The Massachusetts Appellate Tax Board (ATB) found that an out-of-state footwear company qualified as a “manufacturing corporation” for purposes of the state corporate excise (income) tax despite outsourcing the manufacturing of its shoes to third parties. The consequence of the “manufacturing corporation” classification was that the taxpayer had to use a single-sales factor apportionment formula rather than a three-factor apportionment formula, comprised of payroll, property, and sales. See G.L. c. 63, § 38(l)(2).

The ABT concluded that the taxpayer was a “manufacturing corporation” because it engaged in manufacturing “in substantial part.”  See G.L. c. 63, § 38(l)(1). Specifically, the taxpayer designed, developed, and oversaw the production of its footwear. The company created detailed design specifications and prototypes, which were then manufactured by third-party factories. Employees of the taxpayer were also involved in various stages of the production process, including quality assurance and fit testing.

For tax years beginning on and after January 1, 2025, all corporations with income from business activity both within and without Massachusetts are required to use a single-factor formula based on sales. See St. 2023, c. 50, § 31. Taxpayers with significant payroll and property in Massachusetts, which outsource but are involved in the manufacturing of their products, should consider whether they too qualified as “manufacturing corporation,” required to use the single sales factor formula, for prior years.

Skechers USA, Inc. v. Commissioner of Revenue, No. C344671, 2025 WL 1460059 (May 5, 2025).

On May 20, 2025, the last day for bill signing, Washington Governor Ferguson signed two key tax bills that expand the sales tax to include additional services and increase the rates of the (awful) business and occupation (B&O) tax. Some of these increases are targeted at certain industries and will incite litigation. A projected budget deficit of approximately $15 billion over the next four years led to these tax increases.  

Read the full Legal Alert here.

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

We will award a prize for the smartest (and fastest) participant.

This week’s question: Which state recently determined that a taxpayer outsourcing production to a “third-party manufacturer” was “engaged in manufacturing,” thereby subject to single-sales factor apportionment under the state’s corporate income tax rules?

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. This week’s answer will be included in our SALT Shaker Weekly Digest, distributed on Saturday. Be sure to check back then!

Our SALT team is excited to participate in several key events this week, covering everything from state income tax adjustments to sales tax concepts.

Here’s where you can find members of our team.

COST’s 2025 Intermediate/Advanced State Income Tax School

While most states start their taxable income computation with some reference to federal taxable income, every state requires adjustments. SALT Counsel Jeremy Gove and Laurin McDonald will explore the advanced nuances of state adjustments during COST’s 2025 Intermediate/Advanced State Income Tax School in Dallas, TX.

COST’s 2025 Intermediate/Advanced Sales & Use Tax School

SALT Partner Jonathan Feldman will present “Manufacturing and Construction Sales Tax Concepts” at COST’s 2025 Intermediate/Advanced Sales & Use Tax School. His session will guide attendees through the differences in how states define “manufacturing” and what is considered taxable under a “construction contract.”

TEI Region 10’s 2025 Tax Conference

SALT Partners Michele Borens, Jeff Friedman, and Tim Gustafson will present the latest developments in apportionment and federal/state conformity issues during TEI Region 10’s 2025 Tax Conference, held in Dana Point, CA.

TEI CTO Webcast

Finally, SALT Partner Jeff Friedman will participate in a TEI CTO webcast tailored for executive leaders navigating the SALT landscape.

For decades, the sales factor has been a primary focus of state and local tax articles and a hot topic of discussion at conferences across the country, and the attention is well deserved. There has been no shortage of impactful legislative changes, interesting administrative rulings, and significant (and at times frustrating) judicial decisions regarding the sales factor. Most coverage, however, is devoted to the sales factor numerator.

But the sales factor denominator should not be overlooked. In this installment of “A Pinch of SALT” published in Tax Notes State, Eversheds Sutherland attorneys Ted Friedman, John Ormonde and Daniel Hopper suggest that there is a renewed focus on the denominator, in part driven by changes made under the Tax Cuts and Jobs Act of 2017.

Read the full article here.

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

We will award a prize for the smartest (and fastest) participant.

This week’s question: Which state recently passed a bill that raised the transient accommodations tax (i.e., hotel tax) from 10.25% to 11%?

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. This week’s answer will be included in our SALT Shaker Weekly Digest, distributed on Saturday. Be sure to check back then!

Yesterday, the U.S. House of Representatives’ Energy and Commerce Committee released its draft reconciliation bill. This bill, which will go through markup today, includes the “Artificial Intelligence and Information Technology Modernization Initiative.” The Committee proposes a 10-year moratorium on states and political subdivisions “enforc[ing] any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems.”

While the term “regulating” is not defined, an exception within the provision implies the proposal will limit state and local taxation of AI unless the tax is “imposed in the same manner on models and systems, other than [AI], that provide comparable functions to [AI].” This prohibition is similar to the Internet Tax Freedom Act’s ban on “discriminatory taxes” (which is defined differently).

We will continue to monitor the proposed bill.

Meet Theodora, our May SALT Pet of the Month! With her royal presence, it was only fitting that her owner, SALT Associate Constance Chien, named her after Empress Theodora. Constance welcomed Theodora into her home three years ago when a neighbor was looking to rehome her, and it turned out to be the perfect match.

Theodora has a particular fondness for fishy treats, especially enjoying a bit of tuna before Constance makes a sandwich. She is an avid explorer, having ventured through Maine with Constance during the summer, and now she continues her adventures along the long hallway of their apartment building. Theodora is also extremely vocal, always having something to say whenever she encounters new things.

Her cuddly demeanor and regal disposition even managed to win over Constance’s mom, who was previously afraid of cats and is now considering getting one in the future. We are thrilled to have Theodora as part of the SALT Pet of the Month family!

This is the first edition of the Eversheds Sutherland SALT Scoreboard for 2025. Since 2016, we have tallied the results of significant taxpayer wins and losses and analyzed those results.

This edition includes discussions of the taxability of private line services and content delivery networks, as well as a spotlight on combined reporting decisions.

Dive into the Eversheds Sutherland SALT Scoreboard for the first quarter of 2025 now!

This week, the Eversheds Sutherland SALT team is gearing up for a series of exciting speaking engagements.

TEI Nashville Chapter’s Spring Tax Seminar

On Monday, May 12, 2025, SALT Partners Ted Friedman and Charlie Kearns will cover SALT cases to watch and policy considerations in Nashville, TN for the TEI Nashville Chapter’s Spring Tax Seminar.

TeleStrategies’ Communications Taxation Conference

In addition, our SALT team is pleased to again support this year’s Communications Taxation Conference, held May 13 – 15, 2025 in Nashville, TN. SALT attorneys Liz Cha, Maria Todorova, Eric Tresh and Chelsea Marmor will present on the following topics:

  • Liz Cha and Eric Tresh – State Tax Litigation Update
  • Maria Todorova and Chelsea Marmor – Old and New Frontiers: Gross Receipts Taxes, New Taxes/Fees and Legislative Trends

TEI Denver State and Local Tax Day

On May 14, SALT Partners Todd Betor, Michele Borens, Jeff Friedman, Ted Friedman and Tim Gustafson will present on a variety of state and local tax topics at the TEI Denver’s State and Local Tax Day. Sessions and speakers include:

  • Jeff Friedman and Michele Borens – Litigation and Legislative Roundup
  • Ted Friedman and Tim Gustafson – To Pay or Not to Pay, That is the Question?
  • Todd Betor and Ted Friedman – Are you Gross? Net?
  • Todd Betor, Michele Borens, Tim Gustafson, and Jeff Friedman – C-SALT: What Every Executive Should Know About State and Local Tax

NCSL SALT Task Force Spring 2025 Meeting

Finally, on May 16, SALT Partner Charlie Kearns will present during the NCSL’s SALT Task Force Spring 2025 Meeting. Among other topics, Charlie’s panel will provide an overview of taxes in the communications industry and their current state of play.

Stay tuned for more updates and insights from the Eversheds Sutherland SALT team!