In this episode of the SALT Shaker Podcast focused on policy issues, host and Eversheds Sutherland Partner Nikki Dobay welcomes back fellow SALT Partner Charlie Kearns for a conversation with Luke Morris, Deputy Secretary of the Louisiana Department of Revenue. Together, they discuss Louisiana’s local tax administration situation, including the 2021 efforts at the ballot and recently pre-filed 2022 legislation that seek to address some of these challenges.

Nikki’s surprise non-tax question focuses on burritos – are they classified as a sandwich?

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. Partner Nikki Dobay, who has an extensive background in tax policy, hosts this series, which is focused on state and local tax policy issues.

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 second state to pass legislation that would decrease 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!

 

 

The New York Tax Appeals Tribunal upheld the New York Division of Tax Appeals’ determination that an information technology security company provides a taxable protective service. The taxpayer provides monitoring and firewall management services, by configuring its customers’ software and devices to prevent malicious activity. The Department of Taxation and Finance asserted that the taxpayer’s services were taxable protective services, which include protection against any malfunction or damage to property. In upholding the assessment, the Tax Appeals Tribunal found that the taxpayer’s services prevented outside threats to customers’ networks, which falls within the statutory definition of taxable protective services. The Tribunal rejected the taxpayer’s argument that the services did not actively or directly guard or protect property, because the purpose of the taxpayer’s software and devices is to protect or guard customers’ networks from malicious activity.

On March 7, Eversheds Sutherland Partner Jeff Friedman will participate in a panel from Thomson Reuters ONESOURCE and Tax Executives Institute (TEI), covering important SALT trends and issues to watch in the coming year. For more information and to register, click here.

In addition, on March 9, join Eversheds Sutherland attorneys Tim Gustafson and Eric Coffill for a California tax update, as they will explore recent key California tax developments and how they will impact the state’s tax landscape in 2022. To register, click here.

Finally, on March 10, Eversheds Sutherland Partners Nikki Dobay and Charlie Kearns will present during the during the 2022 COST Sales Tax Conference in Las Vegas, NV.

Presentation topics include:

  • Issues with Local Taxes – Focus on Lodging Taxes and Home Rule Jurisdictions – Nikki Dobay
  • Does the Permanent Internet Tax Freedom Act Have any Teeth? – Charlie Kearns

For more information and to register, click here.

On March 4, 2022, the United States District Court for the District of Maryland partially dismissed a challenge to the Maryland Digital Advertising Gross Revenues Tax.

  • The plaintiffs asserted that the Tax violates the Internet Tax Freedom Act and the Commerce and Due Process Clauses of the United States Constitution.
  • The federal court held that the Tax Injunction Act applied and, therefore, the court did not have jurisdiction to hear a challenge to the Tax.
  • However, the court agreed to hear the First Amendment and Commerce Clause challenges to the Tax’s “anti-pass-through” provision.
    • The Tax contains a provision that prohibits the taxpayer from “directly pass[ing] on the cost of the [Tax] to a customer who purchases the digital advertising services by means of a separate fee, surcharge, or line-item.” Code Ann., Tax-Gen. § 7.5-102(c).
    • But the Tax does not contain any express penalties for violating the anti-pass-through provision.
    • The court determined that a challenge to this provision does not fall within the Tax Injunction Act because it does not involve a challenge to the assessment, levy, or collection of the Tax.

Chamber of Commerce of the United States of America, et. al., v. Franchot, No. 21-cv-00410-LKG (D. Md. Mar. 4, 2022).

The Texas Court of Appeals ruled that a law firm’s purchases of loan packages for lending institution clients was the taxable purchase of data processing services. The law firm purchased loan packages consisting of promissory notes, deeds of trust, tax disclosures and other pertinent legal documents from vendors. The law firm argued that the “essence of the transaction” was the conveyance of the loan package, which included services of paralegals and mortgage experts and not data processing. The court disagreed, finding that the contracts provided that the firm’s vendors collect and manipulate data, while the firm is responsible for the legal content in the packages. Thus, the “essence of the transaction” was the purchase of taxable data processing services.

Missouri Senate Joint Resolution 33 provides that voters will decide whether to amend the state constitution to tax digital products. Missouri’s constitution prohibits expanding the sales and use tax to any services that were not taxable as of January 1, 2015. Joint Resolution 33 proposes to allow taxation of “subscriptions, licenses for digital products, and online purchases of tangible personal property.” The Joint Resolution still needs approval from the full House.

In this episode of the SALT Shaker Podcast, host and Eversheds Sutherland Associate Jeremy Gove is joined by Associate Annie Rothschild to discuss some noteworthy developments in the proposed amendments to California’s market-sourcing regulations. They highlight changes to the regulations that Annie discusses at length in a recent Tax Notes State article.

They conclude their discussion with Jeremy’s favorite question – overrated/underrated? Cold means citrus season, so this time they discuss the sumo citrus orange.

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: What famous Valentine’s Day gift is subject to sales tax in 29 states but exempt from sales tax in 16 states and Washington DC?

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!

 

 

In Virginia Department of Taxation v. R.J. Reynolds Tobacco Co., the Virginia Supreme Court ruled that the taxpayer was entitled to a corporate income tax refund because leaf tobacco stored in the taxpayer’s Virginia warehouse was not “used” by the taxpayer for purposes of inclusion in its Virginia property factor.

The taxpayer stored leaf tobacco in its Virginia facilities in order to allow the tobacco to reach its target drying age and then shipped the tobacco to the taxpayer’s production and manufacturing team in North Carolina for processing and manufacturing into cigarettes.  While stored in Virginia, the tobacco aged naturally without any action taken or directed by the taxpayer.  The Virginia Department of Taxation argued that the taxpayer’s storage of the tobacco in the Virginia facilities constituted “use” for Virginia property factor purposes because the tobacco was aging during the time it was stored there, and aging was important to the subsequent use of the tobacco.  The taxpayer argued that it merely exercised ownership over the tobacco by storing it in Virginia and did not take any positive action with regard to the tobacco so as to constitute use.

Finding that there was no ambiguity in the Virginia Code’s employment of the term “used,” the Court thus limited its analysis to the plain meaning of the word, which it defined as putting “into action or service” or “employ[ing] for the accomplishment of a purpose.”  Applying this definition, the Court held that the taxpayer did not use the tobacco while stored in Virginia because the taxpayer did not “introduce any treatment to the leaf tobacco” or “perform any affirmative act or activity to prompt or aid the aging process.”  Accordingly, the Court concluded that the taxpayer should not include the tobacco in calculating its property factor.

Virginia Dept. of Taxation v. R.J. Reynolds Tobacco Co., Va., No. 201263, 2/10/22.