The Maryland Tax Court held that six nonresident Limited Liability Companies (LLCs) wholly-owned by another out-of-state limited liability company owed Maryland income tax despite the fact that the LLCs, as disregarded entities, had no federal income tax liability. Maryland law imposes an income tax “on each pass-through entity that has . . . any member who is a nonresident of the State or is a nonresident entity” and “any nonresident taxable income for the taxable year” under Md. Code Ann., Tax-Gen, Sec. 10-102.1(b). The Court reasoned that although Maryland income tax is calculated using federal taxable income as the starting point, the taxability of individuals and corporations in Maryland does not turn on whether a taxpayer actually completed a federal return. Accordingly, while the LLCs may not be obligated to complete a Form 1120 for the federal government, they “are clearly required to do so in order to complete the Maryland return.” This decision is pending review in circuit court. CNI Technical Services, LLC v. Comptroller of Maryland, Nos. 17-IN-00-0743; 17-IN-00-0748 (Md. Tax Ct. Jan. 17, 2019).

The Tennessee Department of Revenue issued a letter ruling finding that a taxpayer’s mobile and web data analytics services were not subject to sales and use tax. The taxpayer’s customers installed the taxpayer’s software code, which collected user data about the customers’ websites or mobile applications. The taxpayer then analyzed the data and granted the customers a limited, non-exclusive software license allowing them access to the taxpayer’s web-based dashboard to review reports and analysis of the data. The Department’s ruling noted that access to the web-based dashboard constituted taxable computer software while the taxpayer’s data analytics services were not subject to Tennessee sale and use tax. The Department explained, however, that the “true object” test determined the taxability of a bundled transaction involving both taxable and nontaxable components. The Department concluded that the true object of the taxpayer’s transaction was the sale of nontaxable data analytics service and the provision of computer software was merely incidental to the sale such that the entire transaction was not subject to sales and use tax.

Tenn. Letter Ruling No. 18-09 (Dec. 14, 2018)

The Kentucky Court of Appeals held in an unpublished opinion that an out-of-state parent company was not an “includible corporation” as defined by Kentucky law and could not file a consolidated return with its in-state subsidiary. The Department argued that the parent company taxpayer was not an includible corporation because it fell within two exceptions included in the statutory definition – one for companies that have net operating losses and de minimis apportionment factors and the other for companies with zero apportionment factors. The parent company argued that, regardless of those exceptions, it qualified as an “includible corporation” under a separate section in the statute that defines “affiliated group.” Based on statutory construction and legislative history, the Court of Appeals sided with the Department, reasoning that “includible corporation” and “affiliated group” are two different definitions and one cannot be read into the other. Even if it is a member of an “affiliated group,” a common parent must also meet the definition of an “includible corporation” to be included in the Kentucky consolidated return.
World Acceptance Corp. et al. v. Fin. & Admin. Cabinet, Kentucky Dep’t of Revenue, No. 2015-CA-001852-MR (Ky. Ct. App. Jan. 4, 2019).

The South Carolina Court of Appeals upheld the imposition of sales tax on sales of optional “waivers,” which were sold to renters and relieved them from liability of damaged or stolen rental property. Rent-A-Center East, Inc. and Rent Way, Inc. (collectively, the “Taxpayers”) operated retail stores in South Carolina from which customers could rent-to-own durable consumer products. In conjunction with the rentals, taxpayers could purchase waivers that released the customer of its liability if the property was damaged, lost, or stolen. The Taxpayers collected sales tax on the rentals of the consumer products, but not on the sales of the waivers. The Court found that the waivers were part of a bundle subject to sales tax under the “true object” test. Specifically, the waivers were subject to sales and use tax because the waivers and rental fees were “merely incidental” and “inextricably linked” to the sales of the taxable rentals. Rent-A-Center East, Inc., v. Dep’t of Revenue, No. 2016-001210 (S.C. Ct. App. Jan. 16, 2019).

The Indiana Supreme Court recently held that a company properly classified a driver as an independent contractor, not an employee, for unemployment insurance tax purposes. The company connected drivers with vehicle manufacturers that needed large vehicles driven to their customers or dealerships. When a former driver filed a claim for state UI benefits, the Indiana Department of Workforce Development (DWD) classified the driver as an “employee” and an ALJ agreed. The Court of Appeals reversed and the DWD appealed.

Indiana employers pay UI tax on employee wages, but not independent contractor payments. Applying Indiana’s three-part worker classification test, the court found the company rebutted the statutory presumption that all workers are “employees” because the driver: (1) was free from the direction and control of the company, both under contract and in fact; (2) performed a “drive-away” service outside the usual course of the company’s business; and (3) independently engaged in an established trade or business of the same nature as the drive-away service performed for the company. Notably, under the “usual course of business” prong, the court rejected arguments by the DWD that placed undue reliance on the company’s advertising or regulatory licensing. Instead, the court analyzed the company’s actual business activity of “match[ing] drivers with customers who need large vehicles driven to them.” Q.D.-A., Inc. v. Ind. Dep’t of Workforce Dev., 114 N.E. 3d 840 (Ind. 2019).

On February 26, 2019, the Oregon Tax Court held that an out-of-state cigarette manufacturer’s in-state activities violated Public Law 86-272, resulting in the manufacturer being subject to Oregon’s corporation excise tax. P.L. 86-272 prohibits any state from imposing a net income tax on out-of-state taxpayers that generally limit their in-state business activities to solicitation. The manufacturer sold cigarettes to Oregon wholesalers, which then sold them to in-state retailers. The manufacturer had a program by which it paid wholesalers to accept returns of non-saleable cigarettes from retailers for replacement or refund. The court held that this practice exceeded mere solicitation and, thus, violated Public Law 86-272, subjecting the manufacturer to the Oregon corporation excise tax. Santa Fe Natural Tobacco Co. v. Dep’t of Revenue, Dkt. No. TC-MD 170251G (Or. Tax Ct. Feb. 26, 2019).

Meet Ellie, the best friend of Hanish Patel, SALT associate in Eversheds Sutherland’s Atlanta office, and his fiancée, Paru.

Ellie and Paru met in St. Louis (Ellie is a 2012 cum laude graduate of the Puppy Obedience School of St. Louis). When Paru accepted a job in Atlanta, Ellie moved in with Paru’s parents in Memphis.

“Ellie claims she’s a free spirit,” says Hanish, “but really she just doesn’t want to get a job.”

Ellie was initially hesitant about moving in with Hanish and Paru in Atlanta, concerned about being a small dog in the big city. At the same time, Hanish wasn’t too thrilled either, reportedly telling friends that he did not want an “animal loose in his house.” Things quickly changed once they got to know each other, and they realized they had much in common. Ellie and Hanish both like to go for evening strolls, listen to podcasts, and catch up on the week’s episodes of Jeopardy! 


According to Ellie, the move hasn’t always been so fun. “One time, [Hanish] told me we were going to the park, but he took me to the groomer instead,” Ellie recalls. “I wasn’t mad he lied to me, just disappointed.”

“Ellie’s a good girl, such a good girl,” Hanish now admits, even though she can still be stubborn at times. “She loves her Cheez-its, and she won’t share them, so don’t even ask.”

When Hanish was told Ellie would be featured as our Pet of the Month, he said, “This is probably the coolest thing that’s ever happened to me.” 



To submit YOUR pet to be featured, visit the Eversheds Sutherland SALT Shaker App, click the Pet of the Month in the drop-down, then click “Submit A Pet.”

On March 8, 2019, the New York Department of Taxation and Finance released an Advisory Opinion ruling that an online marketplace operator that facilitates taxable software sales is a “vendor” liable to collect sales tax. The Department relied on a rarely-used portion of the definition of “vendor,” which states that “when in the opinion of the commissioner it is necessary for the efficient administration of [the sales tax law] to treat any salesman, representative, peddler or canvasser as the agent of the vendor . . . the commissioner may, in his discretion, treat such agent as the vendor jointly responsible . . . for the collection and payment of the tax.” According to the Department, treating a software marketplace operator as a vendor will improve the efficiency of sales tax administration because the software marketplace operator “is in a better position” than a seller of software on the marketplace to collect the tax. The Department further stated in a footnote that a 1999 Advisory Opinion — which ruled that an online marketplace operator facilitating sales of tangible goods was not a “vendor” for New York sales tax purposes — was inconsistent with the new Advisory Opinion and therefore should no longer be followed.

Advisory Opinion, TSB A 19(1)S (N.Y.S. Dep’t of Taxation & Fin., Mar. 7, 2019, released March 8, 2019

On January 31, 2019, the New Jersey Tax Court issued its ruling on whether a taxpayer must add-back intercompany payments to its parent, estimated payments based on tax sharing agreements, as tax payments made to other states. The payments were to reimburse the parent corporation for taxes it paid on behalf of the combined group in non-separate reporting states. On its separate New Jersey return, the taxpayer did not add-back the intercompany payments and treated the payments as deductible business expenses. However, the New Jersey Division of Taxation denied this deduction and argued it was an “indirect payment of tax.” Although the court agreed with the taxpayer that the intercompany payments were not “taxes paid or accrued” to a state, but contractual obligations, the court concluded that the taxpayer must add-back the pro rata share of its tax liability paid by the parent in combined reporting jurisdictions. The court further found that the taxpayer would be entitled to a reduction in CBT related to any overpayment of CBT made by the parent on the taxpayer’s behalf. Daimler Investments US Corporation v. Director, Division of Taxation, No. 008165-2016, 2019 WL 409433 (NJ Tax Ct. Jan. 31, 2019).