This podcast discusses a recent Washington B&O decision and a recent California OTA decision concerning:
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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.
Today’s Question
The Internal Revenue Service was created by which US President?
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 Monday. Be sure to check back then.
On April 3, the San Francisco Treasurer issued a statement extending the property tax deadline from April 10 to May 4. The authority for the extension stems from the County Board of Supervisors adopting a resolution to close its tax collector’s office until May 3. Taxpayers unable to pay San Francisco property taxes by May 4 for reasons related to COVID-19 can request waiver of penalties via an online form. San Mateo County similarly extended its property tax deadline until May 4.
The Treasurer and Tax Collector of Los Angeles, on the other hand, issued a statement informing taxpayers that the County has no authority to extend the April 10 deadline. Beginning on April 11, though, taxpayers unable to pay Los Angeles property taxes on time due to COVID-19 may submit an online request for penalty cancellation.
On March 30, 2020, the California Court of Appeal overruled the city of Oakland’s demurrer regarding the validity of its waste management franchise fees on the grounds the plaintiffs sufficiently alleged that the fees were taxes. The city entered into waste management contracts with two companies. In turn, the companies agreed to pay the franchise fees (and likely pass them on to the city’s residents). Three plaintiff individuals filed complaints for declaratory relief, asserting that the fees were actually local taxes subject to voter approval pursuant to Proposition 218.
In California, a franchise fee may constitute a tax to the extent it is not reasonably related to the value received from the government. The plaintiffs alleged that the waste management contracts were not the product of bona fide negotiations and that various financial analyses were not performed. The plaintiffs also alleged that these fees were disproportionately higher than those paid to other nearby municipalities, and Oakland’s procurement process was “mishandled and subject to political considerations.” The court held these allegations were sufficient to state a claim that the franchise fees were not reasonably related to the value received from the government – and therefore were taxes – and overruled the trial court’s determination to the contrary.
Zolly v. City of Oakland, Dkt. No. A154986 (Cal. Ct. App. Mar. 30, 2020).
Thank you to everyone who participated in last week’s trivia question!
Last Week’s Question:
Which two states refer to their state taxing agency as “the Comptroller?”
The Answer:
Maryland and Texas. Most taxes in Maryland and Texas are administered by, respectively, the Maryland Comptroller of the Treasury and the Comptroller of Public Accounts of the State of Texas.
Keep an eye out for our next trivia question on Wednesday!
On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). Passed in response to the economic repercussions of the COVID-19 pandemic, the CARES Act makes a number of significant changes to the I.R.C., including rolling back certain limitations on the utilization of net operating losses (NOLs) that were put in place by the Tax Cuts and Jobs Act (the TCJA). Because of states’ differing rules on NOLs and conformity to the I.R.C., the CARES Act’s changes to the federal NOL rules will have varying SALT implications.
Read the full Legal Alert here.
Eversheds Sutherland has filed an amicus curiae brief on behalf of the 550 members of the Council On State Taxation (COST) on an important issue as to whether a California imposition of certain local taxes is required to be passed by a two-thirds vote of the California legislature, or a simple majority. City and County of San Francisco v. All Persons Interested in the Matter of Proposition C. 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 for passage only a simple majority, and not a two-thirds, vote. 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.
In 2015, Chicago expanded its 9% “amusement tax” to reach amusements that are delivered electronically. In September , 2019, an Illinois appellate court held in Labell v. City of Chicago that the new streaming tax complied with the state constitution and did not violate the Internet Tax Freedom Act. On March 25, 2020, the Illinois Supreme Court denied the taxpayer’s petition for leave to appeal, leaving the appellate court ruling in place.
For full coverage of the Chicago amusement tax and the September 2019 ruling, see the Eversheds Sutherland legal alert, Illinois appellate court upholds Chicago streaming tax.
In Gannon v. Airbnb, Inc., a Florida appellate court held that vacation rental platforms are not required to collect local lodging tax. The ruling reasons that the tax is imposed on the owner of the property, and vacation rental platforms are “conduits,” not owners. A dissenting opinion analogized rental platforms to property managers, which are generally required to collect tax on behalf of the owners.
The Florida legislature had briefly considered a bill, H.B. 1011, to require vacation rental platforms to collect lodging taxes, but the bill was withdrawn on March 14, 2020.
In response to California Governor Gavin Newsom’s Executive Order N-40-20, the California Department of Tax and Fee Administration (CDTFA) has updated its guidance to taxpayers impacted by COVID-19 regarding relief from interest and penalties and extended filing deadlines for sales and use taxes and other various taxes. All taxpayers filing a return for less than $1 million in tax automatically receive an additional three months to file returns between now and July 31, 2020. Taxpayers with tax liability of $1 million or more are eligible for an extension as well, but must request it.
The City of San Francisco has waived quarterly estimated tax payments of the City’s Gross Receipts, Payroll Expense, Commercial Rents, and Homelessness Gross Receipts Taxes that otherwise would be due on April 30, 2020, for taxpayers or combined groups with combined San Francisco gross receipts in 2019 of $10 million or less. The payments now must be made along with 2020 annual tax payments generally due by March 1, 2021. The City is also extending the due date for annual license fees until June 30, 2020.
