On April 29, 2021, Georgia Governor Brian Kemp signed SB 185, limiting the application of administrative deference in Georgia tax controversies. This law seeks to level the playing field in state tax litigation matters by reducing the level of deference accorded to the Department of Revenue’s interpretations of ambiguous laws. The law provides that “all questions of law decided by a court or the Georgia Tax Tribunal, including interpretations of constitutional, statutory, and regulatory provisions shall be made without any deference to any determination or interpretation, whether written or unwritten, that may have been made on the matter by the department, except such requirement shall have no effect on the judicial standard of deference accorded to rules promulgated pursuant to Chapter 13 of Title 50, the ‘Georgia Administrative Procedure Act.’” Accordingly, the legislation eliminates all subregulatory deference that may have previously been accorded to the Georgia Department of Revenue in litigation matters and applies to new cases commencing at the Georgia Tax Tribunal or a state Superior Court after April 29, 2021. For more information on SB 185, see our prior coverage, here.

On April 27-28, the Multistate Tax Commission’s Uniformity Committee (UC) held its spring meeting virtually. In addition to voting to adopt a UC Charter, the following uniformity projects were advanced:

  • Partnership Projects
  • Taxation of Digital Goods and Services

Read the full Legal Alert here.

On April 26, 2021, the Massachusetts Department of Revenue issued Technical Information Release 21-5. This TIR was issued in response to New Cingular Wireless PCS LLC v. Commissioner of Revenue, 98 Mass. App. Ct. 356 (2020), where the court held that the Internet Tax Freedom Act (ITFA) preempts the imposition of sales and use taxes on sales of internet access service. Two of the requirements for ITFA preemption were at issue in the case. ITFA requires vendors of internet access to separately state the charges for internet services from other services on the customer’s invoice, or to reasonably identify the internet access charges in its books and records. ITFA also requires that internet access providers offer customers screening software that is designed to permit the customer to limit access to material on the internet that is harmful to minors. The TIR states that the Department will continue to enforce the statutory imposition of sales and use taxes on the sales of internet access services in instances where ITFA does not apply and that as confirmed in the Cingular decision, both the accounting and screening requirements must be met by internet access providers for the prohibition on taxation to apply.

Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!

We will award prizes for the smartest (and fastest) participants.

This week’s question: What state’s governor voted against a marketplace facilitator bill in mid-April?

E-mail your response to SALTonline@eversheds-sutherland.com.

The prize for the first response to today’s question is a $25 UBER Eats gift card.

Answers will be posted on Saturdays in our SALT Weekly Digest. Be sure to check back then!

Our April Pet of the Month feature spotlights an intellectual group of furry friends from New York University School of Law!

Partner Jeff Friedman serves as an adjunct professor, instructing alongside the distinguished Professor Richard Pomp to teach a Multistate Taxation course. During a recent online lecture, Professor Pomp and Jeff encouraged the class to bring their pets into the frame, which resulted in a pup-dorable photo opportunity!

Read on to learn more about some of the pets who spiced up a class on gross receipts taxes. Good dogs, bad taxes!

Ryan Amelio and Ranger, a miniature Aussiedoodle

Jack Klug and Buddy, a Bichon Frise

Hannah Daniels’ family dog Roxy, a Yorkie
“Of course, we think she is the best dog in the world!”

Chris Cochran and Cashew, a Golden Retriever / Cocker Spaniel mix

Jason Kras and Aspen, an English Cream Golden Retriever

Lauren Dehasque

Molly McBride

Professor Richard Pomp, and Ruby, a 10-year-old (mostly) Cavalier King Charles Spaniel

Professor Jeff Friedman and Harry, a Westie

AB 71 was introduced earlier this year (see our prior coverage here) to provide additional state funding for homelessness programs, derived – in part – from increasing taxes on business income. In March, AB 71 was amended to eliminate steep corporate tax increases. The bill as amended, however, still would require corporate taxpayers that make a water’s-edge election to include in gross income 50% of the global intangible low-taxed income and 40% of the repatriation income of affiliated corporations. But, the bill does not allow these taxpayers to take into account the apportionment factors of those affiliated corporations.  For calendar year 2022 only, the bill would allow a taxpayer to revoke its water’s-edge election.

On April 20, the Assembly Committee on Revenue and Taxation held a public hearing on AB 71, where significant testimony was provided on both sides.  After a lengthy debate by the Committee, the bill received a “do pass” recommendation by a vote of 7 to 4.  With that, the bill was re-referred to the Housing and Community Development Committee, which will hold a public hearing on the bill on April 29.

On April 14, 2021, the Oregon Tax Court issued a ruling on cross motions for summary judgment in a case involving the inclusion of receipts from commodity hedging activities in the taxpayer’s sales apportionment factor. Chevron filed amended Oregon corporation excise tax returns including its gross hedging receipts in its Oregon sales apportionment factor, and the Department of Revenue issued notices of deficiency regarding these returns. The Department concluded that the gross hedging receipts were not includable in the taxpayer’s sales apportionment factor because they arose from the sale of intangible assets and were not derived from Chevron’s primary business activity. The Department included the net gain from the hedging activities within the sales factor.

On appeal to the Oregon Tax Court, Chevron argued that its hedging receipts were not receipts from the “sale, exchange, redemption or holding of intangible assets” because its commodity hedging transactions are inextricably linked to the underlying commodity and therefore are different in kind from other forms of financial and speculative hedging. Chevron  further argued that summary judgment was not appropriate on the issue of whether its receipts from hedging activities constituted receipts from its primary business activity and thus the gross receipts from such activities should be included within the sales factor, since issues of material facts existed. The Department sought summary judgment on both questions, arguing that: (i) “intangible assets” is defined broadly; and (ii) that the hedging receipts are not derived from Chevron’s primary business activity. The tax court held in favor of the Department with respect to the characterization of the hedging receipts as receipts from intangible assets, despite the fact that the assets are treated as ordinary rather than capital assets under federal tax law, finding that the composition of the sales factor is a matter of state, not federal law. On the second issue as to whether the hedging receipts were derived from Chevron’s primary business activity, the tax court held that summary judgment was not appropriate given the fact-dependent nature of the analysis.

Chevron U.S.A. Inc. v. Dep’t of Revenue, TC-MD 190031N (Or. Tax Ct. Apr. 14, 2021).

On April 22, 2021, the Connecticut General Assembly’s Joint Committee on Finance Revenue and Bonding (“Joint Committee”) approved a revised revenue bill (HB6443) to implement the Connecticut state budget.  We have learned that the revised bill includes: (1) a new digital advertising services tax; and (2) a new wage compensation tax, whereby, at an employee’s or independent contractor’s election, an employer would be required to pay a tax equal to 5% of the electing employee’s wages or electing independent contractor’s payments.  As reported in a prior legal alert, both of these tax proposals were included in a bill introduced by the Joint Committee on April 14.  But as of publication, it is not clear whether there have been any revisions to the previously proposed statutory language.

Connecticut budget legislation (including the revenue bill) is expected to be finalized by the end of June.  In the interim, negotiations between leadership of both houses of the General Assembly, along with the Governor’s office, may lead to any number of changes to the revenue bill—including to the digital advertising services and wage tax proposals.

The Virginia Tax Commissioner issued a determination addressing use tax on the purchase of a software. Virginia statute provides an exemption for services not involving the exchange of tangible personal property, which provide access to or use of the internet and any other related electronic communication services including software, data, content and other information services delivered electronically via the internet. The Commissioner cited to a prior determination where it reasoned that to support this exemption, the sales invoice or contract must expressly certify the electronic delivery of the software and that no tangible medium for the software has been furnished to the customer. While the taxpayer provided correspondence from the vendor stating that the software was delivered electronically, the Commissioner found that this fact alone was not sufficient evidence that electronic delivery was the only method available. The invoice provided by the taxpayer did not substantiate electronic delivery and the taxpayer did not submit other proof of electronic delivery such as a delivery confirmation email. Based on the failure to provide sufficient documentation to meet its burden, the Commissioner determined that the transaction was taxable.