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Pennsylvania

Earlier this year, the Pennsylvania Department of Revenue issued temporary guidance regarding telework during COVID-19 and the related tax implications thereof.  The Department has now issued an end date to its temporary policies: guidance issued by the Department is in effect until the earlier of June 30, 2021 or 90 days after the Proclamation of Disaster Emergency in Pennsylvania is lifted.

Ordinarily, the presence of employees working temporarily from home within Pennsylvania is sufficient to establish nexus for out-of-state businesses for purposes of the ...

In response to various issues created by COVID-19, the Philadelphia Department of Revenue (“Department”) has issued guidance to taxpayers related to the City’s Wage Tax, Use & Occupancy (“U&O”) Tax, and Business Income & Receipts Tax (“BIRT”).Wage Tax

On November 5, 2020, the Department issued revised guidance regarding Wage Tax withholding requirements for Philadelphia-based employers.  This is not a change in position; the guidance serves to explain the City’s policy that was in effect pre-COVID.  The guidance explains that Philadelphia applies the ...

During July, the Commonwealth Court handed down its decision in Synthes v. Commonwealth of Pennsylvania, 108 FR 2016, which was a closely watched case dealing with differing interpretations of Pennsylvania’s costs of performance (“COP”) statute.  Prior to 2014, the statute required services to be sourced to the location of the “income-producing activity.”  Where the income-producing activity occurred both within and without Pennsylvania, receipts were required to be sourced to the state where the greater proportion of income-producing activities occurred, based ...

A Texas appellate court handed down on August 13 reminds taxpayers that the Texas Comptroller refund procedures are laden with traps for the unwary. 

Comptroller Seeks to Dismiss Refund Suit

In the case, Hegar v. El Paso Elec. Co., the taxpayer, El Paso Electric, sued the Texas Comptroller for refund in district court on grounds that it had paid taxes on equipment that qualified for Tax Code section 151.318(a)(4)'s exemption for “telemetry units that are related to ... step-down transformers.”.  No. 03-18-00790-CV (Tex. App. Aug. 13, 2020).  The Comptroller pled that El Paso ...

The Internal Revenue Service is scheduled to publish its final regulations addressing attempts to end-run the 2017 Tax Cuts and Jobs Act’s cap on state and local tax deductions.

As readers will recall, prior to the TCJA’s amendment to Section 164 in December 2017, taxpayers were able to deduct the full amount of their state and local taxes (mostly property taxes and income taxes), subject to the limitation on itemized deduction.  The TCJA added Section 164(b)(6) which limits the aggregate deduction of these taxes to $10,000 (less if not filing a joint return).

This little provision ...

In recent years, the Pennsylvania Department of Revenue (“Department”) has become increasingly aggressive in auditing restaurants for the underpayment of sales tax. By taking proactive measures and understanding the audit landscape, restaurants can set themselves up to successfully defend against the potential consequences.

Keep “Auditable” Records

Many restaurants keep sales ledgers showing cash and credit totals of taxable and non-taxable sales (e.g., alcohol) and tips for each day. This may be enough for their accountants to file sales tax returns, but not for ...

The City of Philadelphia has responded to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, 585 US. ___ (2018), amending its Business Income and Receipts Tax (“BIRT”) regulations to impose economic nexus.  The City’s BIRT is imposed annually upon every person engaging in any business in the City; it is a privilege tax, taxing the “privilege” of doing business in Philadelphia. [Phila. Code §19-2603].

The BIRT has two components: a net income component and a gross receipts component.  Prior to 1998, both portions of the BIRT were subject to the solicitation ...

The Philadelphia Department of Revenue (“DOR”) has issued two new forms of guidance addressing issues raised by the federal Tax Cuts and Jobs Act of 2017 (“TCJA”).  First, on January 16, the DOR issued an Advisory Notice regarding the deductibility of employee business expenses in light of the TCJA.  For tax years 2018 through 2025, the TCJA eliminates most miscellaneous itemized deductions for individuals, including deductions for employee business expenses.  Further, moving expenses are no longer deductible for federal income tax purposes for those tax years.  In ...

Effective July 1, 2019, amendments have been made to Section 202 of the Business Income and Receipts Tax (“BIRT”) Regulation, which will have an effect on taxpayers starting business activity within Philadelphia during calendar year 2019 and thereafter. 

Previously – and still in effect for those taxpayers that commenced business during tax years 2018 and prior – a new business was required to not only pay the tax due for the first year of operation, but also make a 100% estimated tax payment in the amount of the first year tax liability.

The Amendments now allow taxpayers some ...

On January 9, 2019, the U.S. Supreme Court heard oral arguments in the case of Franchise Tax Board of California v. Hyatt, No. 17-1299.  A copy of the oral argument transcript can be accessed here.

In Hyatt, the Supreme Court is again revisiting the question of whether one state can be sued in another state’s courts.  The Hyatt litigation has been ongoing for two decades and has been before the U.S. Supreme Court on two previous occasions.  The case involves damages sought by Gilbert P. Hyatt for several torts allegedly committed by the Franchise Tax Board of California (“FTB”) in its ...