In the latest episode of the SALT Shaker Podcast, Eversheds Sutherland Associate Jeremy Gove is joined by SALT Partner Tim Gustafson to discuss the ins and outs of the one-of-a-kind settlement process in California.

Before diving into specific considerations for taxpayers, Jeremy and Tim provide an overview of the settlement process itself, including a discussion of the agencies involved, the oft-surprising rules in play, and the impact on controversy generally.

Their conversation ends with an overrated/underrated question pertaining to casual office wear – how do you feel about jeans?

You can read the article Tim referenced, co-authored by Partner Liz Cha, in Tax Executive here.

Questions or comments? Email SALTonline@eversheds-sutherland.com. You can also subscribe to receive our regular updates hosted on the SALT Shaker blog.

Listen now:

Subscribe for more:


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: According to the Illinois Independent Tax Tribunal, what type of fuel is not eligible for the expanded temporary storage exemption under the Retailer’s Occupation 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 posted on Saturday in our SALT Shaker Weekly Digest. Be sure to check back then!

Assembly Bill 6008, introduced on March 30, 2023, would impose a $3 delivery surcharge on any item purchased online and delivered within New York City. The person selling the item to be delivered within New York City is liable for the surcharge and the surcharge “shall be passed along to the purchaser and separately stated on any receipt” provided to the purchaser.

Deliveries of food, diapers, baby formula, drugs and medicines are exempt from the surcharge under this proposed legislation. If enacted, the surcharge would take effect on January 1, 2025.

The North Carolina Department of Revenue issued a letter ruling that concluded an online platform owner and administrator was not a marketplace facilitator because it neither collected nor otherwise processed payment for any items sold on the website. The taxpayer requesting the ruling was an affiliate of original equipment manufacturers “OEMs), and operated a platform whereby the OEMs sold parts to established customers. The taxpayer administered the electronic infrastructure of the platform and provided connection support. The taxpayer did not receive any compensation for the use of the platform or for orders received through the platform. An independent entity processed all customer payments, or made payment processing services available.

North Carolina’s definition of “marketplace facilitator” under N.C. Gen. Stat. § 105-164.3(133) has two parts: (1) listing or otherwise making available for sale a marketplace seller’s items through a marketplace owned or operated by the marketplace facilitator; and (2) collects the sales or purchase price of a marketplace seller’s items, processes payment, or makes payment processing services available to purchasers. The Department concluded that while the taxpayer satisfied the first part, it did not meet the second part. Neither the taxpayer nor its affiliates collected or processed payments; instead, an unrelated entity handled that function.

N.C. Private Letter Ruling No. SUPLR 2022-0008 (Dec. 9, 2022).

Eversheds Sutherland is a proud sponsor of TEI’s Region 10 43rd Annual Tax Conference, held in Huntington Beach, CA from April 26 to 28. Eversheds Sutherland Partner Michele Borens will help provide updates in the taxation of the digital economy and cryptocurrency, and Partner Jeff Friedman will discuss a current state of the states.

Find out more information and register here.

During COST’s 2023 Income Tax Conference & Spring Audit Session, Eversheds Sutherland Partner Maria Todorova will present on hot topics in transfer pricing and intercompany transactions, discussing transfer pricing methodologies employed, how to counter aggressive assertions of profit shifting, and risks and opportunities around intercompany transactions and transfer pricing.

Finally, on April 27, Eversheds Sutherland attorneys Todd Betor, Jeremy Gove and Chelsea Marmor will lead a state litigation update during the TEI Minnesota Chapter’s 37th Annual President’s Seminar.

View and learn more about past and upcoming events and presentations.

Say hello to Diego! Adopted in 2022, this 13-year-old certified good boy is owned by Brandi Drake, Senior Director of Strategic Tax at Charter Communications.

When he first came home with Brandi and her husband, Matthew, he looked at them for permission for everything – except for one thing. Despite being a senior pup, he fought his way onto their bed, laid down, and refused to move. With the help of some added steps, he has snoozed there every night since!

He loves all treats, but is particularly fond of dental sticks and doggie ice cream. In fact, he will not go to bed until he gets his nightly dental stick!

Beyond his love for sleeping in his humans’ bed, he enjoys his daily walks and belly rubs. He will also destroy any new toy within minutes, and makes sure to bring Brandi his favorite ball every time she gets home from work and greets him.

We are thrilled to feature Diego as our April pet of the month!

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 legislature recently introduced a bill that would amend the state income tax return to let filers register to be an organ donor?

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 posted on Saturday in our SALT Shaker Weekly Digest. Be sure to check back then!

The California Court of Appeal held that the Los Angeles County Assessor erred by failing to remove the value of certain nontaxable intangible assets when valuing a hotel for property tax purposes. Intangible assets are generally exempt from property tax in California. In valuing the hotel, the Assessor used the income valuation approach, which looks to the current and future income stream associated with the property in order to calculate its present, taxable value. The taxpayer argued that in calculating the income stream, the Assessor failed to remove income associated with three intangible assets: a subsidy from the City of Los Angeles valued at $80 million (directly tied to the City’s hotel tax collected on the rooms); a onetime upfront payment made by the hotel’s operators, Ritz Carlton and Marriott, of $36 million dollars for the right to operate the hotel; and “hotel enterprise assets,” including “flag and franchise, food and beverage, and assembled workforce,” valued at $34 million dollars. 

First, the Assessor argued that the $80 million subsidy was not exempt from tax because it “runs with the land and is associated with the ownership of the property.” Relying on Elk Hills Power, LLC v. Board of Equalization, 57 Cal. 4th 593 (2013), the Court rejected the Assessor’s argument, finding that the correct test is whether “the asset is directly necessary to the productive use of the property, whether it is intangible, and whether it can be valued.”  Because all three of these requirements were met, the Court found the subsidy was not taxable and must be removed from the income stream.

Second, turning to the $36 million dollars paid by Ritz Carlton and Marriott for the right to operate the hotel, the Court found that the Assessor erred by treating the payment as income attributable to the hotel. Rather, the Court concluded, it “was not income to the hotel; it was a price break the managers gave the hotel on payments from the hotel.” 

Third, the Court found that the income attributable to the “hotel enterprise assets” had to be removed from the income stream. The Assessor argued that the value of these assets, owned by the hotel’s operators, had already been removed from the income stream by deducting the fees paid to the operators under the so-called “Rushmore” approach.  Following SHC Half Moon Bay, LLC v. County of San Mateo, 226 Cal. App. 4th 471 (2014), the Court found that this method failed to account for the value of these assets, reasoning that if the “fee were so high as to account completely for all intangible benefits to a hotel owner,” the owner would have no reason to pay it.

Olympic & Georgia Partners, LLC v. County of Los Angeles, 2023 Cal. App. LEXIS 263 (2023).

The Washington Court of Appeals held that a company’s collection of data from electric and natural gas meters constituted data processing services exempt from the retail sales tax. The taxpayer collected data from meters used by an energy company’s customers, converted the data into a usable form, and transmitted the data to the energy company so that it could be used for customer billing.

Washington law defines data processing services (an exception from taxable digital automated services) as “primarily automated service[s]…where the primary object of the service is the systematic performance of operations by the service provider on data supplied in whole or in part by the customer to extract the required information in an appropriate form or to convert the data to usable information.”  The Department contended that the taxpayer’s services did not constitute exempt data processing because the primary purpose or true object of the services was the collection and transmission of data—not its processing. The taxpayer disagreed, arguing that the primary purpose of its services was the manipulation and conversion of the data into information usable for its customers, as opposed to the transmission of the data itself.

Relying on precedent, the Court of Appeals concluded that the company was primarily providing data processing services. The court focused on the distinction between services involving the mere transmission of data, versus those involving manipulation or conversion of the data. Because the company (1) converted the data into an appropriate form in a process that took several hours, (2) quantified the information, (3) identified patterns in the information, and (4) without the company’s conversion the data was useless to the customer, the court held that the manipulation and conversion of the data was the true purpose of the transaction. As a result, the court concluded that the company’s services met the statutory definition of data processing and were therefore exempt from retail sales tax. 

Landis+GYR Midwest Inc. v. Washington Department of Revenue, Case No. 56877-2-II, Wash. Ct. App. 2d  (March 28, 2023).

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 recently held that taxpayers are not entitled to a set interest rate for their refund because no consistent interest rate has been provided on all refunds?

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 posted on Saturday in our SALT Shaker Weekly Digest. Be sure to check back then!