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On September 1, the Superior Court of New Jersey, Appellate Division, issued its opinion in Praxair Technology, Inc. v. Dir., Div. of Taxation, Case No. A-6262-06T3 (N.J. Super. Ct. App. Div. 2010), which upheld the Director’s imposition of a penalty on Praxair for failing to file a tax return for the 1994, 1995, and 1996 tax years. Praxair took the position that it was not subject to tax under New Jersey tax law because it did not have physical presence in New Jersey. Although the statute remained unchanged, the New Jersey Division of Taxation made a regulatory change in 1996 to add an example that explained that it was the Division’s position that Praxair was subject to the corporate business tax. In addition, the Appellate Division upheld a post-amnesty penalty against Praxair because it failed to take advantage of the 2002 tax amnesty, even though the New Jersey Supreme Court, in 2006, held that economic presence was put into effect in 1996 with the regulatory change.  Lanco, Inc. v. Dir., Div. of Taxation, 908 A.2d 176 (N.J. 2006).Continue Reading New Jersey Appellate Division Says Praxair Should Have Read the Tea Leaves on Tax Liabilities

The U.S. District Court (E.D. Pa.) remanded a case to Pennsylvania’s state courts in a suit challenging a local improvement district’s assessment scheme on the grounds that the federal courts lacked jurisdiction over the action based upon the Tax Injunction Act (TIA). Nigro v. City of Philadelphia, No. 10-987 (E.D. Pa. Aug. 25, 2010). The TIA generally prohibits federal courts from entertaining cases regarding state and local “taxes” if the parties have a “plain, speedy and efficient remedy” available in state court. Taxing jurisdictions frequently raise the TIA as a basis for dismissing cases filed by taxpayers in federal court. However, in this case, after the taxpayer filed suit in state court, the City removed it to federal court and the taxpayer was seeking to have the case remanded back to state court pursuant to the TIA.Continue Reading City of Philadelphia Loses TIA Challenge

The Direct Marketing Association (DMA) filed a motion for preliminary injunction in the U.S. District Court for the District of Colorado on August 13 in an effort to stop Colorado from enforcing the recently enacted—and highly controversial—sales tax notice and reporting obligations on remote retailers. Arguing that “affected DMA members will suffer irreparable harm to their businesses” without an injunction, the motion seeks to relieve remote retailers of the burdens of Colorado H.B. 1193 until the substantive issues in the lawsuit are resolved. The parties have attempted to narrow and expedite discovery on the Commerce Clause claims and to consolidate the preliminary injunction proceedings with a trial on the merits on those claims. It appears that the parties agree that resolution of these issues prior to enforcement of the end-of-year reporting requirements is beneficial to both the state and taxpayers.Continue Reading DMA Lawsuit: Twists and Turns Continue

In City of Eugene v. Comcast of Oregon II, Inc., Case No. 16-08-03280, the Oregon Circuit Court reversed its earlier ruling that the City of Eugene’s registration and license fees imposed on cable Internet access services are preempted by the Internet Tax Freedom Act (ITFA), and that the fees violated the Uniformity Clause of the Oregon Constitution.

This case arose when the City of Eugene filed an action to collect a registration fee and license fee imposed under City Ordinance 20083 from a cable Internet access provider. The registration fee requires each entity engaging in telecommunications activities to register and pay a 2% annual fee on gross revenues derived from providing telecommunications services within the City’s public rights of way. The license fee requires each entity using the City’s right-of-way to provide telecommunications services to pay a license fee of 7% of its gross revenues derived from providing telecommunications services in the city. In an earlier ruling, the Court found that cable modem services (Internet access services delivered using a cable modem) were subject to both the registration fee and the license fee. Upon reconsideration, the Court determined cable modem service was not a telecommunications service under the Ordinance.Continue Reading Oregon Court Holds That Internet Access Services Are Not Telecommunications, Are Protected by the Internet Tax Freedom Act

On August 10, the Ohio Department of Taxation issued a decision upholding the Commercial Activities Tax’s (CAT) statutory “bright-line presence” nexus test and concluded that L.L. Bean had substantial nexus with the state solely based upon the volume of its sales to Ohio customers. This is the first known ruling addressing a taxpayer’s challenge to the constitutionality of Ohio’s statutory bright-line imposition.

The CAT’s bright-line test is similar to the model rule adopted by the Multistate Tax Commission and provides that taxpayers are subject to the CAT if they meet any one of the following thresholds:

  1. At least $50,000 of property in the state
  2. At least $50,000 of payroll in the state
  3. At least $500,000 of sales to customers in the state
  4. 25% or more of its total property, payroll and receipts in the state
  5. The taxpayer is domiciled in the state

Continue Reading The CAT Takes a Swat at Quill