The Florida District Court of Appeal reversed the trial court’s certification of a class in a sales tax refund claim because the class was not “ascertainable.” Plaintiff filed suit against BJ’s Wholesale Club, Inc. (“BJ’s”) alleging that BJ’s thirty-one Florida stores improperly imposed sales tax on the full, undiscounted price of products purchased with a discount. The court held that the class was not ascertainable because: (i) the tax issue only affected Florida stores, (ii) members were not members of specific stores, and (iii) any member could make a purchase in a Florida store. Therefore, the court reasoned that BJ’s nationwide membership program, which was not tied to store location, could not be an ascertainable class because the membership program included every current and future BJ’s member or did not include anyone, as membership is not limited by state.

BJ’s Wholesale Club, Inc., and State of Florida Department of Revenue v. Laura Bugliaro, et al., Nos. 3D17-1495 and 3D17-1476 (Fla. Dist. Ct. App. 2019).

Doug Mo, Of Counsel in Eversheds Sutherland’s SALT group, is well known for his deep knowledge of property tax. Today we would also like to share with you his other enterprise, Mo Family Vineyards. Born out of, as Doug puts it, “a 30-year love affair with wine” and a desire to give back (all of the profits go to animal rescue) the family started their vineyard when they moved to the Sonoma Valley in 2006.

Today they produce wine from estate grown grapes, olive oil from their own trees and additional wine varietals from Russian River Valley-sourced grapes.  Our favorite is the Fancy Dog Cabernet Sauvignon, named after Riley, their Border Collie/Labrador mix with a label designed by Doug’s son Benjamin. It is a rich Cabernet that takes on a whole other dimension when paired with chocolate, adding an anise finish (according to this happy taster.)

We congratulate the Mo family for producing terrific wine and supporting a worthy cause. Please view this short video to meet Doug and see their inspiring rescue dogs.


On April 1, 2019, the Arkansas Office of Hearings and Appeals held that a taxpayer could not deduct interest expense for long-term debt used to finance a cash dividend as a non-business expense allocable to Arkansas because there was no corresponding non-business income allocable to the state.

The taxpayer was a corporation based in Arkansas that separated from its parent company. In connection with the separation, the taxpayer obtained third-party long-term debt to finance a cash dividend, which resulted in interest expense for the taxpayer. The taxpayer argued the interest expense should be classified as non-business expense allocable to Arkansas because it satisfied the transactional and functional tests under the Uniform Division for Income Tax Purposes Act (UDITPA). The administrative law judge held, however, that UDITPA’s business and non-business classifications only apply to income and there is no independent characterization of expenses apart from income. Thus, parsing of expenses occurs only after business and non-business income is determined. Here, because the interest expense was not linked to the generation of non-business income directly sourced to Arkansas, the interest expense could not be characterized as a non-business expense allocated to the state. Administrative Decision Nos. 19-185 & 19-186, Ark. Dep’t of Fin. & Admin. (Apr. 1, 2019).

The New Jersey Tax Court held that a parent corporation was not required to add back to its corporation business tax base any amount of royalty payments it made to a subsidiary. The parent company and subsidiary company each filed a New Jersey CBT return. The parent deducted the royalty payment, and the subsidiary included the royalty in its CBT base. New Jersey law generally requires taxpayers to add back federal deductions for royalties paid to related parties except in the case where the taxpayer can show by clear and convincing evidence as determined by the Division of Taxation that the addback is unreasonable. In this case, because the subsidiary’s allocation factor was lower than the parent’s, the Division of Taxation argued that the parent corporation was only entitled to a partial exception from the addback for royalties paid. The Tax Court disagreed and determined that the taxpayer was not required to add back any amount of royalties because the full amount of the royalties had been reported on the subsidiary’s CBT return, and the subsidiary paid tax on the royalties allocated to New Jersey. The court was “hard-pressed to accept Taxation’s argument that there was a mismatch of income and expense solely due to the difference in the unchallenged allocation factors of Parent and Subsidiary” and, accordingly, held that an addback of any amount on the parent’s return would be unreasonable.

Lorillard Tobacco Co. v. Dir., Div. of Taxation, No. 008305-2007 (NJ Tax Ct. Feb. 27, 2019).

The California research and development credit is frequently a high-ticket item for taxpayers. Indeed, according to the California Franchise Tax Board’s (FTB) 2017 Annual Report, $1,440,103,626 of corporation tax research credits were allowed in 2016, which was 72.5% of total corporation tax credits allowed for that year.

In his article for the Journal of Multistate Taxation and Incentives, Eversheds Sutherland Senior Counsel Eric Coffill provides an overview of the major provisions and common issues regarding claiming and defending the research credit on audit.

Read the full article here.

On April 17, 2019, the Maryland Comptroller of the Treasury issued Tax Alert 04-19, “Maryland guidance on the reporting and taxation of IRC Section 951A global intangible low taxed income,” further cementing the state’s tax climate as one that is bad for business.

Alert 04-19 describes the Comptroller’s treatment of GILTI. In their article published in Law360, Eversheds Sutherland attorneys Jeffrey Friedman and Todd Betor criticize Maryland’s guidance that requires the inclusion of GILTI as Maryland taxable income, the inapplicability of Maryland’s dividend subtraction, and Maryland’s unique apportionment factor representation.

Read the full article here.

In this article for Bloomberg Tax, Eversheds Sutherland attorneys Jeffrey Friedman, Stephanie Do and Michael Hilkin discuss the topics covered at the April 25 Multistate Tax Commission Uniformity Committee meeting in Denver, including revisions to the model combined reporting statute, potential revisions to the MTC’s Public Law 86-272 guidance applicable to businesses engaging in activities over the Internet, and sales tax issues post-Wayfair.

Read the full article here.

Meet Oscar, a dachshund mix belonging to Jeff Langer, Senior Tax Manager at The Home Depot. Jeff recruited Oscar to head up his “Squirrel Patrol” in November 2017 from the Atlanta Humane Society. Now at three years old and weighing 19 pounds he takes the job very seriously, watching out the windows and alerting Jeff to the first sign of a critter invading the yard. When Oscar’s workday is over, he lays around the kitchen trying to look adorable so he can get paid (in food.)

Not content to be just a watchdog, Oscar also has been known to be a Meyer Wiener on occasion. However, the job he takes most seriously is being the cutest companion to Jeff, who concluded Oscar’s glowing annual review with “his life goal is to just be near me, whether it’s on top of me, next to me, or simply having one paw on me.” We think Oscar deserves a raise and we are proud to have him as our April Pet of the Month.

This is the first edition of the Eversheds Sutherland SALT Scoreboard for 2019. Since 2016, we have tallied the results of what we deem to be significant taxpayer wins and losses and analyzed those results. This edition of the SALT Scoreboard includes insights regarding Virginia’s costs of performance sourcing, New Jersey’s addbacks of intercompany expenses, and a spotlight on sales and use tax cases.

View our Eversheds Sutherland SALT Scoreboard results from the first quarter of 2019!