The Delaware Superior Court granted summary judgment in favor of the taxpayer finding that the Division of Revenue’s limitation on net operating losses violated the state constitution’s uniformity clause and that the Division improperly limited the amount of separate company NOL the taxpayer could claim on its Delaware income tax return to the amount of its federal consolidated NOL deduction. While the taxpayer in this matter filed a consolidated federal income tax return, Delaware requires separate company income tax returns and thus calculates net operating losses on a separate company basis. The Delaware Division of Revenue limited the amount of the taxpayer’s separate company NOL carryforward deduction to the amount of the taxpayer’s consolidated NOL deduction based on the Division’s policy to require a taxpayer to compute its NOL on a separate company basis under the Internal Revenue Code and then to limit that separate company NOL deduction to the consolidated NOL deduction on the federal consolidated group. The court found that the Division’s policy was consistent with Delaware’s income tax statute and that the policy did not discriminate against interstate commerce in violation of the U.S. Constitution. However, it ruled that the Department’s policy violated the state constitution’s uniformity clause by creating two classes of taxpayers and by treating taxpayers that file a federal consolidated return differently than those that do not. The Division therefore improperly limited the amount of NOL the taxpayer could claim.

Verisign, Inc. v. Dir. Of Revenue, Del Super. Ct., No. N19C-08-093 (12/17/2020)

Welcome to the Eversheds Sutherland State and Local Tax Policy series, a new feature of the SALT Shaker Podcast. In this first episode, we focus on 2021, the effect of the pandemic on state budgets and attempt to prognosticate what to expect as state legislatures near the time for their sessions.

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. This series is hosted by Partners Nikki Dobay, Charlie Kearns and Todd Lard, who each have extensive backgrounds in tax policy.




Listen now: 

For a transcription of this podcast, click here.

Subscribe for more:


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 game show production company recently scored a dismissal of a state’s attempt to tax $3.6 million in royalties?

E-mail your response to

The prize for the first response to today’s question is a $20 UBER Eats gift card.

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

The Illinois Department of Revenue (IDOR) recently issued updated sales tax rules and guidance for remote sellers and marketplace facilitators. The updated rules and guidance reflect changes made by the 2019 “Leveling the Playing Field for Illinois Retail Act” that became effective on January 1, 2021 (Public Act 101-0031 and Public Act 101-0604).

Updated Retailers Occupation Tax (ROT) Rules

The new ROT administrative rules address six categories of retailers with different tax liabilities:

  1. Remote retailers incurring state and local ROT using destination sourcing for sales made to Illinois purchasers;
  2. Marketplace facilitators incurring state and local ROT using destination sourcing for sales made over the marketplace on behalf of marketplace sellers to Illinois purchasers;
  3. Marketplace facilitators incurring state and local ROT using origin sourcing for their own sales that are fulfilled from inventory located in Illinois and incurring state and local ROT using destination sourcing for all other sales of its own;
  4. Out-of-state retailers with a physical presence in Illinois incurring a use tax collection obligation for sales made outside Illinois and shipped or delivered to Illinois purchasers; such retailers also incur state and local ROT using origin sourcing for any sales made in Illinois;
  5. Illinois retailers, including brick and mortar retailers, incurring no state or local ROT for sales made over a marketplace (the marketplace facilitator will now incur state and local ROT liability based on destination sourcing for these sales); and
  6. Illinois retailers, including brick and mortar retailers, incurring state and local ROT based on origin sourcing for sales made in Illinois.

As a result of these differing tax obligations, the IDOR advises that it is critical that retailers examine their selling activities to determine their specific tax liabilities. This is especially important for retailers that engage in multichannel retailing (for example, retailers that engage in selling through their own website, as well as through a marketplace, or Illinois brick and mortar retailers that also sell over a marketplace).

Finally, the scope of the rules is limited to state and local ROT. The rules do not impact the liability of marketplace sellers and remote retailers for other taxes administered by the IDOR or taxes administered by localities.

Destination-based Sales Tax Guidance

On January 4, 2021, the IDOR published a website with technical guidance for remote retailers and marketplace facilitators who must collect destination-based sales tax starting Jan. 1, 2021. The website addresses how these taxpayers can determine tax rates and location codes, add and change locations on a MyTax Illinois account, and properly file Forms ST-1/ST-2.

Threshold Calculation Guidance for Marketplace Facilitators

Illinois Informational Bulletin FY 2021-02-A, provides additional ROT guidance for marketplace facilitators. The guidance advises that for the purposes of calculating the remittance threshold determination for marketplace facilitators, two categories of sales should be excluded:

  • sales for resale, and
  • sales of tangible personal property that is required to be registered with an agency of Illinois, including motor vehicles, watercraft, aircraft, and trailers.

All sales other than these, even if they are exempt from tax, must be included in calculating the tax remittance thresholds. Finally, a marketplace facilitator is considered to be habitually engaged in the selling of tangible personal property and as such, no sales made by a marketplace facilitator are considered to be occasional sales (unlike a remote retailer). Therefore, marketplace facilitators do not have occasional sales to exclude from their tax remittance threshold determination.

Further guidance was provided in September in Illinois Informational Bulletin FY 2021-2: Retailers’ Occupation Tax Guidance for Remote Retailers as set forth by the Leveling the Playing Field for Illinois Retail Act.

On January 5, Eversheds Sutherland SALT Partners Todd Lard and Maria Todorova will present a webinar about top SALT audit issues and trends for the coming year with Associate Mike Kerman as part of Eversheds Sutherland’s 2021 tax outlook webcast series. (Presentation materials can be found here.)

Members of the Tax Practice will also address topics concerning employee benefits, digital taxes and more during the seven-part series, held from January 5 to 15 from 3:00 to 4:00 p.m. EST.

For more information about the series or to register, click here.

On December 4, 2020, the Washington Department of Revenue Appeals Division determined that an out-of-state company’s participation in an annual three-day trade show in Washington state was sufficient to create substantial nexus with the state and subject the company to both business and occupation tax (B&O tax) and retail sales tax. The taxpayer, an out-of-state video game developer, did not maintain a permanent physical presence in Washington and did not have any employees or representatives located in the state. During the audit period, the taxpayer’s employees attended an annual three-day trade show in which the taxpayer displayed its products by hosting demonstrations, gave away free products to attendees of the trade show, and organized discussion panels attended by potential buyers.

According to the Department, the taxpayer’s online sales to Washington residents were subject to B&O tax and sales tax based on the taxpayer’s participation in the trade shows. The taxpayer argued that attending this annual trade show and engaging in these activities, without some additional activity, did not create substantial nexus because the taxpayer did not engage in retail business activity at the trade shows. However, the administrative law judge (ALJ) reviewing the taxpayer’s petition disagreed, citing a prior ruling involving trade show attendance where substantial nexus was found based on the taxpayer engaging in activities in Washington to increase familiarity with their products. The ALJ noted that substantial nexus can exist where a company’s physical presence in Washington is only “demonstrably more than a slightest presence.”

Det. No. 15-0036, 39 WTD 191 (2020).

Legislation (S.302) was prefiled in the New York State Senate for the 2021-2022 legislative session that would expand the sales tax base to digital advertising services. The bill was prefiled by Democratic State Senator Kevin Thomas.

The bill defines “digital advertising services” as “advertisement services on a digital interface, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services which markets or promotes a particular good, service, or political candidate or message.”

Senator Thomas introduced identical legislation (S.8166) during the 2019-2020 legislative session, which did not make it out of committee. New York also considered other approaches to taxing digital advertising services last year, including a stand-alone gross receipts tax (S. 8056).

In addition to New York, other states previously considered – and will consider – legislation that would impose taxes on digital advertising services, although under different approaches. For example, Nebraska and the District of Columbia attempted to expand their sales tax bases to “digital advertisements” and “advertising services,” respectively, during their 2020 legislative sessions. And, like New York, legislators in other states will consider taxing digital advertising services in the 2021 legislative sessions. Most notably, the Maryland General Assembly will consider a veto override of H.B. 732, and Washington will consider expanding its sales tax base to digital advertising services through newly introduced legislation (see Bill Draft H-0028).

If passed, the tax revenue from S.302 would be paid into a special fund for providing zero interest refinancing of eligible undergraduate education loans by the higher education services corporation. The act would sunset after 5 years.

The New York Legislature will convene its 2021-2022 legislative session on January 6th. The Eversheds Sutherland SALT Team will continue to follow S.302 during the upcoming legislative session.

On December 29, 2020, California’s Franchise Tax Board (FTB) staff announced a twenty-day comment period for four changes to the proposed draft language of its 25137 Regulation (Alternative Apportionment). After the twenty-day comment period expires, FTB staff intends to present the newly revised proposed draft Regulation language to the three member Franchise Tax Board to request permission to proceed with the formal Administrative Procedures Act (APA) regulatory process.  This regulation project has been ongoing since 2017 and FTB has held a total of four interested parties meetings on the proposed amendments.

After the Interested Parties Meeting held on August 11, 2020, the FTB proposed the following amendments:

  • The first revision takes previously deleted language “Consideration of said petitions by the Board shall be in open session at a regularly-scheduled meeting” and retains it in section 25137(d).
  • The second revision adds language to section 25137(d)(2)(D) to specify that a taxpayer will receive notification of the petition and the briefing schedule either sixty (60) calendar days from the date of the petition, or sixty (60) calendar days from the date of FTB staff’s determination if a determination was not previously made, whichever occurs later.
  • The third revision modifies the time allowed for opening and reply presentations specified in section 25137(d)(3)(A) from thirty (30) minutes for opening presentations and fifteen (15) minutes for taxpayer’s reply presentation to twenty (20) minutes for opening presentations and ten (10) minutes for taxpayer’s reply.
  • The fourth revision replaces “of” with “at” in section 25137(d)(3)(C) to state: “The Franchise Tax Board, itself, shall render its decision on the taxpayer’s petition during an open session at a regularly-scheduled meeting.”

FTB will accept written comments until 5 p.m. on January 18, 2021, by mail and email.

For a more detailed look at the 25137 regulation project, please see our previous post: The Long Road to Clarity: FTB Holds Latest Meeting in Multiyear Project to Clarify Alternative Apportionment Petition Process.

On December 18, SB 50 was filed in the Florida Senate which would require sales tax collection from a person whose remote sales to Florida exceed $100,000 per year. It states that a person whose “taxable remote sales in the previous calendar year” exceed $100,000 has a “substantial number of remote sales” and is therefore a “dealer.” The bill also requires a “marketplace provider” to collect sales tax. It defines “marketplace provider” to include a person who facilitates retail sales by listing or advertising for sale in a marketplace and directly or indirectly collects payment from the customer. The bill provides an exclusion from this rule for travel agency services, delivery network companies, and payment processor businesses. The Florida House of Representatives previously introduced a similar bill, HB 15.

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 (DOR) issued a letter ruling in October with a rare no-nexus finding for a foreign investment fund?

E-mail your response to

The prize for the first response to today’s question is a $20 UBER Eats gift card.

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