Click here to read our October 2014 posts on stateandlocaltax.com or read each article by clicking on the title. To read our commentary on the latest state and local tax developments as they are published, be sure to download the Sutherland SALT Shaker mobile app.

Thumbnail image for benson.jpgMeet Benson, the handsome three-year-old chocolate lab belonging to Stephen DiGennaro, Sutherland’s Marketing Technology Manager and one of the creators of the Sutherland SALT Shaker app.

Named after Law & Order SVU’s Detective Olivia Benson, this sweet boy has been a member of the DiGennaro family since he was just eight weeks old and loves being a spoiled only child. Benson is an excellent swimmer and enjoys playing fetch. His favorite toy is “Blue,” a chewy latex toy that can be stuffed with treats.

Thumbnail image for steve with benson.jpg

Even without any brothers or sisters, Benson is a very well-socialized pup who has learned to share and play nicely with others. This lucky boy has loads of puppy pals he sees during the week. While Dad’s at work Monday through Friday, Benson attends a local doggy day camp with about 50 other dogs. He can’t wait to tell them that he’s October’s Pet of the Month!

A new version of the Sutherland SALT Shaker mobile app is available for Windows Phone, iPhone and Android users. Updates to this version improve the performance of the app, including:
 
• Improved load time for first-time and returning users.
• Faster navigation.
• An updated interface to support newer high-density screens.
 
Be one step ahead with the Sutherland SALT Shaker mobile app.
 
• Search developments by state, topic and tax type.
• View and send Sutherland SALT presentations.
• Contact a member of the Sutherland SALT team.
• Submit your furry friend for Sutherland Pet of the Month!

Thumbnail image for Phone.jpgA new version of the Sutherland SALT Shaker mobile app is available for Windows Phone, iPhone and Android users. Updates to this version improve the performance of the app, including:

  • Improved load time for first-time and returning users.
  • Faster navigation.
  • An updated interface to support newer high-density screens.

Be one step ahead with the Sutherland SALT Shaker mobile app.

  • Search developments by state, topic and tax type.
  • View and send Sutherland SALT presentations.
  • Contact a member of the Sutherland SALT team.
  • Submit your furry friend for Sutherland Pet of the Month!

Download from the Windows Phone Store

Download from the Amazon Appstore

Download from the iTunes App Store

Download from Google Play

As part of a sweeping law change, New York will require taxpayers to use a water’s-edge combined reporting method when filing corporate income tax returns beginning January 1, 2015.

In this edition of A Pinch of SALT, Sutherland tax attorneys Carley A. Roberts, Pilar Mata, Stephanie Do and Kathryn E .Pittman explore California’s rich regulatory, administrative, and judicial 50-year history of combined reporting to identify ways in which New York can avoid some of California’s pitfalls, learn from California’s experience, and improve on its unitary experiences.
View the full article, reprinted from the September 29, 2014 issue of State Tax Notes.
In this edition of A Pinch of SALT, Sutherland tax attorneys Carley A. Roberts, Pilar Mata, Stephanie Do and Kathryn E .Pittman explore California’s rich regulatory, administrative, and judicial 50-year history of combined reporting to identify ways in which New York can avoid some of California’s pitfalls, learn from California’s experience, and improve on its unitary experiences.

 

View the full article, reprinted from the September 29, 2014 issue of State Tax Notes.
We are pleased to announce that Open Weaver Banks has joined the firm’s State and Local Tax (SALT) practice as counsel in New York. Prior to joining Sutherland, Open was of counsel at Morrison & Foerster LLP. 
 
Open represents clients in state and local tax controversies at the administrative, trial and appellate levels. Her work includes income, franchise, sales and use, and property tax matters. Specifically, she has advised on and litigated complex state and local tax matters associated with unitary combination, the constitutionality of the “throw-out” apportionment rule, intangible holding company nexus, addback of interest and intangible deductions, the application of P.L. 86-272, qualification for sales and use tax exemptions, and the availability of personal income tax credits for taxes paid to other jurisdictions.
 
Open’s clients come from a broad spectrum of industries, including insurance, financial services, media and technology, cable and telecommunications, automotive, construction and manufacturing. Before focusing solely on state and local tax, she represented clients in federal tax planning and controversy matters. Her federal tax background provides an invaluable perspective on state and local tax issues.
 
Sutherland’s addition of Open is the latest step in the firm’s expansion of its SALT practice in New York. In August, the group welcomed Partner Leah Robinson from McDermott Will & Emery LLP.

We are pleased to announce that Open Weaver Banks has joined the firm’s State and Local Tax (SALT) practice as counsel in New York. Prior to joining Sutherland, Open was of counsel at Morrison & Foerster LLP. 

Open represents clients in state and local tax controversies at the administrative, trial and appellate levels. Her work includes income, franchise, sales and use, and property tax matters. Specifically, she has advised on and litigated complex state and local tax matters associated with unitary combination, the constitutionality of the “throw-out” apportionment rule, intangible holding company nexus, addback of interest and intangible deductions, the application of P.L. 86-272, qualification for sales and use tax exemptions, and the availability of personal income tax credits for taxes paid to other jurisdictions.

Open’s clients come from a broad spectrum of industries, including insurance, financial services, media and technology, cable and telecommunications, automotive, construction and manufacturing. Before focusing solely on state and local tax, she represented clients in federal tax planning and controversy matters. Her federal tax background provides an invaluable perspective on state and local tax issues.

Sutherland’s addition of Open is the latest step in the firm’s expansion of its SALT practice in New York. In August, the group welcomed Partner Leah Robinson from McDermott Will & Emery LLP.

By Ted Friedman and Pilar Mata

The Pennsylvania Office of Open Records (OOR) determined that the City of Philadelphia Department of Revenue (City) was not required to provide use and occupancy tax forms and documentation in the City’s possession relating to alleged unpaid use and occupancy taxes in response to a company’s request under Pennsylvania’s Right-to-Know Law (RTKL). The OOR denied the request on the grounds that the records constituted confidential tax information protected by the Local Tax Enabling Act (LTEA) and the Local Taxpayers Bill of Rights Act (LTBRA). The OOR stated that the objective of the RTKL is to empower citizens by affording them access to information concerning the activities of their government, and that records in the possession of a local agency, such as the City, are presumed to be public, unless exempt under the RTKL or other law or protected by a privilege, a judicial order or a decree. The OOR held that the City had met its burden of proof to establish that the records constituted confidential tax information protected from public access under the LTEA and LTBRA. In response to the company’s argument that it was entitled to – at a minimum – copies of its own tax records, the OOR stated that the status of an individual requesting a record is irrelevant as to whether the record is accessible under the RTKL. Walsh v. City of Philadelphia, No. AP 2014-1216 (Pa. Office of Open Records Oct. 1, 2014).

By Derek Takehara and Andrew Appleby

The Illinois Department of Revenue determined that a wholesale distributor of international telecommunications services could source its long-distance telephone receipts based on its Illinois property factor. The taxpayer, an intermediate international telecommunications carrier, owned and rented equipment in several states, including Illinois. Illinois law provides that a taxpayer must source receipts from the sale of telecommunications services for resale using the same apportionment methodology as sales to end-users (e.g., the location of the service, the billing address, or the location where the call is originated, terminated, inputted or received). However, if the determinative information is not readily available to the taxpayer, the taxpayer may use “any other reasonable and consistent method” to apportion the receipts. Here, the information was not readily available to the taxpayer because the taxpayer had no direct interaction with end-users. Accordingly, the Department permitted the taxpayer to use another reasonable and consistent method. The taxpayer proposed two alternative sourcing methods, including a “property method” (based on a proportion of the net book value of the taxpayer’s total property in Illinois) and a “revenue method” (based on a proportion of gross revenue attributed to the taxpayer’s property in Illinois). However, instead of adopting one of these methods, the Department ruled that the taxpayer could source its receipts using the taxpayer’s Illinois property factor, as long as the taxpayer applied all relevant statutory and regulatory rules, including those requiring property owned to be valued at cost and property rented to be valued at eight times the annual rental rate. Ill. Priv. Ltr. Rul. No. IT 14-0004 (June 4, 2014).

By Stephanie Do and Timothy Gustafson

The Washington State Department of Revenue determined that a telecommunications company’s leases of dark fiber were competitive telephone services and thus subject to retail sales tax. The taxpayer leased dark fiber – unused, unlit fiber optic cable – from various carriers and subsequently “lit” the dark fiber with its own equipment to provide telecommunications services to its own customers. The Department held that the leases of dark fiber were taxable competitive telephone services because dark fiber is a telecommunications “equipment or apparatus” under the plain meaning of those terms, and the taxpayer is a “consumer” of the services because it did not resell the leased dark fiber but instead “lit” the dark fiber to enable the transmission of voice and data communications, which the taxpayer then sold to its customers. The Department also held that dark fiber is not real property because it is not annexed to real property but is instead removable through various access points. In making its determination, the Department overruled a previous ruling involving a fiber optic cable purchase, Determination No. 97-157, which held that “telecommunications equipment or apparatus . . . is the apparatus that allows access to the telecommunications system, such as telephones or faxes,” to the extent it is inconsistent with the Department’s guidance in Excise Tax Advisory 3171.2012 (2012) or its current Determination, both holding that dark fiber is a competitive telephone service. Wash. Det. No. 13-0172R, 33 WTD 463 (2014).

By Mary Alexander and Charlie Kearns

The Missouri Department of Revenue determined in a letter ruling that Bitcoins are intangible property not subject to tax under Missouri’s Sales and Use Tax Law. As explained by the taxpayer, Bitcoins are “a form of digital currency that is created by software and stored electronically.” Here, the taxpayer sold Bitcoins in exchange for paper currency through automated teller machines. Because Missouri sales and use tax is imposed only on transactions involving tangible personal property and specifically enumerated services in Missouri – not intangible property – the Department stated that sales tax did not apply to purchases of Bitcoins. Moreover, the Department explained that the Missouri Sales and Use Tax Law does not contain an enumerated taxable service that would encompass intangible property such as Bitcoins. Mo. Dep’t of Rev. LR 7411 (Sept. 12, 2014). 

Missouri’s letter ruling comes after guidance from the Internal Revenue Service (IRS) that Bitcoins will be treated as property, not currency, for federal tax purposes. California, Kentucky and Wisconsin have also issued administrative guidance stating that payment with Bitcoins does not alter the character of a transaction for sales tax purposes; any business that accepts Bitcoins as payment must collect sales and use tax if it is a taxable transaction. IRS Notice 2014-21 (Mar. 25, 2014); Cal. State Bd. of Equalization Special Notice L-382 (June 2, 2014); Ky. Dep’t of Rev. Sales Tax Facts (June 2014); Wis. Dep’t of Rev. Sales and Use Tax Report 1-14 (Mar. 2014). 

On October 2, in PPL Electric Utilities Corporation v. Director, Division of Taxation, No. 000005-2011, the New Jersey Tax Court determined that federal deductions for the taxpayer’s payments of Pennsylvania gross receipts tax and Pennsylvania capital stock tax are not subject to addback in New Jersey. As a result, taxpayers that added back those taxes (either voluntarily or upon audit), and taxpayers that added back similar taxes paid to other states, should consider filing claims for refunds. Note that New Jersey has a four-year statute of limitations period for filing refund claims, and some taxpayers’ statute of limitations periods for the year ending December 31, 2009, if paid on the last day of the extension period, will expire on October 15, 2014.

View the full Legal Alert.