In this episode of the SALT Shaker Podcast policy series, host and Eversheds Sutherland Partner Nikki Dobay welcomes Jared Walczak, Vice President of State Projects at the Tax Foundation.

Jared begins the conversation by providing background on the work of the Tax Foundation, as well as his role within the organization.

He then shares his perspective about state tax revenues during the pandemic and beyond. Jared also discusses how the economic situations have informed the organization’s work of the past year and how that is likely to differ from what he expects to focus on in 2022. Jared and Nikki also touch on the Build Back Better Act.

Then, they wrap up with Nikki’s surprise non-tax question, this time focused on travel – what’s your favorite thing to do when visiting a new state on a work trip?

The Eversheds Sutherland State and Local Tax team has been engaged in state tax policy work for years, tracking tax legislation, helping clients gauge the impact of various proposals, drafting talking points and rewriting legislation. Partner Nikki Dobay, who has an extensive background in tax policy, hosts this series, which is focused on state and local tax policy issues.

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The Ohio Department of Taxation recently issued an FAQ addressing the gross receipts calculation regarding remote sellers’ registration and tax remittance requirements. Following South Dakota v. Wayfair, Ohio required remote sellers to register with the Department and begin collecting sales tax if the seller had greater than $100,000 in gross receipts or at least 200 transactions in either the current or previous calendar year. The FAQ reminds taxpayers that for purposes of calculating the $100,000 economic nexus threshold, gross receipts only includes receipts from retail sales. Thus, while receipts from enumerated services are used when determining the economic nexus threshold, receipts from non-enumerated services and receipts from sales for resale also do not count toward a taxpayer meeting the $100,000 threshold, but the FAQ does not address whether sales for resale count toward the 200 transaction threshold.

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: On a recent SALT Shaker Podcast, Partner Nikki Dobay discussed a recently-introduced ballot initiative in which state?

E-mail your response to

The prize for the first response to today’s question is a $25 UBER Eats gift card.

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

This week, Eversheds Sutherland is a proud sponsor of the virtual New England State and Local Tax Forum. Partner Breen Schiller will cover key issues facing combined filers in 2021.

In addition, Partner Jeff Friedman will present a virtual multistate tax update during the New Jersey Society of Certified Public Accountants Multistate Tax Conference on November 19, addressing the most significant state and local tax litigation and legislation that has taken place across the nation in the past year affecting income, sales and use, and business activity taxes.

View and learn more about past and upcoming events and presentations for the SALT team.

Last week, the Multistate Tax Commission (MTC) held its Fall Executive Committee and Uniformity Committee Meetings (in person) in Alexandria, Virginia. During the Executive Committee Meeting, MTC staff approved California’s participation as a sovereignty member. The Uniformity Committee Meeting focused on discussing the status of its current projects, held its state roundtable, and proposed a study of its special industry apportionment regulations.

Read the full legal alert here.

Uniformity Committee Fall Meeting – November 9, 2021

The MTC held its Uniformity Committee Fall Meeting on November 9. During the meeting, MTC staff presented the Partnership Project’s issues outline and provided a status update. The presentation consisted of a general overview of the project’s history, an analysis of the issues outline, a discussion on the project’s survey results, and the proposal of a project roadmap and next steps.

The Partnership Project’s long-term goal is to analyze each issue set forth in the outline in detail, in order to determine whether the states would benefit from model statutory language. One of the project’s more imminent next steps involves the creation of MTC-sponsored trainings on federal partnership taxation. It is not clear whether such trainings will be available to the public sector, or which area of state partnership taxation will be dealt with first.

During the meeting, both state and business representatives communicated their respective industries’ interest in continuing to pursue the project.

Sixth Meeting – October 26, 2021

MTC staff will present an issues outline during the MTC’s November 9 Uniformity Committee Meeting. On October 26, the MTC held a final Partnership Project meeting, focusing on administrative and enforcement issues as well as a discussion of the survey results.

With respect to the administrative and enforcement issues existing in partnership taxation, MTC staff highlighted three topics: withholding, pass-through entity taxes and audit procedures and adjustments.

The current MTC withholding model does not address procedures for withholding proceeds from sales of a partnership interest, as the federal rules for foreign partners now require. According to MTC staff, those states that impose withholding requirements typically do so in the context of distributive share income and guaranteed payments, but not for sales of a partnership interest.

Moreover, MTC staff highlighted that pass-through entity taxes are generally imposed on income derived within the state (whether the partners are residents or not) and sourced under general sourcing rules applied at the entity level. There are, however, differences in the way such taxes have been implemented by each state, as well as each state’s audit and adjustment procedures.

During the last portion of the meeting, MTC staff went over the state survey results, noting that jurisdiction, nexus, sourcing and credits tied as the most important issues in the realm of partnership taxation. The current order of the issues outline aligns with subject matter importance, according to the survey results. In addition, the taxation of partnership income and sales of partnership interest were voted as the subjects for which training would be most valuable.

Eversheds Sutherland attorneys plan to attend the November 9 meeting and provide timely updates thereafter.

Fifth Meeting – October 5, 2021

MTC staff resumed their discussion on sourcing the sale of partnership interests, considering administrative and enforcement issues in the area of partnership taxation.

During the discussion of the sale of partnership interests, which begun last week, MTC staff considered federal treatment of such sales under IRC § 741.  The statute provides that gain or loss from the sale of a partnership interest is treated as a capital asset, unless overridden by IRC § 751.  States generally conform and source the sale of a partnership interest as an intangible.  In spite of this, state adjustments to the “outside basis” are not uniform.

As foreshadowed in previous meetings, states source the gain (or loss) arising from the sale of a partnership interest differently—some states look at the partnership’s assets to determine the sourcing methodology, whereas other states look at individual partners activities, or the partner’s domicile.

The fifth meeting also covered administration and enforcement issues.  MTC Staff highlighted the importance of reporting by providing examples of serious repercussions that arise because of insufficient enforcement.  The meeting wrapped up with a brief discussion on withholding; while most states have some form of withholding, the methods and exceptions employed by each state vary.

Fourth Meeting – September 28, 2021

MTC staff resumed the discussion on the two methods used when sourcing partnership income: situs-based sourcing and apportionment-based sourcing.  MTC staff recognized that situs-based sourcing is especially appealing for states when the state lacks nexus over the partner or the income in question, as well as when the income is nonbusiness income in the hands of the partner.  The issues outline includes a section on sourcing income from investment partnerships, even though only a minority of the states have specific treatment for investment partnerships.

With respect to apportionment-based sourcing, MTC staff highlighted that additional complications arise when the states take into account the type of partner—that is, whether the partner is a managing partner, general partner, limited partner, et cetera.  As an example, MTC staff stated that some states treat limited partners differently than general partners.  MTC staff disagreed with this conclusion, explaining that “limited partners” are limited only with respect to their liabilities and the type or label of a partner should not be indicia of their involvement in the partnership’s business.  Moreover, there is little authority for treating partners differently in other areas of state partnership taxation.

MTC staff also focused on two topics: credits for taxes paid, and sale of partnership interests.  The discussion on credits was brief—MTC staff acknowledged that states do not credit partnership taxes in the same way.

In contrast, the discussion on sale of partnership interests was lengthy.  Existing case law was highlighted, which suggests that: (1) the existence (or lack thereof) a unitary relationship is the turning point in determining whether the gain may be taxed by a state, and (2) if a due process connection exists with respect to the partnership’s operating income, there should be sufficient nexus for the state to tax any gain resulting from the sale of the partnership interest.

Third Meeting – September 14, 2021

On September 14, 2021, the MTC held its bi-weekly meeting for the Partnership Project.  The discussion started with MTC staff acknowledging that no U.S. Supreme Court case has addressed the application of general sourcing rules, or formulary apportionment, to partnership operating income taxed on a pass-through basis.  As a result, MTC staff looked to the application of general constitutional principles as applied to partnership taxation.

As with other areas of the outline for the Partnership Project, the partnership’s attributes will determine how the constitutional principles are applied.  For example, consider a hypothetical Partnership “AB” formed by Partner A and Partner B.  Partner A lives in State 1 and Partner B lives in State 2; both State 1 and State 2 use single sales factor apportionment.  Partnership AB produces 90% of its sales in State 2.  In addition to its share of partnership items, Partner A receives a guaranteed payment for services done for the partnership—entirely in State 1.  Under federal partnership rules, this guaranteed payment would reduce partnership income.  Modeling a uniform way to treat guaranteed payments, however, is not an easy endeavor.  Conflicting interests amongst the states threaten uniformity; this predicament exists in most areas of state partnership taxation.

MTC staff provided other examples to highlight the potential challenges that exist in applying constitutional principles to state partnership taxation.  The examples provided by Ms. Hecht demonstrate that differences in the partnership or partner’s information as well as the selected approach to sourcing may lead to very different results.

Second Meeting – August 31, 2021

On August 31, 2021, the MTC held another Partnership Project meeting.  During the meeting, MTC staff went over two issues: first, the implications that arise from conformity with the federal partnership rules; and, second, the importance of sourcing partnership income.

When evaluating the potential issues in conforming to the federal partnership rules, MTC staff highlighted themes that could disrupt uniformity amongst the states, including: (1) guaranteed payments for partners of a partnership, (2) deductible partnership expenses, (3) offsetting income and loss from other partnerships or sources, and (4) anti-abuse rules to prevent abusive tax planning.  During the discussion of the fourth item, MTC staff acknowledged that the MTC has a disclosure model that would apply to the Partnership Project.

The second topic of the meeting, sourcing of partnership income, touched on the importance of sourcing partnership income for state tax purposes.  Using a diagram and data from the Outline, MTC staff demonstrated that a state could tax anywhere from 0 to 100% of a partnership’s income, depending on which sourcing approach is used.  Five different types of sourcing methods were considered for this hypothetical illustration: (1) situs-based sourcing based on the partnership’s location, (2) situs-based sourcing based on partner location, (3) apportionment-based sourcing based on partnership location, (4) apportionment-based sourcing based on a corporate partner’s location, and (5) apportionment-based sourcing using a combination of the partnership and the corporate partner’s apportionment factors.

First Meeting – August 17, 2021


On August 17, 2021, the MTC held its first meeting of the Partnership Project, during which the work group discussed a draft outline of partnership issues.  The Partnership Project is being chaired by Laurie McEhatton (California Franchise Tax Board) and staffed by Helen Hecht (General Counsel at the MTC).

As an introduction, MTC staff (Hecht) provided an overview of the Partnership Project.  The project’s first step is the creation of an outline that identifies and describes a list of comprehensive issues existing in the area of state partnership taxation.  Thus far, the current draft is divided into four sections: (1) General Terminology, (2) Taxation of Partnership Income and Items; (3) Taxation of Gain (Loss) from Sales of a Partnership Interest; and (4) Administrative Enforcement. MTC staff reiterated that the outline is a working draft, and ongoing changes will be made to the outline as the Partnership Project advances.

MTC staff then went into a more in-depth discussion of the first and second sections of the outline (General Terminology and Taxation of Partnership Income and Items).  First, the discussion of the General Terminology section consisted of an overview of certain terms defined in the outline.  Given that each state interprets terms differently, uniform definitions/understanding of concepts will be imperative for the Partnership Project’s success.  Next, with respect to the second section of the outline, jurisdiction, nexus and sourcing were discussed.  Specifically, MTC staff noted these issues vary significantly amongst the states, and each state has its own rules to determine the partnership tax base.  Thus, the Partnership Project will consider ways in which the states can achieve uniformity as it relates to these matters.

Digging Deep: a discussion and update on two MTC uniformity projects 

On August 12, 2021, Helen Hecht, Uniformity Counsel at the MTC joined host and Eversheds Sutherland Partner Nikki Dobay for an episode of the SALT Shaker Podcast policy series.  Helen and Nikki engaged in a discussion of the Partnership Project.  Listen to the podcast here.

Introductory Meeting

On June 15, 2021, the Multistate Tax Commission (MTC) held an introductory meeting to discuss the State Taxation of Partnerships Project (the Partnership Project).  The work group intends to focus on the “underdeveloped” state partnership tax rules and provide guidance and structure in the state partnership taxation realm.  The Partnership Project will hold bi-weekly meetings, and Eversheds Sutherland SALT attorneys plan to attend all meetings and provide timely updates.

The work group focused on an issue outline drafted by MTC staff that contemplates areas where state partnership taxation rules either differ from one another or lack specificity.  Based on feedback received from the states and the MTC Standing Subcommittee, the issue outline is divided into three general categories: (1) issues related to taxing partnership income, (2) issues related to gain or loss on the sale of a partnership interest, and (3) administration and other issues.

  1. Issues Related to Taxing Partnership Income. The issue outline discusses the states’ conflicting jurisdictional rules that affect administrative obligations imposed on partnerships.  Similarly, it discusses the confusion regarding nexus rules for nonresident and corporate partners as well as how the factor presence nexus standard might apply.  In addition, the outline notes that the states have distinct sourcing and apportionment rules, exceptions and exemptions, transfer pricing statues and state income adjustments that should be contemplated in pursuit of uniformity, and the working group’s discussion seemed to hone in on the need for guidance in the transfer pricing area.
  2. Issues Related to Gain or Loss on Sale of a Partnership Interest. The issue outline acknowledges that nexus is considered when determining whether a state can tax gain or loss on the sale of a partnership interest.  Likewise, the outline notes that sourcing and reporting rules regarding the sale of partnership interest could be harmonized.
  3. Administration and other Issues. The issue outline concludes that the states’ rules lack guidance on the application of tax credits for partnership income, centralized audits and the functionality of the state and local tax deduction cap.

The Partnership Project’s goal is to finalize an outline and present it to the MTC Uniformity Committee.

On this episode of the SALT Shaker Podcast, host and Eversheds Sutherland Associate Jeremy Gove is joined by Counsel Michael Hilkin from the firm’s New York office. Michael provides an overview of the New York False Claims Act and its recent prevalence and expansion in the state.

Jeremy and Michael also discuss two False Claims Act cases recently litigated in New York, and how those cases inform the balance of power between the New York Attorney General’s Office and the New York Department of Taxation and Finance in enforcing New York tax laws.  Finally, they conclude their False Claims Act discussion with an examination of the impact on taxpayers.

Continuing tradition, they end their conversation with Jeremy’s favorite – overrated or underrated? This week, they cover doughnuts.

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Kansas’s remote seller law became effective July 1, 2021, one of the last states to adopt sales tax nexus requirements for remote sellers. As part of implementing the new law, the Department of Revenue recently issued guidance to remote sellers providing that while a remote seller is not required to collect tax on its first $100,000 in sales for purposes of determining when economic nexus first begins, remote sellers should advise purchasers they have a use tax obligation if no tax is collected on the sale. Once the $100,000 threshold is passed, remote sellers must begin collecting and remitting sales tax on any further sales to Kansas customers.  In addition, for purposes of determining when a remote seller passes the $100,000 threshold, all sales made by the remote seller to Kansas customers count toward the threshold, regardless of whether the item purchased is actually taxable.

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: In our latest SALT Scoreboard, we included our view of the Ohio Supreme Court’s decision on which city’s billboard excise tax?

E-mail your response to

The prize for the first response to today’s question is a $25 UBER Eats gift card.

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

In a private letter ruling, the Illinois Department of Revenue ruled that an out-of-state taxpayer that provided software subscriptions and related hardware for one bundled price was subject to the Service Occupation Tax, not the Retailers’ Occupation Tax, Use Tax, or Service Use Tax. The customer owns the hardware, but the taxpayer retains ownership of the embedded firmware. The Department concluded that the taxpayer is acting as a “serviceman” offering cloud-based services. The taxpayer’s charges for software and firmware are transferred to the customer incident to the cloud-based service and are taxable. As a serviceman, the taxpayer may choose one of four ways to calculate tax—in this case, the taxpayer did not wish to separately state tangible personal property, and therefore was required to collect the service occupation tax based on 50% of the entire bill.