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

We will award a prize for the smartest (and fastest) participant.

This week’s question: Washington recently enacted a bill that eliminates part of a sales tax exemption for what high tech industry?

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

The prize for the first correct 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 North Carolina Superior Court held that intercompany transfers of product between affiliated entities do not constitute “sales” subject to sales tax when those transfers are not supported by bargained-for consideration, even if the taxpayer records the transfers using hypothetical “due to/due from” accounting entries.

The taxpayer, Asphalt Emulsion Industries, LLC (AEI), was a single-member North Carolina LLC wholly owned by Slurry Pavers, Inc. (SPI), a Virginia-based road construction company. AEI operated a facility in Dunn, North Carolina, where it manufactured asphalt emulsion.

During the audit period, AEI’s business model was primarily limited to supplying asphalt emulsion to SPI and other of AEI’s affiliates. At the direction of its parent, SPI, AEI transferred the vast majority of its finished product to SPI and another affiliate, Whitehurst Paving Company (WPC), for use in paving projects. These transfers occurred without invoices, purchase orders, or actual payments. Instead, the entities used a centralized accounting software a to track the movement of inventory.

Following an audit, the North Carolina Department of Revenue (Department) issued an assessment of over $2.5 million in taxes, penalties, and interest. The Department’s position was rooted in how AEI recorded these transfers. For internal bookkeeping, AEI used “due to/due from” entries in the centralized accounting system. These entries were based on a hypothetical markup – the price a third party might have paid – rather than the actual cost of production. Accordingly, the emulsion product “was ultimately reported for tax purposes as being transferred at cost rather than at the hypothetical markup amount.”

The Department contended that the taxes should have been remitted based on the hypothetical markup price, and that AEI erroneously treated itself as a mere division of SPI.

The core of the dispute turned on the definition of a “Sale” under N.C. Gen. Stat. § 105-164.3(235), which requires a “transfer for consideration.”

AEI argued that no sales occurred because there was no consideration. The “due to/due from” entries were purely internal recordkeeping tools used for management purposes and did not represent an obligation to pay. AEI emphasized that SPI already paid sales and use tax on the cost of the raw materials used to make the emulsion.

The Department argued that the accounting entries were, in effect, “accounts receivable.” They argued that even if cash didn’t change hands, the entries represented a legal right to payment. Furthermore, the Department pointed to the “cash infusions” and centralized services (like payroll and accounting) provided by SPI to AEI as the “consideration” AEI received in exchange for the emulsion.

The Superior Court agreed with the taxpayer, affirming the Administrative Law Judge’s grant of summary judgment for AEI. The court explained that the plain meaning of consideration requires a bargained-for exchange. The Court rejected the notion that “due to/due from” entries are “accounts receivable.” Under North Carolina law, an account receivable requires an actual amount owed. Here, the evidence showed that no party ever intended for these hypothetical amounts to be paid. 

The Court further found no link between the general support SPI provided to AEI (like paying its payroll) and the specific transfers of emulsion. To be “for consideration,” the sale, the benefit must be sought in exchange for the specific promise or performance. SPI’s general funding of its subsidiary was simply the behavior of a parent company, not a quid pro quo for individual batches of asphalt.

N.C. Dep’t of Revenue v. Asphalt Emulsion Indus., LLC, 2026 NCBC 5 (Jan. 21, 2026).

In a recent letter ruling, the Virginia Tax Commissioner granted a corporate taxpayer relief from Virginia’s intercompany interest add‑back requirement, concluding that the taxpayer satisfied the statutory business purpose exception.

The case arose from a centralized cash management structure in which subsidiaries deposited cash with the parent entity and relied on intercompany loans when they needed cash. Interest on those loans offset the subsidiaries’ liability to the parent. Additionally, one subsidiary owned intangible property, and other affiliates paid royalties for the use of those intangibles to the parent. Because all cash flows were routed through the centralized system, the taxpayer could not reliably distinguish between royalty payments to the parent and repayments of intercompany debt.

Virginia law requires taxpayers to add back intercompany interest expenses when those expenses are directly or indirectly related to intangible property, such as royalties. See Va. Code §§ 58.1‑402(B)(9), 58.1‑302. However, the statute provides an exception where the taxpayer can establish, by clear and convincing evidence, that the intercompany arrangement was supported by a valid business purpose other than tax avoidance. Va. Code § 58.1‑402(B)(8)(b).

The Commissioner found that the taxpayer met its evidentiary burden under the valid business purpose exception. The centralized cash management system served valid business objectives by enhancing efficiency, decreasing costs, and increasing profitability. Furthermore, the related interest income was subject to tax in other states, suggesting the organization’s structure was not designed to avoid taxation.

Va. Dep’t of Tax’n, Ruling Request: Corporate Income Tax—Intercompany Interest Expenses and Costs Add‑Back, Doc. No. 26‑6 (Jan. 26, 2026).

In this episode of the SALT Shaker Podcast, hosts and Partners Jeremy Gove and Chelsea Marmor welcome Lauren Loricchio, Investigations Editor at Tax Notes, to discuss the publication’s long‑standing commitment to government transparency and access to primary tax materials.

Lauren traces the origins of Tax Notes back to its 1972 lawsuit against the IRS, which paved the way for public access to the Service’s private letter rulings. She explains how her team continues that mission through its newly launched monthly newsletter, FOIA Findings, which uses the Freedom of Information Act (FOIA) and other open records laws to shed light on tax policy and tax administration.

Their discussion explores the realities of the FOIA process – including delays, redactions, and litigation – and why access to original source material remains critical for tax practitioners, academics, and others monitoring tax administration and enforcement.

The episode wraps up with a seasonal overrated/underrated segment: What are your thoughts on wearing shorts?

For questions or comments, email SALTonline@eversheds-sutherland.com. Subscribe to receive regular updates hosted on the SALT Shaker blog.

Listen now:

Subscribe for more:

The Washington Court of Appeals held that a company’s title insurance and escrow services provided remotely should be sourced to Washington because the company’s customers made “first use” of the services in Washington. The trial court held that the services were sourced out-of-state to the remote location where the title company performed its services under RCW 82.32.730(1)(a). Under RCW 82.32.730(1)(a), if the purchaser receives services at the seller’s business location, the services are sourced to that business location. The Court overruled the trial court, holding that subdivision (a) did not apply because the company’s customers did not receive its services at the company’s business locations. The Court ruled that the services should be sourced under subsection (b), which requires sales be sourced to the location where the purchasers “receive” or “make first use of” the taxpayer’s services in Washington.

Chicago Title Ins. Co. v. Dep’t of Revenue, 585 P.3d 162 (Wash. Ct. App. 2026).

We have recently learned from taxpayers that filed refund claims of the Maryland Digital Advertising Tax (DAT) that the Maryland Comptroller is issuing responses entitled “Request Received Does Not Constitute a Refund Claim.”  The Comptroller’s notices state that it rejects refund claims if they do not “disclose[ ] sufficient information about the taxpayer’s annual gross revenues derived from digital advertising services and the Maryland apportionment of those revenues to allow computation of the tax.” Taxpayers that receive a “rejection” notice should consider whether to refile another refund claim to address the Comptroller’s claim that its first claim is defective. The statute of limitations to file a refund claim is three years.

Questions around federal conformity and the scope of administrative agency deference continue to shape New York City tax disputes.

In this installment of NY Tax Talk, a quarterly column in Law360 focused on recent developments in New York tax law, Eversheds Sutherland attorneys Liz Cha, Diane Beleckas, and Madison Ball analyze a recent determination of the New York City Tax Appeals Tribunal addressing the proper method for computing New York City unincorporated business tax for tiered partnerships, and its broader implications for federal conformity and administrative agency deference in New York City tax matters.

Read the full article here.

The Georgia General Assembly passed several significant tax bills during the 2026 legislative session, although the extent of income and property tax changes that were ultimately adopted was short of the groundbreaking tax reform originally proposed. The General Assembly spent significant time debating and amending various bills related to substantially decreasing the personal income tax and reducing or eliminating property taxes for homestead property. Ultimately, in addition to the other provisions discussed in our alert, the General Assembly passed legislation that would accelerate the multiyear planned reduction of the state income tax rate and would cap the growth of assessments of homestead property and allow localities to adopt a penny sales tax to provide additional homestead property tax relief (LHOST). Furthermore, while much attention was given during the session to the taxation of data centers and related high-technology companies and their use of energy, no such legislation received final passage.

The 2026 Georgia legislative session ended on April 3, 2026. Both chambers of the General Assembly passed several bills that now get transmitted to the governor (unless otherwise noted where the governor has already signed). Within 40 days (May 13), the governor can sign or veto the legislation. If the governor does not take any action, the bills that passed both chambers become law at the end of the 40-day period.

Read the full legal alert here.

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

We will award a prize for the smartest (and fastest) participant.

This week’s question: The MTC recently filed an amicus brief in the Ninth Circuit Court of Appeals arguing that the court lacked jurisdiction over claims brought by which intervening party?

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 Maryland Comptroller issued an interpretation of the Maryland Digital Advertising Tax (DAT) that excludes certain digital advertising from the DAT. A Maryland regulation – COMAR 03.12.01.01 – limits taxable “digital advertising services” to those “advertising services on a digital interface that are: (i) Programmatic; and (ii) Visually conveyed.” Thus, receipts from sales of digital advertisements that are audio only, and digital advertisements that are not transacted programmatically are excluded from the DAT. To the extent that a taxpayer included gross revenues from these sales of advertising, it should consider filing a refund claim. 

The deadline to file a refund claim for the first year of the tax (2022 tax year) is “3 years from the date the tax, interest, or penalty was paid.” Tax-Gen. § 13-1104(a). We understand the Comptroller considers estimated taxes to have been “paid” on the date the annual return was filed. Thus, the three-year statute of limitations on refund claims is coming to a close for the 2022 tax year (i.e., three years from the filing of the 2022 annual return). Therefore, April 15 may serve as a deadline for certain taxpayers subject to the DAT. We note that several companies subject to the DAT are not paying the tax due to the pending litigation challenging the legality of the tax.