Sutherland SALT has launched the “SALT Scoreboard,” a quarterly publication that tracks significant state tax litigation and controversy developments and tallies the results of taxpayer wins and losses across the country. Our quarterly publication will feature Sutherland’s observations regarding important state tax decisions and will identify trends by issue, state and forum as they emerge during the year. This issue of the SALT Scoreboard presents the results for the first quarter of 2016, along with some of the most significant developments.

View our official announcement and our SALT Scoreboard results from the first quarter of 2016!

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By Zack Atkins and Eric Coffill

The Alabama Tax Tribunal concluded that an out-of-state retailer was required to collect and remit use tax on the sales of books and educational materials to in-state teachers and students, and that neither the Due Process Clause nor the Commerce Clause impeded the Alabama Department of Revenue’s authority to assess the seller for uncollected tax. The retailer relied on in-state teachers to collect orders and money from students and others and then distribute the purchased items to the appropriate people. The tribunal found that the retailer had a physical presence in Alabama, and thus Commerce Clause nexus with the state, by virtue of the in-state presence and activities of the teachers. The retailer, Scholastic Book Clubs, Inc., has litigated the same issue in a number of jurisdictions, and the tribunal’s decision puts Alabama in line with Connecticut, California, Kansas and Tennessee, and at odds with Michigan, Arkansas and Ohio. Scholastic Book Clubs, Inc. v. Ala. Dep’t of Revenue, No. 14-374 (Ala. Tax Trib. Mar. 25, 2016).

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Sutherland SALT is shaking things up again in state and local tax. We are pleased to announce several new enhancements to our SALT Shaker app. These improvements give users more options to customize and search content, making it even easier to be one step ahead with the latest coverage and commentary on state and local tax. Check out our new features! 

 

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By Mike Kerman and Open Weaver Banks

The Virginia Tax Commissioner ruled that an out-of-state corporation had nexus with Virginia because an employee performed accounting, human resources, payroll and customer support functions from a home office in Virginia. The Commissioner explained that out-of-state corporations are subject to Virginia corporate income tax if they have sufficient in-state business activity, unless their in-state activities are protected by P.L. 86-272 or are de minimis. The Commissioner ruled that the employee’s activities exceeded the protection of P.L. 86-272 because they were accounting and administrative services rather than solicitation, and because her activities caused the corporation to have a Virginia payroll factor. The Commissioner concluded that there was insufficient evidence to determine whether the employee’s activities were de minimis in relation to the taxpayer’s overall business. Va. Pub. Doc. No. 16-15 (Mar. 3, 2016).

By Jessica Eisenmenger and Jeffrey Friedman

The New York State Tax Appeals Tribunal sustained a determination by a Department of Taxation and Finance Administrative Law Judge that receipts obtained from the sale of retail pricing information services are subject to sales tax. Under New York law, information services are taxable, but services that are personal or individual in nature are excluded from tax. RetailData, LLC collects retail store pricing information from publicly available sources. However, RetailData’s service includes client-specific price investigations and reports that are customized for each client. The Tax Appeals Tribunal reasoned that this service does not qualify for the personal service exclusion because the source of its information is publicly available. In the Matter of the Petition of RetailData, LLC, DTA No. 825334 (N.Y. Tax App. Trib. Mar. 3, 2016).

 

Read our March 2016 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 Sutherland SALT Shaker mobile app.
 
 

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Meet Rock, Paper and Scissors—beloved pets of SALT Partner Marc Simonetti. 

Marc loves his pets, but they demand a large amount of attention and only thrive in office environments. But Marc doesn’t mind bringing them to work because they are excellent helpers when it comes to keeping Marc on task. Rock, Paper and Scissors are “office pets” since they require a large desk on which to play, and scissors doesn’t do well with Marc’s young children at home.

Marc rescued Rock, who is actually a SALT rock breed, from a local restaurant famous for “cold cheese pizza.” Paper was stuck in the printer outside of Marc’s office for more than a week before Marc came to her rescue. Marc adores her despite her wrinkles. Scissors followed Marc home from lacrosse practice last fall, and they’ve been buddies ever since.

All three have unique quirks that make Marc a proud pet-owner, and he loves bragging to his colleagues. Rock is subdued and likes to sit in a sunny spot by the window. Paper likes to have her tummy rubbed and helps Marc keep his office organized. Scissors is a very good hip-hop dancer—he can really “cut a rug”!

APRIL FOOLS!

By Chris Mehrmann and Madison Barnett

The New York State Department of Taxation and Finance issued an advisory opinion explaining that the petitioner’s Internet-based document transfer subscription plans are not subject to sales and use tax. Because the primary purpose of the transactions is to facilitate the transfer of files over the Internet, the Department concluded that the plans constitute non-taxable “bridging” services rather than taxable sales of prewritten software, even though a limited download of software is involved. N.Y. Advisory Opinion, TSB-A-16(6)S (Feb. 25, 2016).

On March 24, the Georgia General Assembly passed House Bill 960, which would adjust the statutory interest rate applicable to tax assessments and refunds and addresses other issues related to refund claims for Georgia sales and use taxes. H.B. 960 passed the legislature while the Georgia Department of Revenue continues to consider regulatory action that would eliminate the payment of interest on sales and use tax refund claims for purchases made with direct pay permits. H.B. 960 is currently awaiting Governor Nathan Deal’s signature.

View the full Legal Alert.

By Charles Capouet and Eric Coffill

In Private Letter Ruling ST 15-0016-PLR, the Illinois Department of Revenue explained the application of the temporary storage exemption to the imposition of use tax on the in-state storage of equipment. Illinois’ temporary storage exemption applies where the property is acquired outside Illinois and, after a temporary stay in the state, is shipped out of and used solely outside of Illinois. First, the temporary storage exemption applies when a customer orders equipment from the taxpayer that it acquires from outside of Illinois, the customer requests that the taxpayer store the equipment in the taxpayer’s Illinois warehouse for a period of time, the customer is invoiced and the title transfers after the equipment arrives at the Illinois warehouse, and the taxpayer ships the equipment to the out-of-state customer via common carrier. Second, the exemption does not apply when the taxpayer orders the equipment based instead on an internal forecast or per customer instructions, places the equipment in its inventory when it arrives at the Illinois warehouse, invoices the customer and transfers title if the customer has not requested shipment within 180 days, and ships the equipment only after receiving further instructions from the customer. However, the interstate commerce exemption applies because the taxpayer is obligated to physically deliver the goods from a point in Illinois to a point outside of Illinois, not to be returned to a point within Illinois, as long as delivery is actually made. Third, the temporary storage exemption applies when the taxpayer acquires the equipment from outside of Illinois, the property is shipped to and stored at the Illinois warehouse temporarily, the taxpayer performs services on the equipment, and the product is stored at the warehouse until the customer provides instructions for shipment out-of-state. Ill. Private Letter Ruling No. ST 15-0016-PLR, Ill. Dep’t of Revenue (issued Nov. 13, 2015).