At a March 4, 2021 meeting of the California Franchise Tax Board’s (FTB) three-member Board, FTB Staff announced on the record that a Board hearing on an alternative apportionment petition is not required to exhaust administrative remedies. The announcement was made during Staff’s recommendation to the Board to begin the formal regulatory process to amend FTB Regulation 25137 and establish detailed procedures for such petitions. The announcement constitutes a surprising reversal of the FTB’s longstanding – but unwritten – policy regarding taxpayer petitions for relief under California’s alternative apportionment statute, California Revenue and Taxation Code section 25137. It remains to be seen if the FTB will issue a written notice in line with FTB Staff’s on the record remarks.  Notably, the proposed regulatory amendments are silent on the exhaustion issue. Nevertheless, based on the remarks, taxpayers seeking alternative apportionment may no longer feel pressured to go before the Board in an open hearing prior to bringing an appeal before the Office of Tax Appeals or a refund action in court.

On February 22, 2021, the Georgia House of Representatives introduced H.B. 594, which would impose the Georgia sales tax on digital goods or services. The bill amends the definition of tangible personal property, subject to sales tax, to include “digital goods or services.” It defines digital goods or services to include: (1) specified digital products or prewritten computer software delivered electronically to an end user, (2) a digital code that provides a purchaser with a right to obtain one or more specified digital products (excluding gift cards), (3) specified digital products or prewritten computer software for which rights may be permitted for access or use and for which possession is maintained by the seller or a third party, and (4) rights, licenses, or benefits delivered electronically to enhance, maintain, update, renew, upgrade, or expand benefits for specified digital products or prewritten computer software. However, the bill does not specifically repeal O.C.G.A. 48-8-3-(91) which provides an exemption for “sales of prewritten software which has been delivered to the purchaser electronically or by means of load and leave.” A specified digital product includes digital: audiovisual works, audio works, books, artwork, photographs, periodicals, newspapers, magazines, video greeting cards, audio greeting cards, or video games. If passed, this law would become effective on July 1, 2021 and would be applicable to transactions occurring after that date.

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 enacting a wealth tax on individuals with net assets worth $50 million or more?

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 February 19, 2021, the New York Senate introduced S4959, which would impose a monthly excise tax on the collection of the consumer data of individual New York consumers by commercial data collectors. The tax rate varies based on the number of New York consumers the commercial data collector collects data on within the month, ranging from $0 per month (less than or equal to one million New York consumers) to $2,250,000 per month plus 50 cents per month on the number of New York consumers over ten million (over ten million New York consumers).

“Commercial data collector” is defined as “a for-profit entity that: (i) collects, maintains, uses, processes, sells or shares consumer data in support of its business activities; and (ii) collects consumer data, other than consumer contact information, on more than one million individual New York consumers in a month within the calendar year.” “Consumer data” is defined as “any information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked with a consumer, whether directly submitted to the commercial data collector by the consumer or derived from other sources.”

If passed, the tax would apply to all tax years commencing on or after the first day of the first month that begins more than six months after the law takes effect.

What do you get when you cross a Bernese Mountain Dog with a poodle? A pup so fluffy she doesn’t even look real! This month’s SALT pet belongs to Jennifer Zimmerman, Senior Manager of State Tax Audits and Controversy at Walgreens.

Rosie is a one-year-old Bernedoodle who pawed her way into the Zimmerman family’s hearts in March of 2020, thanks to a breeder in southeast Michigan.

Rosie’s middle name is a tribute to Hermoine from the Harry Potter series, thanks to popular vote by her family. However, with her soft fur, she’s earned herself the nickname of “fluff nugget.”

Beyond exploring through off-leash nature walks with her humans, she loves to chow down on any kind of meat – ham and steak are two favorites!

Don’t let her sweet brown eyes fool you, though. She likes to stir up her own brand of trouble. When she isn’t barking at random noises outside at night, she likes to grab food that isn’t meant for her. This has resulted in consumption of chocolate cake and a chicken skewer, with two vet visits to match. However, this mischief is well worth it for her puppy love.

We’re happy to highlight this fluff nugget for our March Pet of the Month!

The Massachusetts Legislature has recently introduced a variety of bills that would tax digital advertising. Notably, HD.3210 would establish the Digital Advertising Local Revenues Tax, which would be imposed on the annual gross revenues of a person derived from digital advertising services in Massachusetts. “Digital advertising services” is defined as including “advertisement services on a digital interface, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, promoted, boosted, or sponsored content, and other comparable advertising services.” The tax rate would vary from 5 – 15%, depending on the level of the taxpayer’s annual gross revenues. The 15% rate applies to those taxpayers with annual gross revenues exceeding $200,000,001. The tax does not apply to those persons with less than $50,000,000 of annual gross revenues. If passed, the bill would take effect for the tax year beginning on January 1, 2022.

The Massachusetts Legislature has also introduced HD.3601, which would impose a 5% tax on a person’s annual revenue from digital advertising services within Massachusetts.

Alabama considers the sale of prepaid telephone calling cards and the sale of prepaid authorization numbers not evidenced by a physical card, to be the sale of tangible personal property subject to sales tax. Specifically, Alabama statute considers the “sale of prepaid wireless service that is not evidenced by a physical card” to constitute the sale of a prepaid authorization number. The taxpayer was an authorized dealer for a wireless provider and was required to accept customer payments for the monthly cellular service plans offered by the provider. The taxpayer accepted payments from customers, and within a day or two of the deposit into the Taxpayer’s account, the wireless provider would withdraw the payment and later pay the taxpayer a 5% commission. The taxpayer argued that while it accepted payments from customers that replenished the customers’ monthly cellular service plans through the provider, it did not provide a card to its customers, did not provide an authorization number, and was merely facilitating customer payments to the provider. However, the Tax Tribunal disagreed that the taxpayer was merely processing payments and determined that because the taxpayer sold wireless service, and because that the service was prepaid, the transaction was subject to sales tax under Alabama statute even if a physical card or authorization number was not provided.

Cellular Express, Inc. v. Department, Ala. Tax. Trib. No. S. 14-320-JP, (2021)

On February 26, 2021, a subcommittee of the Georgia Ways & Means Committee quickly approved HB 428, which proposes to eliminate the current Georgia sales tax exemption for high-technology companies and facilities that invest at least $15 million in eligible computer equipment in Georgia during a calendar year. The exemption has been available to taxpayers in Georgia for over 20 years. The proposed legislation now proceeds to a vote before the full House Ways & Means Committee, where the committee chairman supports the legislation.

Read our full Legal Alert here.

Earlier today, in a last minute addition to the Maryland Senate’s Budget and Taxation Committee hearing, the committee voted to approve amendments to S.B. 787, Digital Advertising Gross Revenues Tax – Exemption and Restriction. Most notably, the amendments would delay the start of the digital advertising tax to January 1, 2022.

The other relevant amendments are to:

  1. Designate the bill as an emergency measure, meaning that it will take effect when enacted, rather than 30 days after the legislative override of any Governor veto; and
  2. Strike the contingency that the bill will be effective if the H.B. 732 veto is overridden (as it was already overridden on February 12, 2021).

There were no changes to the anti-passthrough or broadcast and news media entity exemptions.  The amendment language is not yet publicly available.

S.B. 787 will next head to the Senate floor for second reading. A hearing is set for 1:30 p.m. today on H.B. 1200, the House of Delegates companion bill to S.B. 787. We will be watching that hearing to see whether any amendments are proposed at that time.