The New Jersey Tax Court rejected the Division of Taxation’s application of a five-factor alternative apportionment formula as invalid rulemaking under New Jersey’s Administrative Procedures Act (APA). The Tax Court previously determined that an application of the statutory apportionment formula in effect prior to 2011 for companies without a “regular place of business” outside New Jersey did not fairly reflect the taxpayer’s in-state business activities and remanded the case to the Division so that other apportionment methods could be considered. The Division then proposed a modified five-factor formula. The Tax Court found that while the five-factor formula could be an acceptable exercise of the Division’s discretionary authority to adjust the taxpayer’s apportionment formula, it nevertheless constituted an impermissible “de facto rule-making” in violation of the APA.


Canon Fin. Servs., Inc. v. Director, Div. of Taxation, No. 000404-2014 (N.J. Tax Ct. Dec. 5, 2018).

On December 5, 2018, the Indiana Supreme Court in a 3-2 split decision held that an RV dealership was liable for uncollected sales tax on RV sales even though it delivered the RVs to buyers at out-of-state locations.

The RV dealership’s protocol for transferring possession of its RVs to customers depended on the customer’s state of residence. Customers from Indiana—or from one of the 40 states with reciprocal tax exemption agreements under Indiana Code section 6-2.5-5-39(c)—drove their RVs directly off the dealership lot and paid Indiana sales tax. Customers from the nine states without reciprocal tax exemption agreements, however, could choose to pay sales tax either at Indiana’s rate or at their home state’s rate, with customers ostensibly choosing the lesser of the two.

The RV dealership is based in Middlebury, Indiana, which is approximately eight miles from the Michigan border. When the RV dealership made sales to Michigan customers, it would drive the RVs to a Michigan gas station approximately three miles north of the Indiana border that functioned as the delivery location. At the gas station, the customers would sign confirmations of delivery and receive the keys to their new RVs. The Indiana Tax Court ruled that these transactions were not subject to Indiana sales tax because the transactions were made outside of the state. The Indiana Supreme Court reversed the tax court’s decision, holding that Indiana sales tax was due on the Michigan sales because the RV dealership delivered the RVs in Michigan solely to avoid paying Indiana sales tax with no other independent, non-tax-related business purpose. (Richardson’s RV, Inc. v. Indiana Dep’t of State Revenue, 112 N.E.3d 192, (Ind. 2018)).

The Louisiana Supreme Court ruled that residents who owned an S corporation and limited liability company were entitled to a credit against their Louisiana income tax liability for Texas franchise tax paid by the pass-through entities. In so holding, the Louisiana Supreme Court found that La. R.S. 47:33, which limits the credit for taxes paid to other states to those states that offer a reciprocal credit to that state’s residents for business transacted in Louisiana, was unconstitutional because it was applied to the Texas franchise tax. Further, in noting that the reciprocity requirement discriminates against interstate commerce, the Louisiana Supreme Court also suggested that the limitation on the amount of the credit by the amount of tax that would have been imposed by Louisiana also discriminates against interstate commerce. (Smith v. Robinson, Dkt. No. 2018-0728 (La. 12/05/2018)).

The Louisiana Court of Appeal, First Circuit held that a taxpayer was not entitled to a refund of franchise tax under an interpretation of the franchise tax law by the Department of Revenue that was struck down in Utelcom, Inc. v. Bridges, 2010-0654 (La. App. 1 Cir. 9/12/2011); 77 So. 3d 39. In Bannister, the court relied on La. R.S. 47:1621(F) finding that such section precluded the Department from issuing a refund because the tax was paid as a result of a “mistake of law arising from the misinterpretation by the secretary of the provisions of any law or of the rules and regulations promulgated thereunder.” Instead, the taxpayer could only seek to recover franchise tax paid under a mistaken interpretation of law by the Department by (1) paying the tax under protest (and filing a petition to recover the payment under protest), or (2) seeking recovery from the Louisiana Legislature under the claim against the state procedure. (Bannister Properties, Inc. v. State of Louisiana, Dkt. No. 2018-0030 (La. App. 1 Cir. 11/02/2018)).

The Missouri Department of Revenue, in a letter ruling, found that a taxpayer’s sales of exercise products were subject to state and local sales taxes because the transactions were not in commerce, since the orders were fulfilled and shipped to Missouri customers by a third-party warehouse in Missouri. The Department of Revenue also found that the taxpayer had substantial nexus with the state, through its use of a third-party warehouse in Missouri, to require it to collect state and local use tax for the sales of its products, fulfilled and shipped outside of the state directly to Missouri customers. (Missouri Director of Revenue, Letter Ruling No. 7972 (Aug. 23, 2018)).

The Massachusetts Appellate Tax Board disallowed a deduction for Indiana utility receipts tax (URT) paid by a natural gas distribution operator with operations in Indiana. The deduction for the URT was disallowed, for purposes of computing Massachusetts net income for corporate excise tax, because the URT is not a deductible “transaction tax.” The Board found that while the URT may have some characteristics of a transaction tax, on balance the URT is more akin to the types of income and franchise taxes that must be added back to net income under the Massachusetts statute. Bay State Gas Co. v. Comm’r of Revenue, Dkt. No. C332071 (Mass. App. Tax Bd. Oct. 23, 2018).

Meet Lola, the svelte and sprightly pet of Mike Kerman, SALT associate in Eversheds Sutherland’s Washington office, and his wife Kristy Callahan (Lola’s “real” last name is Kermallahan, a portmanteau). Lola is a black lab-whippet mix, to be confirmed by DNA test, who celebrated her first birthday on Thanksgiving Day.

Mike and Kristy took Lola in one fateful September day when they received an email from an adoption agency saying Lola (née Seashore) desperately needed to be picked up to prevent her from spreading her highly contagious “kennel cough” to her fellow cellmates. After a few days of wheezing, Lola recovered enough to contract several new ailments. Luckily she loves going to the vet, which eases the burden of her frequent appointments.

Lola is a recovering sufferer of separation anxiety, a remnant of her early shelter life. But with lots of positive training and reassurance that Mike and Kristy will always come home, she now snoozes away on Mike’s big green chair when she has to be left home alone. 

Lola is without fail the fastest dog at the park, zipping back and forth so fast that her ears get stuck inside out. She will happily fetch all day long and expertly fends off attempts from other dogs to steal her favorite ball.
Lola loves all food and is an avid counter-surfer (unauthorized food was consumed during the writing of this post). Besides fetching and scavenging, Lola’s favorite thing to do is meet new people. She turns a short walk around the block into a welcoming committee for every neighbor, stranger and passerby.

Lola is excited to be featured as January’s Pet of the Month!

The State of New Mexico Administrative Hearings Office held that the New Mexico Taxation and Revenue Department could not remove the payroll factor from the apportionment factor calculation of a taxpayer in the credit card and personal lending business. The Hearings Office determined that “the party seeking to depart from the proscribed apportionment method,” which, in this case, was the Department, “bears the burden of proving by clear and convincing evidence that such departure is appropriate.” In this circumstance, the Department failed to prove that the taxpayer’s employees were not contributing significantly enough to the generation of the taxpayer’s income to warrant a full weighting of the payroll factor with the property and sales factors.


In the Matter of the Protest of Discover Bank, N.M. Admin. Hearings Office, Decision and Order No. 18-44 (Dec. 21, 2018).

Significant developments in unclaimed property laws have turned settled expectations upside down in a variety of areas. While states continue to press forward on audits, new legislation, new regulation and litigation across the country are shifting the rules in this already uncertain area. Companies under audit face difficult choices ahead, and those not (yet) under audit face an uncertain risk and compliance landscape. This webcast will examine recent trends and what to expect moving forward. Topics include:

·        trends in audits, legislation and regulation
·        IRA reporting under new IRS guidance
·        gift cards and False Claims Act issues
·        other litigation highlights
·        emerging unclaimed property issues

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