KPMG reports - Indiana (foreign sales); Massachusetts (financial institution excise tax); New York (nexus); North Carolina (bonus depreciation) 

April 29: 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 and features a series of short podcasts presented by KPMG tax professionals. Text of the podcasts is also available.

Today’s edition, for April 29, 2013, includes the following topics (listen to the podcasts; to read text, click on the links below).

  • Indiana: The Indiana Department of Revenue applied the principles of Public Law 86-272* to determine whether an Indiana-based manufacturer of tangible personal property was “subject to tax” in foreign countries for purposes of including sales in those foreign countries in the taxpayer’s Indiana sales factor numerator. The Department ruled that the taxpayer’s activities in Russia, Mexico, and Spain exceeded Pub. L. 86-272 protection and that receipts from the sale of products delivered to customers in the foreign jurisdictions were not required to be “thrown back” into the Indiana sales factor numerator

    *A federal law—Public Law 86-272, 15 U.S.C. sections 381-384—restricts a state from imposing a net income tax on income derived within its borders from interstate commerce if the only business activity of the company within the state consists of the solicitation of orders for sales of tangible personal property, which orders are to be sent outside the state for acceptance or rejection, and, if accepted, are filled by shipment or delivery from a point outside the state. The term "net income tax" includes a franchise tax measured by net income.
  • Massachusetts: The Massachusetts Appellate Tax Board found that a taxpayer (a wholly owned subsidiary of a parent corporation engaged in various aspects of the post-secondary student loan business) qualified as a “financial institution” subject to financial institution excise tax because the taxpayer was engaged in lending activities.

  • New York: The New York State Department of Taxation and Finance found that in-state visits from employees of an out-of-state retailer (a catalog and internet clothing business) did not constitute nexus; and thus, the retailer was not "doing business" in the state given the limited purpose and duration of the employee visits.

  • North Carolina: A North Carolina state court, in addressing whether S corporation shareholders were entitled to deduct bonus depreciation previously added back to taxable income when the entities were C corporations, concluded that a taxpayer's eligibility to use the addback deduction requires that the same taxpayer must have added back bonus depreciation to taxable income. The shareholders, the court observed, were not the entities that previously added back bonus depreciation.

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