The New Jersey Tax Court denied a holding company’s motion for partial summary judgment seeking a determination that the taxpayer lacked nexus with New Jersey and would not be required to file corporation business tax returns. The taxpayer’s only connection to the state of New Jersey was the receipt of royalties from an affiliate doing business in New Jersey. The taxpayer argued that its facts were distinguishable from those in Lanco, Inc. v. Dir., Div. of Taxation, 188 N.J. 380 (2006), in which the New Jersey Supreme Court held that an out-of-state company lacking a physical presence in New Jersey was deemed to be doing business in the state by receiving state-sourced royalty income. The court acknowledged that the taxpayer’s facts appeared to be distinguishable from the facts in Lanco, but noted that the facts regarding the taxpayer’s activities in the state were not sufficiently developed in the motion and that discovery was still incomplete and pending. As a result, the court denied the taxpayer’s motion but left open the question of whether the taxpayer had sufficient contact with the state to satisfy the Due Process and Commerce Clauses of the U.S. Constitution. Crown Packaging Technology, Inc. v. Dir., Div. of Taxation, Dkt. No. 003249-2012 (N.J. Tax Ct. Feb. 26, 2019).

The Eversheds Sutherland SALT team spent time together last week collaborating on strategies to better serve our clients and celebrating the return of Tim Gustafson.


Partners: Dan Schlueter, Jeff Friedman, Michele Borens, Tim Gustafson, Jonathan Feldman, Maria Todorova, Scott Wright, Todd Lard, Charlie Kearns (Missing: Eric Tresh)

Welcome back Tim!



On February 15, 2019, the United States Court of Appeals for the Fourth Circuit held that the Roanoke, Virginia stormwater management charge was not subject to the discriminatory tax prohibition in the Railroad Revitalization and Regulatory Reform Act of 1976 (“4-R Act”) because the charge was a fee. In 2013, Roanoke enacted a stormwater management charge to comply with state and federal stormwater regulations and based the charge on a parcel’s impervious surface cover that contributes to stormwater runoff. Invoking the 4-R Act, the railroad argued that Roanoke’s stormwater charge applied to its property differently than non-railroad property, and hence discriminated under the 4-R Act, even though both property types were equally pervious to stormwater. However, the court determined that the 4-R Act’s discriminatory tax prohibition did not apply because the charge was a regulatory fee, not a tax. The court explained that, among other things, the charge formed part of a comprehensive regulatory scheme to remedy the environmental harm associated with stormwater runoff. Norfolk S. Ry. Co. v. City of Roanoke, No. 18-1060 (4th Cir. Feb. 15, 2019).

The New York City Tax Tribunal held that an out-of-state corporate taxpayer, with an indirect interest in a limited liability company investment fund engaged in business in New York City, had nexus with the City and was subject to tax on capital gain from its sale of the fund. The taxpayer had no property, employees, or otherwise conducted business in the City and the parties stipulated that the fund was not unitary with the taxpayer. The taxpayer sold its interest in the fund through an intermediate partnership and realized capital gain. The taxpayer claimed that its capital gain was not subject to the City General Corporation Tax because it had no nexus with the City and its passive investment in the nonunitary fund did not create nexus for the taxpayer. The Tax Appeals Tribunal disagreed and reasoned that the ownership of a flow-through interest in an entity conducting business in the City, created nexus for the corporate owner and the gain was mainly attributable to the protection, opportunities and other benefits upon the fund by the City. The Tribunal apportioned the gain to the City based on the City’s business allocation percentage of the investment fund. The Tribunal held that the assessment satisfied the four-prong test in Complete Auto and was supported by the ruling in Wayfair and that physical presence is not required to subject an out-of-state corporation to tax in certain circumstances. The Tribunal further found that the imposition of tax did not violate the Due Process Clause or Commerce Clause. (Petition of Goldman Sachs Petershill Fund Offshore Holdings, TAT (H)16-9(GC), (N.Y.C. Tax Trib. Dec 6, 2018))

On February 12, 2019, the Michigan Court of Appeals upheld the imposition of use tax on phones that were given away for no charge by a company in conjunction with its sale of mobile phone service contracts. The company sold service contracts for a single mobile phone service provider and also purchased phones from the provider. The company did not remit sales or use tax on the phones that it purchased from the provider “for purposes of resale.” On audit, the company was assessed use tax based on the price it paid the provider for the phones. The company argued that its purchase price for the phones was zero, asserting that it had been reimbursed by the provider for the cost of phones. The Court, however, determined that the company was not reimbursed by the provider but instead was paid a commission by the provider for the sale of service contracts. Accordingly, the Court upheld the determination that the company owed use tax on its disposition of the phones. Emery Electronics, Inc. v. Dept. of Treasury, Dkt. No. 342250 (Mich. Ct. App. Feb. 12, 2019) (unpublished).

The Texas Comptroller determined that a taxpayer was required to include in its sales factor numerator its receipts from sales of bunker fuel oil to foreign ships in Texas ports. The taxpayer argued that the sales were not from “business done” in Texas even though the oil was delivered to ships in Texas ports. The Comptroller rejected this argument, citing a regulation that provides that receipts from transactions occurring in Texas waters are considered Texas receipts. The taxpayer further argued that this regulation is unconstitutional, but the Comptroller declined to address the argument due to its lack of authority to rule on constitutional matters. (Hearing No. 114,750).

Conventional wisdom states that one does not pick up the nicest habits hanging around a track. However, having spent his youth racing, Rocket, the pet of Jéanne Rauch-Zender, editor in chief of State Tax Notes, nonetheless grew into quite the gentleman. For example, he loves to eat cheese but the only “trick” he learned is to jump slightly to grab it when offered.

Rocket, who was named by son Luke, just turned 11 this month and came to the Rauch-Zender family via Greyhound Pets of America after a career in North Carolina. 

One thing that Rocket did pick up from his misspent youth is an uncanny ability to sneak into his favorite spot. Jeanne reports that every day when they come home, they find Rocket lying on her husband’s side of the bed. They do everything they can to prevent it, such as closing the door and blocking the stairs, but somehow Rocket is able to break in.

Rocket spends his afternoons playing a short game of catch with the kids after they get home from school before returning to his nap.


He is a wonderful pet and perfect for the family. We are so happy to feature Rocket as our February Pet of the Month!

This is the twelfth edition of the Eversheds Sutherland SALT Scoreboard, and the last edition from 2018. Since 2016, Eversheds Sutherland has tallied the results of what we deem to be significant taxpayer wins and losses and analyzed those results. This edition of the SALT Scoreboard includes insights regarding Louisiana’s refund procedure, credit for taxes paid, and a spotlight on New Jersey cases.

View our Eversheds Sutherland SALT Scoreboard results from the fourth quarter of 2018!