Tax Law Blog | IRS Tax Attorneys

Governor David A. Paterson today signed a bill to curb the sale of untaxed cigarettes to Indian retailers in violation of the cigarette tax laws of New York State. The New York State Department of Taxation will have 60 days to issue a certification form and prepare to receive the certifications that will be submitted. Governor Paterson signed bill A11258A/ S 8146-B at a ceremony in Utica.

Under Article 20 of the Tax Law, cigarettes sold by Indian retailers to non-Indians must be taxed. The bill signed by Governor Paterson today will prohibit cigarette manufacturers from selling unstamped cigarettes to stamping agents who have not provided them with a certification, under penalty of perjury, that the cigarettes will not be resold in violation of Article 20. Agents must provide the Tax Department with any certification they give to a manufacturer.

“This law has not been adequately applied for far too long giving non-Indians easy access to tax-free cigarettes both on the reservations and over the internet,” said Governor Paterson. “However, the signing of this bill should not be seen as anything other than enforcing the tax laws of New York in a fair and effective manner. My commitment to the sovereign powers of New York’s Indian Nations has not and will not waver and I will continue to seek a comprehensive negotiated solution with all of New York’s Indian Nations.”

Although cigarettes sold by agents to retailers for re-sale to non-Indian purchasers must bear tax stamps, the State has, for many years, adopted a policy of non-enforcement, and unstamped cigarettes continue to be sold by agents to Indian retailers who sell them to non-Indians at discount prices.

Governor Paterson added: “Tomorrow, I will present my 2009-2010 budget proposal and while we will continue to aggressively and responsibly address New York’s current budget crisis, this bill is not only about collecting revenue for the State of New York, it is also about protecting the health of our citizens. Smoking has long been a tragic public health crisis in New York and around the world. In recent years, the New York State cigarette tax has been one of our most effective tools in addressing this crisis. To the extent that the tax is undermined, our efforts to fight smoking are also undermined.”

Senator Michael Nozzolio, co-sponsor of the bill, said: “For far too long, retail businesses throughout our region have been harmed by an unfair tax policy, driving jobs out of the region and hurting small business owners. Today’s signing of Senate bill 8146 is a historic day for leveling the playing field for all of New York’s businesses and I thank Governor Paterson for ensuring that this important legislation will now be New York State law.”

Assemblyman Bill Magee, co-sponsor of the bill, said: “I am very pleased that New York will soon begin to collect taxes on cigarettes sold on or through Indian land to non-Indian purchasers. The State has long had the legal authority to collect this important revenue stream. We now have a proper mechanism in place that will assure that especially in these hard economic times, taxes on cigarettes are fairly collected. I thank Governor Paterson for signing this important legislation.”

Under the law, an agent who violates Article 20 of the Tax Law is subject to revocation or cancellation of its license. A false certification could be referred to a district attorney’s office for prosecution for perjury or filing a false instrument.

Additionally, this bill requires the Commissioner of Taxation and Finance to prescribe a form for the certification process and instructions on how to use the form within 60 days of the bill becoming law. The Tax Department must be prepared to receive certification forms in the same time frame.

As we near the final days of 2008, what continues to weigh heavy on the minds of many people is the slowing U.S. economy — unemployment has reached the highest percentage in years at 6.7 percent*, layoffs and business closures continue and the housing market remains weak. This year, lawmakers have passed more than a hundred new tax law changes intended to help millions of individual taxpayers. Jackson Hewitt Tax Service(R) encourages taxpayers to find out how these new tax credits and deductions can help lower their individual tax liability and possibly put more money back in their pockets this tax season.

“With more than a hundred pro-taxpayer credits and deductions, many taxpayers will qualify for new benefits that may not have been available last year,” said Mark Steber, vice president of tax resources at Jackson Hewitt Tax Service. “Taxpayers affected by these changes could see significant savings, and with the current recession, it is even more important that taxpayers get all of the tax benefits they deserve.”

More »

Mayor Michael R. Bloomberg’s $1.2 billion property tax increase won approval from the City Council on Thursday, raising homeowners’ bills by 7 percent as the city grapples with a worsening economy and disappearing revenue.

As a result of the 33-to-18 vote, annual tax bills will increase by hundreds or in some cases thousands of dollars, effective Jan 1.

“Even though it won’t be popular, New Yorkers will understand,” Councilman Miguel Martinez of Manhattan said in explaining his support for the tax hike. “Times are hard, and we’re asking everyone to pitch in.”

Opponents warned that residents were already overtaxed. Since Mr. Bloomberg took office, property taxes have increased by 18.5 percent.

“Today, the Council votes to take the bucket to the same old well and ask homeowners to bear the brunt of a swelling budget among dwindling revenues,” Councilman Simcha Felder of Brooklyn said. He added, “I believe that is unacceptable and that will hurt all New Yorkers in this difficult time.”

The property tax increase comes as Gov. David A. Paterson is pushing more than 100 new taxes and fees on items from downloaded music to nondiet sodas, and the Metropolitan Transportation Authority is moving to impose fare and toll increases.

Manhattan homeowners who live in the most expensive co-ops will see their taxes go up by anywhere from $854 to $1,307, according to the city’s Independent Budget Office. People who own single-family homes valued between $1 million and $1.5 million, outside of Manhattan, can expect to pay an extra $464 per year. Taxes on more modest homes, such as a condominium in Queens in the $300,000 to $400,000 range, would rise by $111.

To help ease the pain, Council Speaker Christine C. Quinn announced that Mr. Bloomberg had agreed to send homeowners the much-prized $400 rebate checks by the end of the calendar year.

The mayor had tried to eliminate the checks this year, then delay their distribution, but council members animatedly objected.

In addition, the Council approved an increase in the hotel tax from 5 percent to 5.875 percent per room, or about $3 a night. That change is expected to generate perhaps $80 million between March and the end of the next fiscal year, in June 2010.

Still, no one was under any illusions that the increased taxes would be the last financially difficult decision in the foreseeable future.

Mr. Bloomberg, who in September ordered all city agencies to cut spending by 5 percent, asked that they come up with an additional 7 percent in cuts by Dec. 22. And even with those cuts, and the extra revenue from higher taxes, the city is still facing a budget deficit of more than $1 billion in the next fiscal year.

The vote on Thursday — a close one by City Hall standards — was the latest political victory for Mr. Bloomberg.
More »

China explained more on fuel consumption taxes hikes Friday after revealing a seven- to eight-fold increase on gasoline and diesel products a day earlier, part of a reform of fuel taxation and pricing approved along with slashing retail fuel prices.

Consumption tax on naphtha, solvents and lubricant oil would be raised from 0.2 yuan (almost three U.S. cents) to one yuan per liter, and tax on jet kerosene and fuel oil would rise from 0.1 yuan to 0.8 yuan per liter, the Ministry of Finance (MOF) and Ministry of Taxation said in a joint statement Friday, offering more details of the day-earlier announcement.

The National Development and Reform Commission said late Thursday that the country will raise the gasoline consumption tax from the current 0.2 yuan to one yuan per liter and diesel consumption tax from 0.1 yuan to 0.8 yuan per liter.

The two ministries also said consumption tax on imported naphtha would be reinstalled, while tax on jet kerosene would be temporarily postponed.

In addition, consumption tax on naphtha produced domestically and used for production of ethylene and aromatic hydrocarbon products would be exempt by the end of 2010, according to the statement. Tax already paid on imported naphtha for the same usages would be returned, it added.

The ministries said the country would exempt consumption tax onethanol gasoline produced with imported and already-taxed domestic oil, and ethanol gasoline produced with domestic gasoline would be taxed for gasoline used in the production only.

Taxes on gasoline and diesel products used in producing methanol and biodiesel products could be deducted from the total tax for the finished products, the two ministries said.

Ethanol gasoline, methanol gasoline and biodiesel products are all mixture of gasoline or diesel with ethanol, methanol or biodiesel.

An unidentified MOF official said such adjustments of consumption taxes on fuel products are aimed to play a role in promoting energy conserving and economic restructuring, and ensuring equal share of tax burdens among users.

Virginia Republican House Speaker William Powell on Tuesday criticized a purported plan by the Democratic governor’s to double the tax on cigarettes and said there were better ways for the state to close a widening budget deficit.

“Let’s address the root problem rather than going out and addressing taxes, and especially not addressing taxes in a period of economic uncertainty,” Howell told reporters during a telephone news conference held with Congressman Eric Cantor.

Cantor, also a Republican, said raising cigarette taxes was an “all-out attack … and an assault on jobs here in Virginia and the greater Richmond area.”

Tobacco giant Philip Morris (PM.N: Quote, Profile, Research, Stock Buzz) is based in Richmond, after relocating there from New York earlier this year.

Gov. Timothy Kaine will propose raising the tax on a pack of cigarettes to 60 cents from 30 cents as part of a broader plan to close the state budget shortfall, the Richmond Times reported on Tuesday.

The governor is also planning to ask for $400 million in cuts from education and healthcare and to seek 1,500 layoffs of state employees and a $500 million withdrawal from the state’s rainy-day fund, the report said.

Kaine is due to outline his proposals to the General Assembly on Wednesday and is expected to estimate the budget deficit at $2.9 billion.

Howell and Cantor argued that a cigarette tax hike would send the wrong signal to other states, which might be more inclined to raise their cigarette taxes. That could lead to job losses in the tobacco industry, especially in Virginia.

A spokesman for the governor said he could neither confirm or deny the report ahead of Kaine’s speech on Wednesday.

Under a budget proposed by Gov. David A. Paterson Tuesday, the state would charge sales tax on activities that include downloading music, attending a ballgame and getting a massage.

Paterson’s executive budget included 88 fees, 10 fines and 39 tax changes that would bring in over $5 billion next year.

“The governor feels these fees are fair, reasonable and necessary to balance this budget,” said spokesman Errol Cockfield. He said the administration looked at areas where fees had remained the same for many years, where costs of services had gone up, and where revenue could be brought in quickly, “without unduly burdening our citizens, especially the most vulnerable.”

If the Legislature approves, the state would begin taxing hair salons, credit rating services, cable and satellite television and radio, movies and sporting events. Sales tax would be charged when downloading music, movies, photographs and games. Taxes would increase for cigars and malt beverages, as well as car rentals and limousines. The cost of vehicle registration and licensing would go up 25 percent.

The plan would eliminate the sales tax exemption on clothing and footwear under $110, and creates a luxury goods tax for expensive cars, yachts, jewelry and noncommercial aircraft.

State parks fees for camping, rentals, golf and marina use also would go up.

Senate Majority Leader Dean Skelos (R- Rockville Centre) opposed the increases and said, “It’s my hope we will be able to eliminate a number of these fees and taxes, especially those that impact the everyday working family person who just can’t make ends meet right now.”

The budget presentation said many states already collect taxes on entertainment, and New York City collects sales tax on personal services.

John Vargas, who owns Atlantic Massage Therapy in Merrick, said a sales tax on massage therapy is tantamount to exacting a tribute for self-care. “People are going to feel like the government is taking the money that’s for their wellness,” he said. “Are they going to start taxing doctors’ co-pays, too?”

Staff writer Laura Rivera, on Long Island, also contributed to this story.

The following are among the taxes and fees that Gov. David A. Paterson is proposing in his 2009-2010 budget.
More »

A federal appeals court has sided with Alabama in a lawsuit filed by Norfolk Southern Railway Co. that could have wiped out several million dollars in taxes that support public education.

Norfolk Southern claimed the state’s 4 percent sales and use tax on diesel fuel used by railroads is discriminatory because the railroads’ competition, the trucking industry, doesn’t pay the same tax.

But in a 3-0 decision Thursday, the 11th U.S. Circuit Court of Appeals in Atlanta said the sales and use tax is not discriminatory because it does not single out railroads. The court also noted that trucking companies pay other taxes on fuel that railroads don’t pay.

Margaret Johnson McNeill, attorney for the Alabama Department of Revenue, said the appeals court’s ruling was significant because similar suits had been filed by the other two big railroads operating in Alabama: CSX Corp. of Jacksonville, Fla., and BNSF Railway Co. of Fort Worth, Texas. Those cases had been put on hold pending a ruling from the 11th Circuit in the Norfolk Southern case.

According to court records, Norfolk Southern has about one-third of the railroad market in Alabama and pays the state about $4.5 million annually in sales and use taxes on fuel. The tax revenue is set aside for public schools and colleges, which are already dealing with budget cuts due to declining state tax collections.

“It’s a pretty big deal that we won,” McNeill said.
More »

U.S. Sen. Max Baucus, a Montana Democrat and chairman of the Senate Finance Committee:

* Repeats objection to provision in the Senate’s $14 billion auto rescue bill that would reinstate tax loophole for banks in transit agency leaseback deals.

* Says he was prevented from offering amendment to Senate auto bailout bill to strike the unrelated tax provision.

* Says measure is ‘an abusive tax shelter’ and would undermine negotiations now underway by the U.S. Internal Revenue Service in related cases.

* Says ‘this provision has no business being in the auto bill.’

Source: Forbes

At a time when the economy is driving more people to do their own taxes to save money, the companies that make software to help you with that task are fighting for your business.

In an increasingly competitive business for the 42 million U.S. taxpayers who file their own taxes through Internet or home computer programs, the two major software providers are adding features to their desktop software to impress customers.

“It is a very competitive industry and it’s imperative that we make sure our offerings remain competitive and that we acquire and retain as many customers as possible,” said Julie Miller, a spokeswoman for California-based Intuit Inc., the maker of industry leader TurboTax.

Intuit said Thursday it is including free electronic filing with federal returns prepared with its TurboTax Deluxe boxed software available at retailers. TurboTax Deluxe customers also can e-file up to five federal tax returns and prepare and print unlimited returns at a recommended $59.95 price.

The move comes two days after competitor H&R Block Inc. launched an offensive campaign for its premium TaxCut desktop software, an attempt to capture market share from Intuit, an industry analyst said.

Kansas City, Mo.-based H&R Block’s announcement said it now includes free electronic filing of federal tax returns in its software versions, allowing up to five federal e-filed returns at no additional cost to the recommended $49.95 price on its premium product.

The changes are an acknowledgment to consumers of the tough economy and an effort help offer more value.

“We wanted to give back and said we won’t sacrifice quality for price. We’ll include the things we always have and give a little more in value adds,” said spokeswoman Denise Sposato. “We’re looking at long-term relationships rather than just the one year.”

Both companies offer various versions of software, each with different features. They also offer Internet-based versions of their software at different price points.

About 140 million people file their taxes with the Internal Revenue Service each year. Of those, about 14 million use the traditional pencil and paper method and about 84 million go to a professional tax preparer.

The number of people using their computer for online or boxed programs is at about 42 million and growing.

It is the fastest growing segment of the tax preparation business, Miller said.

Intuit, the industry leader sold about 6.5 million copies of its boxed TurboTax software last year, which represented about 80 percent of the market for federal tax return software sold at retailers, Miller said.
More »

The Wisconsin District Attorneys Association wants to raise the state’s beer and liquor taxes — something that hasn’t happened in nearly 40 years — to pay for more prosecutors.

Wisconsin’s beer tax, third lowest in the nation, hasn’t gone up since 1969. The liquor tax, which is among the lowest nationwide, hasn’t increased since 1981 other than when a new tax on hard cider was added in 1997.

To increase prosecutors’ salaries and hire 121 new assistant district attorneys, the combined beer and liquor tax would have to go up 20 percent.

In 2005-2006, the taxes brought in about $50 million a year. The cost of the prosecutors’ proposal is between $10 million and $15 million annually, said Ralph Uttke, the Langlade County District Attorney and president of the association.

He called the increase proposed Monday “moderate.” Wisconsin’s 6.5 cent tax per gallon of beer is two or three times less than what neighboring states charge. The tax is 14.8 cents in Minnesota, 18.5 cents in Illinois, 19 cents in Iowa and 20.3 cents in Michigan.

The Legislature, along with Gov. Jim Doyle, would have to approve any increase.

A proposal introduced in the Wisconsin Assembly in 2007 to raise the beer tax the equivalent of 2.4 cents per bottle ran into opposition from the Tavern League, which represents bars, the beer industry, and Democratic and Republican lawmakers. The bill went nowhere.

It doesn’t make sense to raise the beer tax and earmark that increase for a specific budget item, Tavern League lobbyist Scott Stenger said Monday.

“That’s not the way state government works,” he said. “We think it’s a bad precedent, and if there’s going to be a discussion on taxes, it needs to be much more global.”

Uttke acknowledged that raising alcohol taxes will not be easy, as shown by Wisconsin’s legislative history.
More »