It is still early in the 2022 session of the California Legislature, which reconvened on January 3, and goes on final recess on August 31. However, a number of proposals to increase taxes are already under consideration.
In his article for Financial Advisor Magazine, Eversheds Sutherland Senior Counsel Eric Coffill details current tax increase proposals to watch.
Read the full article here.
“Business-friendly” Texas has been the leading poacher of California-based companies for over a decade, with relocations from tech-dominated California only accelerating during the pandemic. Oddly enough, at a time when Texas’s highest-profile new neighbors are known for cutting-edge research, the state seeks to narrow the scope of its research and development credit applicable to some internal-use software.
Last fall the Texas Comptroller of Public Accounts adopted amended rules concerning the state’s R&D credit applicable to franchise and sales taxes. These amendments provide detailed guidance regarding how the comptroller seeks to administer the credit in the future.
However, the way in which Texas conforms to the Internal Revenue Code has led the comptroller to misapply the federal regulations to Texas’s R&D credit. This misapplication may create unpleasant surprises for Texas taxpayers, particularly those relocating operations to the Lone Star State.
In this installment of A Pinch of SALT for Tax Notes State, Eversheds Sutherland attorneys Jeff Friedman, Mary Monahan, Dennis Jansen and Mary Kate Nicholson look at Texas’s recently amended rules and their impact.
Read the full article here.
The New York State Supreme Court, Appellate Division, affirmed a New York trial court decision denying a taxpayer’s motion to dismiss a False Claims Act suit brought against the taxpayer in relation to its sales of artwork to an alleged art collector under a resale exemption. According to the complaint, an employee of the taxpayer advised an individual purchaser of artwork to submit a resale certificate in order to avoid paying New York sales tax on his purchase of artwork, despite knowing that the purchaser’s occupation was as a shipping executive and that he had no plans to sell the artwork. The taxpayer’s employee allegedly provided the purchaser with the resale certificate and partially completed the certificate on his behalf. Over the course of five years, the purchaser bought artwork totaling $27 million from the taxpayer without paying New York sales tax, based on the resale certificates. The Appellate Division held that the alleged facts, if proven, would demonstrate that the taxpayer had actual knowledge that the purchaser’s purported exempt status was false and the taxpayer therefore violated its obligation to collect sales tax owed on the purchases. The Appellate Division further found that the facts alleged in the complaint permitted the inference that facilitation of knowingly false resale certificates by the taxpayer’s employees fell within the scope of their employment and was committed in furtherance of the taxpayer’s commission-based business. As a result, the Appellate Division, in a unanimous decision, upheld the trial court’s denial of the taxpayer’s motion to dismiss the complaint for failure to state a cause of action.
N.Y. v. Sotheby’s Inc., Case No. 2021-03657 (N.Y. App. Div. Apr. 14, 2022).
In this episode of the SALT Shaker Podcast, host and Eversheds Sutherland Associate Jeremy Gove welcomes Associates Dennis Jansen and Mary Kate Nicholson for a discussion about Texas’s R&D credit, and the impact of the state’s recently amended rules. In addition, they address an article they recently authored in Tax Notes State covering the topic. 
During the conversation, Dennis offers background and analysis of the Texas R&D credit and the Comptroller’s recently promulgated (and retroactive) rules regarding internally developed software. As these rules rely on their federal counterpart, Mary Kate is called upon to dissect the federal research and experimentation (R&E) credit for internally developed software and its interesting history.
They conclude with Jeremy’s weekly question – overrated/underrated? This week, it’s simple. How do you feel about sleep?
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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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: What was the first state to pass legislation decreasing corporate and individual income tax rates this year?
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!
On April 21, the Connecticut Department of Revenue Services released Ruling no. 2022-2, finding that online learning plans were not taxable digital goods. The company offers various learning plans which address educational needs through virtual learning and on-demand digital courses in academic subjects, professional topics, and vocational licensure preparation courses. The company’s platform is accessed from computers or via the company’s mobile device application. Because the company’s service consists of both taxable digital goods and enumerated taxable services, the Department applied the “true object test” to determine taxability of the service. In this case, the “true object” of the transaction is the is the education or training offered, including live tutors, practice quizzes, and credit toward academic, vocational or professional accreditation, rather than the sale of a digital good. The Department concluded that while the learning plans are generally not subject to sales tax as digital goods, under certain circumstances, the learning plans could be treated as taxable job-related training, computer training, or software training.
Meet Rosey, an Australian labradoodle and our April SALT Pet of the Month! Like a fine wine, Rosey keeps getting better with age. As cute as she is cuddly, she recently celebrated her first birthday with her parents – Michell Rodriguez, Director of Corporate Tax at Costco, and Wayne Monfries, Senior Vice President of Global Tax at Visa.
Rosey earned her name because of her coloring. It’s similar to Michell and Wayne’s favorite wine, rosé, and their favorite color of roses.
When she isn’t destroying a stuffed animal, she loves to chew on Bully Sticks and has recently developed a fondness for peanut butter. Beyond an affinity for good treats, she likes long walks on the beach, playing fetch in the house and hiding her favorite toys for her paw-rents to find.
They often locate her chew sticks in the couch, in chairs or hiding behind the pillows in bed. She also hides her green balls (which smell like bacon!) under beds, cabinets and other sneaky locations.
In addition to her playful mischief, she loves people and other dogs, and likes to sit on the stairs outside Wayne’s home office, waiting to bark at everyone in the neighborhood.
We’re happy to welcome Rosey to the SALT Pet of the Month club!
Between April 25 and 28, members of the Eversheds Sutherland SALT team will present during COST’s 2022 Income Tax Conference & Spring Audit Session in Denver, CO, which focuses on current income and franchise tax issues.
Presentations and topics include:
For more information and to register, click here.
The Multistate Tax Commission (MTC) held its spring meetings in Albuquerque, New Mexico on April 19 through 22. The Uniformity Committee meeting took place on April 20 – some highlights from the meeting are included in our full legal alert.
Read the full legal alert here.
