The New York State Tax Appeals Tribunal affirmed an Administrative Law Judge determination that two taxpayers remained New York residents because the taxpayers did not establish that they had changed their domicile to Florida during the relevant tax years. Because the taxpayers spent “more than 30 but less than 184 days in New York,” the Tribunal looked to whether the taxpayers changed their domicile, as illustrated by their “general habit of life.”   Through their representative, an accountant, the taxpayers alleged several actions were taken that would support a change of their domicile to Florida, including: registering to vote in Florida, changing their driver’s licenses, buying a car from a Florida dealer, executing wills in Florida, and moving other “near and dear” personal property, including an antique car collection, to Florida. However, the evidence provided by the taxpayers consisted entirely of a few formal declarations and unsworn, unsubstantiated statements. The Tribunal agreed with the Administrative Law Judge that such evidence should be given little weight and was insufficient to meet the taxpayers’ burden of proof. The Tribunal specifically noted that the evidentiary burden to establish the taxpayers’ intent to change their domicile to Florida could not be met without sworn statements or testimony to establish the veracity and significance of the other evidence that had been submitted.

Matter of Thomas A. & Jean Boniface, DTA No. 829018 (N.Y.S. Tax App. Trib., June 30, 2022).

In Letter Ruling 22-02 (publicly released last week), the Tennessee Department of Revenue ruled that fees a marketplace facilitator charges for connecting buyers and sellers and processing payments are not subject to sales tax. The taxpayer in the ruling was a “delivery network company” under Tennessee law. It connects third-party sellers of tangible personal property to purchasers and also connects purchasers to third-party service providers (such as delivery services). The taxpayer does this through a web-faced interface or app. The marketplace facilitator taxpayer was responsible for remitting sales tax on behalf of the sellers. The marketplace facilitator taxpayer separately charges the marketplace sellers and the third-party service provider for its fees. The fees are for connection, lead generation, and payment processing services. The Tennessee Department of Revenue ruled that the fees charged to the marketplace seller and service providers are not subject to sales tax because the “true object” of the transactions covered by these fees are lead generation and payment processing, which are not taxable services in Tennessee. The taxable web-based interface and app are merely incidental components of the transaction.

Earlier this month, the California Franchise Tax Board released Legal Ruling 2022-02, regarding the sourcing of Internal Revenue Code Section 751(a) gain from the disposition of a nonresident individual’s partnership interest when the IRC Section 751 property is located in California.

In this article for Law360, Eversheds Sutherland Senior Counsel Eric Coffill discusses the nonresident asset ruling and its potential impact, especially where Section 751 property is involved.

Read the full article here.

In this episode of the SALT Shaker Podcast policy series, Eversheds Sutherland Partner and host Nikki Dobay is rejoined by Morgan Scarboro, Senior Director of Tax Policy at MultiState.

Morgan reviews what needs to be on your radar for the upcoming fall elections and why there is such a focus on the elections’ outcome. They then get into the weeds of some specific state elections and how the elections may impact state tax legislation. In addition, they cover potential challenges on the state budget side.

Nikki’s surprise nontax question this week deals with honeymoons. If you were going on a honeymoon, where would you go, and why?

The Eversheds Sutherland SALT team has been engaged in state tax policy work for years, tracking tax legislation, helping clients gauge the impact of various proposals, drafting talking points and rewriting legislation. This series, which is focused on SALT policy issues, is hosted by Partner Nikki Dobay, who has an extensive background in tax policy.

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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Most decisions issued by the California Office of Tax Appeals involve small dollars, but these decisions can still shape precedent.

In this article for Bloomberg Tax, Eversheds Sutherland Senior Counsel Eric Coffill discusses Appeal of R. Sheward, which addresses the Franchise Tax Board’s legal authority to assess tax on unreported income based on an estimate of income and its unwillingness to follow its own regulations.

Read the full article here.

The Texas Comptroller published a private letter ruling concluding that subscriptions to online learning courses for academic subjects, professional topics, and vocational topics are not taxable. However, a company’s subscriptions for the “teacher plan,” which provides teachers lesson plans and other capabilities to integrate into their classrooms, are taxable as data processing. None of the company’s services constituted “information services,” because they do not gather, maintain, or compile information for its customers. The teacher plan was determined to be taxable data processing because the customizable lessons, instruction scheduling, and grade tracking “includes word processing, data entry, data retrieval, data search, information compilation. . . and other computerized data and information storage or manipulation.” Although the teacher plan includes the same elements as other nontaxable services, the teacher plan is sold for one lump sum charge and the taxable portion exceeds 5% of the total charge, thereby making the entire amount taxable. The Comptroller also determined that the taxpayer’s gathering and sale of information on prospective students to universities is a taxable information service. For any taxable information service or data processing, there is a 20% statutory exemption.

On July 1, 2022, the New York State Department of Taxation and Finance issued the third set of “final draft” regulations relating to the corporation franchise tax reform that took effect for tax years beginning on or after January 1, 2015. The third set of draft regulations relate to apportionment, and contain revisions to the apportionment rules that were last updated in 2019.  The first two sets of “final draft” regulations, which address all rules other than those regarding apportionment, were issued on April 29, 2022.

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 prizes for the smartest (and fastest) participants.

This week’s question: The Washington Department of Revenue’s Administrative Review and Hearings Division recently ruled that a company’s account access services provided to credit unions constituted what type of taxable service?

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. Answers will be posted on Saturdays in our SALT Shaker Weekly Digest. Be sure to check back then!

A Posy of Pups! Meet Iris, a 14-week-old pup belonging to Justin Brown, a SALT associate in our Atlanta office. She joins big sister and previous Pet of the Month honoree, Daisy, in bringing plenty of cuteness to Justin’s home.

Justin recently rescued Iris from a local pet adoption agency after realizing Daisy would like to have a companion in the house. According to the adoption agency, Iris’ mom is a blue heeler mix and dad is a beagle, making for a perfectly adorable combination in Miss Iris.

Iris is still limited to puppy food and small training treats. However, lucky for Justin, she doesn’t seem to mind her meals and happily devours them, unlike her discerning big sister.

While eating seems to be no problem, Iris enjoys a few naughty habits, including leaving puppy tooth prints on everything in the house, especially wooden items such as window sills and furniture. She makes up for it by being surprisingly good on a leash, and has already enjoyed a few nice hikes with her dad and big sister.

Justin was initially worried about how Daisy would take to her little sister, but after about two days together at home, they have become best friends and wear each other out on a daily basis, roughhousing and chasing each other around the house and backyard.

Welcome to the SALT Pet of the Month club, sweet Iris!

 

Understanding—let alone navigating—the layers of bureaucracy is no small feat for taxpayers that seek to resolve a California tax controversy, whether through administrative protest and appeals processes or by means of settlement negotiations.

In many states, the counterpart from the department who handles a taxpayer’s protest or appeal also has authority to negotiate a settlement. Not so in California. Also, many states may issue a substantial assessment against a taxpayer and then settle for ten or twenty cents on the dollar during the administrative process. Again, not so in California.

In their article for Tax Executive, Eversheds Sutherland attorneys Tim Gustafson and Liz Cha provide a brief overview of the settlement process in California, followed by key considerations for taxpayers seeking to resolve matters through that process.

Read the full article here.