Click here to read our April 2014 posts or read each article by clicking on the title. A printable PDF is also available here. To read our commentary on the latest state and local tax developments as they are published, be sure to download the Sutherland SALT Shaker mobile app.

• California Vendor Not Required to Reimburse Customers Before Seeking Refund for Erroneously Collected Sales Taxes
  A California Court of Appeal held that a mobile telecommunications service provider could pursue refund actions against local taxing authorities in California without first having to refund the disputed taxes to its customers.
• No “Best Method” in the Madness: Taxpayer’s Transfer Pricing Study Fails to Stop Forced Combination in Indiana
  The Indiana Department of Revenue required an out-of-state clothing company and its subsidiary to file a combined Indiana corporate income tax return, determining that the taxpayer’s transfer pricing study was insufficient to establish that its intercompany transactions were conducted at arm’s length.
• SALT Pet(s) of the Month: Jethro and George
  Meet Jethro and George, the feline companions of Kathy Filion, an executive assistant at Tyco, who answered our recent call for feline pets.
• Indiana DOR Rules Affiliates Not Unitary, Combination Not Required
  The Indiana Department of Revenue determined that affiliated entities of an out-of-state manufacturing corporation were not unitary.
• No Nexus Here: Indiana Finds Mere Solicitation for Out-of State Wholesaler
  The Indiana Department of Revenue determined that an out-of-state wireless communications equipment wholesaler’s in-state business activities were protected by P.L. 86-272, and therefore, the wholesaler did not have nexus for Indiana corporate income tax purposes.
• Taxpayer Win! Michigan Court Rules Cloud Computing Services Not Subject to Use Tax
  The Michigan Court of Claims held that cloud computing, or software as a service (SaaS), is a nontaxable service rather than a taxable use of prewritten software.
• Get the “Fax” Straight: Mississippi Governor Approves “Quick Fix” Bill in Response to Equifax Decision
  In direct response to the Mississippi Supreme Court’s decision in Equifax, Inc. v. Miss. Dep’t of Revenue, wherein the court upheld the Department of Revenue’s use of market-based sourcing despite the taxpayer’s use of cost-of-performance sourcing in compliance with the governing statute, Mississippi’s Governor signed House Bill 799 into law.
• Missouri Supreme Court Can’t Take a Joke: “Rabbi Trust” Gives Rise to Business Income
  The Supreme Court of Missouri reversed and remanded a decision of the Administrative Hearing Commission and held that income from a “rabbi trust”—a trust established by a corporation to fund a nonqualified deferred compensation plan for company executives—constituted business income subject to apportionment and Missouri taxation.
• No BIS’ing Around in New Jersey: Out-of-State Company Entitled to Refund
  The New Jersey appeals court ruled that BIS LP, Inc. was entitled to receive a New Jersey Corporation Business Tax refund in the ongoing BIS litigation saga.
• Unity Wanted: New York Rejects Taxpayer’s Proof of a Unitary Business
  A New York State Division of Tax Appeals Administrative Law Judge upheld the denial of corporation franchise tax refund claims, determining the taxpayers were not engaged in a unitary business.
• Retroactive Application of New York Tax Law Violates Taxpayers’ Due Process Rights
  A New York appellate court held that the Department of Taxation and Finance could not retroactively apply a 2010 amendment to the Tax Law to a transaction entered into by a Florida couple nearly four years earlier.
• Off With Your Head(quarters)? Oklahoma’s Headquarters Deduction Survives Constitutional Challenge
  The Oklahoma Supreme Court held Oklahoma’s deduction for capital gains arising from the sale of a company headquartered in the state for three or more years does not violate the dormant commerce clause of the U.S. Constitution.
• What Happens in Pennsylvegas Stays in Pennsylvegas: Commonwealth Court Holds that Amount of Tax Paid by Hotels Is Confidential
  The Commonwealth Court of Pennsylvania held that tax records detailing yearly totals of room rental tax and other occupancy data submitted by hotel taxpayers to a locality were not subject to disclosure under Pennsylvania’s Right-to-Know Law.
• Texas Comptroller Determines Digitizing Services Are Taxable Data Processing Services
  The Texas Comptroller determined that a taxpayer’s “digitizing” services provided to oil and gas industry clients were taxable data processing services for Texas sales and use tax purposes.
• Exemptions Abound! Virginia Clarifies Taxability of Sales of Computer Software and Cloud Computing Services
  The Virginia Tax Commissioner issued a taxpayer-favorable ruling addressing Virginia sales and use tax on (1) computer software sold to manufacturers and (2) cloud computing services.