On September, 9, 2020, the New Jersey Appellate Division ruled against the taxpayer in Preserve II, Inc. v. Director, Div. of Taxation, No. A-1331-17T3. On its face, the decision looks like a disappointing taxpayer loss because the court upheld the determination that a corporation was subject to the New Jersey Corporation Business Tax (CBT) based upon its limited partnership interest in a partnership conducting business in New Jersey. However, in what could be good news for other taxpayers, the appellate court also interpreted the CBT imposition statute to require more than simply deriving receipts from New Jersey sources before a taxpayer can be subject to the CBT.

Read the full Legal Alert here.

On September 9, 2020, the California Supreme Court denied review of the opinion of the First District Court of Appeal in City and County of San Francisco v. All Persons Interested in the Matter of Proposition C, which held a voter-initiated local special tax may pass with only a simple majority.  With appeals currently pending in the First and Fifth Districts, California taxpayers and governments alike continue to seek guidance from the courts as to whether a special tax imposed by initiative requires only a simple majority, and not a two-thirds, vote to pass.  If the Fifth District affirms the lower court in the Fresno Measure P matter and agrees that a special tax must receive the required two-thirds vote, it will result in a split among the districts and likely force the California Supreme Court’s hand to clarify its prior decision in in California Cannabis Coalition v. City of Upland (2017) 3 Cal.5th 924.

For more information on California supermajority voting requirement tax cases, check out Eversheds Sutherland’s SALT Scoreboard – CA Local Tax Edition.

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 recently-enacted California bill expands exemptions to the state’s 2019 worker classification law?

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

The prize for the first response to today’s question is a $20 UBER Eats gift card.

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

On August 25, California’s Department of Tax and Fee Administration released a discussion paper and proposed amended regulations to clarify when marketplace facilitators are considered the retailer with regard to drop shipment transactions. The CDTFA is accepting written comments and will hold a virtual hearing on the proposal September 15.

On September 4, 2020, in New Cingular Wireless PCS LLC v. Commissioner of Revenue, No. 18-P-1317, the Massachusetts Appeals Court held that the Internet Tax Freedom Act (ITFA) preempted Massachusetts’ sales tax on New Cingular Wireless’ (NCW) Internet access charges. The court concluded that NCW satisfied ITFA’s requirement that it offer screening software to its customers, even though: (1) NCW’s salespersons did not affirmatively ask each customer whether it wanted to purchase the software; and (2) the software was not compatible with every device sold by NCW.

Eversheds Sutherland filed an amicus curiae brief in support of NCW on behalf of the Broadband Tax Institute.

Read the full Legal Alert here.

In this article published by Bloomberg Tax, Eversheds Sutherland Partners Eric Tresh and Todd Lard and Associate Charles Capouet expand on this alert.

Eversheds Sutherland has filed an amicus curiae brief on behalf of the 550 members of the Council On State Taxation (COST) on the important issue of whether imposition of certain local special taxes in California requires a two-thirds vote by the California electorate, or a simple majority. City of Fresno v. Fresno Building Healthy Communities. After the City of Fresno concluded that Measure P did not pass because it was a “special tax” that did not receive the required two-thirds vote, the nonprofit Fresno Building Healthy Communities filed suit, arguing that Measure P only required a majority vote because it was a citizen initiative. The trial court disagreed and concluded in favor of the City, holding that it would be “erroneous to conclude that the two-thirds requirement” only applied to “local government.” The amicus brief urges the Court to affirm the well-reasoned decision of the trial court and adopt the arguments of the respondents that both Proposition 13 and Proposition 218 require passage by a two-thirds vote and that nothing in the California Supreme Court’s decision in California Cannabis Coalition v. City of Upland (2017) 3 Cal.5th 924 alters that result.

For more information on California supermajority voting requirement tax cases, check out Eversheds Sutherland’s SALT Scoreboard – CA Local Tax Edition.

In this episode we discuss two recent developments, including an Oregon decision concerning sales tax on vehicles (EAN Holdings, LLC v Oregon Department of Revenue) and a Texas letter ruling dealing with software as a service and data processing (Texas Private Letter Ruling No. PLR 20180724152951).

 

 

 

 

 

 

 

Listen Now: 

In Indiana Department of Revenue Letter of Findings No. 02-20191221 (Dated June 3, 2020, published August 26, 2020), the Department concluded there was a lack of a unitary business relationship between an out-of-state holding company and a partnership that operated gas stations within the state. The Department held that the holding company could not show a unitary relationship with the gas station partnership under the “three unities” test of functional integration, centralization of management, and economies of scale. This finding was in part due to the fact that the holding company that did not have employees, property, and or any activities other than holding a minority interest in the gas station partnership:

  • Centralized management: The holding company had no means to oversee or contribute to the day-to-day operations of the gas station partnership because the holding company had no employees.
  • Functional integration: There were no combined functions or common operational resources since the holding company had no employees, assets or activities other than holding the partnership interest.
  • Economies of scale: There could be no economies of scale because the holding company’s sole purpose was holding interests in partnerships.

 Finally, the Department found that although the partnership agreement gave the holding company some management rights over the gas station partnership, there was no evidence that the holding company actually exercised any of those rights. Additionally, the refusal of holding company representatives to sign a routine time extension waiver on behalf of the gas station partnership indicated a lack of management or operational control. Therefore, the holding company could not treat its distributive share of the partnership’s gain/loss as apportionable income.

Eversheds Sutherland has filed an amicus curiae brief on behalf of the 550 members of the Council On State Taxation (COST) on the important issue of whether imposition of certain local taxes is required to be passed by a two-thirds vote by the California electorate, or a simple majority. Howard Jarvis Taxpayers Association, et al. v. City and County of San Francisco. The case is pending in the California Court of Appeal, First Appellate District, on appeal from a judgment of the San Francisco County Superior Court holding that a special tax imposed by initiative requires only a simple majority, and not a two-thirds, vote to pass. The amicus brief urges the Court to adopt the well-reasoned arguments of the appellants that both Proposition 13 and Proposition 218 require passage by a two-thirds vote and that nothing in the California Supreme Court’s decision in California Cannabis Coalition v. City of Upland (2017) 3 Cal.5th 924 alters that result. This case follows on the heels of the First District’s recent order in favor of the City and County of San Francisco in San Francisco’s Proposition C (November 2018) case, City and County of San Francisco v. All Persons Interested in the Matter of Proposition C.

For more information on California supermajority voting requirement tax cases, check out Eversheds Sutherland’s SALT Scoreboard – CA Local Tax Edition.

September 10, 2020 | 12:00 – 1:00 p.m. PDT

In this marketplace webcast, we will discuss ongoing worker classification disputes in California, as well as other states, and the SALT implications resulting from those disputes. We will also discuss SALT issues that teleworking may create for marketplaces with various business models, and provide tips on how to best position your business for the new normal of permanent remote work.

Knowledge level: Overview
Delivery method: Group internet based
Advanced preparation: None
Fee: None
CLE: 1.0 hour for the session
CPE: up to 1.2 hours for the session

After completing this course, participants will be able to:

  • Discuss California legislation and litigation on worker classification.
  • Discuss California and multistate SALT impact of worker classification issues.
  • Evaluate and explain SALT impact of teleworking employees.
  • Determine how to navigate and mitigate SALT implications of a remote workforce.

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