The Texas Comptroller ruled that a taxpayer, which provided education and networking services for the property management industry, was not providing “information services,” but rather a non-taxable service. Taxable information services involve “furnishing general or specialized news or other current information” or “electronic data retrieval or research.” Tex. Tax Code § 151.0101(a)(10), 151.0038; Texas Rule 3.342(a)(6). Here, the taxpayer’s online courses were interactive, involved an instructor and contained tools for student assessments. Because the taxpayer provided student instruction and assessment tools, the Comptroller concluded that the education and networking services were not information services or any other taxable service. Tex. Comptroller of Pub. Accts., Comptroller’s Letter No. 2017010109, Accession No. 201809007R (Sept. 11, 2018).

The Minnesota Supreme Court held that the state’s gross receipts tax on prescription drugs did not violate the Due Process or Commerce Clauses when applied to transactions between out-of-state pharmacies and in-state customers, reversing the Minnesota Tax Court. After concluding that Minnesota’s “legend drug tax” legally applied to the taxpayer under the imposition statute (Minn. Stat. § 295.52, Subd. 4(a)), because the taxpayer was “a person who receives legend drugs for resale or use in Minnesota … when that person receives or delivers those drugs in Minnesota,” the state supreme court addressed—and rejected—the taxpayer’s US constitutional challenges. First, the court ruled that by delivering the drugs into Minnesota through a common carrier, having a sales representative within the state, and taking other actions “purposefully directed” at Minnesota customers, the taxpayer maintained sufficient contacts within the state to establish the “definite link and minimum connection” required under the Due Process Clause. Second, the court held that the tax was fairly apportioned under the internal consistency test and, therefore, did not violate the dormant Commerce Clause. Because the legend drug tax is imposed on a person’s taxable receipt of “legend drugs for resale or use,” the court reasoned that such taxable event in another state is “mutually exclusive” of a person’s receipt of legend drugs for resale or use in Minnesota. Walgreens Specialty Pharmacy, LLC v. Comm’r of Revenue, 916 N.W.2d 529 (Minn. 2018) reversing Minn. Tax Ct., Dkt. No. 8902-R (Oct. 16, 2017).

The federal Tax Cuts and Jobs Act (TCJA) created a new economic development program designed to spur investment in certain low-income communities designated as “Opportunity Zones.” The new federal tax provisions offer significant opportunities to defer, and in some instances permanently reduce, gains that are invested in Opportunity Zones, as well as to abate gains earned post-investment. This legal alert discusses the state and local tax considerations for taxpayers taking advantage of the federal Opportunity Zone provisions.

· Conformity to the federal Opportunity Zone provisions varies among the states.

· The favorable tax treatment of gains invested in Opportunity Zones or gains earned post-investment will not apply in states that do not conform to the IRC post-TCJA and do not otherwise adopt the federal Opportunity Zone provisions, or that have specifically decoupled from those provisions.

· Disparate federal and state tax treatment of investments in Opportunity Zones will require taxpayers to examine their income and apportionment calculations and keep detailed schedules to separately track the federal and state tax treatment of these investments.

View the full Legal Alert

Happy Halloween from the Eversheds Sutherland SALT Team!  Check out some of the wonderful costumes this year!

It’s an Incredible Halloween from Tony Massimo (Comcast).It’s the Incredibles vs Zombies for Maria Todorova (Partner, Atlanta) and her family! 

Jonathan Feldman’s (Partner, Atlanta) family looks great as a Mushroom and Pepperoni Pizza, Princess Anna, a Shrimps Cheerleader and a Ninja (who had to take a power nap in a neighbors driveway after scoring all that candy!)

Chris Lee’s (Associate, Atlanta) clan came dressed as a Deer, Captain America and Fancy Nancy!

This little Ladybug is just too cute! Thanks for sharing, Charlie Kearns (Partner, Washington)! 

Not to be left out, some SALT Pets got in on the Halloween action.  Check out Lexi the Goldfish (Jessica Eisenmenger, Associate, Washington) and Romeo the Zebra (Samantha Trencs, Associate, Washington).


This is the eleventh edition of the Eversheds Sutherland SALT Scoreboard, and the third edition of 2018. Each quarter, we tally the results of what we deem to be significant taxpayer wins and losses and analyze those results. This edition of the SALT Scoreboard includes a discussion of California combined reporting, insights regarding the Washington bad debt deduction, and a spotlight on apportionment cases.

View our Eversheds Sutherland SALT Scoreboard results from the third quarter of 2018!

Meet Teddy and Thai, the precious pooches of tax industry legend and former TEI president Neil Traubenberg and his wife, Joan. Sixteen-year-old Teddy and eight-year-old Thai were rescued from shelters and now hail from Sun Prairie, Wisconsin (hometown of Georgia O’Keefe, for all you trivia buffs).

Teddy, a Yorkiepoo, was once small enough to fit in the palm of Neil’s hand. Now too “mature” for his puppy antics of snacking on carrots and barking at dogs on TV, Teddy’s favorite pastime is sleeping—he even barks to signal bedtime and waits for Neil before turning in for the evening.

Thai, a Schnoodle, is such a playful pup that the Traubenbergs fenced in their yard to provide the perfect arena for frequent games of tennis ball fetch. He is a true companion who waits by the door anytime Neil and Joan leave, and lays by the tub anytime Teddy gets a bath to be sure his brother is okay. Always the consummate greeter, Thai barks with excitement every time he sees people, even if they just briefly stepped into another room.

We are so excited to feature Teddy and Thai as our October Pets 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 menu, then click “Submit A Pet.”

Eversheds Sutherland is proud to sponsor the State and Local Tax Controversy Program, an essential 2-day event for in-house tax professionals, and part of the Tax Executives Institute’s Audits and Appeals Annual Seminar.

Hear from clients, judges and state AGs; and discuss best practices and tactics to navigate your way through tax controversies in 2019.

Register today:



In two cases, the Minnesota Tax Court clarified the extent to which the Minnesota research and development (R&D) credit is calculated based on the Internal Revenue Code’s defined terms. Minnesota law incorporates the Internal Revenue Code’s definition of “base amount” for purposes of calculating the Minnesota R&D credit. The proportion of qualified research expenditures to the base amount is critical for calculating the federal and Minnesota R&D credits. The base amount is the fixed-base percentage multiplied by the average annual gross receipts for the four preceding tax years. The fixed-base percentage is the aggregate qualified research expenditures divided by aggregate gross receipts. At issue in these cases is the extent to which these numbers are limited to Minnesota amounts only for purposes of calculating the Minnesota R&D credit.

In two cases that were consolidated for oral argument and decided with identical analysis language, the Minnesota Tax Court granted summary judgment:

(1) In favor of the Commissioner, in deciding that the Minnesota law incorporates the federal minimum base amount provision as part of the state law definition of “base amount”;

(2) In favor of the taxpayer, in deciding that the Minnesota base amount must be computed using federal gross receipts (rather than Minnesota gross receipts) in the denominator of the fixed-base percentage; and

(3) In favor of the Commissioner, in deciding that the federal provisions allowing for an alternative simplified credit calculation are not incorporated into Minnesota law.

General Mills, Inc. v. Comm’r of Revenue, No. 9016-R (Minn. Tax Ct., Aug. 17, 2018).

International Business Machines Corporation v. Comm’r of Revenue, No. 9053-R (Minn. Tax Ct., Aug. 17, 2018).

OCTOBER 23 – 26, 2018

Council on State Taxation (COST)

Annual Meeting

Eversheds Sutherland is pleased to sponsor the Council on State Taxation’s 49th Annual Meeting from October 23-26, 2018 in Phoenix, AZ. Join us for this informative program. Registration information can be found here.

Eversheds Sutherland SALT lawyers are presenting on several topics including:

  • What to Do About “Phantom Income” In Your Tax Base – Jonathan Feldman
  • All the Right Moves: Understanding and Communicating the State Tax Consequences of Corporate Expansion – Liz Cha
  • The Great “Discussion” – Jeff Friedman

We are also co-hosting the reception on Wednesday evening and look forward to seeing you in Phoenix.

The Pennsylvania Board of Finance and Revenue recently published a decision regarding the sourcing of receipts and property of a satellite television provider.  The Board held that the taxpayer’s receipts from sales of satellite television services were properly included in the taxpayer’s Pennsylvania numerator based on the location of subscribers in the state.  The Board held that the taxpayer failed to meet its burden of proof to show that a greater portion of its income-producing activities occurred outside the state under Pennsylvania’s cost of performance sourcing rules applicable to the tax year at issue.  Pennsylvania sourcing rules changed for tax years beginning after December 31, 2013 to require market-based sourcing for sales of services.

The Board also upheld the inclusion of orbiting satellites in the Pennsylvania property factor numerator.  On audit, the taxpayer’s property numerator was increased to include a percentage of the satellite values as shown on the taxpayer’s federal return, based on the percentage of subscription fees from Pennsylvania customers to subscription fees everywhere.  The Board upheld this adjustment to the property factor, which noted that the satellites were owned by the taxpayer and used in the state to provide satellite television service.  In re Dish DBS Corporation, Docket No. 1713444 (Pa. Bd. Fin. & Revenue May 14, 2018).

See our previous coverage of a similar South Carolina decision involving this taxpayer.

In re Dish DBS Corporation, Docket No. 1713444 (Pa. Bd. Fin. & Revenue May 14, 2018).