The New York Division of Tax Appeals determined that the taxpayer’s sale of a document management services was a taxable sale of software. While the taxpayer argued that its service was a nontaxable, cloud-based platform-as-a-service, the ALJ disagreed. Instead, the ALJ concluded that the taxpayer’s software was the “core element” of the platform, and customers could do nothing with the platform without their use of the taxpayer’s software. Therefore, the ALJ determined that because software was the central element of the product, the customer was purchasing taxable prewritten computer software rather than a nontaxable service. 

NetVoyage Corp. aka NetDocuments.com, DTA No. 850246 (N.Y. Div. of Tax App. Apr. 24, 2025).

The Tax Appeals Tribunal upheld an ALJ’s determination that a taxpayer’s wages earned from working remotely in Connecticut were sourced to New York and subject to tax. For decades, New York has adopted the convenience of the employer test (Rule), which deems a nonresident who teleworks outside the state to be working at its employer’s New York location (and, hence, such wages would be New York-sourced), unless the nonresident teleworks out of necessity for the employer and not just for the employee’s convenience.

During the COVID-19 pandemic, the taxpayer, Professor Zelinsky, was required to telework from his home in Connecticut because New York issued an executive order requiring non-essential workers to telework and because his employer prohibited access to his New York office. The Tribunal held that even though Professor Zelinsky did not work in New York, he had sufficient minimal contacts with the state to satisfy due process. The Tribunal reasoned that the professor availed himself of the state’s economic market through his New York-based employer, even though he spent less than 10% of his total working days in the state. The Tribunal also held that the Rule did not violate the dormant Commerce Clause because if the Rule was applied in every state, double taxation would be avoided, and the Rule only taxes wages from activities performed in the state.

Matter of Zelinsky, DTA Nos. 830517 & 830681 (N.Y.S. Tax App. Trib. May 15, 2025).

This is Professor Zelinsky’s second attempt to take down the Rule. See Zelinsky v. Tax Appeals Tribunal, 1 N.Y.3d 85 (N.Y. 2003), cert. denied, 541 U.S. 1009 (2004).

For decades, the NYU School of Professional Studies has offered a host of Tax Conferences that explore foundational and advanced tax topics.

The Eversheds Sutherland SALT team is proud to chair this year’s Introduction to State and Local Taxation and Intermediate State and Local Taxation conferences, featuring updated content, speakers and timely insights.

Introduction to State and Local Taxation
This conference is designed for professionals new to SALT or seeking a refresher. Some of the topics include:

  • US Constitutional and federal constraints on state taxation
  • Overview of sales and use taxation
  • Overview of state corporate income taxation
  • State tax research tools, tips and tricks
  • State corporate income tax filing methods
  • Financial statement issues associated with state taxation

For a full list of topics, click here.

Intermediate State and Local Taxation
Tailored for experienced practitioners, this conference includes:

  • Ethics and state taxation
  • A roundtable tax discussion with senior government officials
  • Sales and use tax of software and digital products
  • Corporate income tax apportionment issues, including alternative apportionment
  • State taxation of foreign income
  • State taxation of partnerships and partners
  • Lobbying state and local tax issues

For a full list of topics, click here.

We hope to see you there! For more information or to register, click here.

Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!

We will award a prize for the smartest (and fastest) participant.

This week’s question: Which state’s House of Representatives recently passed a bill that would allow small businesses to claim a personal income tax credit for providing employees with individual coverage health reimbursement?

E-mail your response to SALTonline@eversheds-sutherland.com.

The prize for the first response to today’s question is a $25 UBER Eats gift card. This week’s answer will be included in our SALT Shaker Weekly Digest, distributed on Saturday. Be sure to check back then!

Members of our SALT team are on the move again this week with two exciting appearances:

2025 FTA Annual Meeting

On June 10, SALT Partner Jeff Friedman is pleased to present The Good, The Bad and The Strange 2025 during the 2025 FTA Annual Meeting in Chicago. He will help review some of the most notable, unusual and amusing legal cases in tax from the past year.

TEI Region 8 Annual Conference

On June 12, Partner Liz Cha and Counsel Chelsea Marmor will present State Tax Controversy – Update on Key Developments during TEI Region 8’s Annual Conference, held June 11-15 in Hilton Head, SC. Their session will cover some of the most important case developments from 2024 and 2025, addressing corporate income tax sourcing, apportionment, local taxes, and more. Liz and Chelsea will also provide insight regarding issues to watch and developing trends from jurisdictions across the country.

Don’t miss these opportunities to hear from our team!

We’re excited to introduce you to our June SALT Pets of the Month, Scout and Riley! These two lovable pups belong to Anna Schoenbaechler, Senior Tax Analyst at Cox.

Scout is a charming 6-year-old mixed breed with plenty of personality. Weighing 70 pounds, Scout was adopted as an 8-week-old pup from the Atlanta Humane Society in 2019. While his name is officially Scout, these days he answers to his nicknames “Scoot,” “Scooter,” or “Scooty.” Scout is a popcorn connoisseur, and when he’s not snacking, you’ll find him zooming around with his canine crew, living his best off-leash life. But don’t be fooled, Scout has a flair for the dramatic. If the other dogs won’t play, Scout isn’t shy about expressing his dismay. Despite his theatrical side, Scout is all heart. He’s friendly, good-natured, and always ready to wag his tail at both two-legged and four-legged friends.

Scout’s sister, Riley, is a 4-year-old potcake dog from the US Virgin Islands. Weighing in at 50 pounds, Riley was rescued as a stray and found her furever home through Furkids Atlanta in 2020. Riley is a true snack queen, with a soft spot for cheese and pumpkin. While she’s not exactly a fetch phenomenon, Riley more than makes up for it with an impressive prey drive. When she’s not on squirrel patrol, you’ll find her snuggled up for a cozy cuddle or riding shotgun on a car ride adventure.

Anna’s dynamic duo, Scout and Riley, bring plenty of personality and love to her home. Welcome to the SALT Pet of the Month family!

Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!

We will award a prize for the smartest (and fastest) participant.

This week’s question: Washington, DC Mayor Muriel Bowser recently unveiled her Fiscal Year 2026 budget proposal. It includes a delay to a scheduled increase for which tax?

E-mail your response to SALTonline@eversheds-sutherland.com.

The prize for the first response to today’s question is a $25 UBER Eats gift card. This week’s answer will be included in our SALT Shaker Weekly Digest, distributed on Saturday. Be sure to check back then!

The New York Appellate Division, Third Department recently held that a group of taxpayer-plaintiffs were not required to exhaust administrative remedies before commencing an action to declare their services were exempt from sales tax, even though they had not challenged their audit determinations before the New York State Tax Appeals Tribunal. 

Ordinarily, taxpayers in New York must protest audit findings before the New York State Tax Appeals Tribunal before filing an action in a judicial forum challenging such findings. However, New York law provides for an exception to this general rule and permits a taxpayer to skip proceedings before the Tax Appeals Tribunal if the tax at issue is “wholly inapplicable” to the taxpayer and there are no factual issues raised concerning the subject matter of the tax dispute. 

New York imposes sales tax on the sale of “protective and detective services.” And in 2020, the Department of Taxation and Finance issued an advisory opinion (to a nonparty) holding that site safety services provided by licensed site safety managers that performed inspections of construction and demolition projects in New York City, as required by the New York City Building Code, were subject to sales tax as “protective and detective services.” 

The plaintiffs in Site Safety were a group of licensed site safety managers providing these services in the City seeking a declaratory judgment that their services were beyond the scope of “protective and detective services.” The plaintiffs commenced their action in New York Supreme Court (a trial level court). At the time the action was commenced, some plaintiffs had already been audited and received a determination that their services were taxable; some were undergoing audit when the action was commenced; and some had not yet been audited. Supreme Court dismissed the plaintiffs’ complaint, ruling that plaintiffs failed to exhaust their administrative remedies.

The Appellate Division, Third Department affirmed as to the plaintiffs who had not been audited or whose audits were not yet completed (as to the latter group, for different reasons than expressed by Supreme Court). However, with respect to the group of plaintiffs who had received a determination from the Department of Taxation and Finance that their services were subject to sales tax, the Appellate Division reversed, holding that the “wholly inapplicable” exception applied. 

The plaintiffs that received determinations from the Department argued that the sales tax provision imposing tax on “protective and detective services” was “wholly inapplicable” to them and, therefore, the Department lacked jurisdiction to tax.  The Department argued that there were factual questions that had to be resolved because the plaintiffs failed to details regarding the services they provided and therefore “wholly inapplicable” exception did not apply. 

The Appellate Division rejected the Department’s argument explaining that the plaintiffs merely sought a declaration that site safety services as specifically defined in the City Building Code are exempt from sales tax, and that plaintiffs conceded other services that fall outside the building code would not be subject to the declaration—thus, there were no factual issues that barred the judgment.  The case was remanded to Supreme Court to permit the Department to serve an answer.  

Site Safety LLC v. New York State Department of Taxation and Finance, 237 A.D.3d 1395 (Apr. 2025). 

The Eversheds Sutherland SALT team is excited to chair the NYU School of Professional Studies’ Introduction to State and Local Taxation and Intermediate State and Local Taxation programs this year. We hope you and your colleagues join us in July for this valuable opportunity to deepen your SALT knowledge!

Introduction to State and Local Taxation
This foundational program offers a broad-based overview of state and local taxation across the US. Designed for professionals new to SALT or those seeking a refresher, the conference equips attendees with essential knowledge and practical tools to navigate the complexities of multistate tax compliance and planning. It’s an ideal starting point for building a strong understanding of the SALT landscape.

Intermediate State and Local Taxation
Tailored for practitioners with a working knowledge of SALT, this program dives into more complex and nuanced issues that tax professionals regularly encounter. Attendees will explore sophisticated transaction-based tax topics, recent legislative and regulatory developments, and practical strategies for addressing multistate tax challenges. 

We hope to see you there! For more information or to register, click here.

This week, members of the SALT team will present at three major state and local tax events across the country.

TEI Region 2’s 16th Annual Tax Forum

SALT Partner Charlie Kearns will present on key state and local tax developments during TEI Region 2’s 16th Annual Tax Forum, held June 2–3 in Atlantic City. Charlie’s sessions include:

  • What to expect in the current administration
  • Emerging SALT issues

TEI Region 9’s 2025 Conference

SALT Partners Michele Borens and Jeff Friedman will present The When and Where of State Income Taxes during TEI Region 9’s 2025 Conference, held June 3-4 in Vancouver, WA.

Villanova SALT Forum

Finally, Jeff is pleased to join Villanova University Charles Widger School of Law’s Third Annual State and Local Tax (SALT) Forum on June 5. Hosted by the Graduate Tax Program, this year’s forum will answer critical questions about what is apportionable. Jeff will present The One-Legged Stool: Problems with States’ Apportionment Formulas.

Register and find more information here.