which is subject to tax in New Jersey, and who use a trademark, service mark, or trade name that is the same as the trademark, service mark, or trade name used by an affiliated person in New Jersey will be deemed sellers for purposes of being required to register to do business in New Jersey and collect/remit sales tax.

NJ nexus news - part 4

Persons who derive receipts from the lease or rental of tangible personal property situated within New Jersey will be deemed sellers for purposes of being required to register to do business in New Jersey and collect/remit sales tax.

NJ nexus news - part 3

Persons who hold a substantial ownership interest in, or are owned in whole or substantial part by, a business that maintains an office, distribution facility, sales or sample facility, warehouse or storage place or other similar place of business in New Jersey that delivers tangible personal property or specified digital products sold by the person to customers will be deemed sellers for purposes of being required to register to do business in New Jersey and collect/remit sales tax.

NJ nexus news - part 2

Persons who hold a substantial ownership interest in, or are owned in whole or in substantial part by, a person maintaining a place of business within New Jersey, and who use the in-state facilities or the in-state employees of a related person in New Jersey to advertise, promote, or facilitate sales to customers will be deemed sellers for purposes of being required to register to do business in New Jersey and collect/remit sales tax.

NJ nexus news - part 1

Persons who hold a substantial ownership interest in, or are owned in whole or in substantial part by, a person maintaining a place of business within New Jersey and who sell the same or a similar line of products as the related person in New Jersey under the same or a similar business name will be deemed sellers for purposes of being required to register to do business in New Jersey and collect/remit sales tax.

PA RCT-101 return

Don’t forget that a PA RCT-101 filing is required even for single member LLCs. For many small businesses this is a tedious form resulting in little to no taxes due. It is akin to a PA franchise tax. Instructions for this form are cryptically found by searching for something else as detailed below:

https://revenue-pa.custhelp.com/app/answers/detail/a_id/1289/~/how-do-i-get-instructions-for-completing-old-year-rct-101-forms%3F

Businesses not formed under the laws of the Commonwealth of Pennsylvania whose Pennsylvania activity during a tax year is considered de minimis, as detailed in ct_bulletin_2004-01, may not be required to file a complete PA Corporate Tax Report, RCT-101, for that period. Instead, these corporations may file RCT-101D, affirming PA activity during the period is de minimis. A corporation preparing to file RCT-101D is reminded that a RCT-101D is not a tax report, and the statute of limitations regarding the assessment of tax does not apply.

Google the bulletin for more info but a quick heads up: Only the solicitation to sell tangible personal property is afforded immunity from the corporate net income tax. The sale or delivery and the solicitation for the sale or delivery of any type of service does not qualify. There are MANY other disqualifying factors.

VA has a great idea to bring in more taxable income

vs. just raising taxes on less and less income in order to break even like some other states....

VA has a corp and personal income subtraction for income attributed to an investment in certain tech and start-up companies and taxed as long-term capital gain. The period during which qualified investments may be made has been extended to June 2015 although the website has not been updated yet :

"Entrepreneurs and investors who make qualified investments in early stage technology, biotechnology and energy startups in Virginia beginning April 1, 2010 through June 30, 2013 (2015) will be exempt from paying state income tax on their long term capital gains throughout the life of the investment. If and when investments in these qualified companies are successful over the life of a company, any long term capital gains attributable to the investment will be exempt from Virginia's income tax."

More details here:
http://www.technology.virginia.gov/CapitalGains/

NJ sales tax on contracting services

A water damage remediation company was deemed required to charge and remit sales tax on its services because what they provided did not constitute exempt capital improvements.

Many contracting type services are subject to NJ sales tax and those that are exempt often require the contractor to obtain a signed statement from the customer which describes the nature of the work that was completed. Forgetting to charge/quote a customer the 7% sales tax in a situation where you are required to remit sales tax can really cut into your profit margin!

Find complete details here:

http://www.state.nj.us/treasury/taxation/su_15.shtml

Tax info for volunteer emergency workers

MD now allows a subtraction for US Coast Guard Auxiliary and Maryland Defense Force as well as volunteer fire, rescue and emergency personnel. Many states offer a tax credit of this nature so be sure to mention to your CPA that you are a volunteer.

Volunteer workers can also deduct as charitable contributions the non reimbursed equipment purchases, mileage, and certain other expenses incurred for performing their volunteer work but must reduce this amount by any nontaxable compensation received.

Here is some federal tax info for firefighters:

http://www.irs.gov/govt/fslg/article/0,,id=111350,00.html

Nexus news for anyone with telecommuting employees in another state

A Delaware corporation with an employee allowed to telecommute full-time from her New Jersey residence was subject to the NJ corporation business tax (CBT), and required to register to do business in NJ as well as to file CBT returns and employment tax returns. The employee developed and wrote software code from a laptop computer from her residence in New Jersey and then uploaded it to a repository on the company's computer server in another state. This is no different than an out-of-state manufacturer employing someone to fabricate parts in New Jersey for a product that will be assembled elsewhere. The nexus created by the full-time employee in New Jersey was not de minimus. The corporation was doing business in New Jersey.

PA keystone opportunity zone lives on

PA has extended its Keystone Opportunity Improvement Zone tax exemptions, deductions, abatements, and credits, expanded existing zones, and created additional zones. The sunset date of 12/31/2018 has been repealed. Tax benefits available to businesses and residents located in KOZs, KOEZs, and KOIZs include a sales and use tax exemption, a property tax abatement, and credits against corporate and personal income, capital stock and franchise, insurance gross premiums, bank shares, and mutual thrift institutions taxes. Find more information here:

http://www.portal.state.pa.us/portal/server.pt/community/keystone_opportunity_zones_%28koz%29/14707

VA passes single apportionment factor legislation

VA has passed legislation that requires retail companies operating in multiple states to use a single factor (sales) apportionment factor for computing the percentage of total taxable income attributable to VA. (A retail company has can NAICS code in sector 44-45.) The standard is a 3 factor uitizing sales, payroll, and assets/inventory/rental space value.This will be phased in between 2012 and 2015 in an oddball way so each year will use a different number or apportionment factors. Triple then quadruple (?) then single. Whyyyy?

Nexus news for those shipping tangible personal property to VA eff 1/1/2014 (2)

If a dealer has a location in VA but it can prove that this location does not materially participate in the process of delivering or selling merchandise to VA customers it may exempt itself from the requirement to collect/remit sales taxes. However, the merchant must advise VA purchasers that use tax may be due from them to VA for their purchase from an out of state seller. Dealers will be subject to a penalty of $5 per failure to provide this notice and must further send a second notice by 1/31 which reports the total amount paid by the purchaser in the previous year (plus a variety of other details) for any sales using a billing address in VA. A similar statement must be sent to the VA Division of Taxation by 3/1 of each year. Dealers will be subject to a penalty of $10 per failure to provide each of these last two notices.

Nexus news for those shipping tangible personal property to VA eff 1/1/14

VA now has a presumption that a merchant has sufficient activity within Virginia to require it to register for the collection of retail sales and use taxes if any commonly controlled person/entity maintains a distribution center, warehouse, fulfillment center, office, or similar location within Virginia that facilitates the delivery of items to customers of the business. For example, this would apply in a situation where a customer orders from a call center outside if VA (or online) but the merchandise is drop-shipped from or stored in a VA location. Such warehouse/center even if owned by another business will be treated the same as a VA retail location if owned/controlled by merchant or essentially the same stockholders as the merchant.

VA Decoupling Modifications

VA reminds taxpayers that it’s tax calculations differ from federal in the areas of: the special bonus depreciation allowance, the five-year carryback period for certain net operating losses, the federal domestic production activities deduction, the provisions of IRC §32(b)(3) that relate to the federal earned income tax credit, and the deferral of income from the cancellation of debt.

State Copies of 1099 forms

Thirty six states require 1099 forms reporting for various types of non-payroll compensation and other miscellaneous income. While the 1099 filing requirements and dollar reporting thresholds may vary, the requirement to file a state return is generally contingent on the reporting requirements for the state in which the 1099 recipient resides. The states not requiring tax filing for 1099 forms are Alaska, District of Columbia, Florida, Illinois, Iowa, Louisiana, Nevada, New Hampshire, New York, Oregon, South Dakota, Tennessee, Texas, Washington and Wyoming.

Deadline for 2011 PA Property Tax rebate applications approaches

PA residents age 65 or older (widow or widower 50 or older and people with disabilities 1 or older) with incomes of less than $35k for homeowners and $15k for renters (excluding ½ of social security) are eligible to apply for a rebate of up to $975 for property taxes or rent. The deadline for a 2011 rebate is 6/1/2012. More info here:

http://www.portal.state.pa.us/portal/server.pt/community/property_tax_rent_rebate_program/11410/sign-up_to_receive_a_form/581708

MD makes a minor form replacement

The Maryland Comptroller of the Treasury has replaced form MW507 with form MW507M (Exemption from Maryland Withholding Tax for a Qualified Civilian Spouse of a U. S. Armed Forces Servicemember) to be used beginning with tax year 2011. Affected taxpayers who have already filed Form MW507 for 2011 should contact their employers to obtain and complete Form MW507M, which will be effective retroactive to the date that Form MW507 was filed.

VA deems provision of an all digital 'product' not subject to sales tax

Services provided by the taxpayer that were accessed by its customers online and delivered to the customers electronically were not subject to the Virginia retail sales and use tax because no tangible personal property was transferred as a result of these transactions. The transactions were deemed a provision of services.

PA cracks down on remote sellers re: sales tax

In December the department issued a tax bulletin that explains existing sales tax nexus law for remote sellers and clarifies the law and the department’s authority to require e-commerce and other out-of-state sellers to collect sales tax.

Examples of maintaining a place of business in the Commonwealth include, but are not limited to:

(1) A remote seller storing its property or the property of a representative at a distribution or fulfillment center located within the Commonwealth, regardless if the center also stores property of third parties that is distributed from the same location.

(2) A remote seller who has a contractual relationship with an entity or individual physically located in Pennsylvania whose website has a link that encourages purchasers to place orders with the remote sellers. The in-state entity or individual receives consideration for the contractual relationship with the remote seller.

(3) A remote seller utilizing affiliates, agents and/or independent contractors located in Pennsylvania who will provide repair, delivery or other service relating to tangible personal property sold by the remote seller to Pennsylvania customers.

(4) A remote seller’s affiliates, agents and/or independent contractors provide service(s) within the Commonwealth (including, but not limited to storage, delivery, marketing or soliciting sales) that benefit, support and/or complement the remote seller’s business activity.

(5) A remote seller’s employee(s) regularly travel(s) to Pennsylvania for any purpose related to the remote seller’s business activity.

(6) A remote seller who accepts orders that are directly shipped to Pennsylvania customers from a Pennsylvania facility which is operated by a remote seller’s affiliate, agent or independent contractor.

(7) A remote seller who regularly solicits orders from Pennsylvania customers via the website of an entity or individual physically located in Pennsylvania, such as via click-through technology.

Reminder: If You Worked in DE but lived in another state...

Delaware does not maintain reciprocity agreements with other states and, therefore, nonresidents who work in Delaware must still file a Delaware tax return. Likewise, Delaware residents who work out of state are required to file a return with Delaware AND with the state where they worked.

Miscellaneous 2011 MD Tax Return Changes

Libraries and Post Offices – The Comptroller’s Office will no longer supply area post offices and libraries with tax booklets. Each library will receive a CD Rom of all of our forms if requested.

Splitting a direct deposit – Taxpayers can now have a tax refund deposited into multiple bank accounts by using Form 588.

New Dependent Form 502B - Form 502B will be a required form to be attached to Form 502 to determine what exemption you are entitled to claim. Taxpayers claiming more than two exemptions must use Form 502.

Increased pension exclusion - Maryland's maximum pension exclusion, which is available to qualifying taxpayers 65 or older, increased from $26,100 to $26,300 for tax year 2011.

Nonresident Form 505SU/502SU - This year, other certain subtractions for which taxpayers may qualify will be reported on Form 505SU/502SU. If multiple subtractions apply, taxpayers should be sure to indicate all of them on Form 505SU/502SU and attach it to the Form 505/502.

Local Tax Rate Increase - For tax year 2012, Anne Arundel County has decreased their local tax rate to 2.49% and Queen Anne's County has increased their local tax rate to 3.20%. Please note the change on the Form 502D.

Proposed Legislation: Mobile Workforce State Income Tax Simplification Act

This federal bill was never put to a vote in the last session but hopefully it will reappear. If passed, then as of the January after enactment, an employee's wages would not be subject to personal income tax or withholding and reporting requirements in any state other than the employee's state of residence and a state in which the employee is present and performing employment duties for more than 30 days during a calendar year. Currently each state makes its own rules about how many days are allowed with some at 1 day.


The general rule is that employees owe taxes to the state where services are performed vs. the state where the employer is located or where they reside. The world is shrinking and many business owners/employers, especially those headquartered in small states, can no longer afford to turn down work across state borders. Registering as an employer and allocate a few day’s or a few week’s wages to another state is burdensome. This brings about quarterly and annual payroll tax from filing requirements (which stay in place until you submit more forms to close the accounts) and the need for the employees to file personal income tax returns for each state. In some cases, a DE contractor may do one 2-3 week job in each PA, MD, NJ, and VA in a year. The costs for employment form prep (registration, wage reporting, and closing the account after the job is complete) could be $600 per state and employees may pay $60 per additional state attached to their personal tax returns.
Write your Congressperson and ask him/her to support this bill!

The following DE Gross Receipts Tax Rates Decreased Effective January 1, 2012

• The license fee for occupations requiring licenses has decreased to 0.4023% of aggregate gross receipts.


• The contractors’ license fee has decreased to 0.6537% of aggregate gross receipts.

• The manufacturers’ license fee is now 0.1886% of aggregate gross receipts.

• The wholesalers’ license fee is 0.4023% of aggregate gross receipts.

• The additional petroleum product wholesalers’ license fee has decreased to 0.2514% of taxable gross receipts from the sale of petroleum or petroleum products.

• The food processors wholesalers’ license fee has decreased to 0.2012% of aggregate gross receipts.

• The commercial feed dealer wholesalers’ license fee is now 0.1006% of aggregate gross receipts.

• The retailers’ license fee is 0.7543% of aggregate gross receipts.

• The transient retailers’ license fee has decreased to 0.7543% of aggregate gross receipts.

• The restaurant retailers’ license fee has decreased to 0.6537% of aggregate gross receipts.

• The farm machinery retailers’ license fee is now 0.1006% of aggregate gross receipts.

• The leasing use tax rate is 2.0114% of the rent paid on a lease of tangible personal property.

• The lessors’ license fee has decreased to 0.3017% of lease rental payments received.

• The grocery store retailers’ license fee is now 0.33% of aggregate gross receipts. The application of two different rates has been discontinued.

Sec 105/HRA Money May Now Be Used to Pay Health Insurance Premiums in DE

A basic HRA is an employer funded plan wherein an employer sets aside an amount of money to reimburse eligible employees for qualified expenses. For example, you might say that you will reimburse up to $2000 per year of medical expenses for 35+ hr/week employees who have been with the company for at least 2 years. The employer may deduct this as a fringe benefit and the employee does not have to pay tax on this money. Unused amounts carry forward for 1 year. Employees turn in expenses on a form using vague descriptions (prescription, Dr, Dentist, etc) so their privacy is not impeded and a service with handle all the tax forms for a very minimal fee. The employer does not have to have a separate bank account for housing unused HRA funds and they are forfeited upon employment termination.


In the past, in Delaware and most states, HRA money could not be used for purchasing major medical insurance (only Dental and Vision). Effective with 2012, DE participants may use the HRA for medical insurance premiums. This provides a great vehicle for small business owners to offer some vs. no medical benefits without opening themselves up to unknown future liabilities as they would when offering to pay medical insurance premiums as a part of a compensation package.

Contact BASE for more info: http://www.baseonline.com/

New Jersey—Ponzi Scheme Victims Entitled to Refunds

Taxpayers, who were victims of the Madoff Ponzi scheme, were entitled to file amended New Jersey gross (personal) income tax returns for 2005 through 2007 to claim refunds for interest, dividends, and capital gains reported and taxed in those years from which they received no economic gain. The income never existed and, therefore, was not taxable.

Virginia—Sales and Use Tax Exemption: Investment and Job Creation Clarifications/Scenarios

Prior to claiming the exemption, any qualifying entity must enter into a memorandum of understanding with the Virginia Economic Development Partnership Authority ("VEDP").


A qualifying data center is a data center (1) that is located in a Virginia locality; (2) that on or after January 1, 2009, results in a new capital investment of at least $150 million; and (3) that on or after July 1, 2009, results in the creation of at least 50 new jobs associated with the operation or maintenance of the data center, provided that such jobs pay at least one and one-half times the prevailing average wage in that locality. (The jobs requirement is reduced to 25 new jobs if the data center is located in a locality that has an unemployment rate for the preceding year of at least 150% of the average statewide unemployment rate for such year or is located in an enterprise zone.)

A single entity makes a data center investment of $150 million, creates 50 jobs and enters into a memorandum of understanding with the Virginia Economic Development Partnership.

A single entity makes a data center investment of $150 million, signs agreements with tenants who contractually commit to create 50 jobs and submit verification of job creation through the single entity and the single entity enters into a memorandum of understanding with VEDP.

A number of tenants create a single entity, like a limited liability company (LLC), for the construction and operation of a data center, make a data center investment totaling $150 million, sign agreements with tenants who contractually commit to create 50 jobs and submit verification of job creation through the LLC, and the LLC enters into a memorandum of understanding with the VEDP as a single entity.

Maryland—Working in MD for Part Year Prior to Relocation Does Not Equal Residency

MD courts ruled that a taxpayer was not a resident of Maryland. The taxpayer worked in Maryland for part of the year prior to moving to Maryland the subsequent year. The court noted that facts such as the taxpayer’s driver’s license, automobile registration, voter registration, homeowners’ fees, real estate taxes, mortgage payments, and testimony indicated that the taxpayer intended to reside in Michigan during the subject year. (Taxpayers contributed to the confusion by filing a part-year MI return despite being full year MI residents.)

DE 2011 Searchable Unclaimed Property List

See FAQs at same link for more info about how property winds up on this list and how to claim it.


http://www.revenue.delaware.gov/unprop/unprop_search.shtml

PA Governor Orders Implementation of Licensee Tax Responsibility Program

The state Department of Revenue (DOR) has been instructed to develop and operate a licensee tax responsibility program. The Secretary of Revenue will issue a notice to licensing agencies indicating those licensees and applicants who have unresolved tax obligations on not less than an annual basis and administrators of state agencies will provide the Secretary of Revenue with information regarding business licensees and applicants for licenses, including various tax identification numbers and a statement signed by each licensee and applicant, under penalty of perjury, indicating that all state tax reports have been filed and paid, or alternatively, that a deferred payment plan currently is in effect.

Guidance on New Jersey Alternative Business Loss Deduction Provided

For tax years beginning after 2011, the legislation provides a deduction that uses a calculation that consolidates business income and/or loss and allows taxpayers to carry forward unutilized losses. A net loss in one category of personal income still cannot be used to offset income in another category of personal income.


The four categories of business income included in the alternative business calculation deduction are:

(1) net profits from business

(2) net gains or net income derived from or in the form of rents, royalties, patents, and copyrights (3) distributive share of partnership income

(4) net pro rata share of S corporation income

To calculate the alternative business calculation deduction ah…use tax prep software. Or see examples in the below link.

http://www.state.nj.us/treasury/taxation/pdf/nettingnotice.pdf

Delaware - Georgetown DE Business Owner Charged with Felony

George W. Donald, 46, was charged with two felony counts of failing to pay over state withholding taxes that were withheld from his employees’ wages during the years 2006 and 2007. Donald was also charged with five felony counts of failing to pay over rental use taxes collected from customers of his construction equipment rental business, Delaware Rental, during the years 2006 through 2010. Taxes total more than $30,000. Investigators say that Donald operated Delaware Rental and, as part of his duties, he was responsible for remitting withholding taxes and rental use taxes owed by the business to the Division of Revenue.


Payroll taxes are part of an employee’s wages which are retained by the employer for the sole purpose of remitting them to the state for application against the employees’ personal state tax liabilities as calculated on their tax returns. During the period in which the money has been withheld from employees but not yet remitted to the government the funds are considered held in trust. They never belong to the employer. Similarly rental use taxes are collected from customers as an agent for the State but never belong to the collecting entity. (The rental of tangible personal property within Delaware is subject to a rental use tax at the rate of 2.07%.)


Instead of paying over these taxes to the state, Donald transferred a significant amount of corporate funds into a separate business he controlled. It is illegal to use withholding and trust-fund taxes for any purpose other than payment to the government. The seven felony counts each carry a maximum penalty of five years in prison, and such fines and penalties as the court deems appropriate. Donald awaits arraignment and trial date in Superior Court in Wilmington.

Virginia—No Filing Requirement but Still Get NOL

A Virginia corporation commercially domiciled and operated in a foreign country, and a corporation commercially domiciled out of state, were appropriately excluded from the consolidated return because they did no business in Virginia and lacked sufficient activities to generate income from Virginia sources or to create a positive apportionment factor. However, the parent co did not have to back out a deduction for the full amount of a net operating loss incurred by the out of state corp between the date it was acquired and the date it was liquidated.

New Jersey—Jobs Tax Credit

The New Jersey Legislature has passed a bill that would provide a credit against the corporation business tax. Partnerships, S corporations, and limited liability companies would be able to pass through the credit to their members. The business must utilize a facility of a minimum $20 million value, employ at least 100 full-time persons (retained or created), provide health care benefits, and be a desirable industry as identified by the New Jersey Economic Development Authority (Authority). The business would have to demonstrate that 1) it would yield a net positive benefit to the state and 2) the existence of a credit was instrumental in the decision to create or retain that many jobs. (What? No room for a 'hand over your first born' clause?)


The credit is $5,000 per year for a period of 10 years for each new or retained full-time job. The Authority would be authorized to grant a bonus award of up to an additional $3,000 per job, depending on the type of industry, the location of the business, and whether the annual salaries for the jobs exceed the average full-time salary in the state. The amount of tax credits available to be applied by a business annually would be limited. Apply by July 1, 2014. A carryover of unused credits would be available for up to 20 tax periods. Credits would be transferable. Credits would be forfeited if conditions of certification were not met.

http://nj.gov/governor/news/news/552012/approved/20120106a.html