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Duly Noted

Employer-provided cell phones nontaxable, IRS says. Employees who make personal use of employer-provided cell phones do not owe income tax on the cost of the phones or the service, as long as the phones are provided primarily for “noncompensatory” reasons, the IRS announced. Noncompensatory reasons include an employer’s need to reach employees after hours for emergencies, making employees available to customers at all times, and making it easier for employees to reach clients in other time zones. The new rules apparently apply to data service as well as voice calls, at least as long as the device is considered a “cell phone.” The extent to which the rules apply to tablets and other devices is not immediately clear. The lenient treatment reflects a recent change in the tax law and is effective for 2010 and thereafter. IRS Notice 2011-72.

Some opposite-sex civil unions treated as marriage for tax purposes. Civil unions originated in Vermont in 1999 as an attempt to provide same-sex couples, who at the time could not legally get married, with legal rights largely equivalent to marriage. Though several states now allow same-sex marriage and others allow same- and opposite-sex couples to create civil unions and registered domestic partnerships, the IRS continues to enforce the federal Defense of Marriage Act, which denies federal recognition to same-sex marriages and civil unions. But, in a new twist, IRS attorneys this summer decided that some opposite-sex couples in civil unions should be considered married for tax purposes. The guidance arose from an Illinois tax preparer’s inquiry about an opposite-sex couple that has a civil union in that state. The IRS Office of Associate Chief Counsel advised the preparer that the couple can file a joint federal tax return if they are treated as married under state law. 2011 TNT 215-62.

Mandatory restaurant tips subject to California sales tax. A sushi restaurant chain that added automatic gratuities to parties of six or more was required to collect sales tax on the mandatory tips, California’s Board of Equalization has ruled. Blowfish Sushi to Die For operates restaurants and take-out service in several Bay Area locations. The chain failed to remit tax on about $350,000 of automatic gratuities it collected between late 2003 and mid-2007, state tax auditors found. The state also found about $42,000 in recorded but unreported sales, based on extrapolation from a random sample of records. The BOE upheld about $54,000 in additional tax and interest that the auditors assessed against the chain. Matter of Blowfish LLC et. al.

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