The Wisconsin Court of Appeals held that guidance issued by the Department of Revenue required the Department to allow a dividends-received deduction for cash distributions received by a taxpayer from a foreign partnership that was classified as a corporation for federal purposes. The taxpayer based its claim to the deduction on published guidance in effect at the time, which provided that an LLC treated as a corporation under the Internal Revenue Code was treated as a corporation for Wisconsin purposes, and if an LLC was classified as a corporation, then an LLC interest was treated in the same manner as stock.

Its guidance notwithstanding, the Department denied the deduction at audit and argued on appeal that the taxpayer was not entitled to a deduction because the foreign entity involved was not organized as a corporation and did not pay out dividends or issue common stock. The Court disagreed, finding the Department’s position was contrary to its guidance and thus precluded by Wisconsin statute. Specifically, the Court concluded that in contrast to the Department’s position, the guidance did not draw a universal distinction between stock-issuing corporations and non-corporations such as LLCs or limited partnerships, and the language of the guidance was broad enough to cover distributions for purposes of the dividends-received deduction.

Wisconsin Dept. of Revenue v. Deere and Company, Case No. 2020AP726 (Feb. 25, 2021).

On March 30, 2021, the Kansas legislature passed S.B. 50, which would require sales and use tax and transient guest tax collection by marketplace facilitators selling or facilitating the sale of property or services subject to these taxes, as well as set a remote seller tax collection threshold. Marketplace facilitators are required to collect and remit these taxes if, during the current or immediately preceding calendar year: (1) the marketplace facilitator made taxable sales in Kansas exceeding $100,000; or (2) made or facilitated taxable sales, on its own behalf or on behalf of marketplace sellers, for delivery into Kansas in an amount exceeding $100,000. Marketplace facilitators would not be required to collect and remit any of the taxes from sales occurring prior to July 1, 2021. Effective April 1, 2022, marketplace facilitators would also be required to collect and remit applicable prepaid wireless 911 fees. Additionally, S.B. 50 would define a retailer doing business in the state to include remote sellers with greater than $100,000 of cumulative gross receipts from sales to Kansas customers in the current or immediately preceding calendar year. Remote sellers would not be required to collect and remit tax for sales occurring prior to July 1, 2021. S.B. 50 is now pending enrollment and transmittal to the governor for approval.

During the 2021 legislative session, the Georgia General Assembly passed key legislation, including conformity to the federal tax law, the elimination of deference to subregulatory interpretations of the Department of Revenue, the ability for pass-through entities to elect to pay state income tax at the entity level, temporary ad valorem relief for manufacturers, and significant changes to existing income tax credits and sales tax exemptions.

Wednesday, March 31, 2021 was “Sine Die” or the 40th and final legislative day of the 2021 legislative session. Unless indicated as already signed by the Governor, bills passed by both chambers of the General Assembly are transmitted to the Governor, who can sign or veto the legislation within 40 days after the end of the legislative session. If the Governor fails to take any action, the legislation will also become law upon the expiration of the 40-day period.

Read the full Legal Alert here.

In this episode of the SALT Shaker Podcast, host Chris Lee reviews an Arkansas determination that rent-to-own leases are subject to the short term rental tax, a Texas holding that a taxpayer’s refund claims fulfill the notice requirements, a California denial of a taxpayer’s refund claim for failing to exhaust the administrative remedies and a North Carolina determination that a taxpayer’s sales of software as a service are not subject to sales tax.

Questions or comments? Email SALTonline@eversheds-sutherland.com.

 

 

 

 

 

 

 

 

 

 

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On March 17, 2021, Arkansas introduced S.B. 558, which would impose Arkansas sales tax on advertising revenue from social-media platforms that have annual gross revenue from social-media advertising services in Arkansas of at least $500,000. The bill amends the sales tax statute to include a new subchapter imposing a 7% sales tax on a social-media provider’s gross revenue from social-media advertising services in Arkansas plus one dollar for the average number of Arkansas account holders during a calendar year. Social-media advertising services includes advertising services that are placed or provided on a social-media platform, including without limitation banner advertising, promoted content, interstitial advertising, and other comparable services. “Social-media provider” includes a business entity that maintains or operates a public social-medial platform, and that has at least 500,000 Arkansas account holders.

The New York Supreme Court, Appellate Division, ruled that a tax exemption that applied to New York special non-profit local development corporations only did not violate the equal protection clause or commerce clause of the US Constitution. New York imposes a mortgage recording tax on each mortgage of real property situated in New York and also provides an exemption from taxing the income and operations of not-for-profit local development corporations incorporated in New York. The taxpayer was a non-for-profit corporation incorporated in New Jersey and sought a declaratory judgment that the exemption only available to New York corporations was unconstitutional. The Supreme Court determined that the taxpayer failed to demonstrate that there was no “rational basis” for the New York Legislature’s determination to limit the availability of the mortgage recording tax exemption only to entities incorporated under New York’s not-for-profit corporation statute concerning local development corporations; that the taxpayer, as a general New Jersey not-for-profit corporation, failed to demonstrate that its exclusion from the tax exemption was based solely on its incorporation in New Jersey and not on its nonconforming business structure; or that there was any discriminatory treatment between it and a New York not-for-profit that did not otherwise meet the requirements of the special non-profit local development corporation rules. Accordingly, the Court reversed the decision of the lower court finding the failure to afford this tax exemption to a New Jersey not-for-profit violated the Equal Protection and Commerce Clause.

Trenton Business Assistance Corporation v. O’Connell, N.Y. App. Div., No. 2018-01203 (2021)

In this legislative webcast, Eversheds Sutherland Partners Nikki Dobay, Charlie Kearns, Todd Lard and Associate Samantha Trencs discuss various state legislation that has been enacted, proposed and is still moving, as well as the proposals that died in Q1.

View the presentation slides here.

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: Which state is considering a bill that would create a temporary “digital nomad” exemption for individual income taxes?

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!

On March 24, 2021, the Nevada Senate introduced Senate Bill No. 346, which would impose an excise tax on the retail sale of specified digital products to an end user in Nevada. “Specified digital products” is defined as electronically transferred digital audio works, digital audio-visual works, digital books, digital codes, and other digital products. “Other digital products” is defined as greeting cards, digital images, video or electronic games or news and prewritten computer software. The bill would also impose an excise tax at the rate of 5 percent of the gross receipts derived from providing direct-to-home satellite television service to customers in Nevada. The bill was referred to the Committee on Revenue and Economic Development. If passed, the tax expansion would take effect January 1, 2022.

The California Court of Appeal held that a county’s failure to comply with statutory notice requirements did not render an assessment a “legal nullity” that would excuse the taxpayer from the requirement to exhaust administrative remedies.

For property tax purposes, California requires a “Notice of Proposed Escape Assessment” (which levies a retroactive assessment to recapture any under-taxation in prior taxable years) be issued ten days before the assessments are enrolled. The assessor, however, mailed the taxpayer such Notices only five days before the assessments were enrolled. The taxpayer timely paid the property taxes assessed by the Notices, and filed a refund action in court arguing that because the Notices were issued less than ten days before enrollment the assessments were void and subject to refund.

The court held that the taxpayer’s claim was not reviewable because it did not exhaust its administrative remedies. For escape assessments, taxpayers are required to file an administrative request for reassessment and refund before filing a refund action in court unless the assessment is a “nullity as a matter of law.” The court concluded that the assessment may be treated as a nullity only when the real property at issue was not tax exempt, nonexistent, or outside the county’s jurisdiction—circumstances that did not exist in the taxpayer’s case.

LA Live Props. LLC v. Cty. of L.A., No. B298278 (Cal. Ct. App. Feb. 26, 2021).