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Daily Tax Report: State

California Giving Businesses a One-Year Sales Tax Reprieve (4)

April 2, 2020, 2:53 PMUpdated: April 3, 2020, 1:30 AM

California has given businesses up to a year to gradually remit the sales taxes they collect from customers. Revenue directors from Illinois and Oregon say further tax relief guidance is coming. And Texas and Pennsylvania, meanwhile, extended more deadlines. Here’s the latest on shifting state tax guidelines, deadlines, and policy to deal with the new coronavirus pandemic. For our Wednesday coverage click here. Here’s a state-by-state roadmap.

Small California businesses can take one year to gradually remit up to $50,000 in sales tax collections to the state to help them weather the health crisis, Gov. Gavin Newsom (D) said Thursday.

“In essence it is a bridge loan,” Newsom said at noon briefing. “No penalties, no interest, de facto a loan.”

The delay in paying tax they’ve collected from customers will help keep their businesses running, Newsom said.

Businesses must file their returns to be eligible for the delay, according to the California Department of Tax and Fee Administration. Once they’ve filed, they can enter into payment plans that spread the tax liability over 12 months, interest free. For example, a business that owes $50,000 for the first quarter of 2020 could pay that in 12 installments starting July 1, 2020.

Newsom called the one-year payment plan a reprieve from tax payments.

The new relief is in addition to Newsom’s March 30 decision to push sales tax filing and payment deadlines to July 31 for businesses that owe $1 million or less in quarterly payments.

Newsom said Thursday that the new option would help businesses avail themselves of two new federal programs: loans from the Small Business Administration, and a paycheck-protection program that starts Friday giving businesses up to $10 million in low-cost loans if they use 75% of the loan to pay their employees.

“We need to be able to get the federal support into the state,” Newsom said.

States Say More Guidance Is Coming

Now that states have extended their income tax filing and payment deadlines in response to the coronavirus pandemic, revenue agencies are examining additional relief measures to support taxpayers during the public health crisis.

Revenue officials from Oregon, Illinois, Pennsylvania, and Texas said Wednesday that they would be issuing guidance in the coming days to address taxpayer burdens resulting from the global health emergency. The comments came during a state and local tax webinar sponsored by the law firm Reed Smith LLP.

The guidance will help to clarify inconsistencies between the new July 15 federal income tax filing deadline and the myriad of state income, sales, property, franchise, and activity taxes. States are also scrambling to address tax issues emerging from the $2 trillion Coronavirus Aid, Relief and Economic Security Act (CARES), signed by President Donald Trump on March 27.

Oregon

Oregon is resisting business pressure to push back its April 30 deadline for initial estimated payments on its new Corporate Activities Tax but open to waiving penalties. The new tax, which became effective on Jan. 1, is a privilege tax levied on businesses for their total commercial activity in the state.

The Oregon Department of Revenue, however, won’t penalize taxpayers for submitting a “good faith” payment by the April 30 deadline, said Deanna Mack, the department’s government relations manager.

“If they make a good faith effort at making their first estimated payment timely, we have the ability to waive penalties on underpayment on the back end,” Mack said during the webinar. “So we’re telling folks to document assumptions that have been made in determining the amount of estimate, and keep that in your records. No one is going to see any penalty until after the first return is filed in April 2021.”

Illinois

While Illinois has brought its filing deadlines into conformity with the new federal deadline for income taxes, the change doesn’t apply to many state deadlines for incremental payments, said Brian E. Fliflet, acting general counsel for the Illinois Department of Revenue. He said taxpayers should pay close attention to those deadlines and any applicable signing requirements. Illinois doesn’t permit e-signatures on some documents but does accept facsimiles of signatures.

If a taxpayer is under pressure to submit a document to the department, Fliflet said, the form should be submitted without a signature. “We will work with you get the form signed at a later date,” he added.

Fliflet said IDOR is aware that some taxpayers are having problems calculating installment payments due to the state during the coronavirus pandemic, particularly with regard to sales and use taxes. He said IDOR plans to release an information bulletin shortly explaining how taxpayers should calculate such payments.

Texas Extends Franchise Tax Deadlines

Texas has extended the deadline for 2020 franchise tax reports to July 15, conforming with changes in Internal Revenue Service’s filing protocols announced March 20.

Texas Comptroller Glenn Hegar announced the changes Thursday, noting the due date extension applies to all franchise taxpayers. The change became effective automatically and taxpayers will not be required any additional forms.

“We recognize that the information aggregated from taxpayers’ federal tax returns comprises the building blocks for their Texas franchise tax returns,” Hegar said in a statement. “In addition to coping with the unprecedented impacts of the growing pandemic, we understand the difficulty Texas businesses will face in filing franchise tax returns now that the federal deadline has moved, and so we thought it appropriate to align the state’s franchise tax deadline with the IRS deadline.”

Pennsylvania Extends Corporate Tax Due Date

Pennsylvania on Thursday extended until Aug. 14 the deadline for corporate tax returns due May 15.

It also announced several other deadline extensions to aid taxpayers in navigating the pandemic. Estimated corporate taxes are still due June 15.

The measures are meant to “make sure that Pennsylvanians and business owners in the commonwealth are able to put their health and safety first during this challenging time,” Revenue Secretary Dan Hassell said.

—With assistance from John Herzfeld in New York City.

(Adds details on California's tax relief.)

To contact the reporters on this story: Michael J. Bologna in Chicago at mbologna@bloomberglaw.com; Laura Mahoney in Sacramento, Calif. at lmahoney@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; David Jolly at djolly@bloombergtax.com

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