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 Supreme Court Appellate Division recently ruled that a taxpayer’s fiber-optic cables did not qualify for an exclusion from real property 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!

On Wednesday, March 27, Eversheds Sutherland attorneys Eric Coffill and Chelsea Marmor will provide a coast-to-coast SALT update for the Tax Executives Institute (TEI) Philadelphia Chapter. During the SALT Committee Meeting, Eric and Chelsea will review case and legislative updates from both the East and West Coast. 

The Illinois Appellate Court affirmed the Illinois Tax Tribunal’s determination that aviation fuel sold to airlines and subsequently stored at O’Hare International Airport is not exempt from the Retailer’s Occupation Tax (ROT) because the fuel was not consumed solely outside of the state.

The taxpayer, an aviation fuel retailer, argued that its fuel was subject to an exemption for property temporarily stored in the state and subsequently used outside of the state because only 2% of the fuel was consumed in Illinois, with the remaining 98% of the fuel being consumed outside of the state. Relying on the statute’s plain language, the Court disagreed with the taxpayer and found that the entire use or consumption of the property at issue must be outside of Illinois. Accordingly, to qualify for the exemption, the purpose of the temporary storage must be for future transportation outside of Illinois for use or consumption solely and entirely outside of the state. The Court further explained that, pursuant to the Department’s regulation, it would have been proper to certify that a portion of the purchase of fuel qualifies for the exemption if the airlines were to have purchased the fuel, temporarily stored it in Illinois, transported a portion of it out of the state, and then used that portion in planes in another state. Because the taxpayer’s fuel was loaded on planes in Illinois and partly consumed in Illinois, the Court concluded that the fuel at issue did not qualify for the exemption.

American Aviation Supply, LLC v. Illinois Department of Revenue, 2024 IL App (1st) 230072.

The Missouri Administrative Hearing Commission held that real-estate investment trust (REIT) dividends from sources within Missouri are deductible from Missouri income.

The decision involved a REIT that generates income from mortgages secured by real property. The REIT made distributions of profits derived from sources within Missouri to its controlling interest holder. The controlling interest holder included those distributions in its federal taxable income, which was included in its parent’s federal and Missouri consolidated corporate income tax returns. The parent then deducted the REIT distributions on its Missouri consolidated corporate income tax returns as Missouri dividends pursuant to Mo. Rev. Stat. § 143.431.2. The Department disallowed the deduction and issued a notice of deficiency. The parent appealed. 

Neither “dividend” nor “corporate dividend” is defined by Missouri statute. Because Missouri’s income tax expressly incorporates terms from the Internal Revenue Code, the Commission looked at IRC Section 316, which “determines what constitutes a dividend” and Section 243, which “determines the circumstances under which dividends received by corporations may be deducted from federal income.” The Commission held that REIT dividends are dividends under Section 316, and nothing in Section 243 “transforms them into something else.” Further, as the Missouri statute provides that corporate dividends from sources within Missouri are deducted “to the extent included in federal taxable income”, the deduction is only applicable to dividends that are not deductible under federal law. Therefore, the REIT dividends, which were not deductible from federal income, are deductible from Missouri income if from a Missouri source.

Great Southern Bancorp, Inc. & Subsidiaries v. Director of Revenue, No. 21-1768 (MO AHC, Jan. 26, 2024).

In this episode of the SALT Shaker Podcast, Eversheds Sutherland Counsel Jeremy Gove welcomes back Sacramento SALT Partner Tim Gustafson for another California-focused conversation!

Tim and Jeremy base their discussion around a recent article Tim co-authored in Tax Notes State with Associate Sharon Kaur about the California FTB’s informal guidance.

Specifically, they delve into the work of the FTB, which administers the state’s corporate franchise and income taxes, and discuss its routine issuance of informal guidance on a broad array of topics and issues. Tim and Jeremy explore these topics, as well as the effect on taxpayers and practitioners.

Similar to the article, Tim and Jeremy also cover two 2023 decisions, Appeal of Minnesota Beet and American Catalog Mailers Association, examining how these decisions may affect current informal guidance and the issuance of guidance in 2024 and beyond.

The episode concludes with another edition of overrated/underrated – how do you feel about lettuce on sandwiches?

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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Delaware bears an outsized importance for corporate America. While there are a number of reasons to incorporate in Delaware, Eversheds Sutherland attorneys Jeff Friedman and Jeremy Gove describe a significant downside – an annual franchise tax for the privilege of doing so. This article, published in Bloomberg Law, describes this Delaware tax that generates $2.2 billion in revenues and is easily avoided. 

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: Which state’s appellate court recently rejected a single-subject rule challenge to the state’s single-sales factor apportionment?

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 Appellate Division, Third Department, affirmed the Tax Appeals Tribunal’s decision that a taxpayer was providing taxable information services for sales tax purposes.  The taxpayer provided services that measured the effectiveness of its customers’ advertising campaigns.  The services included providing a report analyzing surveys of customers/internet users, including a comparison of the client’s campaign results with industry specific benchmarking data from a database in which the taxpayer’s survey responses were aggregated and anonymized. The taxpayer also provided advice and recommendations for improving advertisement effectiveness.

The Appellate Division applied a rational basis standard of review and deferred to the Tribunal’s decision. First, the Appellate Division affirmed the Tribunal’s holding that the taxpayer provided information services and not consulting services because the primary function of the services was to collect and analyze information. Second, the Appellate Division affirmed the Tribunal’s holding that the services did not fall within the sales tax exclusion for information services furnishing information that “is not or may not be substantially incorporated in reports furnished to other persons” under Tax Law § 1105(c)(1), as portions of the taxpayer’s database data generally appeared in the reports furnished to customers.

Matter of Dynamic Logic, Inc. v. Tax Appeals Tribunal of the State of N.Y., 2024 NY Slip Op 01136, (App. Div.).

This week, Eversheds Sutherland is a proud platinum sponsor of Tax Executives Institute’s (TEI) 74th Midyear Conference at the Grand Hyatt Hotel in Washington, DC.

SALT Partner Michele Borens will present on Wednesday, March 20, covering the taxability of “X” as a service, including background and recent cases, sourcing and nexus considerations, and more.

For more information and to register, click 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: Which state’s supreme court recently ruled that a state statute allowing municipalities to tax nonresidents for work done outside of the municipality does not violate the federal Due Process Clause?

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!