The New York Department of Taxation and Finance has recently issued guidance clarifying the rules around amending Sales and Use Tax returns. This guidance stems from previously enacted legislation and brings Sales and Use Tax returns under similar limitations as other tax filings. Understanding these updates is crucial for businesses required to collect tax under Tax Law Article 28 (Sales and Compensating Use Taxes), especially as they take effect for filing periods beginning on or after December 1, 2024. Here’s a breakdown of the new rules and what they mean for your business.

Under the new guidance, businesses required to collect Sales and Use Tax can amend previously filed returns, but there are important limitations to be aware of:

1. Conditions for Amending Returns:

• A business can amend a previously filed return only if the amendment does not reduce or eliminate a past-due tax liability related to that specific filing period.
• Past-due tax liability refers to any tax debt that has become final and unchangeable, where the taxpayer has no further right to administrative or judicial review.
• However, if the business self-reported past-due tax liability, they may amend the return to reduce or eliminate this liability within 180 days of the original due date.

2. Overpayments and Refunds:

• If no past-due tax liability exists, and the amended return results in an overpayment, the business can claim a credit or request a refund.
• This claim must be made within three years from the original tax due date or within two years from the date the tax was paid—whichever is later.

3. Department’s Right to Assess:

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Maine Revenue Services recently released General Information Bulletin No. 114 to provide guidance regarding significant changes to the state’s sales and use tax rules as they apply to leases and rentals. These updates, which will take effect on January 1, 2025, reshape how lessors are required to handle sales tax on leases of tangible personal property.

For businesses and individuals involved in leasing and renting, understanding these new rules is essential to remain compliant with Maine’s tax regulations.

Until the end of 2024, lessors (those leasing tangible personal property) must pay sales tax upfront when they purchase property that will be leased or rented out. The tax is calculated based on the full value of the property. This means that even if the property is rented over several years, the tax liability is borne by the lessor at the time of purchase.

This approach simplifies tax collection but creates a significant upfront cost for lessors, as they are paying taxes before they’ve even begun to collect lease or rental income.

Key Changes Effective January 1, 2025Starting on January 1, 2025, lessors in Maine will be able to purchase tangible personal property exempt from sales tax, provided they present a resale certificate. Here’s how it will work:

1. No Sales Tax on Initial Purchase: Lessors will no longer be required to pay sales tax when they purchase tangible personal property to lease or rent out. Instead, they will use a resale certificate to purchase the property exempt from sales tax.

2. Sales Tax on Lease Payments: Instead of paying the tax upfront, lessors will be responsible for collecting sales tax on each lease or rental payment they receive from their customers. This change aligns Maine’s rules more closely with how most other states handle sales tax on leases and rentals of tangible personal property.

3. Sourcing Rules for Taxation: The guidance also addresses sourcing rules, which determine how and where taxes are applied. The location of the leased or rented property, and potentially the location of the lessee, will play a role in determining where the tax is sourced.

What Does This Mean For Lessors?

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