By Jonathan Feldman and Hanish Patel

The Georgia Department of Revenue issued a proposed regulation amending the use of direct pay permits for state and local sales and use taxes. The proposed regulation would cause all current permits to expire on December 31, 2016, and require all current holders to reapply and agree to certain conditions, most notably the waiver of interest on refunds of taxes remitted on purchases made with the permit. In December 2015, the Georgia Association of Manufacturers and the Council on State Taxation commented on the first proposed amended version of the regulation, advocating against the required waiver of refund interest and other procedural items. In this second version, the Department has revised several of the procedural items, but the interest waiver remains. The public comment period is open until March 3, 2016. Georgia Notice SUT 2016-001.

By Hanish Patel and Open Weaver Banks

The Magistrate Division of the Oregon Tax Court held that an insurance company’s gain from the sale of a subsidiary and income from a holding company both constituted nonbusiness income. The court found that the acquisition and sale of a 40% owned subsidiary that operated as a third-party administrator of workers’ compensation claims was not “inextricably mixed” with the company’s title insurance business conducted in Oregon, as required under the state’s transactional test for business income. Similarly, the court also held that income arising from the company’s interest in a holding company that owned restaurants and food manufacturers also constituted nonbusiness income because such interest was not integrated with the company’s insurance business. Fid. Nat’l Fin. v Dep’t of Revenue, No. TC-MD 140440D, 2016 WL 198149 (Or. Tax Ct. Jan 15, 2016).

By Jessica Eisenmenger and Leah Robinson

The Alabama Tax Tribunal ruled that freight charges paid by the seller but passed through on an invoice to the customer are not subject to sales tax. Alabama law exempts shipping and freight charges “paid by the purchaser” from sales tax. Chief Tax Tribunal Judge Bill Thompson ruled that such charges qualify for the exemption because the purchaser ultimately bears the economic burden of the charges. Mike Kilgo & Associates, Inc. v. Dep’t of Revenue, No. S. 14-1060 (Ala. Tax Tribunal Jan. 13, 2016).

Read our January 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.

 
  • California BOE Adopts Beneficial Amendments to Sales Tax Exemption for Manufacturing and R&D Equipment
    The California Board of Equalization (BOE) voted to adopt an amendment to Ca. Code Regs. tit. 18, § 1525.4, to resolve a statutory ambiguity by clarifying that a taxpayer will qualify for the partial sales and use tax exemption available for certain manufacturing and research and development equipment purchases and leases if the purchase has a useful life of one or more years, even if the taxpayer expensed the purchase.
 
 
 
  • Heisman Would Be Proud: Taxpayer Stiff-Arms Indiana DOR with Transfer Pricing Studies
    The Indiana Tax Court granted summary judgment to Columbia Sportswear USA Corp., (“Columbia”), determining that: (1) Indiana’s alternative apportionment statute did not permit the Department to equitably adjust Columbia’s tax base; and (2) Indiana’s standard sourcing rules clearly reflected Columbia’s Indiana source income because transfer pricing studies supported Columbia’s intercompany transactions as being consistent with Indiana’s conformity to I.R.C. § 482.
  • Dance, Dance Fever: Missouri Supreme Court Holds Dance Lessons Are Fun…and Taxable
    The Missouri Supreme Court held that a dance school was subject to sales tax on its charges for dance lessons as fees paid to a place of amusement, entertainment or recreation. The court reasoned that even though the school had a primary purpose of teaching students how to dance, amusement or recreational activities comprised more than a de minimis portion of the business activities.
 
 
 
 

By Zach Atkins and Madison Barnett

The Ohio Department of Taxation issued a revised information release announcing its new positions regarding sales and use tax on electronic information services used in business. In the release, the Department takes the position that taxable electronic information services can include, among other things, subscription services, inventory advertising and online chat features for use in business. In addition, in the Department’s view, the tax is “grandfathered” (i.e., not preempted) for purposes of the federal Internet Tax Freedom Act. Ohio Department of Taxation, On-line Services and Internet Access, Info. Release No. ST 1999-04 (rev. Dec. 2015).

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Meet Bolt, aka “Boltie,” and Teddy, aka “Puppy,” belonging to Sutherland SALT Senior Counsel Eric Coffill and his wife Margaret.

Boltie was rescued from a kill shelter about two years ago after Margaret saw him on the Petfinder app. Very little is known about his background other than his prior owners kept him in the garage and never allowed him in the house. The little guy was in such poor condition when Margaret brought him home from the shelter that she and Eric worried he was not long for this world.  His mouth was so infected he could hardly eat. The surgery he needed was so complex that Eric and Margaret’s usual vet could not do it. The UC Davis School of Veterinary Medicine examined him and declined to even attempt the needed dental work. Luckily, Boltie was referred to a wonderful local vet who performed the incredibly expensive surgery and removed all of his teeth. For the next month, Eric and Margaret fed Boltie with a syringe and with their round-the-clock care, he pulled through. He now enjoys a very comfortable life complete with home-cooked meals. He is especially fond of chicken dishes.

While Boltie prefers to spend most of his time cuddling, Teddy, named for his crazed, disheveled teddy bear appearance, enjoys chasing birds and squirrels, killing his toys and chewing on things – people included.

These two little sweeties are so very thankful to be January’s Pets of the Month!

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By Olga Goldberg and Marc Simonetti

The California Superior Court struck down a regulation that imposed a de facto ban on contingent fee arrangements between businesses and consultants applying for the California Competes tax credit. The Court ruled that the regulation improperly exceeded the scope of the related statute. Ryan U.S. Tax Services, LLC v. State of California, Superior Court, Sacramento County (California), No. 34-2014-00167988 (Jan. 7, 2016).

By Charles Capouet and Charlie Kearns

The Kentucky Supreme Court held that the interpretation of inheritance tax statutes by the Kentucky Board of Tax Appeals was not entitled to Chevron deference. Deference is given only to an administrative agency’s interpretation of the statutes which it administers. The Board is merely a reviewing tribunal; it is not an administrative agency charged with implementing Kentucky’s inheritance tax statutes. The state supreme court concluded, “if any deference is to be given, it is to the Department’s formal interpretation of a statute that it administers[,]” and, therefore, “no deference is given to the Board’s interpretation of tax statutes.” Estate of McVey v. Ky. Dep’t of Revenue, No. 2014-SC-000013-DG (Ky. Dec. 17, 2015).

By Samantha Trencs and Madison Barnett

The Rhode Island Supreme Court held that a wind turbine owned by a non-utility private party was exempt from personal property tax under a manufacturing exemption because the turbine converted wind into electricity. The court rejected the taxing authority’s argument that the turbine was ineligible for the exemption because the electricity was sold at wholesale to a utility company. DePasquale v. Cwiek, No. 2015-83-Appeal (R.I. Jan. 14, 2016).

By Mike Kerman and Maria Todorova

The Illinois Appellate Court held that a property tax exemption for nonprofit hospitals which provided certain services or subsidies equal in value to their estimated property tax liabilities was facially unconstitutional because it did not require exclusive charitable use of the property, as prescribed under the Illinois Constitution. Carle Found. v. Cunningham Twp., Nos. 4-14-0795, 4-14-0845 (Ill. App. Ct. Jan. 5, 2016).