By Chris Beaudro and Carley Roberts

On June 21, 2017, the Maine Legislature overrode the Governor’s veto and passed legislation requiring the collection of sales tax by remote sellers. The legislation requires remote sellers to collect Maine sales tax on their sales into the state if the seller’s gross revenue from sales into Maine exceeds $100,000 or the seller made at least 200 separate sales into the state during the previous or current calendar year. This legislation also contains a somewhat unique provision that allows the state to bring a declaratory action against any person that it believes meets the above requirements to collect tax regardless of whether the state has initiated an audit of that person. The legislation also allows taxpayers that are required to collect sales tax pursuant to the law to deduct and retain 2% of the sales tax collected as a “collection allowance.” With the enactment of this legislation, Maine has joined a growing number of states that have enacted sales tax nexus laws that are directly contrary to the US Supreme Court’s holding in Quill. ME Senate Paper 483.

The Georgia Senate Special Tax Exemption Study Committee held its initial meeting to plan evaluation of Georgia income and sales tax exemptions by December 1, 2017.

  • The special study committee was created by a Georgia Senate Resolution during the 2017 Legislative Session.
  • The Committee will prioritize exemptions to evaluate, and then recommend whether to continue, expand, reduce, or sunset each exemption.
  • The Committee scheduled dates for its next four meetings, which will take place throughout the state.

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Eversheds Sutherland SALT releases the sixth edition of its SALT Scoreboard, a quarterly publication that tracks significant state tax litigation and controversy developments. This edition of the SALT Scoreboard also includes observations regarding beverage tax issues and California’s documentary transfer tax.

View our Eversheds Sutherland SALT Scoreboard results from the second quarter of 2017!

ES SALT Scoreboard Graphic Q2.jpg

Rarely does a subject as mundane as a documentary transfer tax become worthy of its own article. However, the June 29, 2017, decision of the California Supreme Court in 926 North Ardmore Avenue LLC v. County of Los Angeles is a worthy exception. Read this Law360 article by Eversheds Sutherland (US) attorneys Eric Coffill, Robert Merten and Nicholas Kump, which discusses:

  • Three criteria that must be met in order for California’s documentary transfer tax to be imposed
  • Background on the state’s Documentary Transfer Tax Act
  • The California Supreme Court’s ruling in North Ardmore v. County of Los Angeles
  • What’s to come

View the full article

 

On April 6, the Third District California Court of Appeal decided Morning Star Packing Company v. California Air Resources Board, which challenged the state’s cap-and-trade auction process as an unconstitutional tax. View this latest edition of A Pinch of SALT, by Eversheds Sutherland (US) attorneys Eric Coffill and Robert Merten, which discusses:

  • Background on the California cap-and-trade case
  • The Morning Star opinion
  • What’s next?

View the full article

By Charles Capouet and Tim Gustafson

On June 15, 2017, the Maine Supreme Judicial Court held that property tax recovery charges and carrier cost recovery charges imposed by a telecommunications service provider of long distance telephone service on its customers were not subject to service provider tax for the tax years 2008 – 2010. The charges were calculated with reference to revenue from interstate and international telecommunications services and were not collected from customers with only intrastate services. 

As a preliminary matter, the court held that the charges were included within the “sale price” of telecommunications services. Prior to July 18, 2008, Maine excluded the sale price of interstate and international telecommunications services from taxation. Because the charges were only included in the sale price of interstate and international telecommunications services, the charges were also excluded from taxation. Beginning July 18, 2008, Maine instead exempted from service provider tax the “sales of” interstate and international telecommunications services. The court held that the term “sale” is “broader than and inclusive of the price.” Thus, any charge that is part of the sale price of interstate or international services is also part of the sales of those services. As a result, the charges were part of the sales of exempt interstate and international telecommunications services and exempt from service provider tax under the amended statute as well. State Tax Assessor v. MCI Commc’ns Servs., Inc., Dkt. No. Ken-16-358 (Me. June 15, 2017).

By Jessica Eisenmenger and Open Weaver Banks

The Commonwealth Court of Pennsylvania upheld the Philadelphia Beverage Tax (PBT) against a challenge by the American Beverage Association and other challengers. The PBT imposes a 1.5¢ per fluid ounce tax on sugar-sweetened beverages and is generally payable by the distributor of the beverages. The court decided in favor of the City of Philadelphia, finding that:

  1. The PBT was not impermissibly duplicative of the Commonwealth’s Sales Tax under Pennsylvania’s Sterling Act, which precludes the imposition of a local tax on subjects that are taxed by the state, because the subject matter and the incidence of the PBT are different from those of the Sales Tax;
  2. The PBT was not preempted by the federal Food Stamp Act, its regulations, and Section 204(46) of the Internal Revenue Code, which prohibit the imposition of tax on items purchased at retail with food stamps, because the PBT is imposed on distributors, rather than on end customers;
  3. The PBT does not violate the uniformity clause in the Pennsylvania Constitution because it is not a property tax imposed on a quantity, rather than an ad valorem basis; and
  4. The trial court had reasonable grounds to deny the challengers’ request for a special injunction.

In her dissent, Judge Anne Covey stated her belief that the PBT violates the Sterling Act because it is only triggered when the beverages are held out for retail sale, and therefore it is impermissibly duplicative of the Sales Tax. Williams v. City of Philadelphia, Nos. 2077 and 2078 C.D. 2016 (Pa. Commw. Ct. June 14, 2017) (en banc).

SACRAMENTO—Eversheds Sutherland (US) LLP is pleased to announce that state and local tax (SALT) attorneys Carley A. Roberts and Eric J. Coffill were selected as top Northern California attorneys by Super Lawyers. The designations are the result of an annual survey conducted by the publication, which focuses on professional achievement and peer recognition.

View the full press release

By Robert Merten and Andrew Appleby

The Maryland Tax Court granted a summary judgment motion exempting a Vermont-licensed insurance company from almost $24 million in corporate income tax, interest, and penalties. The short two-page order swiftly cites to and expressly follows the court’s previous order in the 2015 case, Nat’l Indem. Co. v. Comptroller of the Treasury, M.T.C. No. 14-IN-OO-0433 (Md. Tax Ct. 2015), in which the court determined taxpayers “engaged as a principle in the business of writing insurance contracts, surety contracts, guaranty contracts, or annuity contracts” are statutorily exempt from Maryland corporate income tax. The court determined in this case that because the insurance company was “engaged in the insurance business,” the court saw “no reason to distinguish this case from National Indemnity and will rely on the analysis therein,” resulting in a full taxpayer victory at the summary judgment stage. Leadville Ins. Co. v. Comptroller of the Treasury, M.T.C. No. 13-IN-OO-0035 (Md. Tax Ct. Mar. 30, 2017).

Read our June 2017 posts on stateandlocaltax.com or read each article by clicking on the title. For the latest coverage and commentary on state and local tax developments delivered directly to your phone, download the latest version of the Eversheds Sutherland SALT Shaker app.

  • SALT Pets of the Month: Chloe and Bella:
    Meet Chloe and Bella, twelve and eleven year old Shih Tzu’s belonging to Valerie Saines, Director – State Income Tax at T-Mobile. Also known as Chloe-Poo and Bella-Roo, these two girls are best friends who go everywhere and do everything together despite their very different personalities.
  • New York Sales Tax Price of Being a Member of the Club
    In an Advisory Opinion, the New York Department of Taxation and Finance concluded that fees paid to a social club by non-members for certain activities (tennis lessons, children’s camp, basketball court use, etc.) are not subject to tax, although membership fees that provide access to the same activities are subject to tax.
  • FEATURED PUBLICATIONS
    • A Pinch of SALT: Trends and Developments in Alternative Apportionment of State Income
      In this edition of A Pinch of SALT, Eversheds Sutherland (US) attorneys Christopher Lutz, Robert Merten and Nicholas Kump report on the latest cases and regulatory efforts regarding alternative apportionment, and discuss the Multistate Tax Commission’s amended model section 18, designed to provide fairness to taxpayers.
    • Developing Strategic Solutions to Multistate Tax Litigation
      In their article for State Tax Notes, Eversheds Sutherland (US) attorneys Jeffrey Friedman and Stephanie Do along with Pilar Mata, Tax Counsel at Tax Executives Institute, discuss the complexities of challenging tax assessments in a multistate setting and the importance of developing a comprehensive strategy for multistate tax litigation.
    • Some Observations on Gross Receipts Taxes
      The majority of states impose a form of a corporate income tax. However, currently five states—Delaware, Ohio, Nevada, Texas, and Washington—impose a broad-based, statewide corporate gross receipts tax. The most recent addition to that list is Nevada, which in its 2015 Legislative Session enacted a new Commerce Tax that is imposed on gross revenue. More recently, there have been and are, at the time of writing, ongoing efforts in Oregon to enact a corporate gross receipts tax, either as a separate tax or as an alternative tax to the existing Oregon corporate income/excise tax. Even more recently, both West Virginia and Louisiana have considered a gross receipts tax. Such existing and proposed gross receipts taxes present a variety of policy and legal issues. In their article for the Journal of Multistate Taxation and Incentives, Eversheds Sutherland (US) attorneys Eric Coffill and Jessica Allen discuss a number of those issues and what appears to be a recent upsurge in interest in gross receipts taxes, with a discussion of the most recently enacted gross receipts tax (Nevada) and the most serious current effort to enact a gross receipts tax (Oregon).