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!


On February 14, 2019, the Georgia House Ways and Means Committee voted in favor of House Bill 182. Effective for January 1, 2020, the bill would amend O.C.G.A. § 48-8-2(8)(M.1) to lower the sales threshold on the requirement to collect or report sales and use tax from $250,000 to $100,000 and would repeal subsection (c.2) of O.C.G.A. § 48-8-30 in its entirety to eliminate the option to provide notification to the purchaser and state in lieu of collecting and remitting tax.

O.C.G.A. § 48-8-2 currently requires out-of-state sellers to collect and remit sales tax if the seller obtains gross revenue of more than $250,000 from the retail sales of tangible personal property delivered within Georgia or if the seller conducts 200 or more separate retail sales of tangible personal property delivered within Georgia. Alternatively, O.C.G.A. § 48-8-30 currently gives retailers that reach that threshold the option to instead provide specified information and notification to the purchaser and to the Department of Revenue stating that sales or use tax may be due. House Bill 182 would remove the option for sellers to provide the required notification instead of collecting and remitting tax.

House Bill 182 adopts the same sales threshold used by the South Dakota statute at issue in South Dakota v. Wayfair, 138 S. Ct. 2080 (2018). If enacted, the legislation would be effective for sales made on or after January 1, 2020.

A Georgia marketplace bill has also been introduced, House Bill 276, that if enacted would also become effective January 1, 2020.

On January 9, 2019, the South Dakota Supreme Court upheld the denial of South Dakota’s advertising services use tax exemption to a Sioux Falls-based company (Company) that designs and maintains websites that allow individuals and car dealerships to advertise vehicles for sale. On audit, the Company was assessed use tax for purchases it made for cloud services, anti-virus software, contract labor, and similar tangible personal property and services, as well as purchases of Internet domain names. The Company argued that the assessed purchases were exempt as advertising services and, if not otherwise exempt thereunder, the domain name purchases were exempt sales for resale.

In construing the advertising exemption in regard to the state’s use tax, the court found that the exemption “requires the advertising agency to both prepare the advertisement and place it in the advertising media.” Here, the exemption did not apply because (i) none of the assessed transactions, other than the domain name purchases, were used by the Company to complete advertising services for a customer; and (ii) the car dealers, and not the Company, prepared the advertisements displayed on the Company’s website themselves after the Company provided login credentials to the dealers. Therefore the court found that the assessed services did not qualify for South Dakota’s advertising services exemption. And because the Company retained ownership of the domain names and did not otherwise sell them to customers in the form purchased, the purchases of Internet domain names did not qualify as sales for resale., Inc. v. South Dakota Dep’t of Rev., 2019 S.D. 4 (S.D. 2019)

The New Jersey Tax Court ruled that a corporation was entitled to apportion its corporate income based on a “regular place of business” outside of New Jersey. This now-repealed apportionment requirement was the source of several New Jersey Tax Court cases. For tax years beginning before July 1, 2010, N.J. Rev. Stat. § 54:10A-6 provided that corporations must maintain a regular place of business outside of New Jersey as a prerequisite to apportion its income. The court rejected the New Jersey Division of Taxation’s interpretation of its regulation, N.J.A.C. 18:7-7.2. Notably, the court disagreed with the Division’s contention that all of the regulation’s factors for finding a regular place of business must be met. And, the court also rejected the Division’s position that an employee’s employer is determined based on which entity is paying the employee, rather than which entity directs and controls the employee. (ADP Vehicle Registration, Inc. v. Division of Taxation, Dkt No. 014946-2014 (N.J. Tax Ct. Dec. 11, 2018)).

The Maryland House of Delegates is considering legislation (House Bill 426) that would impose sales and use tax on digital products and sales tax on digital codes. If signed into law, Maryland would begin taxing digital products and digital codes on July 1, 2019. House Bill 426 was read for the first time in the Ways and Means Committee on January 31, 2019.

Read the full legal alert here.

A New York State Administrative Law Judge ruled that the retroactive application of amendments to the state’s Empire Zones statute—disqualifying a taxpayer from the tax reduction credits—did not violate the taxpayer’s constitutional due process rights. Acknowledging that the stated public purposes of curtailing perceived abuses and raising revenue were better accomplished in prospective legislation, the Division nevertheless found that the application of statutory amendments to the tax year in which the amendments were enacted was an “extremely short period of retroactivity” that outweighs the lack of a public purpose. (In the Matter of the Petition of NRG Energy, Inc., Dkt. No. 826921 (N.Y. Div. Tax App. 11/08/2018)).

The Washington Department of Revenue Appeals Division ruled that for B&O apportionment purposes under the “services and other activities” tax classification, an out-of-state automated teller machine (ATM) card transaction processor’s receipts are properly sourced to the location of its financial institution customers’ ATM transaction activities. The Appeals Division found that location to be the location of an ATM machine where an individual cardholder “swiped” his/her ATM card and the ATM transaction was completed, and not the customer’s billing address. The Appeals Division concluded that the Department of Revenue’s method of attributing the benefit of the taxpayer’s service to the location of the taxpayer’s customers’ activities did not violate the Commerce Clause and Due Process Clause of the US Constitution and was a reasonable method under Washington law. Finally, the Appeals Division ruled that the card service fees were not royalties because they were not related to an intangible right such as a license, a trademark or a similar item, but rather were charged for access to a payment system that was vital to the business activities of the taxpayer’s customers. (Det. No. 16-0026, 37 WTD 201 (2018)).

The New Jersey Tax Court rejected the Division of Taxation’s application of a five-factor alternative apportionment formula as invalid rulemaking under New Jersey’s Administrative Procedures Act (APA). The Tax Court previously determined that an application of the statutory apportionment formula in effect prior to 2011 for companies without a “regular place of business” outside New Jersey did not fairly reflect the taxpayer’s in-state business activities and remanded the case to the Division so that other apportionment methods could be considered. The Division then proposed a modified five-factor formula. The Tax Court found that while the five-factor formula could be an acceptable exercise of the Division’s discretionary authority to adjust the taxpayer’s apportionment formula, it nevertheless constituted an impermissible “de facto rule-making” in violation of the APA.

Canon Fin. Servs., Inc. v. Director, Div. of Taxation, No. 000404-2014 (N.J. Tax Ct. Dec. 5, 2018).

On December 5, 2018, the Indiana Supreme Court in a 3-2 split decision held that an RV dealership was liable for uncollected sales tax on RV sales even though it delivered the RVs to buyers at out-of-state locations.

The RV dealership’s protocol for transferring possession of its RVs to customers depended on the customer’s state of residence. Customers from Indiana—or from one of the 40 states with reciprocal tax exemption agreements under Indiana Code section 6-2.5-5-39(c)—drove their RVs directly off the dealership lot and paid Indiana sales tax. Customers from the nine states without reciprocal tax exemption agreements, however, could choose to pay sales tax either at Indiana’s rate or at their home state’s rate, with customers ostensibly choosing the lesser of the two.

The RV dealership is based in Middlebury, Indiana, which is approximately eight miles from the Michigan border. When the RV dealership made sales to Michigan customers, it would drive the RVs to a Michigan gas station approximately three miles north of the Indiana border that functioned as the delivery location. At the gas station, the customers would sign confirmations of delivery and receive the keys to their new RVs. The Indiana Tax Court ruled that these transactions were not subject to Indiana sales tax because the transactions were made outside of the state. The Indiana Supreme Court reversed the tax court’s decision, holding that Indiana sales tax was due on the Michigan sales because the RV dealership delivered the RVs in Michigan solely to avoid paying Indiana sales tax with no other independent, non-tax-related business purpose. (Richardson’s RV, Inc. v. Indiana Dep’t of State Revenue, 112 N.E.3d 192, (Ind. 2018)).

The Louisiana Supreme Court ruled that residents who owned an S corporation and limited liability company were entitled to a credit against their Louisiana income tax liability for Texas franchise tax paid by the pass-through entities. In so holding, the Louisiana Supreme Court found that La. R.S. 47:33, which limits the credit for taxes paid to other states to those states that offer a reciprocal credit to that state’s residents for business transacted in Louisiana, was unconstitutional because it was applied to the Texas franchise tax. Further, in noting that the reciprocity requirement discriminates against interstate commerce, the Louisiana Supreme Court also suggested that the limitation on the amount of the credit by the amount of tax that would have been imposed by Louisiana also discriminates against interstate commerce. (Smith v. Robinson, Dkt. No. 2018-0728 (La. 12/05/2018)).