Nichols’ Tax Update, Issue 21-41

  1. Economic Nexus . . . Remote Seller in South Carolina
    • At ‘Press time” only three states, Alaska, Montana, and Oregon had NOT enacted some sort of economic nexus statues along the general lines of the Wayfair decision regarding remote sellers and marketplace facilitators. In every other state a remote seller must comply with some sort of registration and taxation rule. Marketplace facilitators are also subject to the same rules in a majority of jurisdictions.
    • In South Carolina, S 214 , signed into law April 26, 2019, amends the state Sales and Use Tax Act to define the term “marketplace facilitator” and reinforce the state’s sales tax collection requirements. On September 18, 2018, the Dept. of Revenue finalized a  ruling requiring remote sellers with more than $100,000 in gross revenue from sales in the state to collect and remit the sales tax.   [S. 214, followed by SC Revenue Ruling No. 18-14]
  1. Social, Recreational Organization Is Denied Exemption
    • The IRS denied tax-exempt status to an organization seeking exemption as a section 501(c)(3) entity because its events appear to be social and recreational, and it did not show that it will be operated exclusively for exempt purposes.  [LTR 202139011; 7/6/2021, rel. 10/1/2021]
  1. IRS Addresses Deadlines for Push-Out Statements
    • In emailed advice, the IRS confirmed that an audited partnership must furnish specified push-out statements (Form 8986 ) within 60 days of when partnership adjustments are finally determined and that the passthrough partner has until the extended due date of the audited partnership’s adjustment year return to furnish statements or pay the imputed underpayment if they fail to do so.  [ECC 202139009; 8/18/2021, rel. 10/1/2021]
  1. Practice Unit Covers Reseller’s UNICAP Cost Calculation
    • The IRS has issued a practice unit that provides guidance on reviewing a reseller’s uniform capitalization cost computations under section 263A, focusing on the costs a reseller must capitalize to inventory. This is likely to be of interest only to CPAs with reseller clients that have gross receipts in excess of $26,000,000 (adjusted for inflation.) [COR-P-021; 9/17/2021, rel. 10/4/2021]
  1. Tax Court Sustains Collection Action After Appeals Remand
    • The Tax Court, in a case that was remanded to IRS Appeals in a prior decision, rejected an individual’s challenge to her underlying tax liability, finding that she was required to report her distributive share of a partnership’s section 1231 gain whether it was distributed or not and held that the IRS did not abuse its discretion in sustaining a collection action against her. [Taryn L. Dodd; T.C. Memo. 2021-118, 10/5/2021]
  1. Broken IRS System Needs Solutions, NAEA Says
    • Federal agencies and lawmakers need to work together to resolve serious issues in the IRS, including backlogged tax returns, erroneous notices sent to taxpayers, and lack of services to tax practitioners, David W. Tolleth of the National Association of Enrolled Agents said in an October 7 letter to Treasury Secretary Janet Yellen and Congress. [Letter from National Association of Enrolled Agents, 10/7/2021]

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(*** identifies item with useful analysis of current issue but not covered in Lynn’s recorded commentary due to complexity and time required for fair comment.)