Over the years, too many corporations doing business in Illinois have had the unfortunate experience of receiving a notice of delinquency from the Office of the Secretary of State of Illinois (the “Secretary of State”) demanding immediate payment of additional franchise tax, penalties, and interest. Not to be confused with the Illinois corporate income tax, which is administered by the Illinois Department of Revenue, the Illinois franchise tax is codified in the Business Corporate Act of 1983, 805 ILCS 5/1.01, et seq. (the “BCA”), and is administered by the Secretary of State. The franchise tax is considered a fee for the privilege and protections of “incorporation”, and therefore only applies to “corporations” and not other business entities (e.g., LLCs, LLP, GPs, etc.). The Illinois franchise tax base is measured by a corporation’s Illinois “paid-in capital” — meaning, funds generated by corporations by issuing stock, plus additional cash/equity contributed by shareholders.
The Texas Comptroller of Public Accounts (the “Comptroller”) will initiate the Texas Tax Amnesty Program (the “Program”) this week. The Program will run from May 1, 2018 to June 29, 2018 and covers all state and local taxes and fees administered by the Comptroller, including Texas franchise tax and sales/use taxes. The Program applies to all tax reports originally due before January 1, 2018, and is designed to allow participants to “wipe the slate clean” by filing all past due reports or by amending reports that underreported taxes. Program participants benefit from a 100% waiver of both penalties and interest. This is the first Texas amnesty program since 2012, when an earlier amnesty program ran from June 12, 2012 through August 17, 2012.
The Utah Supreme Court recently heard arguments in Utah State Tax Comm’n v. See’s Candies Inc., Utah, No. 20160910-SC, which is an important case for whether Utah will respect arm’s-length transfer pricing. During the hearing, the Utah State Tax Commission (“Commission”) argued that Internal Revenue Code (“IRC”) § 482 should not limit its discretionary authority to reallocate income between related companies. The taxpayer, on the other hand, claimed the intercompany transactions at issue were at arm’s length and therefore deductible.
On September 22, 2017, the Massachusetts Department of Revenue (the “Department”) officially promulgated a remote vendor sales tax nexus regulation, 830 CMRH.1.7: Vendors Making Internet Sales (the “Regulation”). The Regulation sets forth the following bright-line nexus threshold:
An Internet vendor with a principal place of business located outside the state that is not otherwise subject to tax is required to register, collect and remit Massachusetts sales or use tax with respect to its Massachusetts sales […] if during the preceding 12 months […] it had in excess of […]” (1) “$500,000 in Massachusetts sales from transactions completed over the Internet […]”; and (2) “made sales resulting in a delivery into Massachusetts in 100 or more transactions.