On October 3, 2019, California’s Office of Tax Appeals (OTA) held that value-added tax (VAT) imposed on the provision of services is included in the sales factor of California’s apportionment formula. The taxpayer, filing on a worldwide unitary basis, included VAT in its sales factor denominator that it billed, and collected, to its customers in foreign jurisdictions on service fee invoices. After auditing the taxpayer, the Franchise Tax Board (FTB) took the position that VAT was improperly included in the sales factor. On appeal, FTB argued that the definition of “sales” in California Code of Regulations 25134(b) only allows for excise or sales tax (including VAT) in the sales factor for sales of tangible personal property—not for sales of services. OTA rejected FTB’s position and concluded that the term “sales” for purposes of calculating the sales factor is defined in California’s Rev. & Tax. Code section 25120(e) as “all gross receipts” in agreement with a California court’s prior broad construction of the term to include “the whole amount received.” See Microsoft Corp. v. FTB, 39 Cal.4th 750, 759 (Cal. 2006). OTA also rejected FTB’s deference argument because Regulation 25134 is based on a Multistate Tax Commission model regulation, not unique to FTB, and not ambiguous.

In the Matter of the Appeal of: Robert Half International Inc. and Subsidiaries, OTA Case No. 18011756 (October 3, 2019).

Most kids leave cookies or biscuits for Santa, but for Beth Anne Stanford’s kids, Santa was the one who left Biscuit. Of course, we are talking about this adorable Goldendoodle, who was appropriately named for his light, fluffy and irresistible qualities.

Beth Anne, Tax Counsel at InterContinental Hotels Group, adopted 10-month-old Biscuit right before the holidays as a surprise for her kids. Now six-years-old, Biscuit has fully embraced his new family. He enjoys serving as the family vacuum cleaner, eating anything and everything that lands on the floor. He also tries to help his family find their shoes. Any time someone walks in the front door, Biscuit immediately feels the need to bring that person their shoes from the mudroom. While his heart is in the right place, family members are more often than not left trying to track down where their other shoe is.

Biscuit enjoys going off-leash hiking in the mountains, where his herding instincts can fully kick in – running ahead to check the trail then looping back to make sure the family is still with him, then run ahead again. He will repeat the herding cycle for miles!

We are thrilled to feature Biscuit as our November pet of the month!

The United Kingdom and other European Union member states have been introducing measures to ensure that overseas sellers selling goods in the UK via online marketplaces are paying the right amount of VAT on those goods.

In December 2018, the European Commission announced that beginning in 2021, large online marketplaces will become responsible for ensuring that VAT is collected on sales of goods by non-EU companies to EU consumers taking place on their platforms.

Joint and Several Liability – Knew or should have known test

The UK introduced legislation in 2016 that made online marketplaces jointly liable with a non-UK seller for UK VAT. This was extended in March 2018 for UK sellers too.
Beginning March 15, 2018, new UK legislation allows HM Revenue & Customs (HMRC) to hold the operator of an online marketplace jointly and severally liable for the unpaid VAT of non-UK sellers operating on its marketplace where:

• a non-UK seller operating on its marketplace has not registered for UK VAT; and

• the operator of the online marketplace knew or should have known that the seller should be registered for UK VAT.

These rules also extend existing rules, so that the online operator can also be held jointly and severally liable if HMRC tells the online marketplace operator that a UK or overseas seller operating its marketplace is not meeting its VAT obligations.

HMRC has invited online marketplaces to sign up to an agreement that is intended to build a collaborative relationship between online marketplaces and HMRC, and to promote VAT compliance by users of the marketplaces. However, it requires the marketplace to find a legally compliant way to disclose huge amounts of data to the tax authorities.

Other Measures

The EU Commission has also suggested that payment intermediaries, who are involved in over 90% of online sales, could be a useful source of data in identifying sellers who should be registered for VAT.

Meanwhile in other EU member states, the German tax authorities have proposed new VAT rules requiring online marketplace operators to provide a paper certificate in Germany to comply with German VAT law. The EU Commission has deemed this process to be inefficient and will require more strenuous compliance measures. The EU Commission has proposed extending its one-stop-shop system for goods so that sellers can register in one EU member state for all their sales in the EU.

A California Superior Court ruled that a City of Oakland ballot measure seeking to impose a 30 year parcel tax to fund educational programs required a two-thirds vote. Ballot measure AA was the result of a citizens’ initiative. In publicly circulated materials prior to the election, the City Attorney indicated that passage of Measure AA required approval by two-thirds of voters. However, after Measure AA received only 62.7% of the vote, the Oakland City Council passed a resolution stating that Measure AA had passed. The City contended that the two-thirds requirement did not apply because Measure AA was not imposed by a local government because it was a voter-sponsored initiative. The court classified the tax proposed in Measure AA as a “special tax,” meaning a tax dedicated to a specific purpose, and held that special taxes are subject to the state constitution’s two-thirds voting requirement regardless of whether they are proposed directly by local governments or by voter initiatives. The court further concluded that Measure AA was not enforceable because the City’s pre-election materials “unambiguously advised voters that Measure AA would require two-thirds of the votes to pass,” and to subsequently enforce the tax “would constitute a fraud on the voters.”

Jobs and Housing Coalition v. City of Oakland, Order on Motion for Judgment on the Pleadings, Case No. RG19005204 (Ca. Super. Ct., Alameda Cty., Oct. 15, 2019)

On October 25, 2019, the Oregon Tax Court upheld the Department of Revenue’s proposed increase in the real market value of Level 3’s centrally assessed property. Level 3 operated an optical fiber network and provided various communication services. It argued that the Oregon Department of Revenue should not have included in its “unit” certain “investment attributes” it claimed do not qualify as property. The taxpayer argued that the first four attributes (future tangible and intangible property, present value of growth opportunities and potential mergers and acquisitions) “inhere in Taxpayer’s shares of stock and are not property that Taxpayer itself owns.” The court rejected this argument because “the potential for revenue growth may derive from an attribute of the unit of assembled equipment, real property, customer relationships and workforce in place, or from the ability of the company to attract merger partners and additional capital investment.” The legislature intended any or all of these factors to “‘count’ in the valuation of the unit of real, tangible and intangible property in place on any given assessment date.” The court then considered the remaining attributes, including stock liquidity, expected appreciation and favorable income tax treatment. The court rejected the taxpayer’s argument that, while the attributes have value, that value belongs to the taxpayer’s shareholders, not to the taxpayer as a company. The court was skeptical that some of the attributes created value for the taxpayer’s shareholders, and the taxpayer did not attempt to quantify any increment of value associated with any particular attribute. As a result, the court accepted the Department’s revenue growth rates, which resulted in an increase in the value of the property relative to the original assessed value.

Level 3 Commc’ns, LLC v. Oregon Dep’t of Revenue, TC 5236, 5269, 5291 (Or. Tax Ct., Reg. Div. Oct. 25, 2019) (unpublished).

On Friday, November 8, 2019, North Carolina’s Governor Roy Cooper signed Senate Bill 557, which among its provisions, requires marketplace facilitators to collect and remit sales tax in the state beginning on February 1, 2020. The economic thresholds for collection and remittance are gross sales of over $100,000 or two hundred or more separate transactions in the state for the previous or current calendar year. The economic thresholds apply to direct sales by the marketplace facilitator, and all marketplace facilitated sales for marketplace sellers.

S.B. 557 adopts a more narrow definition of “marketplace facilitator.” It defines a “marketplace facilitator” as a person that either directly or indirectly and whether through one or more affiliates: (1) lists or otherwise makes available for sale a marketplace seller’s items through a marketplace owned or operated by the marketplace facilitator, and (2) collects the sales price of a marketplace seller’s items, otherwise processes the payments, or makes payment processing services available for purchasers for the sale of the marketplace seller’s items.

Marketplace facilitators are required to collect and remit sales tax regardless of whether the marketplace seller for whom it makes a marketplace-facilitated sale is required to be registered to collect and remit sales tax in the state. Marketplace facilitators and marketplace sellers may enter into an agreement regarding the new law; however, such agreements cannot require a marketplace seller to collect and remit sales and use tax on marketplace-facilitated sales. The new marketplace collection law also provides class action protection for marketplace facilitators and liability relief if the marketplace facilitator receives incorrect information from the marketplace seller or if it does not receive specific written advice from the Secretary for the transaction at issue.

The new law also requires marketplace facilitator to provide marketplace sellers with information regarding the gross sales and number of transactions sourced to the state on its behalf within ten days after the end of each calendar month.

Why this is important: North Carolina was one of only nine remaining states with a sales tax that had not enacted a marketplace collection law. With the passage of S.B. 557, there are only eight states that have not enacted a marketplace collection law.

What to prepare for: Marketplace facilitators should prepare to collect sales tax in North Carolina state beginning on/or after February 1, 2020. Marketplace facilitators should also ensure that they have a system in place to provide notice reports to marketplace sellers on a monthly basis regarding the gross sales and number of transactions sourced to the state on the marketplace seller’s behalf.

Veterans Day is a time for us to reflect upon and celebrate the heroism of those who have served our country, past and present. In honor of this year’s Veterans Day, we sat down with SALT Partner Tim Gustafson (Sacramento) to ask him about his experience serving our nation.

What branch of the military did you serve in?

I served in the Army’s Judge Advocate General’s (JAG) Corps.

What was your primary job?

Because I was stationed at a small installation, I wore many hats over the course of my tour.  I assisted individual clients with estate planning, family law and contract issues.  I advised the local command on aspects of administrative, international, and criminal law.  And I represented the United States Government as a prosecutor for military courts-martial.

What motivated you to join the JAG Corps? 

Initially, it was because I didn’t want to work at a law firm right out of law school.  After I looked into the JAG Corps, though, I quickly learned it would provide me with immediate, substantive experience in many areas of law, the opportunity to travel and meet all kinds of people and the chance to serve my country.  Ironically, I also found out the Army JAG Corps fashions itself the nation’s oldest “law firm,” dating back to 1775.

How many years did you serve? 

I served for three years, which was one tour.

Did you go overseas?

I was stationed in the Netherlands, and it was awesome.  There is a small military installation in the southernmost province of Limburg with a bowling alley, a grocery store and a law center.  There was no on-post housing, so I lived in a converted Dutch farmhouse down the road from a traditional windmill.  My command was in Germany so I spent a lot of time there, too, including at training events in the Moselle Valley (Germany’s wine country) and the German Alps.  On one trip to Stuttgart, my place of duty for the evening was the local beer hall for Octoberfest. As for the rest of Europe, it was just a car, train or plane ride away.

What made you go to law school? Where did you go?

As a kid, grown-ups would tell me I would make a good lawyer because of how much I liked to argue.  So I guess those comments, coupled with a strong and steady dose of “Matlock” reruns every summer during my elementary and junior high years, set me on the path to law school.  Having gone from Southern California to Cleveland for undergrad, I returned west for law school and attended Stanford.

What made you choose tax law?

I fell into SALT.  I ran the local tax center for one filing season while in Europe, but that was the extent of my tax experience.  When I separated from the military, my father-in-law wanted my wife and me to land in Sacramento, and he, a judge at the time, would send me job postings, one of which was for a SALT associate at another firm.  And the rest is history.

Do you get up earlier now or when you were on active duty?

I tend to be an early riser and enjoy exercising before work.  So, in that sense, the military lifestyle fit me perfectly.  These days, my personal “PT” begins a couple of hours earlier than it did in the Army, and sadly I don’t get paid to work out anymore.

Which era of life had tougher workouts?

Because I was stationed at a small unit, I was able to do my own thing in terms of a workout regimen.  I still had to qualify on the two-mile run every year, though, and that was something I never enjoyed.

Favorite aspect of SALT? 

I enjoy SALT for many of the same reasons I enjoyed my time in the JAG Corps.  The SALT community is a relatively small group of professionals who are very bright, always interesting and in many ways like a family.  The work is intellectually stimulating and varies considerably, so one never gets bored.  And the Sacramento office, like the Netherlands Law Center, is far from the flag pole, giving us a bit more flexibility in our day-to-day routines.

What does Veterans Day mean to you?

Serving in the military was an incredibly enriching and humbling experience for me.  In this politically-charged world of ours, the military community stands apart, a family of brothers and sisters doing right by each other and the country they love.  It’s not about right or left, but about freedom, and sacrifice, and the men and women who fought, fight and will continue to fight for us all.


On October 21, 2019, the Multistate Tax Commission (“MTC”) Marketplace Work Group released its draft marketplace facilitator white paper addressing issues arising from marketplace facilitator laws that have been enacted in nearly all states. The draft white paper is the result of several months of public meetings held by the Work Group. The meetings consisted of input by representatives from the MTC, state revenue departments, taxpayers and outside consultants.

In August, the Work Group developed a prioritized issues list of the top 13 issues of greatest importance to the states. The Work Group then spent the following months reviewing the issues and considering feedback from taxpayers and tax advisers.

The 13 priority issues include:

  1. Definition of marketplace facilitator/provider.
  2. Who is the retailer?
  3. Remote seller and marketplace seller vs. marketplace facilitator/provider recordkeeping, audit exposure and liability protection.
  4. Marketplace seller-marketplace facilitator/provider information requirements.
  5. Collection responsibility/determination.
  6. Marketplace seller economic nexus threshold calculation.
  7. Remote seller sales/use tax economic nexus threshold issues.
  8. Certification requirements.
  9. Information sharing.
  10. Taxability determination.
  11. Return simplification.
  12. Foreign sellers.
  13. Local sales/use taxes.

While the MTC’s draft white paper does not take positions or provide recommendations on most of the issues, there are a few important points made in the white paper:

  • Businesses desire a narrow definition of “marketplace facilitator.”
    Taxpayer participants in the Work Group expressed a strong preference for the narrow definition of marketplace facilitator because the broad definition leads to more uncertainty and compliance issues. Specifically, a business that does not directly or indirectly process or collect payment cannot practically comply with a tax collection requirement.
  • Businesses strongly prefer the marketplace to be the “retailer” for facilitated sales.
    The prevailing trend among states enacting marketplace collection laws is to treat the marketplace facilitator as the “retailer” under the sales/use tax laws. Taxpayer participants in the Work Group expressed a strong preference for marketplaces being the sole retailer in marketplace transactions.
  • Audit liability protections are still needed for marketplace facilitators.
    Marketplace collection laws generally provide that the marketplace facilitator is the party to be audited on facilitated sales transactions. However, some marketplace collection laws also impose recordkeeping requirements on marketplace sellers for facilitated sales and subject the marketplace seller to audit when the marketplace facilitator can establish that its failure to collect was due to erroneous information provided by the marketplace seller. Taxpayer participants in the Work Group believe that at least for a transition period, audit liability protection needs to remain in place for marketplace facilitators for non-collection caused by erroneous information from marketplace sellers.
  • Collection obligations regarding other types of fees and taxes remain unresolved.
    Generally, state laws requiring marketplace facilitators to collect tax, limit the collection requirement only to sales and use taxes. It is often unclear what should happen when other types of fees or taxes apply to the transaction. Certain participants in the Work Group urged that one party or the other should collect all applicable taxes to avoid a customer receiving multiple invoices for the same transaction. However, other participants wanted the marketplace collection requirement limited to sales/use tax.
  • State information sharing can create a chilling effect for registrants.
    A mechanism currently exists for state tax agencies to share or exchange taxpayer information. However, the MTC acknowledged that remote sellers may be hesitant to register if information sharing among the states is targeted specifically to identify those remote sellers who have registered in one state but not others.
  • Foreign sellers need better guidance.
    States need to provide clearer guidance to foreign sellers and marketplace facilitators regarding registration procedures. States should also develop work-around processes for foreign sellers needing to register for sales/use tax when those foreign sellers have no permanent establishment, lack an FEIN number, and their officers are not US citizens.
  • Local tax collection solutions are in the works.
    The collection of local sales/use taxes adds a layer of complexity to tax compliance for remote sellers and marketplaces. Some states have local jurisdictions with “home rule” authority to impose and administer local sales/use taxes, and local sales tax administration may not be centralized at the state level. These states are working to create centralized filing systems in an effort to solve this problem.

What to prepare for: The MTC will be meeting this week in San Antonio, Texas, where the findings of the white paper will be presented. It is expected that the white paper will serve as guidance for states considering implementing or modifying their marketplace collection laws, in addition to providing taxpayers with important insight regarding how states view marketplace collection obligations.

Why this is important: States are expected to make revisions to existing marketplace collection laws in the 2020 legislative sessions. The MTCs recommendations will likely have some influence on these revisions.

Happy Halloween from the Eversheds Sutherland SALT Team! Check out some of the “spooky” costumes from our lawyers and their families this year:

Maria Todorova (Partner, Atlanta) and her family dressed up as the Addams Family.

Jonathan Feldman (Partner, Atlanta) and his wife dressed up as peanut butter and jelly. His kids were having a blast while trick-or-treating!


Tim Gustafson (Partner, Sacramento) is pictured with his family at the Gustafson family aquarium/zoo/farm/prehistoric DNA replication fun center!

Charlie Kearns’ (Partner, DC) daughter, Princess Ella the First, was loving the Halloween sweets!










Open Weaver Banks (Counsel, New York) and her husband may not have worn their costumes, but they did enjoy the Halloween festivities by attending the Keene, New Hampshire Pumpkinfest.

Chris Lee’s (Associate, Atlanta) family went out as two unicorns and a werewolf!

SALT Secretaries Debbie Manders’, Candide Alba’s, Melissa Bragg’s and Sandie Kiedrowski’s kids and grand kids dressed as a vampire, demon princess, Woody, Scooby Doo, S.W.A.T. Officer and inmate, Tinkerbell and Peter Pan, and a Greek Goddess and Elsa .



























And, lastly, it wouldn’t be an Eversheds Sutherland SALT Halloween without some of our SALT Pets.  Todd Betor’s (Counsel, DC) Caldwell dressed up as a pineapple, while Sam Trencs‘ (Associate, DC) Romeo wore a pumpkin costume this Halloween.











We hope everyone had a safe and happy Halloween! Share your Halloween photos with us via Twitter @ESsaltLaw.

Bingham and Angela Merklaws were never supposed to be friends. The rivalry between cats and dogs is the oldest story in the book, but somehow these two were destined for each other. Growing up in separate parts of the country, it was Casey Mock, Manager, Public Policy, State and Local Tax at Amazon, and his wife Abby, who brought these two together.

Bingham, named after Grammy and Oscar-winning musician, Ryan Bingham, was adopted by Casey and Abby from a Washington, DC rescue organization after being picked up as an unclaimed stray in Clemson, South Carolina.

Angela Merklaws, named after German Chancellor, Angela Merkel, was abandoned and found by Abby in a Vermont grocery store parking lot.

As adopted pets with little known history, Casey was curious to find out more about their ancestry. So, Casey opened up the Amazon app and purchased a DNA kit. The results? Angela is a brown tiger tabby, and Bingham is a mix of Dalmatian, Rhodesian, German shepherd and Chow.

Angela and Bingham love to eat together – and who can blame them? Casey has made the unfortunate mistake of turning his back on two pounds of smoked brisket sitting on the counter. In less than a minute, without a sound or a mess, the two were able to devour every last bite. When there is no brisket around, Angela’s favorite food is ahi tuna, but Bingham will pretty much chow down on anything Angela chooses to share with him. When they’re starving, Angela will start opening all of the cabinets looking for the duo’s next meal.

We are thrilled to feature Bingham and Angela Merklaws as our October pets of the month!