We understand that many companies are taking significant steps to combat COVID-19, including asking employees to work remotely from their homes.

Working from home has advantages and disadvantages, but there is one significant perk that is undeniably putting smiles on our faces – working closely with our adorable pets! We want to see how you and your newest office-mate are getting through the remote workday!

Send us photos of you and your pet on Twitter using #SALTPets or email saltonline@eversheds-sutherland.com.

The Mississippi Senate will take up a proposal to require marketplace facilitators to collect and remit sales taxes. S.B. 2773 would require marketplace facilitators that meet a sales threshold of $250,000 in any consecutive 12-month period to collect and remit sales use tax. The bill is similar to H.B. 379, a sales and use tax requirement for marketplace facilitators approved by the Mississippi House of Representatives last week.

The Michigan Court of Appeals remanded a case on whether Detroit may impose its income tax on an out of state taxpayer, in light of the US Supreme Court’s Wayfair ruling. The Michigan Court of Appeals previously upheld the Tax Tribunal’s decision that the taxpayer lacked sufficient nexus with Detroit to be subject to its income tax because the taxpayer did not have a physical presence in Detroit and therefore was not doing business within the City. Apex Labs. Int’l Inc. v. City of Detroit, No. 338218, 2018 WL 2269748 (Mich. Ct. App. May 17, 2018), vacated and remanded, 503 Mich. 1034, 927 N.W.2d 243 (2019).

On appeal, the Michigan Supreme Court remanded the case back to the Court of Appeals in light of Wayfair. The Court of Appeals declined to rule and further remanded the case to the Tax Tribunal. The Court of Appeals concluded that it was not the appropriate venue to decide the case since the Tax Tribunal’s original decision focused only on whether the taxpayer had physical presence in Detroit, as understood under the now overturned Quill and Bellas Hess rule. Additionally, the appellate court could not simply overturn the case in Detroit’s favor, because the Tax Tribunal, disposing of the case on the physical presence issue, never considered the taxpayer’s alternative arguments against the assessment of Detroit’s tax. Apex Labs. Int’l Inc. v. City of Detroit, No. 338218, 2020 WL 34298 (Mich. Ct. App. Jan. 2, 2020). On remand, the Tax Tribunal will consider the parties’ arguments and whether to extend the US Supreme Court’s decision in Wayfair beyond sales and use tax.

Apex Labs. Int’l Inc. v. City of Detroit, No. 338218, 2020 WL 34298 (Mich. Ct. App. Jan. 2, 2020)

Massachusetts’ Supreme Judicial Court held that receipts from subscriptions to remote access software were subject to sales tax as taxable transfers of prewritten software.  Following a change in the law to tax sales of prewritten software regardless of medium of delivery, the Massachusetts Department of Revenue promulgated a regulation stating that such taxable sales include “transfers of rights to use software installed on a remote server.” In holding the remote access software was taxable, the Court deferred to the Department’s interpretation of law, as reflected in the regulation, noting that such interpretation is “rational” based on the legislative intent to tax prewritten software regardless of the medium of delivery. The Court, however, specifically noted that the taxpayer did not challenge the regulation as ultra vires (illegal because it is contrary to the statute). Finally, the Court held that the subscriptions to online products were not non-taxable services because the object of the transaction was acquiring access to the software.

Citrix Systems, Inc. v. Commissioner of Revenue, SJC-12741 (Mass. Feb. 5, 2020).

After nearly a decade of stalled litigation in Illinois state court, the US Court of Appeals for the Seventh Circuit permitted a group of taxpayers to proceed in federal court with their US constitutional challenge to property tax assessments, over Tax Injunction Act and comity objections by Cook County. While the district court held that the TIA barred the federal suit, the Seventh Circuit reversed, noting that this is the rare case where there is not a “plain, speedy and efficient remedy” in Illinois courts. And, for similar reasons, the Seventh Circuit rejected the county’s argument that the appeals court should decline jurisdiction on the principle of comity.

Here, the procedural statute at issue, (35 ILCS 200/23-15(b)(3)), solely permits a taxpayer to challenge the correctness of a property assessment, without regard to an assessor’s methods or intent. The taxpayers were able to show the appeals court that the statute limited who the taxpayers could name as a defendant, what evidence they could present and what arguments they could raise. Therefore, the Seventh Circuit concluded that the governing procedural statute effectively prohibits a taxpayer from raising an Equal Protection Clause challenge in state court because it ignores the assessor’s methods and intent, which are needed to meet the “no rational basis” test to prevail on such a challenge.

A.F. Moore & Associates, Inc., et al v. Maria Pappas, et al., Illinois Court of Appeals Case No. 19-1971 (Jan. 29, 2020)

The Maryland Senate Budget and Taxation Committee voted to pass out of committee Senate Bill 2, which would impose a new tax on digital advertising services. The committee amended the bill to include a new sourcing provision. Now, the Comptroller of the Treasury must determine when gross revenues are derived from digital advertising services in Maryland. The bill will next head to the entire Senate for second reading and consideration.

Read the full Legal Alert here.

The Florida Department of Revenue issued a Technical Assistance Advisement concluding that an internet-based streaming video subscription service is subject to Florida’s communication services tax. The Taxpayer maintains a website where viewers can watch live or on-demand video of individuals (or, “Broadcasters”) playing video games, music or e-sports events. Among other things, the website provides a chat function, whereby viewers may interact with the Broadcasters. Viewers may access this content free of charge or purchase a variety of site-wide or Broadcaster-specific subscriptions to receive additional benefits.

The Taxpayer argued that their services are distinguishable from other streaming subscription services because subscribers purchase subscriptions primarily to support Broadcasters, rather than to receive access to streaming video content (the vast majority of which is available for free to non-subscribers).

The Department nevertheless concluded that the Taxpayer provides a video service subject to the communications services tax. However, because the communications services tax applies only when consideration is paid, the provision of free access to the website is not subject to the tax. Separately, the Department concluded that the Taxpayer’s services did not constitute a sale of tangible personal property or a sale of a taxable service for Florida sales tax purposes.

Florida Technical Assistance Advisement No. 19A19-001, 8/7/2019

The quarterly Eversheds Sutherland SALT Scoreboard tallies significant state and local tax litigation wins and losses. Twice each year, Eversheds Sutherland releases a videocast analyzing recent results.

In this Bottom Line videocast, Charles Capouet and Samantha Trencs discuss:

  • the overall results for 2019, including a breakdown of corporate income tax and sales and use tax case results
  • comparisons with the results from prior years
  • significant Q4 2019 cases, including Matter of Mackenzie Hughes LLP v. New York State Tax Appeals Tribunal

Watch the full video here.

A Louisiana legislator has pre-filed S.B. 138 ahead of the legislative session beginning March 9. The bill would require marketplace facilitators to collect and remit sales and use tax if they have either $100,000 of in-state sales or 200 total in-state sales. A person can be a marketplace facilitator even if it does not receive compensation for its services. Louisiana’s remote seller law, which takes effect July 1, 2020, created a central commission for the administration and collection of taxes for remote sellers. Marketplace facilitators would report and remit taxes to that same commission, rather than individual localities. If passed, the law would become effective January 1, 2020.

Mississippi H.B. 379, introduced in late January, has been approved by the House 106-13 and advanced to the Senate. The bill obligates marketplace facilitators with sales in excess of $250,000 to collect and remit sales and use tax. A person can be a marketplace facilitator even if it does not receive compensation for its services. Additionally, marketplace facilitated sales will not count towards the same $250,000 threshold present in the state’s remote seller law. If passed, the bill will become effective July 1, 2020.