TWIST - This Week in State Tax

Colorado: Retail Delivery Fee Changes Enacted

On May 4, 2023, Governor Jared Polis signed Colorado Senate Bill 23-143, which makes certain changes to the administration of the state’s retail delivery fee. Currently, retailers are required to add the fee to the price of the retail sale, collect it from purchasers, and remit it to the Department of Revenue, similarly to a sales tax. Importantly, the bill allows a retailer to elect to pay the retail delivery fee on behalf of a purchaser effective July 1, 2023. A retailer that makes this election shall remit the fees to the Department as if the fee had been collected from the purchaser on the date of the retail delivery.  In addition, effective July 1, 2022, Senate Bill 23-143 exempts qualified businesses from the retail delivery fee. A “qualified business” is a retailer that made retail sales into the state totaling $500,000 or less in the prior calendar year. Qualified businesses will not be entitled to refunds for any retail delivery fees remitted for the period from July 1, 2022 and before July 1, 2023.  Finally, Senate Bill 23-143 created a primary definition for “retail delivery” that is cross-referenced in other statutory provisions. Please contact Steve Metz with questions on the changes in Senate Bill 23-143.

Florida: Tax Package Includes Sales Tax Holidays, IRC Conformity Update

A comprehensive tax relief package (House Bill 7063) initially proposed by Governor DeSantis has passed both chambers of the Florida legislature and is expected to be signed into law.   This summary focuses on those provisions with the greatest impact on businesses.  House Bill 7063 does not make any major changes to Florida’s corporate income tax laws, but does update the state’s conformity statute by adopting the Internal Revenue Code as in effect on January 1, 2023. This change applies retroactively to January 1, 2023. The most significant sales and use tax changes are the adoption of several new, permanent sales tax exemptions and numerous sales tax holidays. Under House Bill 7063, new sales tax exemptions apply to various categories of items: specified baby and toddler products and clothes, diapers and incontinence products, oral hygiene products, firearm safety devices, and small private investigative agency services. The bill also extends exemptions to certain items depending on the manner in which they are used. New exemptions apply to machinery and equipment used to produce renewable natural gas, and an agricultural exemption is expanded to include certain types of fencing.  Much like legislation enacted last year, House Bill 7063 includes several new sales tax holidays, including two 14-day “back-to-school” tax holidays that will be held from July 24, 2023 through August 6, 2023, and January 1, 2024 through January 14, 2024. This holiday would apply to a variety of clothing items, school supplies, and personal computers. Two 14-day “disaster preparedness” tax holidays will be held from May 27, 2023 through June 9, 2023 and from August 6, 2023 through September 8, 2023.  Fourteen different categories of items are exempt during this time, including a number of “common household consumable items” and various “supplies necessary for the evacuation of household pets,” e.g., collapsible food bowls with a price of $15 or mess, or cat litter pan with a sales price of $15 dollars or less. A three-month “Freedom Summer” tax holiday will be held from May 29, 2023 through September 4, 2023 for specified recreational items and activities, including but far from limited to, admissions to events, boating and water activity supplies and children’s toys. From September 2, 2023 through September 8, 2023 the retail sales tax will not apply to tools and equipment commonly used in skilled trades with a purchase price of less than a specified amount. The “back-to-school” sales tax holiday applies at the option of the dealer if less than five percent of the dealer’s gross sales of tangible personal property in the prior calendar year are comprised of items that are exempt under the holiday. If a qualifying dealer chooses not to participate in the tax holiday, by July 17, 2023, for the tax holiday beginning July 24, 2023, and by December 23, 2023, for the tax holiday beginning January 1, 2024, the dealer must notify Department of Revenue in writing of its election to collect sales tax during the holiday and must post a copy of that notice in a conspicuous location at its place of business. A longer sales tax holiday, from July 1, 2023 through June 30, 2024, applies to certain purchases of ENERGY STAR certified appliances as well as gas ranges and cooktops.

Finally, the bill reduces the business rent tax from 5.5 percent to 4.5 percent, effective December 1, 2023. Per the bill’s fiscal note, the business rent tax is expected to drop to 2.0 percent beginning August 1, 2024 when the state’s unemployment trust fund is expected to reach its pre-pandemic balance. Please stay tuned to TWIST for future Florida updates.

Indiana: Omnibus Tax Bill Signed into Law

Senate Bill 419, an omnibus tax bill that includes a potpourri of tax changes, was recently signed into law by Governor Eric Holcomb.  On the corporate income tax side, the bill updates the definition of "Internal Revenue Code" to mean the Internal Revenue Code of 1986 as amended and in effect on January 1,2023. A few important changes are made to the provisions addressing the computation of Indiana taxable income for corporations. Notably, the bill decouples from the Tax Cuts and Jobs Act changes to IRC section 174 by requiring a taxpayer to: (1) deduct from the taxpayer’s adjusted gross income the amount of specified research or experimental expenditures charged to capital account for the taxable year; and (2) add to the taxpayer's adjusted gross income an amount equal to the deduction claimed under Section 174 of the Internal Revenue Code for the taxable year. The change is effective for taxable years beginning after December 31, 2021. Under current Indiana law, corporations are required to add back the amount excluded from federal gross income under IRC section 103 for interest received on an obligation of a state other than Indiana, or a political subdivision of such a state, that is acquired by the taxpayer after December 31, 2011. New provisions dictate when an obligation is deemed acquired under certain circumstances. Next, a new deduction is allowed for providing or expanding access to broadband services in Indiana. Specifically, a deduction applies to: (1) federal, state, or local grants received by the taxpayer; and (2) discharged federal, state, or local indebtedness incurred by the taxpayer; when used for purposes of providing or expanding access to broadband services in Indiana. Senate Bill 419 also makes significant revisions to the computation of Indiana net operating losses.

Another section of the bill adopts a new safe harbor provision for when an employer must begin withholding income taxes on a nonresident employee. Under Senate Bill 419, once an employee performs employment duties in Indiana for over thirty days in a calendar year, the employer must withhold from all compensation paid to the employee for every day on which the employee performed employment duties in Indiana. Income for less paid to a nonresident employee for less than 30 days in a calendar and who is not a professional athlete, entertainer or public figure is exempt from Indiana income tax.

On the sales and use tax side, a new exemption applies to transactions involving tangible personal property that (1) is a component of a solar energy system or wind energy system and (2) is acquired by a public utility or certain businesses that sell electrical energy to a public utility. In addition, provisions requiring separate manufacturers and wholesaler’s exemption certificates are repealed. Finally, the bill adopts new successor liability provisions. Whenever a business engages in a transfer of more than one-half of its tangible personal property, including inventory, the potential successor in liability or the transferring business shall notify the Department of the transfer at least forty-five days before taking possession of the assets or paying the purchase price, on a form prescribed by the Department. If the notice is not provided, the potential successor in liability may be liable for unpaid tax liability to the extent of the purchase price. Please contact Marc Caito with Indiana questions.