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Friday, May 18, 2012

Weekly Round-Up: Is Arizona Going Against the Grain on the Use Tax Liability Reporting?

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Arizona recently repealed a year-old requirement for a statement of use tax liability for online purchases on a taxpayer's income tax return, according to a story in this week’s issue of Bloomberg BNA’s Weekly State Tax Report. While the legislation [S.B. 1214] repeals the tax reporting requirements, it does not erase the taxpayer's liability to pay taxes owed, the story provides.

The Arizona Legislature enacted H.B. 2332 in 2011 requiring a person who “stores, uses, or consumes’’ tangible personal property that is subject to use tax for a nonbusiness purpose to declare the annual amount of tax due on that person's income tax return, if the tax was not collected by a registered retailer, the story explains.

The reporting requirement was on income tax forms used for year 2011 taxes, and was regarded at the time of enactment as a first gauge of the amount of internet purchases made by Arizona residents, Bloomberg BNA’s Daily Tax Report said in an April 2012 story.

Supporters of the repeal, however, called the reporting requirement cumbersome because many taxpayers did not keep track of whether sales tax was collected for online purchases, the story said.

Meanwhile a new study out of Minnesota’s House Research Department is reevaluating the state’s efforts to collect the use tax via the income tax return, and options for Minnesota to use the income tax return to increase use tax reporting and collections.

Thirty-eight states impose both a sales and use tax and an individual income tax, with twenty-five of these states providing use tax reporting on individual income tax returns, the report states.

In looking to the other states, the study reports that “collections in Louisiana, Massachusetts, and Michigan all increased substantially in the year following implementation of use tax reporting on the income tax return.”

In other developments…

Special Report: Taxation of Online Travel Services: Lawsuits Generally Not Succeeding In Effort to Expand Hotel Taxes, by Joseph Henchman at the Tax Foundation.

California Prop. 29 and state cigarette excise taxes, from Nick Kasprak of the Tax Foundation.

North Dakota's Measure 2: High risk for little reward, according to Michael Leachman, Phil Oliff, and Anderson Heiman, of the Center on Budget and Policy Priorities.

Tax provisions enacted in 2012-13 state budget, is the focus of an article in Morrison & Foerster LLP’s May 2012 edition of New York Tax Insights.

Scholastic Books faces state tax overreaching, by Joseph Henchman at the Tax Foundation, by Jordan King and Joseph Henchman at the Tax Foundation.

Compiled by Priya D. Nair
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