Click here to read our August 2013 posts on stateandlocaltax.com or read each article by clicking on the title. If you prefer, you may also read a printable PDF version.

• No Expressions of Goodwill from Arizona Department of Revenue
  An Arizona Department of Revenue hearing officer determined that the gross receipts from a taxpayer’s deemed asset sale pursuant to I.R.C. § 338(h)(10), including gross receipts attributable to goodwill, could not be included in the taxpayer’s sales factor for corporate income tax apportionment purposes.
• California Court of Appeal: ITFA Doesn’t Make the CUT
  The California Court of Appeal, in affirming summary judgment in favor of the City of Los Angeles, concluded that the taxpayer, j2 Global Communications, Inc., did not produce evidence to demonstrate that its purchase of telecommunications services was exempt from the City’s communication users tax (CUT) under the Internet Tax Freedom Act (ITFA).
• Round We Go: Indiana Denies Taxpayer’s Intercompany “Residual Profit” Deduction Citing Circular Cashflow
  The Indiana Department of Revenue issued a Letter of Findings denying a taxpayer’s deductions for certain intercompany payments to a subsidiary management company.
• To Market, To Market: Massachusetts Adopts Market-Based Sourcing of Intangibles, Expands Definition of Taxable Services
  On July 24, 2013, the Massachusetts Legislature passed the Transportation Finance Bill (H.B. 3535) over Governor Patrick’s veto, implementing three key changes to Massachusetts’ state tax system.
• The Show Me (the Allocation) State: Passive, Non-Missouri Source Income Allocable as Nonbusiness Income
  The Missouri Administrative Hearing Commission held that a telephone company’s interest income received from its parent company was passive, non-Missouri source income and thus excludible from apportionable income as nonbusiness income.
• Second Circuit Categorizes Dial-Up Internet Services as Telecommunications for Federal Excise Tax Purposes
  The U.S. Court of Appeals for the Second Circuit determined that dial-up internet services were taxable local telephone services when analyzing an Internal Revenue Service bankruptcy claim for federal excise taxes.

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