Chloe Bella.jpgMeet 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.

Chloe is a true little princess. Her most favorite things in life are toys and snuggling. Chloe.jpgShe is a sponge for a good tummy rub anytime and gives lots of sweet kisses in return. Chloe makes sure there’s plenty of play time in every day. Her signature “toy chasing move,” which she has perfected over many years, is to start running on the family room carpet then go into a long slide when she reaches the kitchen hardwood floor and snag her toy just before the refrigerator!

Bella.jpgBella is an active outdoors girl—She loves soaking up the sun, rolling in the cool grass, collecting twigs and chasing rabbits in the backyard. She also makes sure geese at the park stay off the grass. Bella is an accomplished escape artist—she has springs in her feet jumping high over obstacles and can squeeze through small spaces to make her stealth move into the neighborhood. Toys just don’t interest her—the real fun for Bella is chasing Chloe!

These cuties love walks along Lake Washington, meeting new pups and people on the way. At the end of the day, you’ll find Bella curled up in Valerie’s lap with Chloe snuggled by her side. 

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We are thrilled to feature Chloe and Bella as June’s SALT Pets of the Month!

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To submit YOUR pet to be featured, visit the Eversheds Sutherland SALT Shaker App, click the Pet of the Month in the drop-down, then click “Submit A Pet.”

By Dmitrii Gabrielov and Jonathan Feldman

An Indiana federal court remanded a lawsuit brought under the Indiana False Claims and Whistleblower Protection Act (False Claims Act) back to Indiana state court. The relator, Michael Harmeyer, alleges that Kroger and affiliates violated the False Claims Act by failing to collect sales tax on various items at grocery stores in Indiana. Kroger tried to remove the case to federal court on the basis of diversity jurisdiction, arguing that Indiana was not a party because Indiana’s Attorney General and Inspector General declined to intervene in the case. The court disagreed and held that Indiana is the real party in interest even if it does not intervene because the action is brought “on behalf of the State.” Indiana’s presence in the litigation destroyed diversity jurisdiction because Indiana is not a citizen of any state. Indiana ex rel. Harmeyer v. Kroger Co., No. 1:17-cv-00538-JMS-DML (S.D. Ind. June 13, 2017).

While alternative apportionment is an important relief mechanism to avoid unjust taxation, it is often used to justify the ad hoc administration of tax. View the latest edition of A Pinch of SALT, by Eversheds Sutherland (US) attorneys Christopher Lutz, Robert Merten and Nicholas Kump, which reports on:

  • Recent case law regarding alternative apportionment
  • Recent state regulatory efforts to address alternative apportionment
  • The Multistate Tax Commission’s amended model section 18

View the full article.

On June 15, the California Legislature passed Assembly Bill 102, the Taxpayer Transparency and Fairness Act of 2017, which divests the California State Board of Equalization (BOE) of several key functions and creates two new government agencies—the California Department of Tax and Fee Administration and the Office of Tax Appeals—to perform many of the BOE’s previous duties. Effective July 1, 2017, the Act:

  • Confers all of the BOE’s collection and administrative responsibilities related to various taxes and fees, such as tobacco taxes, cannabis taxes, and sales and use tax, on the California Department of Tax and Fee Administration.
  • Grants the Office of Tax Appeals the authority to perform the BOE’s appellate duties.
  • Maintains the BOE’s duties as provided in the California Constitution including reviewing and adjusting certain property tax assessments and setting certain tax rates.

View the full Legal Alert.

By Jeff Friedman and Stephanie Do

Following an unfavorable court decision, state legislatures have been able to effectively reverse a decision by retroactively changing the law. Several taxpayers have challenged the validity of retroactive state tax changes by arguing that the retroactive laws violate the US Constitution’s Due Process Clause, which requires that no state may “deprive any person of life, liberty, or property without due process of law.”

The US Supreme Court last addressed the constitutionality of retroactive tax legislation in 1994 in United States v. Carlton, 512 U.S. 26 (1994). In Carlton, the Court upheld retroactive tax legislation because it was enacted for a “legitimate legislative purpose furthered by rational means” and the legislature “acted promptly and established only a modest period of retroactivity.” Carlton involved a one-year retroactive effective date. The standard provided in Carlton, however, does not give clear guidance on a constitutionally acceptable length of time for retroactive tax changes and what is considered a “modest period of retroactivity.” On May 22, 2017, the US Supreme Court declined two opportunities to clarify what is an acceptable length of time: (1) Dot Foods Inc. v. Wash. Dep’t of Revenue, 372 P.3d 747 (Wash. 2016), where the taxpayer challenged Washington’s retroactive application of tax law changes going back 27 years; and (2) six cases, including Gillette Comm. Ops. N. Am. v. Mich. Dep’t of Revenue, 878 N.W.2d 891 (Mich. Ct. App. 2015), denying appeal, 880 N.W.2d 230 (Mich. 2016), challenging Michigan’s retroactive repeal of an alternative apportionment method going back six years. Both cases involve decisions upholding a statutory amendment applied retroactively after the statute had been reviewed by the states’ supreme courts in favor of the taxpayers. In the absence of additional guidance by the US Supreme Court, victorious taxpayers may find their hard-fought successful litigation undone by a retroactively applied tax law.

Published in the June edition of the Eversheds Sutherland Global Tax Brief.

By Alla Raykin and Jonathan Feldman

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. Membership fees are taxable under New York Tax Law § 1105(f) because members purchase ownership of the club, not directly for activities. However, the Opinion determined that the fees paid by non-members directly for specific activities would be taxable only if the nature of the activity or service was taxable. The Opinion then separately analyzed the activities in question and determined whether they themselves were taxable. TSB-A-17(5)S (NY Dep’t of Taxation & Finance Mar. 3, 2017).

Managing state tax controversies is challenging not only because of the complexities that a particular case presents, but also because of the multidimensional considerations of litigating similar cases in multiple forums. View this article, which highlights the importance of developing a comprehensive strategy to avoid the pitfalls of multistate tax litigation, such as:

  • Setting goals, including settlement strategies
  • Prioritizing individual multistate tax cases
  • Understanding the procedural rules of each forum
  • Limiting information sharing among the states

In their article for State Tax Notes, Eversheds Sutherland (US) attorneys Jeff 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.

View the full article.

Read our May 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.

 

Doodle.jpgMeet Doodle, the family member of Cooper Monroe, State and Local Tax Director at Duke Energy. Doodle is a rescue dog from a Dachshund rescue place in York, South Carolina. Cooper and his family were told that Doodle was a wire-haired dachshund; however, because the vet says Doodle’s legs are too long, he is a type of mutt. Cooper and his family got him when he was about one and he has been part of Cooper’s family for about three years.

He is pictured in his hunting pose, which he patiently assumes for hours at a time. Early in his life, Doodle managed to catch a bird using this technique. He’s been trying to repeat that feat ever since with no success. Squirrels are Doodle’s arch enemy that send him into a fit of barking. Cooper thinks Doodle doesn’t like squirrels so much because he knows they’re the most frequent cause of power outages (proof can be found here).

Doodle’s best attribute is his method of greeting you. He will stand at your feet, wag his tail vigorously and howl loudly. He also likes to wrestle with Cooper’s other dogs, Mocha the yorkie and Pogo the shih tzu/Boston terrier mix. While Doodle is a fun-loving blonde, don’t be fooled. He’s the alpha dog and never lets the other dogs win at wrestling.

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We are so excited to feature Doodle as our May Pet of the Month!

To submit YOUR pet to be featured, visit the Eversheds Sutherland SALT Shaker App, click the Pet of the Month in the drop-down, then click “Submit A Pet.”

By Nick Kump and Todd Lard

The Texas Comptroller of Public Accounts has issued a private letter ruling finding that a Texas company’s revenue from sales of real-time payment risk and fraud prevention services should be sourced to the location of Taxpayer’s customers. In Texas, receipts from a service are sourced to the location where the service is performed, and in determining where a service is performed, the Ruling notes, “the focus is on the specific, end-product act for which the customer contracts and pays to receive, not on non-receipt producing, albeit essential, support activities” (citing previous Comptroller Decisions). Taxpayer’s customers access Taxpayer’s services by submitting certain information on Taxpayer’s website and then receiving a response within seconds of the submission after Taxpayer’s servers access the databases of third-party vendors. The Comptroller explained that “while the processing of information is essential to the performance of Taxpayer’s service, it is nonetheless a support activity and not the service for which the customers contract.” Instead, Taxpayer’s customers pay to receive Taxpayer’s response at the customers’ location. Therefore, for purposes of the Texas franchise tax, gross receipts from providing that response should be sourced based on the customers’ location. (Tex. Private Letter Ruling No. 201703005L (Mar. 15, 2017) (released May 2017).)