Shaking things up in state and local tax
Shaking things up in state and local tax
By Christopher Chang and Timothy Gustafson
A prepaid telephone card and long-distance service provider’s attempt to source phone card sales receipts outside of Texas was rebuffed by the Texas Comptroller because the taxpayer failed to carry its burden of proof. After initially sourcing 100% of its gross receipts to Texas and unsuccessfully claiming a cost-of-goods-sold…
By Madison Barnett and Jack Trachtenberg
The Michigan Court of Appeals ruled in two consolidated cases that the state’s estimated corporate income tax assessments were invalid because the taxpayers’ sales factors were improperly calculated using an alternative population-based formula rather than the statutory costs of performance (COP) formula. The two taxpayers were out-of-state book publishers…
By Zachary Atkins and Andrew Appleby
The Oregon Supreme Court held that a taxpayer’s sale of an FCC license as part of a liquidation generated apportionable business income. The taxpayer, Crystal Communications, Inc., sold all of its assets to AT&T, including an FCC license. The gain on the FCC license was treated by the taxpayer…
By Todd Betor and Pilar Mata
Oregon’s $29 million corporate excise tax claim against the taxpayers’ parent company was held to violate both the Due Process and Commerce Clauses of the U.S. Constitution by the U.S. Bankruptcy Court for the District of Delaware. Oregon claimed that Washington Mutual, Inc. (WMI) was liable for its subsidiaries’…
By David Pope and Timothy Gustafson
The abatement of late payment and tax amnesty penalties was upheld in favor of several United Parcel Services (UPS) subsidiaries by the New Jersey Superior Court, Appellate Division. The taxpayers and their parent company utilized a cash management system designed to ensure that all subsidiaries had access to cash…
By Zachary Atkins and Jack Trachtenberg
The Commonwealth notched another win before the Massachusetts Appeals Court in a case of first impression affirming corporate excise tax assessments based on a disallowance of the taxpayers’ interest and royalty expenses for pre-addback (pre-2002) and addback tax years (post-2001). Under a clear and convincing evidence standard, the court…
By Scott Booth and Prentiss Willson
The Vermont Supreme Court held that coupon books distributed monthly, within a free weekly newspaper and also separately distributed on news racks, were not “component parts” of the newspaper, and thus were not exempt from Vermont sales and use tax as newspapers. Vermont exempts newspapers and tangible personal property…
By Mary Alexander and Prentiss Willson
The disallowance of a credit for income taxes paid to other states against Maryland’s county income tax was ruled unconstitutional as a violation of the dormant Commerce Clause by the Court of Appeals of Maryland. Maryland’s income tax, which includes both state and county components, is imposed on all…
The Virginia Tax Commissioner overturned the Department of Taxation’s adjustments to a taxpayer’s nonresident Virginia income tax return based on a determination that certain transactions between related entities were indeed conducted at arm’s-length, contrary to the Department’s prior findings. The nonresident taxpayer was the majority owner of both an out-of-state LLC as well as a…
By Kathryn Pittman and Andrew Appleby
The Utah Department of Revenue concluded that gift codes sold by an out-of-state seller (Gift Code Issuer) to Utah consumers were not subject to sales and use tax and that specified activities conducted by third parties in Utah relating to such sales of gift codes did not create nexus…
