In this episode we discuss two recent California decisions, including a Court of Appeal decision concerning property tax escape assessments (Prang v. Los Angeles Cnty. Assessment Appeals Bd., Case No. B301194 (Cal. Ct. App. Aug. 27, 2020) and an Office of Tax Appeals decision concerning nexus for the state’s LLC tax. (In the Matter of the Appeal of Aroya Inv. I, LLC, 2020-OTA-255P (Cal. Office of Tax Appeals Jul. 7, 2020). 

 

 

 

 

 

 

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The Tennessee DOR issued three FAQs (123) explaining that the sale of a pre-recorded video of an online course is subject to sales tax as the sale of a specified digital product. The tax result is the same whether the video is on-demand or must be accessed at a scheduled time and whether or not there is a live instructor associated with the course.

Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!

We will award prizes for the smartest (and fastest) participants.

This Week’s Question: Justice Ruth Bader Ginsburg authored the opinion in this 1994 landmark state tax case, upholding California’s worldwide combined reporting against constitutional challenge.

E-mail your response to SALTonline@eversheds-sutherland.com.

The prize for the first response to today’s question is a $20 UBER Eats gift card.

Answers will be posted on Saturdays in our SALT Weekly Digest. Be sure to check back then!

Mississippi Notice 72-20-09 provides additional guidance on Mississippi’s marketplace facilitator law, which took effect on July 1, 2020. The Notice explains that a sale facilitated and delivered by a third-party food delivery service is not a “retail sale” by the facilitator. Rather, the restaurant will charge sales tax on the selling price it charged for the food. But if a third-party delivery company additionally makes direct sales of items from its own inventory, the delivery company must collect and remit sales tax on those sales.

A California Court of Appeal found that because the taxpayer did not file proper notice with the California Board of Equalization (BOE), the limitation on the number of years the county assessor can levy retroactive escape assessments did not apply. The taxpayer’s 2006 merger constituted a change in ownership triggering reporting requirements to the BOE.   Shortly after the merger, the taxpayer filed the Delaware certificate of merger with the county Recorder’s Office but did not file the change in ownership statement with the BOE until 2013.  Pursuant to Proposition 13, county assessors may reassess property when there is a triggering event such as a change in ownership, and when there is a delay between the event and its discovery by the assessor, the assessor may levy retroactive “escape assessments” to collect any underpayment for the years in between the triggering event and discovery. By statute, California limits the retroactive escape assessment to four years, however, this cap does not apply if the taxpayer fails to file a change in ownership statement with the BOE. The court rejected the taxpayer’s argument that the filing of a certificate of merger with the county recorder’s office satisfied the requirement to file a change in ownership statement with the BOE and held that without strict compliance with the statutory notice requirements, the four year limitation on escape assessment did not apply.

Prang v. Los Angeles Cnty. Assessment Appeals Bd., Case No. B301194 (Cal. Ct. App. Aug. 27, 2020)

 

On September 10, the Colorado Department of Revenue promulgated four sets of regulations related to remote sellers and marketplace facilitators. One set, adopts a special rule that establishes the sales tax requirements and conditions for sales made through a marketplace facilitator’s marketplace. A second set updates Rule 39-26-102(3) to clarify when a retailer is doing business in the state for state sales and use tax purposes. The other two published rules made conforming amendments to related administrative provisions, including an updated provision regarding the sales tax license requirement.

The Illinois Department of Revenue recently proposed regulations implementing their remote seller and marketplace facilitator legislation. The guidance adds Ill. Admin. Code tit. 86, § 131.101 et seq. to provide updated definitions, explain the determination of remote retailer status, and explain when the gross receipts and separate transaction thresholds are met.

The Minnesota Supreme Court held that the gain from a corporation’s sale of its majority interest in a limited liability company (LLC) was apportionable business income subject to Minnesota corporate income tax. The Court explained that the corporation conducted its business through operating subsidiaries that were owned by the LLC, and that the corporation and the subsidiaries formed a unitary business at the time of the sale. The Court rejected the corporation’s argument that Minnesota did not have a sufficient connection with the gain at issue. The Court stated that the “undisputed facts showed that the operating subsidiaries – the asset – had a sufficient connection to Minnesota,” that the business received one percent of its revenue from transactions with Minnesota customers, and that the value of the operating subsidiaries was based, in part, on the success of the corporation’s business operations, which included the revenue generated from Minnesota sales. The Court also rejected the corporation’s argument that the gain constituted nonbusiness income under the Minnesota statutes because it was “derived from a capital transaction that solely serves an investment function.” The Court stated that if “a taxpayer and the corporation that was the source of the income do not have a unitary business relationship, and if the income from the sale serves an investment function, rather than an operational function, Minnesota cannot apportion the income.” The Court concluded that the provision did not apply to the corporation and the operating subsidiaries because it was undisputed that they formed a unitary business.

 

YAM Special Holdings, Inc. v. Comm’r of Revenue, No. A20-0021 (Minn. Aug. 12, 2020)

On September 9, US Congressmen Dan Kildee (D-MI) and Ron Estes (R-KS) introduced a House Resolution condemning foreign digital services taxes. H.Res. 1097 expresses “strong opposition to the imposition of digital services taxes by other countries that discriminate against United States companies” and called “on all other countries to cease and desist from implementing any DST, and to immediately stop unfairly targeting United States companies” while the OECD continues its work. Congressman Estes said “France led the charge in implementing DSTs, which only prompted others to seek profit from American ingenuity.”

Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!

We will award prizes for the smartest (and fastest) participants.

This Week’s Question: Earlier this month, the Massachusetts Appeal Court held that the Internet Tax Freedom Act (ITFA) preempted sales taxes on Internet access charges because the Internet service provider satisfied ITFA’s requirement for this type of software.

E-mail your response to SALTonline@eversheds-sutherland.com.

The prize for the first response to today’s question is a $20 UBER Eats gift card.

Answers will be posted on Saturdays in our SALT Weekly Digest. Be sure to check back then!