Are you up to speed on the current state of SALT? Eversheds Sutherland Counsel Jeremy Gove and Chelsea Marmor will cover hot topics for TEI’s Dallas Chapter on Wednesday, April 24 as part of its Annual State Tax School.
Find more information and register 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: Alabama’s House Ways and Means Education Committee recently introduced a bill that would increase the simplified sellers use tax (SSUT) by 1.33% on which type of taxpayers?
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!
In the latest episode of the SALT Shaker Podcast, Eversheds Sutherland Counsel Jeremy Gove welcomes Tyler Henderson, Senior Tax Manager at Amazon, for a discussion about Tyler’s experiences as a SALT practitioner.
Tyler sheds light on his journey to his current position, including why he chose to enter the tax field, what he enjoys about his role and what drives him to serve in the educational sector, as well.
Jeremy and Tyler wrap up their conversation with an overrated/underrated question: How do you feel about re-watching TV shows?
Questions or comments? Email SALTonline@eversheds-sutherland.com. You can also subscribe to receive our regular updates hosted on the SALT Shaker blog.
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On March 22, 2024, the Appellate Court of Illinois issued a split decision in a case involving local fuel taxes transferred by a fuel distributor to affiliates that operated gas stations in Cook County, Illinois.
Under Cook County’s local fuel tax ordinance, distributors must pay a 6 cent per gallon tax on fuel sold to a “retail dealer,” which the ordinance defines as a person engaged in the business of selling gasoline or diesel fuel for use or consumption. Taxpayer was a fuel distributor that transferred gasoline and diesel fuel to affiliated and unaffiliated gas stations in Cook County. Taxpayer collected tax on fuel sold to unaffiliated stations but not on fuel transferred to affiliated stations. There were two types of affiliate stations: (1) stations owned by Taxpayer but operated by an affiliate (Buck’s) and (2) stations owned and operated by another affiliate (Buchanan South).
The County imposed tax on all of Taxpayer’s transfers to the affiliated stations. A Department ALJ upheld the assessment, but on appeal, the circuit court reversed in part, finding that only transfers to the second type of affiliated stations were taxable sales to a retail dealer. On further appeal, the Appellate Court of Illinois agreed with the circuit court, finding that transfers to the first type of affiliate station were not taxable, because the affiliate operating the stations, Buck’s, was not a retail dealer since Taxpayer was the owner of the stations and Buck’s did not ultimately receive the revenue generated from the gas stations.
The Court, however, reached the opposite conclusion with respect to sales to stations owned by Taxpayer’s other affiliate, Buchanan South, since Buchanan South owned the stations. The Court rejected Taxpayer’s argument that it did not owe tax because the companies had a “single unitary business model” and that the fuel tax was paid on all retail consumer purchases of fuel. The Court reasoned that the businesses were two separate entities and the local ordinance did not create different obligations for companies based solely on the intertwined nature of their business construction. Accordingly, the Court held that Taxpayer was responsible for paying tax on all fuel provided to its affiliate, including fuel that its affiliate could not sell due to evaporation or spillage.
Buchanan Energy (N) LLC v. Cty. of Cook, 2024 IL App (1st) 220056 (Mar. 22, 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: Which state’s legislature recently passed a bill to exempt Social Security benefits from the state’s personal income tax?
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 Louisiana Board of Tax Appeals granted summary judgment to the taxpayer, holding that its sale of video-on-demand and pay-per-view are not subject to sales tax. A group of local parishes assessed the taxpayer on the theory that video-on-demand and pay-per-view are tangible personal property because the content was “perceptible to the senses,” and the content was temporarily stored on set-top boxes. The Board of Tax Appeals rejected this argument, concluding that the services fall within the exemption for necessary fees incurred with the service of cable television.
The Board agreed with the Louisiana Court of Appeals’ decision, Normand v. Cox Communications Louisiana, LLC, which also determined that video-on-demand and pay-per-view were not software, and therefore applied for Louisiana’s sales tax exemption for cable television service fees. 167 So.3d 156 (2014). Despite some factual distinctions in the Cox case, the Board stated that video-on-demand and pay-per-view are not “tangible personal property” merely by being perceptible, since that would mean all cable services—which are also perceptible—are tangible personal property, thereby rendering the cable services exemption moot. Furthermore, the Board stated that while content can be stored on set-top boxes, “the right to view the program can be severed from the perceptible manifestation of the program’s data.” Accordingly, the Board concluded that video-on-demand and pay-per-view were not taxable sales or rentals of tangible personal property.
DirecTV LLC v. City of Baton Rouge, Docket No. L01329 (La. Bd. of Tax Appeals Mar. 14, 2024).
The Florida First District Court of Appeal held that Florida’s annual corporate income tax net operating loss (NOL) deduction limit is the same as the federal limit. Verizon Communications Inc. (Verizon) accumulated federal and state NOLs upon its 2006 acquisition of MCI, Inc. ($15 billion federal and $267 million Florida NOLs) and 2011 acquisition of Terremark Worldwide, Inc. ($308 million federal and $238 million Florida NOLs). The Florida Department of Revenue (the Department) proposed to limit Verizon’s NOL usage from the acquired companies to an apportioned amount of the federal limit, noting that it would take Verizon 65 years to use its acquired Federal NOLs, and thus a similar result should apply for Florida purposes.
The court disagreed with the Department, finding that for Florida purposes the IRC § 382 limitation on utilizing acquired NOLs is the same as the pre-apportioned federal limitation. Florida’s NOL deduction limitation provided in Fla. Stat. § 220.13(1)(b)(1) allows an NOL deduction which is the same as the federal NOL limitation provided in IRC § 172. In addition to the statute, the court noted that the Department’s regulation “confirms the mirror federal and state deduction amounts.” Based on both the plain meaning of the statute and the Department’s own rule, the Court agreed with Verizon and concluded that the Florida NOL deduction limit is the same as the federal limit.
Florida Dep’t of Revenue v. Verizon Communications Inc., No. 1D2022-2096 (Fla. Dist. Ct. App., Feb. 28, 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: Which state’s legislature recently introduced a bill to tax private higher education endowments at a rate of 2% for each dollar over $1 billion?
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 Georgia General Assembly passed several significant tax bills during the 2024 legislative session. Among them was the creation of a tax court in the judicial branch, a reduction of the individual and corporate income tax rates, limitations on income tax credit carryforwards, and the suspension of the data center sales tax exemption. Bills that were considered but did not ultimately pass include limitations on the film tax credit. Because this is the final year of the two-year legislative session, any legislation not adopted this year will have to be re-introduced in the next legislative session.
Read the full Legal Alert here.
On April 1, 2024, the California State Assembly amended a digital advertising tax into A.B. 2829, formerly a property tax bill. As amended, A.B. 2829 would adopt the digital advertising tax effective January 1, 2025. The California proposal is similar to the Maryland Digital Advertising Gross Revenues Tax, which is currently the subject of litigation at the Maryland Tax Court. As the California proposal is similar to Maryland’s, it also likely violates the Internet Tax Freedom Act, Commerce Clause, Due Process Clause, and First Amendment.
As amended, A.B. 2829’s digital advertising tax would be imposed on the annual gross revenues of a person that are derived from digital advertising services in the state. Unlike Maryland, the tax would be imposed at a rate of 5%, rather than escalating rates based on global annual gross revenues. However, like Maryland, the tax would apply to only persons with at least $100 million in global annual gross revenue, even including revenues unrelated to digital advertising.
The tax base in A.B. 2829 is the same as Maryland’s: “digital advertising services,” which means “advertisement services on a digital interface, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services.” The California proposal also excludes from the tax “advertisement services on digital interfaces owned or operated by or operated on behalf of a broadcast entity or news media entity.” Because there currently is no sourcing regime in A.B. 2829, it is impossible to determine when a digital advertising service would be taxable by California.
And much like the Maryland digital advertising tax, California would also prohibit taxpayers from “directly pass[ing] on the cost of the tax … to a customer who purchases the digital advertising services by means of a separate fee, surcharge, or line item.” Maryland’s pass-through prohibition is currently in litigation before the U.S. District Court for the District of Maryland.
