In December 2023, the Financial Accounting Standards Board added significant income tax disclosure requirements to the already cumbersome and complex checklist of state tax financial statement disclosure rules.

In this installment of A Pinch of SALT published in Tax Notes State, Eversheds Sutherland attorneys Todd Betor and Jeff Friedman discuss the Financial Accounting Standards Board’s changes to the state and local income tax financial statement disclosure rules. Effective for public business entities for annual periods beginning after December 15, 2024, the consequences of these disclosures — and the potential confusion stemming from them — will further burden state tax professionals.

Read the full article here.

Eversheds Sutherland is proud to participate in TEI’s 2024 Audits & Appeal Seminar on the State and Local Tax Controversy Track, an essential 1.5 day event for in-house tax professionals.

The State and Local Tax Controversy Track will focus on state and local tax audit issues and strategies, including best practices to manage the controversy function. Additionally, this year’s programming will include a session comprised of former state department of revenue officials who will share their unfiltered view “from the other side.”  

Other sessions include:

  • Anticipating State Tax Audits and Controversy: Managing Audit Triggers and Aggressive Positions
  • Challenging Assessments and Filing Protests
  • State Tax Judges Panel – Hear from the Other Side of the Bench
  • Ethical Dilemmas Facing State Tax Professionals
  • Strategic Considerations for Managing your Audit and Litigation Portfolio
  • Tax Technology for State Tax Audits
  • Audit Therapy: An Interactive Discussion of Industry Personnel Sharing Experiences
  • Financial Statement Considerations of State Tax Controversies

Register now!

For more information, please contact: meetings@tei.org

Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!

We will award prizes for the smartest (and fastest) participants.

This week’s question: The MTC recently amended their Commission Bylaws to effectively cap their membership fee for which state?

E-mail your response to SALTonline@eversheds-sutherland.com.

The prize for the first response to today’s question is a $25 UBER Eats gift card. This week’s answer will be included in our SALT Shaker Weekly Digest, distributed on Saturday. Be sure to check back then!

New York continues to closely review the application of state sales tax to services performed using software platforms. 

Recently, two May decisions by the New York Tax Appeals Tribunal and the New York Division of Tax Appeals affirmed the Division of Taxation’s decision to tax service providers for the sales of prewritten computer software in Matter of Beeline.com Inc. and Matter of FacilitySource LLC, respectively.

In their quarterly column published by Law360, Eversheds Sutherland SALT attorneys examine recent developments in New York tax law. In this installment, Liz Cha and Madison Ball focus on two decisions from the Tax Appeals Tribunal and the Division of Tax Appeals concerning sales of prewritten computer software.

Read the full article here.

Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!

We will award prizes for the smartest (and fastest) participants.

This week’s question: A bill recently passed the California Senate and was advanced to the Assembly that would provide for an income tax exemption for settlement payments from what type of natural disaster?

E-mail your response to SALTonline@eversheds-sutherland.com.

The prize for the first response to today’s question is a $25 UBER Eats gift card. This week’s answer will be included in our SALT Shaker Weekly Digest, distributed on Saturday. Be sure to check back then!

The South Carolina Administrative Law Court upheld a bank tax assessment that was based on adjustments made by the Department of Revenue to a taxpayer’s sales factor and tax base.  The taxpayer, a national bank, offered a range of banking and trust services, and generated income by providing residential mortgages and other loans, and issuing credit cards.

Regarding the sales factor, the taxpayer asserted that its mortgages and mortgage servicing activities constituted services and should be sourced pursuant to the rule governing receipts from the provision of a service.  The Court, however, determined that mortgages are intangible property, and that the receipts generated by the mortgages, including interest and fees, must be sourced using the rule applicable to intangibles, which looks to the location where the intangible is used.  The Court reasoned that a mortgage is used at the location of the real property, and that the location of the borrower is a “reasonable proxy.”  Thus, the Court held that payments on mortgages and other kinds of loans should be sourced to South Carolina when paid by a borrower located in South Carolina.  In addition, the Court held that the taxpayer’s sales of its South Carolina mortgages to government sponsored entities should be sourced to South Carolina because the “mortgages are tied to real estate in South Carolina.”

The Court also determined that the taxpayer’s receipts from credit cards, including interest, late fees and annual fees, constituted receipts from intangibles that should be sourced to South Carolina when the amounts are paid by cardholders in South Carolina.  With respect to the taxpayer’s interchange fees, i.e., fees paid by a merchant to facilitate the routing of a credit card transaction, the Court determined that the fees are from the provision of a service and must be sourced under the rule for services.  However, the Court held that, to the extent the taxpayer’s merchants are located in South Carolina, the primary income-producing activity related to the merchant interchange fees occurs in South Carolina, and that the associated receipts must be sourced to South Carolina.

Finally, regarding the tax base, the Court held that the taxpayer’s sale of stock in a credit card company, which the taxpayer had used in swap agreement transactions, “was connected to its business” and, therefore, that the gains from the sale of the stock were apportionable to South Carolina.

U.S. Bank National Association v. South Carolina Department of Revenue, No. 20-ALJ-17-0168-CC (S.C. Admin. Law Ct. June 25, 2024).

In a 2020 article, the Eversheds Sutherland SALT team guided taxpayers on how to handle a Multistate Tax Commission (MTC) audit, providing an overview of the MTC’s Joint Audit Program and highlighting the differences between an MTC audit and a single-state audit. At the time, the article observed that “the MTC has been gaining in prominence and, arguably, effectiveness.” That is even truer four years later.

In the June 2024 installment of A Pinch of SALT in Tax Notes State, Eversheds Sutherland attorneys Michele Borens and Cat Baron provide an update on the MTC’s Joint Audit Program and its latest developments.

Read the full article here.

Meet the newest members of our SALT Pet of the Month family – Scottie and Wallace! They belong to Audrey Pollitt, Editor in Chief of Tax Notes State.

Audrey’s wife, Alena, adopted Scottie (age 7) from an Alabama rescue before they met. Scottie is short for Damariscotta, a charming town in Maine where Alena spent her childhood summers at her family’s lakeside camp. Prior to adoption, Scottie was “Scramble” – a name to which she still responds if called in a thick Southern accent. Audrey and Alena later adopted Wallace (age 5), which seems to fit him perfectly, even if there’s no meaning behind it.

Scottie’s a Catahoula leopard dog and Wally’s a sato (Puerto Rican street dog). Audrey mistakenly called Scottie a Charleston Chew for quite some time before things clicked.

Scottie’s favorite food is chocolate, which has been highly problematic, while Wally’s favorite food is whatever happens to be on the table.

Beyond getting their paws on clandestine treats, the pair enjoy hiking, going to new dog parks (to ignore other dogs) and playing Scrabble. In addition, Wally punches into work around 6 p.m. every day, posting up at the windowsill to oversee and track all street activity. For all of his precision, they’ve never received a dime for his labor as neighborhood watch! Scottie has taken to tandem paddle boarding but chooses to forgo paddling. She prefers her humans do all the work!

Audrey and Alena are very grateful to have both of these pups filling out the Pollitt pack – Audrey may be the only member thereof who’s much for SALT, but they make everything else just a little less taxing. Welcome to the SALT pack, Scottie and Wallace!

The Washington Court of Appeals recently upheld the dismissal of a putative class action brought against four grocery store chains that collected sales tax on sales of 100 percent juice beverages. A taxpayer alleged that the grocers violated Washington’s Retail Sales Tax Act and Consumer Protection Act by wrongfully collecting sales tax on the exempt beverages. The court held that the taxpayer’s allegations were tantamount to a tax refund claim that could only be brought against the state Department of Revenue. Washington’s regulations provide that a taxpayer aggrieved by the amount of tax paid could not maintain “any action or proceeding” to recover paid taxes except against the state, and therefore the taxpayer could not bring an action against the grocers through creative pleading. Where a taxpayer seeks a refund of a tax already paid, the procedural requirements (to seek administrative remedies against the Department) remain the same no matter the reasoning presented in support of the claim.

Caneer v. Kroger, No. 85009-1-I (Wash. Ct. App. Div. 1, 2024).

Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!

We will award prizes for the smartest (and fastest) participants.

This week’s question: Earlier this month, the Massachusetts Senate introduced an economic development bill that primarily provides tax incentives for what green industry?

E-mail your response to SALTonline@eversheds-sutherland.com.

The prize for the first response to today’s question is a $25 UBER Eats gift card. This week’s answer will be included in our SALT Shaker Weekly Digest, distributed on Saturday. Be sure to check back then!