On January 25 and 26, Eversheds Sutherland Partner Nikki Dobay will present during the Ohio Chamber of Commerce’s 2022 Business Tax Conference, which will offer both in-person and virtual attendance options.
In two panels, Nikki will cover federal and state constitutional provisions that should be on your radar, as well as information for remote sellers.
For more information about the conference, click here.
On January 18, 2022, New York Governor Kathy Hochul released her fiscal year 2023 budget and accompanying legislation (the Budget Bill). The Briefing Book accompanying the Budget Bill highlights New York’s “remarkable reversal of fortune as tax revenues rebound”—giving the Governor the room to propose a variety of tax cuts targeted toward the middle-class and small businesses.
Read the full Legal Alert here.
In this episode of the SALT Shaker Podcast, host and Eversheds Sutherland Associate Jeremy Gove welcomes Partner Jeff Friedman for a discussion of the most interesting SALT trends and developments that occurred in 2021. In case you missed it, read our year-end post here and be sure to subscribe to receive our regular updates hosted on this blog. 
Together, Jeremy and Jeff review developments and cases from the following areas:
Finally, they conclude with Jeremy’s always engaging overrated/underrated question. This week, they tackle whether or not soup is worth all of the commotion!
Questions or comments? Email SALTonline@eversheds-sutherland.com.
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The Massachusetts Appellate Tax Board found that software-as-a-service (SaaS) provider Akamai Technologies Inc. was a manufacturing corporation, rather than a service provider. Akamai, headquartered in Massachusetts, provided software-based cloud services allowing customers to manage the delivery of web and media content over the Internet. In Massachusetts, a manufacturing corporation must use single sales factor apportionment, instead of the standard three factor formula. Manufacturing corporations may also claim the Investment Tax Credit and a limited exemption from local property tax.
The Board ruled that because Akamai developed and sold standardized computer software, which its customers accessed remotely, Akamai qualified as a manufacturing corporation. The Board rejected the Commissioner’s arguments that Akamai provided a service instead of selling software.
In holding that Akamai was a manufacturer, the Board looked to how the Department had previously distinguished sales of prewritten software from sales of services for sales tax purposes. In the Board’s view there was a transfer of property because Akamai’s software products operated almost automatically without its employees’ intervention, it charged separately for personalized professional services, and its software was not designed for any specific customer. The Board rejected the Commissioner’s argument that the object of the transaction test dictates that Akamai provides a service because Akamai billed separately for its services. The Board also disagreed with the Commissioner that Akamai provided services because it held itself out to be a “service” provider and because its large computer server network cost more than its software development. Rather, Akamai’s expenses to maintain its network hardware were part of its overhead for its standardized software products. Akamai’s use of the word “services” in describing its software products is not determinative, nor is the financial reporting description of its “internal-use software” costs. Ultimately, the Board looked to the substance of what Akamai sold to its customers – remotely-accessed computer software – to determine it was a manufacturing corporation.
Notably, this decision may result in an increased Massachusetts apportionment factor for out-of-state sellers of remotely accessed prewritten software, as they could be considered manufacturers subject to single sales factor apportionment.
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 recently-introduced bill would impose both a new excise tax and a new payroll tax, and increase personal income tax rates to fund universal single-payer health care coverage and a health care cost control system for state residents?
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!
An Alabama legislator has re-introduced a bill that would expressly exempt “virtual currency” from ad valorem tax. Alabama broadly imposes its ad valorem tax on all property, unless expressly exempt. Under current law, several other forms of currency are enumerated as exempt, such as “money on deposit in any bank or banking institution and all other solvent credits”; stock; and federal, state, and municipal bonds. The bill defines “virtual currency” as a “digital representation of value, other than a representation of the United States dollar or a foreign currency, that functions as a unit of account, a store of value, and/or a medium of exchange.” A similar bill failed to pass the Alabama legislature last year.
On January 18, 2022, Governor Kathy Hochul released the fiscal year 2023 budget Briefing Book. While we are still waiting for the public release of accompanying legislation (i.e., the Budget Bill) and memoranda, the Briefing Book indicates that the Budget Bill will propose a variety of tax cuts targeting middle-class individuals and small businesses. Other notable proposals include:
The Briefing Book also indicates that the Budget Bill includes proposals to:
The Eversheds Sutherland SALT team is closely monitoring New York budget legislation and will keep you apprised when actual legislation is released in the coming hours or days.
The New York Division of Tax Appeals determined that a multilevel marketing company’s provision of access to its web-based software that contains confidential and proprietary information and reports for use in developing business was neither the taxable sale of prewritten computer software, nor the sale of a taxable information service. The company, a multilevel marketing company, sells health and beauty products directly to end customers via e-commerce through its distributors and independent sales agents. The distributors paid a subscription fee to have access to a web-based software service that provided various personalized commission and transaction reports, reports regarding how their downline sellers were performing, as well as additional information, including access to a mobile application. The Department of Taxation and Finance assessed sales tax against the company, asserting that receipts from subscriptions to the web-based software was the taxable sale of prewritten computer software and that the furnishing of the information reports constituted the sale of a taxable information service. The ALJ applied the primary function analysis in concluding that the primary function of the subscription was the generation of confidential financial reports rather than the taxable sale of prewritten computer software. The ALJ also determined that the subscription sales were not the sale of a taxable information service because the confidential information provided in the reports was personal or individual in nature which would not be substantially incorporated in reports furnished to others, and thus qualified for the exclusion from tax on information services.
Happy New Year from the SALT Shaker Podcast!
In the first episode of the 2022 SALT Shaker Podcast focused on policy issues, host and Eversheds Sutherland Partner Nikki Dobay welcomes Lucy Dadayan, senior research associate with the Urban-Brookings Tax Policy Center at the Urban Institute, where she is leading the State Tax and Economic Review project. Lucy is an expert on state government revenues.
And, during their discussion, they discuss where state tax revenues were before the pandemic, what happened during the pandemic, and where the states are coming into 2022.
Then, they wrap up with Nikki’s surprise non-tax question – what’s your New Year’s Eve ritual?
The Eversheds Sutherland State and Local Tax 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.
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The Indiana Department of Revenue issued a protest ruling that an auto parts manufacturer was entitled to a refund on certain software service purchases for the 2017, 2018, and 2019 years. The taxpayer licensed software through a remote platform into which taxpayer loaded its own data for education services, cloud services, and manufacturing support services. For 2019, the ruling quickly concluded that the service at issue was a “software as a service” and exempt from sales tax because effective in 2019, Indiana expressly exempted “software as a service.” For 2017 and 2018, the Department examined whether the taxpayer acquired a possessory interest in the software.” The ruling cited Indiana Bulletin #8, which lists the factors for determining whether a possessory interest is acquired. Here, the taxpayer’s software agreement “ticks all the boxes” to indicate that the software services provider retained sole and exclusive ownership, and the taxpayer did not have “constructive possession” of the software. Therefore, Indiana sales tax was not due on the software service agreement for any of the years at issue.
