SALT Newsletter - July 2012

Thank you for your continuing interest in our State & Local Tax e-newsletter. Beginning in August, we will publish our newsletter quarterly. Our focus will be on the predominant state and local tax issues that we believe many of you face on an ongoing basis. As always, we will discuss ideas and solutions designed to help you manage your risk and maximize your wealth.

State Amnesty Programs At-a-Glance

State Amnesty Period Benefits
Kentucky Sometime in 2013 50% of Interest & Penalties waived
Maine - use tax Oct. 1 - Nov. 30, 2012 Penalties waived
Ohio Consumer's use tax Oct. 1, 2011 to May 1, 2013 Interest & Penalties waived(1)
Rhode Island Sept. 2 - Nov. 15, 2012 25% of Interest & Penalties waived
Texas June 12 to Aug. 17, 2012 Interest & Penalties waived

(1) Depending on specific circumstances. For additional informamtion on Ohio's consumer's use tax amnesty program, click on the following link: http://tax.ohio.ogv/divisions/sales_and_use/idenx.use.stm

Amnesty Programs


Kentucky has enacted legislation authorizing the Department of Revenue to conduct a tax amnesty program sometime during the next fiscal year (July 1, 2012 - June 30, 2013). The program will be available to all taxpayers owing taxes, penalties, fees of interest subject to the administrative jurisdiction of the department, with the exception of certain ad valorem taxes and penalties. The program will apply to tax liabilities for taxable periods ending or transactions occurring after December 2, 1001 and prior to October 1, 2011.


Under the program, taxpayers are required to pay the full amount of tax and one-half the interest due. Taxpayers are also required to file all tax returns when due and make all tax payments when due for threeyears following the date amnesty is granted. Full payment must be made upon application, and any additional tax must be paid within 30 days of notification by the department (the department may enter into an installment payment agreement in cases of severe hardship).

Following the amnesty period, additional collection fees will be imiposed by the Department. Additional information on this amnesty program will be posted, when published by the Department.


The Governor has signed a supplemental budget bill enacting legislation that establishes the 2012 Maine Use Tax Compliance Program, which will allow taxpayers to pay use tax liabilities that have not been previously assessed. The program egins September 1, 2012 and runs through November 30, 2012, and applies to use tax liabilities incurred during the period of January 1, 2006 to December 31, 2011.

To participate, taxpayers must properly file a special use tax return, reporting all unreported and/or unpaid use tax liabilities incurred during the above look-back period. The taxpayer must pay in full, by November 20, 2012, or the end of an approved plan period, the use tax liability incurred during the three calendar years of the look-back period with the highest use tax, plus any interest associated with any approved plan. A taxpayer must also agree to forgo the right to protest or pursue an administrative or judicial proceeding with regard to taxes paid under the program, as well as the right to file a refund claim or a petition for reconsideration.

Pennsylvania Tweaks Taxation of "Cloud Computing"

As we've stated before, states are just beginning to grapple with the taxability of "cloud" software and related services. Pay particular attention to states that state their position and then change their mind. Pennsylvania is a case in point. Just about 18 months ago, the Pennsylvania Office of Chief Counsel advised taxpayers that "...access to software solely through the Internet is not a taxable transfer of software unless the server or data center resides in Pennsylvania." (Legal Letter Ruling No. SUT-10-005, November 8, 2010.)

Citing Dechert, LLP v. Commonwealth, 998 A.2d 575 (Pa. 2010) (the sale, including a license to use, canned computer software is subject to tax, even if delivered electronically) and having considered technological advances, the Office of Chief Counsel now advises taxpayers that software "is not subject to sales tax if the end user of the software is located outside of the Commonwealth, even if the cloud server that hosts the software is located in Pennsylvania. However, if the end user is located in Pannsylvania, tax is due regardless of the location of the seller or server." (Legal Legger Ruling No. SUT-12-001, May 31, 2012.)

That's a pretty quick change in policy. It may be that Pennsylvania believes that as cloud applications grow, too much revenue would be lost by limiting taxation to in-state use/in-state servers. Or, since New York already taxes the use of software regardless of where the software is stored, maybe it's just a case of keeping up with the Joneses.

Which state will change its mind next? Stay tuned!

Any tax advice included in this written or electronic communication was not intented or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue code or any other governmental taxing authority or agency.