In a prior SALT@Work column for the Journal of Multistate Taxation and Incentives, Eversheds Sutherland attorneys Charlie Kearns and Alexandra Louderback discussed the localization of work rules that determine where an employer will be subject to state unemployment insurance (UI) registration, reporting and taxes when an employee works in multiple states.

Shortly after that column published, two states, California and Massachusetts, issued or updated guidance pertinent to the localization rules that apply to UI and other employment taxes. In a new column,  they summarize that guidance and discuss its relevance among the other state employment tax regimes during the COVID-19 pandemic.

The New York State Department of Taxation and Finance issued an advisory opinion determining that the fee paid for an information technology support service was not subject to sales and use tax because the taxable component of the service was delivered outside of New York. The taxpayer provided investment advice to its customers and as part of the service, it conveyed significant data through its website. To deliver this service the taxpayer used servers and other information technology assets located outside of New York. The taxpayer hired a New York based company to manage these assets and to provide IT services. The advisory opinion determined that the management of the IT system including security audits, providing anti-virus software, routing emails through anti-spam platform, and managing the taxpayer’s domain name system, constituted a taxable protective service under New York statute. However, because the computer assets and data being protected were located outside of New York, this service was not subject to New York sales tax.

On April 12, 2021, the Florida legislature presented S.B. 50 to Governor DeSantis, 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 collection by a “marketplace provider,” defined as 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. These requirements apply to remote sales made or facilitated on or after July 1, 2021, by a person who made or facilitated a substantial number of remote sales in calendar year 2020. A marketplace seller shall consider only those sales made outside a marketplace to determine whether it made a substantial number of remote sales. Starting April 1, 2022, marketplace providers are also required to collect and remit the E911 fee, waste tire fee, and lead-acid battery fee.

Maryland had previously enacted two important – and troubling – sets of tax changes: a new tax on digital advertising and a substantial expansion of its sales tax to digital products and services.  As a result of several significant problems with both tax changes, the Maryland legislature just passed Senate Bill 787.

  • S.B. 787 amends Maryland’s Digital Advertising Gross Revenues Tax by: (1) delaying the start date to January 1, 2022; (2) exempting broadcast and news media entities’ digital advertisement services, and (3) prohibiting the pass-through of the tax via a separate charge.
  • S.B. 787 also amends Maryland’s sales and use tax expansion on digital products by: (1) exempting a limited number of digital services, including live-streamed school instruction; (2) expanding the custom computer software exemption; and (3) making various technical corrections.

Maryland Governor Larry Hogan is expected to neither sign nor veto the bill, which would allow S.B. 787 to become law in 30 days.

Read the full Legal Alert here.

New Jersey’s Appellate Division concluded that a Jersey City payroll tax violated the dormant Commerce Clause because there was no mechanism to resolve disputes if two taxing entities, in different states, impose a payroll tax on the same employee.  The lower court had previously dismissed the case, ruling that the Jersey City payroll tax was not prohibited by federal or state constitutions.

The payroll tax was enacted for the stated purpose “to establish a payroll tax on the payrolls of Non-Jersey City residents for the benefit of Jersey City school.  “Payroll” includes the total remuneration paid by employers to employees for services performed within the city or performed outside of the city but supervised in the city.”  Plaintiffs, a group of business owners, real estate developers, labor unions and trade associations, challenged the state and federal constitutionality of the payroll tax.  After disposing of the state constitutional challenges, the Court also rejected Plaintiffs’ argument that the payroll tax was unconstitutionally discriminatory, as it applies equally to all employers whether in state or out of state, and upheld the provision that exempted payroll paid to Jersey City residents from taxation.  However, the Court concluded that neither the applicable statute nor the Ordinance provide a mechanism to resolve disputes if two taxing entities, in different states, impose a payroll tax on the same employee, resulting in a violation of Commerce Clause internal consistency and thus the second “fairly apportioned” prong of the Complete Audit.  The Court remanded the case to the lower court to determine the remedy for the discrimination.

The New York State Department of Taxation and Finance issued an advisory opinion, determining the taxability of two online services sold by a taxpayer relating to government requests for proposal: (1) the procurement service was nontaxable; but (2) the notification service was a taxable information service. The procurement service allowed government customers to create RFPs via the website and release them for distribution to potential bidders. Contractors would then submit proposals through the website. The Department concluded that this service was not taxable because providing customers with the ability to distribute their RFPs is not an enumerated service. The notification service allowed the contractors to identify and respond to more bid opportunities by: (1) constantly monitoring all known government RFP releases; (2) inputting them into its database; and (3) notifying the customers of potentially applicable RFPs. The Department concluded that this service was a taxable information service and the “personal or individual” information exclusion did not apply because the information was derived from a common database.

In this episode of the SALT Shaker Podcast policy series, Carol Portman, President of the Taxpayers’ Federation of Illinois, joins Breen Schiller, Partner in the Chicago office of Eversheds Sutherland, and host Nikki Dobay for an insightful discussion about the 2021 Illinois legislative session.

They discuss the Legislature’s COVID-19 procedures, whether a handful of bills that would change the way in which Illinois taxes foreign source income have legs, the yet-to-be finalized budget and select bills that Illinois taxpayers should have on their radar.

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, which is focused on state and local tax policy issues, is hosted by Partner Nikki Dobay, who has an extensive background in tax policy.

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On April 6 & 7, 2021, the New York Assembly and Senate passed Fiscal Year 2022 budget legislation addressing revenues and taxation (the Budget Bill). The Budget Bill is part of a broader deal between Governor Cuomo and both chambers of the Legislature. The Budget Bill is expected to raise $3.5 billion in new tax revenue in FY 2022 and $4.3 billion in new tax revenue in FY 2023.

Read the full Legal Alert here.

The New York State Department of Taxation and Finance issued an advisory opinion, concluding that a taxpayer’s charges for its online webhosting solution were not subject to sales tax. The customers pay an annual fee for their events (audio and video meetings, conferences, webinars and live presentations) to be hosted and maintained and also for on-demand viewing of the events. The Department concluded that, to the extent that the product facilitates the hosting of events, it is not taxable. The ability to create event pages, build webinar features into events, and control the player/console interface would have been taxable prewritten software, if sold separately. But the features did not cause the entire charge to be taxable because they were provided at no additional charge and were ancillary to the main function of the webcasting and virtual communications product.

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 Midwestern state’s legislature is considering a bill that would ratify a local sales tax that was passed illegally 11 years ago?

E-mail your response to

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 Weekly Digest. Be sure to check back then!