Stock Transaction Tax Gains Backers as Way to Pay for Jobs Bill

Democratic lawmakers are considering a proposal to institute a stock transaction tax in order to raise revenue to pay for job creation efforts, such as new spending on infrastructure, broadband expansion or providing new tax incentives to employers, according to House Speaker Nancy Pelosi, D-Calif. Pelosi told reporters during her weekly press conference on November 19 that some Democrats have suggested a stock transaction tax, but no decisions have yet been made to pursue that idea.

Pelosi cautioned that such a tax might have drawbacks and would have to be part of an international rule in which other nations are involved. She explained that a stock transaction tax has long been suggested during international financial meetings, but U.S. officials have always resisted that effort. Now House Democrats are taking a closer look at the tax, even though it has yet to become a high priority for the Democratic Caucus, Pelosi said.

One effort is being led by Rep. Peter DeFazio, D-Ore., who is seeking support for his legislation to raise $150 billion by imposing a .25-percent tax on stock transactions and a .02-percent tax on other transactions, including swaps, credit default swaps and options. Approximately half of the tax revenues would be used for deficit reduction and the remaining amount would go to a" job creation reserve" to fund the creation of good jobs, according to a Dear Colleague letter from DeFazio to other lawmakers. "The tax appropriately disincentivizes excessive speculation because much of the excessive risk on Wall Street is high-volume short-term speculative trading," he said in the letter.

Houses Minority Whip Eric Cantor, R-Va., said the stock transaction tax is a bad idea, given that the U.S. financial markets are still recovering during the recession. Rep. Randy Neugebauer, R-Tex., said a tax on capital would lead to higher interest rates for small businesses seeking to borrow. Cantor and Neugebauer spoke during a meeting of the GOP Economic Solutions Group, which hopes to deliver a set of proposals to President Obama before he begins his economic tour in early December. Rep. Kevin Brady, R-Tex., said lawmakers are considering tax cuts for small businesses and permanent tax relief.

By Stephen K. Cooper, CCH News Staff

Pilot Program Allows Information Return Filers to Truncate Social Security Numbers on Paper Statements (Notice 2009-93)

The IRS has created a pilot program allowing filers of information returns to truncate an individual payee's nine-digit identifying number on paper payee statements for calendar years 2009 and 2010 if the filers meet certain requirements. The pilot program is available only to paper payee statements in the Form 1098 series, Form 1099 series and Form 5498 series, which report payments or distributions made to an individual during a calendar year.

The three types of identifying numbers applicable to individuals are social security numbers, IRS individual taxpayer identification numbers and IRS adoption taxpayer identification numbers. These numbers are sensitive personal information; consequently, a risk exists that the information could be misappropriated from a payee statement and misused in various ways, possibly to facilitate identify theft. The pilot program is an effort to minimize this risk. If requirements regarding the type of information return and the type of identifying number are met, the identifying number is truncated by replacing the first five digits of the nine-digit number with asterisks or Xs.

The IRS invites interested parties to comment on the pilot program by submitting comments by May 1, 2010.

Notice 2009-93, 2009FED ¶46,531

Other References:

Code Sec. 6041

CCH Reference - 2009FED ¶35,836.30

Code Sec. 6045

CCH Reference - 2009FED ¶35,930.28

Code Sec. 6050H

CCH Reference - 2009FED ¶36,186.075

Code Sec. 6722

CCH Reference - 2009FED ¶40,240.021

CCH Reference - 2009FED ¶40,240.40

Tax Research Consultant

CCH Reference - TRC: FILEBUS: 12,106

Illinois --Sales and Use Tax: Shipping Charges on Purchases from Retailer's Internet Store Taxable

Shipping charges on purchases of merchandise from a certain retailer's Internet store were properly included in the selling price of the merchandise and thus were subject to Illinois retailers' occupation (sales) and use tax. In so ruling, the Illinois Supreme Court affirmed the judgment of an appellate court affirming the dismissal of the plaintiffs' class action complaints.

 Selling Price

The selling price on which tax is computed means the consideration for a sale valued in money determined without any deduction on account of the cost of the property sold, the cost of materials used, labor or service cost, or any other expense whatsoever.

The retailer in this case set up its Internet store so that the subtotal amount of purchases was provided to customers as they added items to their electronic shopping cart. When customers proceeded to checkout, they selected where and when the items would be delivered. Only after they chose a shipping option were customers provided with the total amount to be paid for the order. Customers could not submit their Internet orders unless and until they selected a shipping option. Because customers were required to buy the delivery service, the cost of shipping was part of the taxable selling price.

 Absence of Separate Agreement for Shipping

Although a statute provides that shipping charges are not taxable if a buyer and seller separately contract for shipping, in this case, no evidence of a separate agreement for shipping was disclosed in the pleadings. Moreover, no separate agreement for transportation arose when ordering items from the retailer's Internet store. Rather, the plaintiffs entered into a single agreement that necessarily included shipping.

The fact that under its refund policy, the retailer would generally refund the price of a returned item but not shipping charges was not indicative of a separate agreement for shipping.

The court rejected the plaintiffs' reliance on several general information letters issued by the Illinois Department of Revenue which stated that shipping charges on mail order transactions were not taxable. These statements were based on a regulation that deleted the mail order references in 2000. Further, general information letters do not constitute statements of agency policy, are not binding on the department, and may not be relied upon by taxpayers.

Kean v. Wal-Mart Stores, Inc., Illinois Supreme Court, , No. 107771, November 19, 2009, ¶402-040

Other References:

Explanations at ¶60-445

Explanations at ¶61-150

Washington --Business and Occupation Tax: Manufacturer's Inclusion of Tax in Wholesale Price of RVs Permissible

A manufacturer of recreational vehicles (RVs) did not violate Washington law in passing through the business and occupation (B&O) tax on its wholesale sales to an RV retail dealer because it disclosed the tax as part of the negotiated purchase price. In calculating the wholesale invoice price for each unit, the manufacturer included the applicable excise tax as a line item to account for the B&O tax that the manufacturer incurred in its sale to the dealer. The Washington Court of Appeals had held that a business could include a B&O tax or surcharge as a line item in the price if the surcharge was revealed during negotiations. (Johnson v. Camp Auto., Inc., 199 P.3d 491 (2009)) Furthermore, the U.S. Court of Appeals for the Ninth Circuit had interpreted a B&O tax statute providing that the incidence of the tax is on the business in the same fashion as Washington courts. Rather than prohibiting a pass-through of the B&O tax, the statute simply structured the contract's negotiation and disclosure, mandating that businesses quote all prices inclusive of the tax. In the present case, as in Johnson, the negotiated price included applicable Washington taxes that were reflected in the wholesale purchase price of the unit invoices. The RV dealer was thus put on notice that the B&O tax would be included in the wholesale price as a part of the commercial dealings between the parties.

Other References:

Explanations at ¶65-005