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Vol. 17, No. 4 Autumn, 1996

Sales of cigarettes to minors illegal

Businesses will receive notices

In cooperation with the Maryland Department of Health and Mental Hygiene, the Comptroller's Office conducted an underage tobacco buying survey of 882 Maryland businesses for two weeks in July and August. Under state law, it's illegal to sell cigarettes to anyone under 18. During the survey, 16-and 17year-olds tried to buy cigarettes while under observation by an agent from the Comptroller's Office. 45% of the establishments visited refused to sell cigarettes to the minors. 55% were willing to make the sales. The retailers who were willing to sell cigarettes to minors will receive letters notifying them of the problem and reminding them of state law. Those who refused to sell to minors will receive letters thanking them for complying with the law. Cigarette retailers can get signs and posters warning minors about the law from their cigarette distributors. The survey, which provided data used by the state health department to qualify for a $25 million federal grant, will be repeated annually.

Finding forms easier than ever

Available on CD ROM, Internet

It will be easier than ever for tax preparers to have as many Maryland income tax forms as they need when they need them, thanks to several new options for getting forms. For the first time, all Maryland income tax forms and instructions will be available on CD ROM, free of charge. Preparers receiving the order card for bulk forms will have the option of ordering a Package X of forms on CD ROM on that card. Orders from the bulk order card will be filled beginning December 16. Preparers who don't receive an order card can order the CD ROM by calling the Revenue Administration Division at 410-974-3951. You can also visit the comptroller's new web site, where tax forms, instructions, publications and e-mail access to taxpayer assistance will be provided as they become available. Our web site address is www.comp.state.md.us. Taxpayers and preparers can also e-mail questions to [email protected] For the second consecutive filing season, practitioners can receive forms and publications 24 hours a day, seven days a week, through our Forms-byFax system. For best service, call the system - at 410-974-FAXX (3299) from the handset of a fax machine. Package X gives preparers all of the forms in photo-ready, reproducible quality. Preparers can order a Package X on the bulk order card. Each Maryland library will also receive a Package X, available in paper or on CD ROM, which they make available for photocopying.

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FYI Thanks for your input

Those of you who are business people know you wouldn't be in business very long if you didn't know what your customers wanted. While the Comptroller's Office isn't likely to go out of business any time soon, we can't do the best possible job either if we don't know what our customers want. Some of our most important customers are tax practitioners, and recently, we've been asking them what they wanted. A tax practitioner survey was included in the Spring, 1996, issue of this newsletter and also distributed through the Maryland Society of Accountants. An Internet home page survey was distributed to selected ReveNews readers, and preparers who file returns electronically were surveyed about that program. The response to all of these surveys was outstanding. Your answers and comments have helped us design our new home page, expand ways of distributing Maryland income tax forms, and provide better support to electronic filers. You can read about these efforts in other articles in this issue. In the comments section of one survey, a practitioner said, "By all appearances, this is one area of Maryland's government that is...aware that the taxpayers are their `customers,' not an intrusion into their day." I cannot state our philosophy of service any better than that, and it's gratifying to know that we're meeting our goal. Louis L. Goldstein

Inside

n withholding errors to avoid n making purchases for resale n local income tax rate change in Talbot n sales & use receipts top $2 billion

Comptroller of Maryland

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Maryland ReveNews

Autumn,

1996

Briefly noted

Talbot lowers local tax rate to 40%

Elected officials in Talbot County have lowered the county's local income tax rate from 55% to 40% for tax year 1997, which begins January 1, 1997. Talbot County was the only subdivision among Maryland's 23 counties and Baltimore City to declare a rate change for the next calendar year. All employers will receive new local rate cards, and new withholding guides and instructions for the 40% rate for 1997 will be mailed in November to employers on Maryland's eastern shore. Other employers who need that information should call the taxpayer service section at 1-800-MD TAXES (974-3981 in the central Maryland area). This change does not affect Talbot County residents in the upcoming tax filing season for tax year 1996, when the 55% rate was still effective. Employers should remember that withholding is based on where employees live, not on where they work. dors should continue to work directly with their agency contacts to resolve any problems. However, if a problem cannot be resolved, they should contact the General Accounting Division's Check Distribution Section at 410-974-3520, 3813, or 3814. there were two large finds, one for $63,000 and another for $31,000. Thanks to outreach efforts like the fair booth, the Comptroller's Office returned $9,318,167 in unclaimed funds to 7,572 rightful owners in fiscal year 1996.

Telefiling for "zero" returns popular

The sales and use tax coupon books mailed to businesses in July have all of the information needed to telefile "zero" business tax returns. Each month, businesses that don't owe sales and use tax or employer withholding tax can simply dial 410-974-FILE (9743453) to file. The new telefiling system was activated on December 29, 1996, and through the end of August, almost 21,000 employer withholding returns and almost 29,000 sales and use tax returns had been filed by phone.

Hagerstown office has new address

The Hagerstown taxpayer service office has moved - but not too far. It relocated from the third floor to the first floor in the Professional Arts Building. Phone numbers remain unchanged (phone, 301-7914776 and fax, 301-791-7163). But since the entrance now faces a different street, the office has a new mailing address: State of Maryland Comptroller of the Treasury Professional Arts Building 1 South Potomac Street Hagerstown, MD 21740-5512

Oops! We goofed!

In the "New Laws" section of the Summer, 1996, ReveNews, we stated that Chapter 183, Acts of 1996, clarified "that income from all state and municipal obligations is not subject to state income tax even as a tax preference item on the Maryland return." That should have read "income from all Maryland state and municipal obligations..." We regret any inconvenience caused by this error.

Fairgoers find funds as well as fun

The Maryland State Fair really was "the ten best days of summer" for 1,017 lucky fairgoers. Those folks found leads on more than $410,000 in unclaimed funds at the Comptroller's Office booth at the fair. While the average State Fair claim this year was $300,

Business license study

A committee of Comptroller's Office personnel and representatives from the clerks of the circuit courts, the Department of Assessments and Taxation, and the business community has been formed to study the business license issuing procedure. If you or your clients have suggestions or ideas on improving the process, please send them to: Ron LaMartina Compliance Division Room 408 301 W. Preston Street Baltimore, MD 21201

Don't make these withholding errors!

Paying Maryland income tax withholding with your coupon book is easy - if you avoid some common errors and keep some helpful hints in mind. ü The number one error is sending in the wrong coupon. Send in the coupon marked for the correct month. ü The second most common error is incorrect figures. Please double check your entries. ü The MW506, MW506A, MW508 and MW508A forms must be completed in black ink. ü Correct mistakes you make on the MW506 with liquid correction fluid. ü File the "final report" form in your coupon book if you are closing your business to avoid unnecessary delinquent notices and collection action. ü You can use Form MW506 to pay penalty and interest charges. ü You must provide your employees with a wage and tax statement (MW509 or federal Form W-2) on or before January 31 each year. ü If you don't have our preprinted envelope, mail your withholding tax forms to: Comptroller of the Treasury, Revenue Administration Division, P.O. Box 17132, Baltimore, MD 21297-0175.

Notice to vendors

Since July 1, the Comptroller's Office has been testing a new statewide accounting and reporting system that uses state-of-the-art data processing and communications technology. The new system is currently running parallel with the existing accounting system. During the parallel testing phase, vendors dealing with state agencies may experience some delays in purchases and payments. Ven-

Autumn,

1996

Maryland Reve News

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The courts decide...

Unclaimed property

Attorney escrow account. On July 16, 1996, the Circuit Court for Montgomery County ruled, in Hawkins v. Goldstein, that the proceeds of an attorney escrow account constitute abandoned property under Title 17 of the Commercial Law Article when the owner of the funds is unknown. William Blanton McDanald died in 1989 after practicing law in Montgomery County since 1964. At his death, there was a balance of more than $500,000 in his attorney escrow account, due to his practice of holding his fees in escrow until needed. His personal representative paid to the estate all unpaid fees she could verify had been earned as of Mr. McDanald's death, leaving a balance of $41,108.80 for which she could not account. She filed an interpleader action, naming the heirs and the comptroller as parties and paid the money into the Registry of the Court. After a bench trial, the court issued a memorandum opinion ruling the heirs had failed to prove that Mr. McDanald owned the funds in question. Therefore, the funds must be considered abandoned property under section 17306 of the Commercial Law Article. Property held by a fiduciary for more than five years after it becomes payable or distributable is presumed abandoned if the owner has made no claim. The court ordered the clerk to pay the funds to the comptroller in his capacity as custodian of abandoned property, pending any claim by the owner or owners.

Compliance updates

Corporate charters can be forfeited for unpaid taxes

If a corporation has an outstanding liability for one or more taxes administered by the Comptroller's Office, its corporate charter could be at risk. Under Maryland law (sections 3-503 through 3508 of the Corporations and Associations Article of the Annotated Code of Maryland), the Comptroller's Office may certify the liability to the Department of Assessments and Taxation, resulting in forfeiture of the charter. When the charter is forfeited, the business loses all privileges and benefits of being a corporation. Don't let this happen to your or your clients! Get in touch with the Compliance Division at 410-767-1623 to clear up any unpaid taxes.

Awards and recognition

MD receives highest financial reporting award

While the eyes of the world were on the Olympics in Atlanta, Georgia, Maryland won what amounts to the gold medal for top performance in government financial reporting. On July 23, 1996, the Government Finance Officers Association of the United States and Canada (GFOA) awarded Maryland's fiscal year 1995 Comprehensive Annual Financial Report, prepared by the State Comptroller's Office, its highest form of recognition for government accounting and financial reporting. This is the 16th time Maryland has won the Certificate of Achievement for Excellence in Financial Reporting. The GFOA also presented its Award of Financial Reporting Achievement to Comptroller Louis L. Goldstein, recognizing him as primarily responsible for the state earning its certificate. Maryland and Tennessee were the first two states to win the coveted award from GFOA. As recently as 1987, only seven states received the certificate. The importance the states place in the award can been seen by the growing number of states now working to meet the stringent requirements. Last year, 28 states were recognized. Beginning with fiscal year 1996, the Comprehensive Annual Financial Statement will be available on line for users of the World Wide Web.

Assessment appeals

Taxpayers who disagree with assessments made by the Comptroller's Office must appeal within 30 days of the assessment. The first step in all appeals is an informal hearing with the Hearings and Appeals Section. Taxpayers who disagree with the hearing officer's decision may pursue the appeal through the Maryland Tax Court and other state courts of law. All assessments contain instructions for filing an appeal.

Tax administrators recognize Goldstein

The Federation of Tax Administrators (FTA) presented a special lifetime achievement award to Maryland State Comptroller Louis L. Goldstein at its annual meeting held in Baltimore June 9 to 12. The FTA is an organization of state tax and revenue officials for all 50 states, the District of Columbia, and New York City. In presenting the award, FTA President William C. Hamilton noted Mr. Goldstein's unusual position as a popularly elected tax collector and complimented Maryland's leadership in developing technologies to process tax returns.

Most taxes paid electronically

During fiscal year 1996, most major business tax payments were made the easy way - electronically. 57% of income tax withholding and sales and use tax receipts - more than $4 billion - were made by electronic funds transfer. Half of all corporate income tax receipts - almost $195 million - and three-quarters of motor fuel tax payments - $468.7 million - were also made electronically. While these taxes must be paid electronically if the payment amount is $20,000 or more, the option of paying them electronically is available to all taxpayers. For more information on electronic funds transfer, call 410-974-2601.

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Maryland ReveNews

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1996

In the classroom

Federal-state tax institutes

The upcoming income tax filing season will be the focus of the 22nd annual federal-state tax institutes, scheduled for five sessions at four locations during November and December. The Maryland program will cover the latest regulations, administrative releases, changes in Maryland forms, tax law changes, and other items of interest. The $145 registration fee includes the sessions, a valuable reference manual, a catered lunch, and a certificate of attendance. Participants will earn eight Continuing Professional Education credit hours from the Maryland Board of Public Accountancy. For more information, call the University of Maryland University College, Center for Professional Development at 1-800-444-6853. To register by phone, call 301-985-7171. Registrations can be faxed to 301-985-7887. The institutes will be held on the follow dates:

November November November December

7 13 26 7 & 12

Salisbury Hagerstown Baltimore College Park

Wicomico Youth & Civic Center Ramada Inn Baltimore Convention Center University of MD, Univ. College Center of Adult Education

Electronic filing seminars

Tax preparers who file federal and state returns electronically should plan to attend one of the electronic filing seminars sponsored by the IRS and the State Comptroller's Office held during the week of October 7 through 11. The seminars are free, and preregistration is not required. For more information on these electronic filing seminars, please call Luc Guinand at 410-974-3754. The seminars will be held on the following dates:

October October October October

7, 9 a.m. & 1 p.m. 8, 9 a.m. & 1 p.m. 9, 11 a.m. 11, 11 a.m.

Baltimore Beltsville Salisbury Hagerstown

University of Baltimore, Langsdale Library Auditorium USDA Agricultural Research Center Auditorium State Multiservice Center Rm. 104, Hagerstown Center of F.S.U.

Multistate tax forum

Are you interested in multistate tax developments? Current sales and use tax issues? Nexus and audit issues? If so, you might be interested in attending the 1996 multistate tax forum, presented by the Maryland Association of CPAs on November 19 and 20 at Martin's West in Baltimore. At the conference, government officials and practicing CPAs representing Maryland, Delaware, New Jersey, Pennsylvania, Virginia, New York, California and the District of Columbia will discuss current developments and state tax trends. Linda Tanton, director of the Compliance Division, and George Spriggs and David Brown, director and assistant director respectively of the Revenue Administration Division, will be featured speakers from the Comptroller's Office. The forum qualifies for 16 Continuing Professional Education credit hours. Lunch both days, refreshments, a federal and state directory, and numerous handouts are included in the $290 registration fee. For more information on the multistate tax forum, call the Maryland Association of CPAs at 410-296-6250 or Sandy Glock at 410-825-8300. Registration information and checks can be mailed to: MACPA, P.O. Box 4417, Lutherville, MD 21094-4417.

Higher levy on taxable food in Ocean City due to local, not state, law

Throughout the summer, the comptroller's Taxpayer Service offices got a lot of calls from folks vacationing in Ocean City who wondered why they paid a 6% sales tax on restaurant meals and other taxable food purchases in the resort city when Maryland's sales tax rate is 5%. The reason is a law passed by the 1995 session of the Maryland General Assembly, which authorized the Worcester County Council to impose a 1% tax on food and beverages sold in Ocean City. Proceeds from the local levy will be used to fund the expansion and renovation of the Ocean City Convention Center. The 1% tax, which went into effect on January 1, 1996, is collected by the Worcester County Treasurer's Office. Businesses or consumers with questions about what is subject to the Worcester County tax can call Food and Beverage Tax Administrator Lisa Harrison in the Worcester County Treasurer's Office at 410-632-0756.

Autumn,

1996

Maryland Reve News

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Sales & use tax receipts top $2 billion for first time in almost 50 year history

In fiscal year 1996, Maryland's sales and use tax produced more than $2 billion for the first time ever. Collections of $2,000,294,902 exceeded estimates by 1.35%, thanks to a stonger-than-expected economy and renewed consumer confidence. Sales tax receipts also exceeded estimates in the very first year of collection, when the tax produced $23.7 million, well above the estimate of $18 million. When the tax went into effect in 1947, the rate was 2%. It was increased to 3% in 1959, 4% in 1969, and 5% in 1977.

1948 $23 million

1978 $628 million

1985 $1.0 billion

1989 $1.5 billion

1996 $2.0 billion

IFTA update

Taxpayer errors still plague processing

After filing two quarterly Maryland motor carrier reports under the International Fuel Tax Agreement (IFTA), taxpayers are still making some easily avoided errors that can lead to penalty and interest payments if the report is filed incorrectly. The Summer, 1996, issue of ReveNews described some of the most common IFTA reporting errors and told taxpayers how to avoid them. In particular, taxpayers should remember to use the pre-printed IFTA report, schedules and instructions they received in the mail and should be sure not to mail IFTA reports and schedules to the Motor Fuel Tax Unit in Annapolis. Instead, mail the reports to the IFTA Regional Processing Center address indicated on the back of the report. If you have questions about completing the IFTA report or schedules, call 410-974-3138. The Summer, 1996, issue of ReveNews reported on a new law affecting farm area motor carrier exemptions. This exemption applies only if the 10 mile radius is solely within Maryland. If any portion of the 10-mile radius falls within a neighboring state, IFTA takes precedence over Maryland statute. Farm area vehicles that meet the IFTA qualifying standards would not be exempt from the motor carrier tax if those vehicles travel in another IFTA jurisdiction, regardless of the number of miles traveled. Farm trucks (Class E) that have two axles and a registered or operating gross or combination weight of less than 40,001 pounds remain exempt if they travel solely within Maryland.

Forms

(continued from from page)

Preparers can also order individual forms on the bulk order card. Please help us save paper and taxpayer dollars by ordering only the forms you need or by generating your own forms from CD ROM or Package X. Preparers who use computerprinted substitute forms generated by private software should be aware that we accept only those substitute forms that conform to the corresponding official forms, comply fully with our requirements and do not have an adverse impact on tax processing. If you have questions about substitute forms, call the Taxpayer Service Section at 410-974-3981 in the Central Maryland area or 1-800-MD TAXES from elsewhere.

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Maryland ReveNews

Autumn,

1996

New look for sales and use tax reports

If you're a sales and use tax licensee, you probably noticed the "new look" report when you received your new coupon book. The return has been redesigned to provide more space for tax information. But there are also several reporting changes on the new report: Column A for lines 2, 3, and 4 has been eliminated. You no longer need to report the amount of your taxable sales, purchases and car/truck rentals - just the tax due on them. If the amount on line 5 is zero, meaning no tax is owed, do not mail your return. Instead, telefile by calling 410-974-3453. Late charges or timely discounts are now calculated before deducting any refund claims of less than $1,000.

Focus on

Business tax tip #4 - If you make purchases for resale

You're a buyer. You're a seller. Maybe you're both. But just because your business life is complex doesn't mean your sales tax responsibilities should be. It's easy to deal with the sales and use tax implications of making purchases for resale - with the help of business tax tip #4. Contrary to what many people believe, a sales and use tax license is not a "tax number" that exempts businesses from paying any sales tax. But there is a way for businesses to make tax-exempt purchases of property they intend to resell or that will be incorporated into something manufactured for sale. It's called a resale certificate. Business tax tip #4:

u explains what a resale certificate is and what information it must include, u describes limitations on the use of the resale certificate, u provides a sample blanket resale certificate you can use as a model for your own certificate, u details the responsibilities of sellers accepting resale certificates, u tells sellers how to handle thirdparty drop shipment transactions u explains the difference between resale certificates and exemption certificates issued to qualifying non-profit organizations and government agencies.

Reve News .....

is a quarterly publication of the Maryland Comptroller's Office, printed in Annapolis, Maryland. Inquiries concerning ReveNews or requests for this publication in an alternate format can be directed to the Public Affairs Office, Box 466, Goldstein Treasury Building, Annapolis, Maryland 21404-0466, (410) 974-3885 (voice) or (410) 9743157 (TDD). Editor: Gail Parran

For more information on making purchases for resale and resale certificates, send for a free copy of business tax tip #4, If you make purchases for resale, by calling the Taxpayer Service Section at 410-767-1300 in Central Maryland or 1-800-492-1751 from elsewhere in Maryland. If you have a fax machine, you can call our "Forms by Fax" number - 410974-FAXX (974-3299) - and have business tax tip #4 faxed to you directly. It is item # 4004 from index number 2. Or you can access this information electronically on the comptroller's home page at www.comp.state.md.us.

Fed-state tax institutes, electronic filing seminars described inside

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