Dear tax professional:

Happy Friday!  The 2023 NESTOA conference kicks off this Sunday, September 10th. Safe travels, and we look forward to seeing everyone in Wilmington, Delaware. 

There are many news items this week.  Please enjoy this week's e-briefing!

Idaho State Tax Commission's Steven Thimsen to Retire

FTA thanks Steve for countless volunteer hours served as e-Standards Committee leader

It's a bittersweet time for FTA as Steve Thimsen embarks on retirement from the Idaho State Tax Commission.  

Steve volunteered countless hours of his time as the state leader of the FTA e-Standards Committee. 

“Steve’s depth of tax administration electronic commerce knowledge is unparalleled, and filling that void will be truly challenging,” said FTA Executive Director Sharonne Bonardi.

“Steve has left an indelible mark on the tax administration community, and his delightfully blunt while kind and judicious approach to tackling complex and at times controversial issues will be sorely missed.” 

Steve’s supervisor, Justine Weaver, shared this: 

“Before joining the Tax Commission in 1988, Steve was a truck driver. Due to a back injury, he had to change careers, so he took an aptitude test that indicated he’d be good as a print press operator or computer programmer. Luckily for us, he chose computer programming.

He spent the next 28 years in our IT department. During that time, he was instrumental in bringing in the first electronic returns (production pilot was 1994) and then again with MeF filing. In 2000, he was selected for the project team to implement Gentax, the first state to do so.

In 2016, he decided to make a change from IT and became a program supervisor for our Revenue Operations Division, overseeing TAP (Taxpayer Access Point), our annual income tax projects, and MeF filing. 

In 2020, he joined my Quality Assurance and Research team as a software engineer III where he provided data and information for internal and external inquiries, mentored new IT and Revenue Operations staff in implementation of the annual income tax changes and other system changes, and was able to participate more with FTA.

We are losing 35 years of knowledge and expertise with Steve’s retirement, but we are very happy for him.”

FTA thanks Steve for his many contributions to the tax administration community, and we wish him the best of luck in retirement!

FTA Letter of Intent Design Committee Solicits Feedback

Deadline to submit feedback is October 13

The FTA Letter of Intent Design Committee is currently soliciting feedback for recommended changes to the Income Tax Letter of Intent (LOI).  

If you are a user of the LOI process and would like to submit feedback, the feedback window is open through October 13, 2023.   

The LOI is updated annually and is a binding agreement that communicates city and state agency expectations of Software Providers who will be offering products for electronic return filing.   

The LOI: 

State Revenue Growth Flat

Total June state revenues fell by a median rate of 1.5% over last year

With 38 states reporting for the FTA Monthly Revenue Survey, total June state revenues fell by a median rate of 1.5% over last year. The growth rate was -10.1% for the past 3-months. For the 12-month period ending in June - the fiscal year for most states - total revenue growth was flat, increasing at a median rate of 0.7%. 

The declining growth rate can be largely attributed to a slowdown in individual income taxes, as capital gains and final payments decreased from last year’s record levels. Overall, individual income tax collections fell at a median rate of 22.4% during the past three months. Withholding and sales taxes saw modest growth, increasing at median rates of 4.2% and 2.8%, respectively. Corporate collections increased by a median 6.8%, during the past three months.

The accompanying chart plots preliminary July collections. While July is typically not a big tax payment month, the chart shows growth rates are improving.

The article first ran in FTA’s By the Numbers report. To subscribe, email newsletter@taxadmin.org.

FTA Leaderboard Video Series

This week's featured interview: North Carolina Secretary Ronald Penny

Prior to joining DOR, Secretary Penny held numerous professional roles, including positions in state government, the North Carolina University System, and the private sector. Penny served as a tenured associate professor in the North Carolina Department of Public Administration, teaching courses in human resources, policy, government, law, and leadership at North Carolina Central University. He served as chairman of the department for more than a decade.

Penny was the first vice president for Human Resources for the University of North Carolina System. Prior to that appointment, he served eight years as the director of the NC Office of State Personnel (now NC Office of State Human Resources) and as a member of the executive cabinet of former Governor James B. Hunt. In 1999, he served as President of the National Association of State Personnel Executives.

Other professional experiences include senior managing partner in Penny & Barnes, a multi-state law firm in northeastern NC and Tidewater Virginia, general counsel to the chancellor of Elizabeth City State University and environmental attorney for E.I. DuPont Corporation in Delaware.

Penny holds a B.S. in Economics from North Carolina Agricultural & Technical State University, summa cum laude, and a Juris Doctor from the University of North Carolina at Chapel Hill and is a member of the North Carolina Bar.

The FTA Leaderboard Series is a collection of brief interviews with leaders throughout tax administration sharing their insights on what leadership means to them.

Motor Fuels Section Annual Conference Registration Open

Join us in Orlando, Florida September 17–20

The 2023 FTA Motor Fuels Annual Conference of the FTA Motor Fuels Section will be held at Rosen Plaza in Orlando, Florida on September 17–20, 2023. The meeting consists of general session topics of interest to state motor fuel tax administrators and industry. 

This is a forum for states to share their best practices and to hear about the latest and greatest in improved processes, compliance innovations, ideas, and networking.  

Revenue Estimation and Tax Research Conference

Join us September 30–October 4 in Salt Lake City, Utah

If you are a revenue estimator, forecaster, tax analysis, or just interested to tax policy topics, register now for the Annual FTA Revenue Estimation and Tax Research Conference in Salt Lake City at the Sheraton Hotel - Downtown from September 30 through October 4.  Full details, including registration, are available on the Revenue Estimation and Tax Research Conference page.    

Tennessee DOR Rules Services Provided Via Digital Platform Nontaxable

True object test used to determine taxability

Tennessee DOR letter ruling 23-05, regarding sales and use tax to staff augmentation and payment processing services accessed through a digital platform, concluded that an out-of-state company, offering staffing and payment processing services accessed through a digital platform, is not subject to Tennessee sales and use tax. 

DOR based its ruling on the fact that such transactions are not enumerated taxable services under state law. The department drew parallels with labor halls, hiring halls, and employment agencies, reasoning the same conclusion would apply had the company been offering its services through these forums. 

DOR also held that while these services were provided through an app that arguably could be subject to Tennessee sales and use tax as a taxable use of computer software, such was not the case here as the app's communication is limited to details of the job and logistics.

Under the true object test used to determine the taxability of a transaction that involves taxable and non-taxable items, when the non-taxable components are the true object, and the taxable components are merely incidental, the transaction is not subject to sales and use tax. In this case, the communication feature is merely incidental to the non-taxable true objects of the transaction, which are staff augmentation and payment processing services. 

DOR pointed out that, under the facts: 

Businesses Must Electronically File Form 8300, Report of Cash Payments Over $10,000 beginning January 1, 2024

Electronic filing and communication options should be simpler and easier to file with IRS

The IRS recently announced that starting Jan. 1, 2024, businesses are required to electronically file (e-file) Form 8300, Report of Cash Payments Over $10,000, instead of filing a paper return. This new requirement follows final regulations amending e-filing rules for information returns, including Forms 8300. 

Businesses that receive more than $10,000 in cash must report transactions to the U.S. government. Although many cash transactions are legitimate, information reported on Forms 8300 can help combat those who evade taxes, profit from the drug trade, engage in terrorist financing, or conduct other criminal activities. The government can often trace money from these illegal activities through payments reported on Forms 8300 that are timely filed, complete, and accurate. 

The new requirement for e-filing Forms 8300 applies to businesses mandated to e-file certain other information returns, such as Forms 1099 series and Forms W-2. Electronic filing and communication options will be simpler and will make it easier to interact with the IRS. Beginning with calendar year 2024, businesses must e-file all Forms 8300 (and other certain types of information returns required to be filed in a given calendar year) if they’re required to file at least 10 information returns other than Form 8300.  

For example, if a business files five Forms W-2 and five Forms 1099-INT, then the business must e-file all their information returns during the year, including any Forms 8300. However, if the business files fewer than 10 information returns of any type, other than Forms 8300, then that business does not have to e-file the information returns and is not required to e-file any Forms 8300. However, businesses not required to e-file may still choose to do so.  

For information on waivers, exemptions, late returns, recordkeeping, e-filing and more related to Form 8300 requirements, visit the IRS’s Form 8300 press release page. 

South Carolina Taxpayers Impacted by Idalia Qualify for Tax Relief

October 16 deadline, other dates postponed until February 15

The IRS this week announced tax relief for individuals and businesses affected by Idalia, anywhere in South Carolina. These taxpayers now have until Feb. 15, 2024, to file various federal individual and business tax returns and make tax payments. This is similar to relief already being provided in most of Florida. 

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). All 46 counties in South Carolina qualify. Individuals and households that reside or have a business in these counties qualify for tax relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov. 

Filing and Payment Relief

The tax relief postpones various tax filing and payment deadlines that occurred from Aug. 29, 2023, through Feb. 15, 2024 (postponement period). As a result, affected individuals and businesses will have until Feb. 15, 2024, to file returns and pay any taxes that were originally due during this period. 

This means, for example, that the Feb. 15, 2024, deadline will now apply to: 

In addition, penalties for the failure to make payroll and excise tax deposits due on or after Aug. 29, 2023, and before Sept. 13, 2023, will be abated as long as the deposits are made by Sept. 13, 2023. 

The IRS disaster relief page has details on other returns, payments, and tax-related actions qualifying for relief during the postponement period. 

September is National Preparedness Month

IRS reminds taxpayers to prepare for natural disasters

With the peak of hurricane season just ahead, the IRS reminds taxpayers to develop an emergency preparedness plan or, if they already have one, to update it for 2023. 

Taxpayers can begin getting ready for a disaster with a preparedness plan that includes securing and duplicating essential documents, creating lists of property and knowing where to find information if needed. 

In the aftermath of a disaster, having the updated documents and other information readily available can help victims apply for the relief available from the IRS and other agencies. Disaster assistance and emergency relief may help taxpayers and businesses recover financially from the impact of a disaster, especially when the federal government declares their location to be a major disaster area. 

Secure key documents and make copies

Taxpayers should keep critical original documents inside water and fireproof containers in a secure space. These include tax returns, birth certificates, social security cards, deeds, titles, insurance policies and other similarly important items. 

In addition, consider having a relative, friend or other trusted person keep duplicate copies of these documents at a location outside the potentially impacted disaster area. 

If original documents are available on paper, they should be scanned into a digital file format and stored in a secure digital location. This can provide added security and portability. 

Document valuables

Maintain a detailed inventory of the contents in your property and business. Taxpayers can take photos or videos to record their possessions and should also write down descriptions that include year and make and model numbers where appropriate. 

The IRS disaster loss workbooks can help individuals and businesses compile lists of belongings or business equipment. After a disaster hits, this kind of documentation can help support claims for insurance or tax benefits. 

Rebuilding records

Reconstructing records after a disaster may be required for tax purposes, getting federal assistance or insurance reimbursement. Most financial institutions can provide statements and documents electronically, an option that can aid the reconstruction process. For tips on reconstructing records, visit the IRS' Reconstructing Records.

Employers should check fiduciary bonds

Employers using payroll service providers should check if their provider has a fiduciary bond in place to protect the employer against a possible provider default. 

Most employers already use the Electronic Federal Tax Payment System (EFTPS) to make their federal tax deposits and business tax payments. 

Because these payments can easily be made either by phone or online, EFTPS offers an especially convenient option when a disaster may displace businesses and their employees. It’s also easy to track tax payments and receive email alerts through EFTPS. Any business that doesn’t have an EFTPS account can create one by visiting EFTPS.gov. 

IRS is ready to help

Following a federal disaster declaration, the IRS may postpone various tax filing and tax payment deadlines or provide other relief. For a list of localities qualifying for relief and details on relief available, visit the IRS Tax Relief in Disaster Situations webpage or Around the Nation on IRS.gov. 

The IRS identifies taxpayers located in the covered disaster area and automatically applies filing and payment relief. This means taxpayers whose IRS address of record is located in the disaster area don’t need to contact the IRS to get disaster tax relief. 

Many taxpayers living outside the disaster area may also qualify for relief. This includes those assisting with disaster relief and taxpayers whose records necessary to meet a filing or payment deadline postponed during the relief period are located in the disaster area. Eligible individuals and businesses located outside the disaster area can request relief by calling the IRS disaster hotline at 866-562-5227. 

In addition, a special rule allows both individuals and businesses to choose to deduct uninsured or unreimbursed disaster losses on either the tax return for the year the disaster occurred or the return for the previous year. For more information, see Publication 547, Casualties, Disasters, and Thefts, available on IRS.gov. 

For more information about National Preparedness Month, visit Ready.gov/September. 

Associate Counsel

South Carolina DOR

Chief Economist

State of California Franchise Tax Board

Director of Economic Research and Tax Policy

Federation of Tax Administrators

Open until September 15, 2023

Director of Excise and Miscellaneous Tax Programs

Federation of Tax Administrators

Open until September 15, 2023

Public Affairs Specialist

Washington DC Office of Chief Financial Officer

FTA has announced a number of dates for its 2023 conferences and symposia.  Be sure to mark your calendars!  Registration information is available for many of the conferences.  Please visit the FTA website for the full calendar.

Revenue Estimation and Tax Research Conference
September 30–October 4
Salt Lake City, UT

Compliance Conference
December 3–6
Tucson, AZ

Motor Fuel September Uniformity
September 15 and 16
Orlando, FL

Motor Fuel Annual Meeting
September 17–20
Orlando, FL

NESTOA Annual Meeting
September 10–13
Wilmington, DE

WSATA Annual Meeting
October 8–11
Reno, NV