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: Which state’s Department of Revenue recently ruled that fees a marketplace facilitator charges for connecting buyers and sellers and processing payments are not subject to sales 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. Answers will be posted on Saturdays in our SALT Shaker Weekly Digest. Be sure to check back then!

Pennsylvania recently codified the state’s corporate income tax economic nexus threshold, making corporations with no physical presence in Pennsylvania responsible for corporate income tax if they have sales of $500,000 or more per year sourced to Pennsylvania for tax years beginning after December 31, 2022. The legislation also includes a non-exhaustive list of other nexus creating activities. This change to the Pennsylvania tax law is similar to the Department’s substantial nexus position originally published in Corporation Tax Bulletin 2019-4 on September 30, 2019 which deemed $500,000 in gross receipts sourced to Pennsylvania to create a rebuttable presumption of substantial nexus. The new law does not address the interim period between the new law’s effective date for the 2023 tax year and the issuance of Bulletin 2019-4.

This week, the MTC will host its 55th Annual Meeting & Seminar, including meetings of its standing committees, between August 1 and 4 in Anchorage, AK.

On August 2, Eversheds Sutherland Partners Michele Borens, Nikki Dobay and Jeff Friedman will present during the Uniformity Committee Meeting.

Topics include:

  • Uniform Power of Attorney Proposal – Nikki Dobay
  • Marketplace Implementation Issues – Michele Borens, Jeff Friedman

For more information and to register, click here.

In this episode of the SALT Shaker Podcast, Eversheds Sutherland Associates Jeremy Gove and Chelsea Marmor dive in to the history of New York’s corporate tax reform, including a discussion of the anticipated “final draft” apportionment regulations the Department released on July 1.

They discuss the regulations, the New York State Department of Taxation and Finance’s process and different avenues taxpayers may use to find guidance in the absence of finalized regulations.

Jeremy’s overrated/underrated question this week is a bit more metaphorical. Is nostalgia overrated, or underrated?

Questions or comments? Email SALTonline@eversheds-sutherland.com. You can also subscribe to receive our regular updates hosted on the SALT Shaker blog.

 

 

 

 

 

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The New York State Tax Appeals Tribunal upheld an income tax assessment and disallowed taxpayers’ claim of resident tax credits (RTCs) to the extent such RTCs were claimed for taxes paid to Connecticut on the taxpayers’ carried interest income. The taxpayers, both of whom were residents of New York, were employed by an affiliate of two investment hedge funds. Both taxpayers received flow-through investment income in the form of carried interest, consisting of interest income, dividends, capital gains and ordinary business income or loss generated by such hedge funds. During the periods at issue in the case, the taxpayers paid income tax in both Connecticut and New York on all of their carried interest income and each taxpayer claimed an RTC in New York for income taxes paid in Connecticut.  The Division of Taxation disallowed the RTCs and issued assessments. The taxpayers’ argued that they were entitled to the RTC because the carried interest constituted income derived from property employed in a business, trade, profession or occupation within another jurisdiction. The Tribunal disagreed, finding that, as an initial matter, the taxpayers had not met their burden in demonstrating that the operations of the hedge funds were solely based in Connecticut rather than New York. In addition, the Tribunal held that the carried interest income was intangible income derived from the trading of intangible property. As a result, the income could not be generated from a business in any jurisdiction and that New York taxed such income based on the taxpayers’ residency in New York. The Tribunal determined that the resulting double taxation in both Connecticut and New York was not a violation of the U.S. Constitution’s Commerce Clause because New York did not tax the intangible income of nonresidents.

Matter of Allison Greenberg and Scott J. and Martha M. Farrell, DTA Nos. 829737, 829738 (N.Y.S. Tax. App. Trib., July 14, 2022).

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: Which California Office of Tax Appeals decision did Eversheds Sutherland Senior Counsel Eric Coffill discuss in his recent article for Bloomberg 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. Answers will be posted on Saturdays in our SALT Shaker Weekly Digest. Be sure to check back then!

The New York State Tax Appeals Tribunal affirmed an Administrative Law Judge determination that two taxpayers remained New York residents because the taxpayers did not establish that they had changed their domicile to Florida during the relevant tax years. Because the taxpayers spent “more than 30 but less than 184 days in New York,” the Tribunal looked to whether the taxpayers changed their domicile, as illustrated by their “general habit of life.”   Through their representative, an accountant, the taxpayers alleged several actions were taken that would support a change of their domicile to Florida, including: registering to vote in Florida, changing their driver’s licenses, buying a car from a Florida dealer, executing wills in Florida, and moving other “near and dear” personal property, including an antique car collection, to Florida. However, the evidence provided by the taxpayers consisted entirely of a few formal declarations and unsworn, unsubstantiated statements. The Tribunal agreed with the Administrative Law Judge that such evidence should be given little weight and was insufficient to meet the taxpayers’ burden of proof. The Tribunal specifically noted that the evidentiary burden to establish the taxpayers’ intent to change their domicile to Florida could not be met without sworn statements or testimony to establish the veracity and significance of the other evidence that had been submitted.

Matter of Thomas A. & Jean Boniface, DTA No. 829018 (N.Y.S. Tax App. Trib., June 30, 2022).

In Letter Ruling 22-02 (publicly released last week), the Tennessee Department of Revenue ruled that fees a marketplace facilitator charges for connecting buyers and sellers and processing payments are not subject to sales tax. The taxpayer in the ruling was a “delivery network company” under Tennessee law. It connects third-party sellers of tangible personal property to purchasers and also connects purchasers to third-party service providers (such as delivery services). The taxpayer does this through a web-faced interface or app. The marketplace facilitator taxpayer was responsible for remitting sales tax on behalf of the sellers. The marketplace facilitator taxpayer separately charges the marketplace sellers and the third-party service provider for its fees. The fees are for connection, lead generation, and payment processing services. The Tennessee Department of Revenue ruled that the fees charged to the marketplace seller and service providers are not subject to sales tax because the “true object” of the transactions covered by these fees are lead generation and payment processing, which are not taxable services in Tennessee. The taxable web-based interface and app are merely incidental components of the transaction.

Earlier this month, the California Franchise Tax Board released Legal Ruling 2022-02, regarding the sourcing of Internal Revenue Code Section 751(a) gain from the disposition of a nonresident individual’s partnership interest when the IRC Section 751 property is located in California.

In this article for Law360, Eversheds Sutherland Senior Counsel Eric Coffill discusses the nonresident asset ruling and its potential impact, especially where Section 751 property is involved.

Read the full article here.