Recent developments in state tax laws include a non-titled tangible personal property use tax in Cook County, Illinois, that is effective on April 1, 2013; and an income tax increase on individuals, estates and trusts in California that is retroactive to January 1, 2012.
Cook County, Illinois: Effective April 1, 2013, Cook County will impose a non-titled tangible personal property use tax on tangible personal property used in Cook County that was purchased outside of Cook County (e.g., computers, furniture, pencils, construction materials, equipment, etc.). The tax rate is 1.25 percent of the property's value when first used in the county, which will likely be determined by its purchase price. No credit for other state or local taxes paid is allowed under the county tax. The purchaser is required to pay the tax monthly to the Cook County Department of Revenue. The first $3,500 in value of annual purchases (basically a $43.75 tax credit) is not subject to tax. Certain other exemptions also apply. While businesses doing business in Cook County must register for the tax, both businesses and individuals are liable for the tax and must file returns if tax is due.
There are significant questions about the legality of the tax, but until the tax is enjoined or struck down by the courts, businesses in Cook County should be aware of its provisions and this new tax filing obligation.
California: Retroactive to January 1, 2012, the state of California has increased its income tax on individuals, estates and trusts to a maximum of 13.3 percent from 10.3 percent of taxable income. The rate increases start at $250,000 for individuals where the rate increases from 9.3 percent to 10.3 percent, then at $300,000 from 10.3 percent to 11.3 percent, then at $500,000 from 11.3 percent to 12.3 percent, then at $1,000,000 from 10.3 percent to 13.3 percent. The tax rate on corporations was not changed. Because this was a retroactive tax rate increase, persons should be aware that when they file their California returns for 2012, their tax liability will be higher, possibly resulting in a tax payment due.
It is important to note that California also increased its statewide sales/use tax to 7.5 percent from 7.25 percent, starting on January 1, 2013. This is in addition to the local sales/use taxes.
If you would like more information about this Alert, please contact Stanley R. Kaminski, any other member of the State and Local Tax Practice Group or the lawyer in the firm with whom you are regularly in contact.
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