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The Massachusetts Appeals Court upheld the Appellate Tax Board’s costs-of-performance decision in the AT&T case. Comm’r of Revenue v. AT&T Corp., Dkt. No. 11-P-1462 (Mass. App. Ct. July 13, 2012).  The Court issued an unpublished decision that granted summary disposition in favor of AT&T. In June 2011, the ATB determined that AT&T had properly…

Florida recently issued an unusual ruling that:

  1. Gross receipts from hedging transactions must be excluded from the sales factor, although
  2. Net receipts from output hedges are included, and
  3. Net receipts from input hedges and proprietary trading are excluded. 

The rule seems to be that all hedging receipts are excluded, unless the hedging activities are connected to making a profit, like the output hedges, in which case the net receipts are included. This is definitely an odd result.Continue Reading Show Me the Money: Florida Issues TAA on Inclusion of Hedging Receipts in Sales Factor

The California Supreme Court reversed the appellate court’s decision regarding the Franchise Tax Board’s (FTB) authority to conduct an audit to determine whether a taxpayer is entitled to an enterprise zone hiring credit. DiCon Fiberoptics, Inc. v. Franchise Tax Bd., Case No. S173860 (Apr. 26, 2012).

California’s Enterprise Zone Act (the Act) permits a taxpayer that employs a “qualified employee” in an enterprise zone to claim a tax credit for five years. To be a “qualified employee,” at least 90% of the employee’s services must “directly relate[ ] to the conduct of the taxpayer’s trade or business located in an enterprise zone,” and the employee must perform at least 50% of his or her services in the enterprise zone. Cal. Rev. & Tax. Code § 23622.7(b)(4)(A). In addition, the employee must fall within one of several categories that demonstrate the employee is disadvantaged or endures some form of employment barrier. Cal. Rev. & Tax. Code § 23622.7(b)(4)(A)(iv). To claim the credit, taxpayers are required under the Act to: (1) obtain from the local zone government authority a certification (or “voucher”) that provides the qualified employee meets the eligibility requirements; and (2) retain a copy of the certification and provide it upon request to the FTB. Cal. Rev. & Tax. Code § 23622.7(c).Continue Reading Franchise Tax Board’s Broad Audit Authority to Review Returns and Ascertain Correct Amount of Tax Underscored in Enterprise Zone Hiring Credit Decision by California Supreme Court

In an unusual case, the Oregon Department of Revenue tried to argue that a taxpayer’s receipt of an assessment from two other states held open the statute of limitations for Oregon income tax purposes. The Oregon Tax Court disagreed, holding that the assessment from another state would have to impact the taxpayer’s Oregon income tax…

On cross motions for summary judgment, the Minnesota Tax Court held the activities of an out-of-state watch and jewelry distributor (Taxpayer) went beyond mere solicitation of orders for tangible goods in the state of Minnesota and established sufficient nexus to impose Minnesota’s corporate franchise tax. Skagen Designs Ltd. v. Comm’r of Revenue, Minn. Tax. Ct., No. 8168-R (Apr. 23, 2012). The Taxpayer employed two types of employees in Minnesota, sales representatives and merchandisers (Merchandisers). The application of Public Law 86-272 to the Merchandisers’ activities, including completing weekly reports, maintaining product floor maps, holding product training sessions and inspecting display cases, were at issue before the court.Continue Reading Time to Pay Up: Public Law 86-272 Does Not Protect Watch Distributor’s Merchandising Activities

The New Mexico Court of Appeals held that for purposes of imposing the state’s gross receipts tax, Barnes & Noble Booksellers, Inc.’s (Booksellers) in-state activities may be imputed to an out-of-state retailer (Taxpayer) based on the use of common Barnes & Noble trademarks. New Mexico Tax. & Revenue Dep’t v. Barnesandnoble.com LLC, No. 31, 231 (N.M. Ct. App. Apr. 18, 2012). Notably, Booksellers undertook no physical activities on behalf of the Taxpayer that would independently satisfy the physical presence standard established in Quill. However, according to the court, the goodwill generated by Booksellers’ use of the same Barnes & Noble trademarks helped the Taxpayer establish and maintain a market in the state, thereby creating substantial nexus that is the “functional equivalent” of physical presence under Quill.Continue Reading “Functional Equivalent” Nexus: When Goodwill Goes Bad in New Mexico