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New York amended its False Claims Act (FCA) to allow whistleblowers to bring qui tam actions against taxpayers for false claims under New York tax law. If subject to the FCA, a taxpayer could be subject to civil penalties, treble damages, and reimbursement of the plaintiff’s costs including attorney fees. N.Y. STATE FIN. LAW § 189(1)(g), (3).

While the FCA has been in existence in New York since 2007, the recent amendment repeals a statutory preclusion for actions related to the tax law. Under the amendment, a taxpayer is subject to the FCA if it has at least $1 million in income or sales in a tax year and the whistleblower pleads damages in excess of $350,000. Id. § 189(4)(a). This dramatic change occurred quietly because the FCA is in the Finance Law rather than the Tax Law. Interestingly, Eric Schneiderman, New York’s Attorney General, was a chief proponent of the amendment while a member of the New York Senate, and he now has enhanced authority to investigate and commence civil actions under the amended FCA. Id. § 190(1).Continue Reading Rise of the Tax “Snitch”: How Amendments to New York’s False Claims Act May Ensnare Taxpayers and Practitioners Alike

The New York State Department of Taxation and Finance issued an advisory opinion regarding whether three different financial advice services are subject to New York sales and use tax. Section 1105(c)(1) of the New York Tax Law imposes sales tax on receipts from the “furnishing of information” by printed matter, including the collection, compilation, or analysis of information of any kind or nature and furnishing reports on the same. However, the statute excludes from the scope of “furnishing of information”: 

  1. Information that is personal or individual in nature; and 
  2. Information that is not or may not be substantially incorporated into reports furnished to others.

New York courts have further qualified the first criterion by requiring that an information service be “uniquely” personal or individual in nature.Continue Reading New York Issues (Another) Advisory Opinion on Taxability of Financial Advice Services

On November 18, 2010, the New York Division of Tax Appeals held that Dann Ocean Towing (Dann), a Florida corporation with no employees or property in New York State, was liable for New York’s petroleum business tax. In re Dann Ocean Towing, Inc., Determination DTA No. 822683 (Nov. 18, 2010).

Dann owned 12…

In an unfortunate misapplication of the constitutional nexus rules, the New York Tax Appeals Tribunal has found that two corporations had franchise tax nexus with New York solely because the corporations received income from ownership interests in a seven-plus tier entity structure culminating in a pass-through entity that was doing business and earning income in the State. Matter of Shell Gas Gathering Corp. No. 2 et al., DTA Nos. 821569 and 821570 (Sept. 23, 2010). The taxpayers, Shell Gas Gathering Corp. No. 2 and Shell Gas Pipeline Corp. No. 2, were both holding companies that were not themselves doing business in New York. To make a really long story short, the taxpayers, through approximately seven tiers of various ownership interests in various types of pass-through entities, had an indirect interest in an entity, Coral Energy Resources LP, that did business in New York. Coral Energy was a seller and marketer of natural resources and conducted business, owned property, and made sales in New York. A distributive share of the income from Coral Energy’s business was ultimately passed-through to the taxpayers.Continue Reading New York Tax Appeals Tribunal Confuses Nexus Rules With Income Sourcing Rules–Constitutional Mashup Ensues

On September 15, 2010, the New York State Tax Commission issued an Advisory Opinion, TSB-A-10(40)S, addressing the taxability of various services offered on a professional networking website. The website enables members to create profiles, search for potential contacts, research business opportunities, and participate in discussion groups, among other things. The Commission held that charges…