On July 22, the Tennessee Governor signed into law S.B. 1778, which requires short-term rental unit marketplace facilitators to collect and remit local occupancy tax. The bill, as amended, defines “short-term rental unit marketplace” to mean any person or entity that provides a platform for compensation, through which a third party offers to rent a short-term rental unit to an occupant. “Short-term” refers to rentals of less than thirty days. It does not affect hotels or bed and breakfasts. The changes go into effect January 1, 2021.

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: 

The Supreme Court recently determined that the eastern half of this state primarily consists of Native American reservations, which could have significant SALT implications.

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!

This is the second edition of the Eversheds Sutherland SALT Scoreboard for 2020. Since 2016, we have tallied the results of significant taxpayer wins and losses and analyzed those results. This edition of the SALT Scoreboard includes a discussion of the Mississippi Supreme Court’s decision on agency deference, insights regarding the First Amendment’s application to Cincinnati’s billboard tax and a spotlight on New York cases.

 View our Eversheds Sutherland SALT Scoreboard results from the second quarter of 2020 now!

Meet Burrito! This adorable pup belongs to Kelly Moriarty, Product Manager at Stripe. Almost eight years old, Burrito is a mixed-breed pup with all the fixings. Some of those ingredients include chicken, veggies, rice, black beans, guac, sour cream and salsa – or wait, maybe that was lunch…

But seriously, Burrito’s heritage is still unknown. A DNA test came back inconclusive, and the company had no answers for Kelly and Burrito. So Kelly likes to consider her a mix, between a German Shepherd, a Corgi, and a bat (she has GIANT ears!).

It would be easy to assume that Burrito’s favorite type of food is Mexican, but that would be wrong. She loves all food, but her absolute favorite is Brazilian BBQ. Kelly’s partner is Brazilian, so Burrito often reaps the spoils when he grills!

In addition to eating, Burrito loves to play fetch, and no area is too small for her to run after a ball. She also enjoys doing tricks, and is great at “roll over,” and finding a ball or hidden toy that is out of sight using only her nose.

Not only is she great at finding hidden objects, Burrito also excels at hiding items too. She loves to steal and bury Kelly’s socks around the house. She won’t tear any holes or destroy them, but Burrito loves to hide Kelly’s socks in the most random places. Maybe it’s her way of getting Kelly back for hiding her balls and toys.

In this episode we discuss the top ten issues that should be considered when evaluating and implementing marketplace collection laws. It is excerpted from the third in our series of webcasts on marketplaces. In the prior two webcasts, we talked about marketplace collection legislative changes in the first one and the marketplace litigation cases and other developments in the second one.

Webcasts:

Listen to the hour-long version of this third episode in our webcast series here.

Episode One: “Behind the Eight Ball – A Look at the Past and Present State of Marketplace Laws”

Episode Two: “Stuck in the Middle Again: Latest Developments in Online Marketplace Litigation”

 

Listen Now:

Subscribe to our Podcast for more: 

  

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 Founding Father was granted a tax incentive from New Jersey—a 10-year property tax exemption—to establish his manufacturing company in the state?

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!

The Pennsylvania Commonwealth Court issued its much-anticipated decision on July 24 in Synthes USA HQ Inc. v. Commonwealth of Pennsylvania.

  • The Court upheld the Department of Revenue’s position that under the State’s pre-2014 costs-of-performance (COP) statute, service providers were required to apportion their receipts based on where customers received the benefit of the services, rather than where the costs of performing the service were incurred.
  • In so holding, the court rejected the Attorney General’s position that the Department’s benefits-received interpretation was incorrect and ordered the Department to issue a refund to the taxpayer.
  • Although the Pennsylvania legislature amended the COP statute to expressly require a benefits-received sourcing methodology effective with the 2014 tax year, this decision has implications for service providers that have open years prior to 2014 or businesses with certain other receipts, such as receipts from licensing intangibles, that continue to be sourced in accordance with the pre-2014 COP statute.

Read the full Legal Alert here.

The California Court of Appeal held that California income tax applies to the entire amount of trust income that is derived from California sources, even though a trust is managed in part by a non-resident trustee. The taxpayer had requested a refund on income taxes paid on capital gains, claiming that the income was incorrectly sourced to California. The taxpayer argued that under Section 17743 of the Revenue and Taxation Code, the gain should be sourced to California based on the proportion of trustees that were resident in California, without regard to the source of the income. Taxpayer also argued that Section 17041, subdivision (i) of the Revenue and Taxation Code, which provides that gross income of nonresident taxpayers are subject to tax if such income is derived from sources within California, did not apply to trusts because the term “resident” did not include trusts.

The California Court of Appeal disagreed with the taxpayer, holding that the Revenue and Taxation Code requires treating individuals and trusts similarly. The Court cited to section 17743 of the Revenue and Taxation Code, which incorporates the trust provisions of the federal Internal Revenue Code, and Section 17041, subdivision (e) of the Revenue and Taxation Code, which mandates that a trust’s taxable income must be calculated in the same way as if the trust were an individual. Further, the Court cited to the condition of Section 17743 of the Revenue and Taxation Code that it only apply where taxability “depends on the residence of the fiduciary.” The Court concluded that, according to Section 17041, subdivision (i), the taxability of gross income only depends on the residence of the taxpayer or fiduciary when the income is derived from a source outside of California. This case represents one of several recent state tax cases, many with different outcomes, ruling on the sourcing of income from trusts.

Steur v. Franchise Tax Board, No. A154692 (Cal. Ct. App. June 29, 2010).

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The California Department of Tax and Fee Administration adopted an emergency regulation to clarify and resolve specified issues with the California Marketplace Facilitator Act (CMFA), as amended. The regulation clarifies, among other things, the registration requirements for marketplace facilitators and marketplace sellers and provides definitions for terms left undefined by the CMFA and relevant examples. As an emergency regulation, it will remain in effect for two years following its June 29, 2020 effective date.

Earlier today, the D.C. Council voted to amend the Fiscal Year 2021 Local Budget Act of 2020 (“LBA”) and effectively eliminate the proposed sales tax expansion to advertising services and personal information.

On July 21st, the Council first attempted to vote on the LBA (which sets the District’s expenditures), but the Council was unable to agree on: (1) whether to retain the sales tax expansion in full; (2) whether to amend the advertising tax to impact only the placement of advertising; and (3) how to account for the $18.4 million that the advertising tax was expected to generate, if they chose to eliminate the tax. Chairman Mendelson then recessed the meeting until today to attempt to reduce the budget by the $18.4 million. Late on July 22nd, the Council’s and Chairman Mendelson’s offices distributed documents detailing his proposal.

At today’s Legislative Meeting, numerous councilmembers commented that they disagreed with the advertising tax and were glad to come to a compromise that eliminated it. However, Councilmember Grosso noted that he still supports the advertising tax. He wants to broaden the sales tax base and ultimately decrease the tax rate. The Council then approved the revised budget by a vote of 11-2. On July 28th, the Council will formally eliminate the proposed taxes by amending the Fiscal Year 2021 Budget Support Act of 2020.

While today was a victory against the advertising service and personal information sales taxes, the Council expects that they will revisit the budget in approximately two months after the District government understands the full impact of the COVID-19 pandemic. In a recent press release, Chairman Mendelson also announced that he is scheduling a hearing on the Tax Revision Commission Reestablishment Amendment Act of 2019, which would re-establish the Tax Revision Commission and require it to submit tax recommendations to the Mayor and Council. The Tax Revision Commission last released a Final Report in May 2014 that made numerous recommendations, including: (1) reducing the business franchise tax from 9.975% to 8.25%; (2) raising the sales tax rate from 5.75% to 6%; and (3) creating separate income tax brackets for single and married people. If re-established, the Tax Revision Commission may address advertising service and personal information sales taxes, among numerous other issues affecting multistate taxpayers. Eversheds Sutherland SALT will closely monitor any developments of the re-established Commission.