On April 28, 2020, the Multistate Tax Commission (MTC), as part of its 2020 Spring Committee Meetings, held its Strategic Planning Committee Meeting by teleconference. Over the prior week, the MTC also held meetings of its Executive, Uniformity, Nexus, and Audit Committees.

The Eversheds Sutherland SALT group attended the Strategic Planning Committee Meeting. During the meeting, the Committee discussed:

  • Implications of tax related policies implemented by states during the COVID-19 crisis. The Committee noted that many policies adopted on a temporary basis may need to be reconsidered if they become more permanent, like individuals working remotely.
  • Ideas for updating the MTC’s training program. The Committee discussed using technology to provide remote training to the states. The Committee is also considering how to best allocate funds and its staff resources to trainings. At the next Strategic Planning Meeting, the Committee plans to provide comprehensive information on its training policies.
  • Additional projects to consider in the next year or two include further opportunities for cooperation and uniformity, as well as working to balance the need for uniformity with states’ sovereignty.

The Florida District Court of Appeal affirmed a trial court decision holding that certain online vacation rental platforms (the “Companies”) are not required to collect and remit Palm Beach County’s Tourist Development Tax (“TDT”). The Companies each provide an online platform where property owners can advertise their properties for short-term rentals. The Court explained that the Companies do not own, possess, or have a leasehold interest to convey in any of the properties listed on their online platforms, and that the Companies are simply conduits through which customers can compare properties and rates and book a reservation at the chosen property. Accordingly, the Court concluded that the Companies are not in the taxable business of renting, leasing, or letting transient accommodations as contemplated by the TDT statute. The Court rejected the argument that, because the Companies receive the consideration on the owners’ behalf, they are “dealers” and are required to collect and remit the TDT. The Court explained that a dealer is one who can grant a possessory interest in the property, and reasoned that because the Companies do not own the properties and cannot grant a possessory interest in them, they are not dealers. The Court also determined that the Companies do not act as agents of the property owners for purposes of exercising the taxable privilege of renting.

Gannon v. Airbnb, Inc., No. 4D19-541 (Fla. Dist. Ct. App. Mar. 25, 2020).

Thank you to everyone who participated in last week’s trivia question!

Last Week’s Question:
What was the first state to adopt a single-factor sales factor formula for apportioning an interstate corporation’s income for state income tax purposes?

The Answer:
In 1911, Wisconsin was the first state to formally enact a tax on corporations based on net income (although a few states imposed temporary levies on corporations during the Civil War). Law of July 13, 1911, ch. 658, 1911 Wis. Laws 984.

Since it was imposed on both domestic and foreign corporations, the law also utilized an apportionment methodology using a two-factor formula of “business transacted” and “property located” within the state. See U. S. Glue Co. v. Town of Oak Creek, 247 U.S. 321 (1918) (addressing the constitutionality of Wisconsin’s newly-enacted corporate income tax).

Keep an eye out for our next trivia question on Wednesday!

A New York appellate court affirmed the Division of Tax Appeals (DTA) denial of a telecommunications company’s refund request on sales tax paid on its purchases of electricity. The telecommunications company argued that its electricity purchases were exempt from sales tax under one of two alternative grounds. First, the company argued that its purchase of electricity was an exempt sale for resale N.Y. Tax Law § 1105(a) because the electricity was resold to its customers “as a component part of the telecommunication services that it provides.” Alternatively, the company argued that, as a public utility, its purchases qualified for the exemption under N.Y. Tax Law § 1105(b) for purchases of electricity by a utility for resale as such – i.e., buying electricity to resell as electricity.

The court affirmed the DTA’s conclusion that the company did not meet its burden of proving that it purchased electricity for resale under either resale exemption theory. N.Y. Tax Law § 1105(a) requires that, in order to qualify for the resale sales tax exclusion, items purchased and resold must be tangible personal property. The court not only concluded that the electricity, in this context, was not tangible personal property within § 1105(a)’s sale for resale exemption, but cited a previous decision involving the company’s predecessor reaching the same conclusion. Matter of XO N.Y., Inc. v Comm’r of Taxation & Fin., 51 A.D.3d 1154 (N.Y. App. Div. 2008). The court also concluded that the exemption in N.Y. Tax Law § 1105(b) was not met because the company did not purchase electricity to resell as electricity. Instead, finding that the electricity was purchased to provide company’s telecommunications services.

Matter of XO Communications Services LLC v Tax Appeals Tribunal of the State of New York et al., No. 527336, 2020 WL 1705288 (N.Y. App. Div. Apr. 8, 2020).

On April 23, 2020, the Multistate Tax Commission (MTC), as part of its 2020 Spring Committee Meetings, held a meeting of its Executive Committee by teleconference. Over the prior two days, the MTC also held meetings of its Uniformity, Nexus, and Audit Committees.

The Eversheds Sutherland SALT group attended the Executive Committee’s public meeting. This committee is the “primary policy and administrative decision-making body of the MTC between meetings of the full Commission.” Keith Richardson, the Deputy Chief Financial Officer for the District of Columbia chairs the committee. In particular, the committee:

  • discussed the MTC’s recent decision to allow taxpayers to provide their own narratives during MTC audits;
  • announced MTC staffing changes;
  • approved potentially holding the annual meeting electronically; and
  • approved the Uniformity Committee’s Finnigan and P.L. 86-272 projects for public hearings.

Read our full legal alert here.

For the first time in its history, the Multistate Tax Commission (MTC) held its 2020 Spring Committee Meetings via teleconference in lieu of the in-person meetings originally scheduled to take place in Alexandria, Virginia. The Uniformity Committee held its meeting on April 22, while the Nexus and Audit Committees held meetings on April 21. Portions of each meeting were open to the public.

The Eversheds Sutherland SALT group attended all of these public sessions. Several interesting topics were discussed during these meetings, including:

  • an updated P.L. 86-272 Statement of Information;
  • the Multistate Voluntary Disclosure Program (MVDP);
  • and the status of MTC’s Joint Audit Program.

Read our full legal alert here.

The New Jersey Division of Taxation (Division) quietly issued special regulations addressing the inclusion and apportionment of global intangible low-taxed income (GILTI) and foreign-derived intangible income (FDII) for purposes of the Corporation Business Tax (CBT).

Taking advantage of special authority granted by the New Jersey Legislature in conjunction with 2018 amendments to the CBT,1 the Division issued the regulations without complying with the notice and comment requirements of New Jersey’s Administrative Procedure Act (APA).2 The regulations are effective beginning April 8, 2020 and expire on October 5, 2020, by which time it is expected that the Division will promulgate replacement regulations consistent with the APA’s procedures.

For the most part, the regulations track the Division’s recent guidance posted on its website on the treatment of GILTI and FDII. The regulations also provide new guidance on the circumstances when a taxpayer may have to include net GILTI or FDII amounts in the numerator of the New Jersey allocation factor.

Read our full legal alert here.

Join us on Friday, April 24 at 2:00 pm ET for a casual conversation with Duncan Riley, Director of the Conciliation Bureau at the New York City Department of Finance. Duncan has been the Director of the Conciliation Bureau since the Bureau’s inception in 1992. Previously, Duncan held positions in the Department as Deputy Director of the Office of Technical Services in the Tax Policy Division, and as Assistant Unit Manager in the Audit Training Group.

The Conciliation Bureau provides an informal and confidential avenue to resolve tax disputes related to a variety of New York City taxes, including the Business Corporation Tax, Unincorporated Business Tax, Real Property Transfer Tax, Commercial Rent Tax, and Utility Tax.

Duncan and his fellow Conciliators regularly settle disputes prior to any administrative or judicial appeal. In our experience, Duncan and his fellow Conciliators settle the vast majority of disputes that they hear.

We will talk to Duncan about his perspective on the Conciliation Bureau’s role in heading off litigation and brokering resolutions to tax disputes, as well as the impact of COVID-19 on the Conciliation Bureau’s work.

The webinar will be moderated by Eric Tresh and Open Weaver Banks

Register Now

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
What was the first state to enact a net income tax on corporations?

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!