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!

The California Franchise Tax Board (FTB) administers the state’s corporate franchise and income taxes. The California Legislature authorized the FTB to promulgate regulations in order to implement and interpret the governing statutes. Beyond issuing formal guidance, however, the FTB historically, and routinely, has issued informal guidance on a broad array of topics and issues for the purported benefit of taxpayers, tax practitioners, and FTB staff alike.

While taxpayers and tax practitioners have disagreed with certain conclusions presented in the FTB’s informal guidance over the years, the materials by and large have provided valuable insight into the agency’s varied positions and interpretations, particularly for taxpayer reporting purposes. Regarding the points of disagreement, a question until recently remained as to what effect, if any, was to be given to the FTB’s informal guidance by a tribunal adjudicating a corporate tax controversy matter.

Two 2023 decisions, Appeal of Minnesota Beet and American Catalog Mailers Association, offered differing answers to this question that may affect current informal guidance and the issuance of guidance in 2024 and beyond.

In this installment of A Pinch of SALT in Tax Notes State, Eversheds Sutherland attorneys Tim Gustafson and Sharon Kaur examine the two decisions closely and identify their potential fallout.

Read the full article here.

While providing a new revenue opportunity for college athletes, name, image, and likeness (NIL) deals have exposed recipients to potential risks—including tax liability—outside the university bubble.

Since the US Supreme Court’s 2021 NCAA v. Alston ruling, college athletes have become eligible for paid endorsements and can monetize their athletic success outside of their school-funded scholarships and benefits.

In this article published by Bloomberg Tax, Eversheds Sutherland Partners Tim Gustafson and Baird Fogel, US sports practice lead, explain the complicated tax issues college athletes face when they sign lucrative NIL deals.

Eversheds Sutherland attorneys Charlie Kearns, Eric Coffill and Alla Raykin will speak during the 2024 ABA/IPT Advanced Tax Seminars held March 11 – March 15 in New Orleans, LA.

Their panel presentations will cover a variety of income and sales and use tax topics, including how to effectively work with the California FTB, navigate the expansion of sales and use tax bases to include digital goods and services, and sales tax technology through automation.

You can view the seminars’ program here and register here.

The Virginia General Assembly passed the 2024-2026 Biennium Budget (House Bill 30) that would expand the sales and use tax to “digital personal property” and certain digital “taxable services” as of January 1, 2025.

The General Assembly’s conference report resolved differences between the House and Senate budgets, respectively, on the sales tax treatment of business-to-business transactions. The House wanted a full exemption for business purchases of certain digital “taxable services,” but the Senate wanted to fully tax all purchases of such services. The conference committee reached consensus on the issue by sending Governor Glenn Youngkin a partial exemption for business purchases, where only business purchases of “software application services” would be subject to tax.

The legislation now goes to the governor for his 30-day review period, where he may approve the legislation as-is, offer amendments to the legislation, or veto or line-item veto the legislation. If the governor offers amendments, the legislation may be approved by the General Assembly by simple majority. Any veto or line-item vetoes by the governor would need to be approved super (two-thirds) majority of the General Assembly. The Eversheds Sutherland SALT team will continue to monitor the Virginia budget process at it continues to move forward.