This is the second edition of the Eversheds Sutherland SALT Scoreboard for 2025. Since 2016, we have tallied the results of significant taxpayer wins and losses and analyzed those results.
This edition includes developments in investment tax credit limitations, the exhaustion of administrative remedies, and cloud service taxation. We also spotlight a couple of recent decisions from the Empire State.
Dive into the Eversheds Sutherland SALT Scoreboard for the second quarter of 2025 now!
This week, the Eversheds Sutherland SALT team is pleased to again support COST’s SALT Technology Workshop in Burlingame, CA. The two-day workshop will cover key state and local tax issues that technology companies face. such as state taxation of digital business inputs, FITFA, sourcing, apportionment, streaming, marketplace facilitators, digital service taxes and much more. SALT speakers and topics will include:
You can find more information and register here.
On July 3, 2025, the Colorado Court of Appeals held that sales of streaming video service subscriptions are subject to sales tax because they are sales of tangible personal property. Colorado imposes sales tax on retail sales and purchases of “tangible personal property,” which is defined as “corporeal personal property.” In 2021, the Department of Revenue promulgated an administrative rule that “provide[d] clarification” on the term’s definition and added examples indicating sales tax is due on the purchases of downloaded and streamed movies, as well as monthly streaming video service subscriptions. The legislature subsequently amended the sales tax statute to “clarify” that digital goods (e.g., video, music, or electronic books) are taxable as tangible personal property, regardless of the “method of delivery.” A streaming video service provider paid sales tax across these periods and requested refunds. It argued that: (1) the rule conflicted with the underlying sales tax statute; and (2) both the rule and statute violated the Colorado Taxpayer’s Bill of Rights, which prohibits the implementation of new taxes or tax policy changes without voter approval.
The appellate court agreed with the Department of Revenue that for an item to be corporeal, it “can be perceived by any of the senses – not exclusively the sense of touch.” (Emphasis added.) Additionally, the court found that the term “incorporeal property” addresses “abstract rights that have no real existence perceptible to the senses, even if the possession of such rights can be represented in a physical form,” such as book accounts, stocks, bonds, mortgages, notes, and other evidences of debt. As a streaming video subscription provides images and sounds that physically exist and are perceived by the user, the court found it to be corporeal tangible personal property and thus subject to sales tax.
There is a lot of uncertainty around state tax penalties. The standards are murky because the authority to impose penalties often turns on whether a taxpayer exercised “ordinary business care” or had “reasonable cause” for its tax positions. And while many states use similar standards, courts interpret them differently.
Taxpayers are in a tough spot because they lack the necessary information as they operate across jurisdictions with inconsistent penalty regimes. In this installment of “A Pinch of SALT,” published by Tax Notes State, Eversheds Sutherland attorneys Jeremy Gove, Chelsea Marmor and Megan Long examine the legal standard for penalty imposition, how courts have interpreted these rules, and where this leaves taxpayers in this challenging landscape.
Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!
We will award a prize for the smartest (and fastest) participant.
This week’s question: Which Rust Belt state recently introduced legislation that would exempt steel made in the state from the sales tax and create a tax credit for businesses that invest in steelmaking facilities in the state?
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 included in our SALT Shaker Weekly Digest, distributed on Saturday. Be sure to check back then!
Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!
We will award a prize for the smartest (and fastest) participant.
This week’s question: The Tax Appeals Tribunal of which state recently held that a tax on internet access sold to internet service providers was preempted by the Internet Tax Freedom Act?
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 included in our SALT Shaker Weekly Digest, distributed on Saturday. Be sure to check back then!
On June 18, 2025, in a 5-2 decision, the Ohio Supreme Court held that reimbursements received by Aramark under “management-fee” contracts were not excluded from “gross receipts” as amounts received or acquired by an agent in excess of a commission, fee, or other remuneration.
Aramark is a food services, hospitality, facility services, and uniform services company. It provides a broad range of managed services to businesses and educational, healthcare, and government institutions. Some of Aramark’s services were provided pursuant to a “management fee” agreement where customers purchased food, supplies, and other items. Even though Aramark purchases these items, its customers reimburse Aramark for the expenses. Aramark sought to exclude the gross receipts associated with these purchased items.
Under Ohio’s CAT, there is an exclusion from “gross receipts” for “[p]roperty, money, and other amounts received or acquired by an agent on behalf of another in excess of the agent’s commission, fee, or other remuneration.” Ohio Rev. Code § 5751.01(F)(2)(1). The code defines an agent as “a person retaining only a commission from a transaction with the other proceeds from the transaction being remitted to another person.’” Ohio Rev. Code § 5751.01(P)(2).
The majority explained that Aramark did not meet the definition of an “agent” because Aramark failed to show that it did not hold or keep the reimbursements that it received from its management-fee clients. Instead, the Court observed, nothing in the record showed that Aramark passed on to its third-party vendors the reimbursements it received from its management-fee clients. The Court also determined that Aramark did not receive the reimbursements on behalf of third parties. Rather, Aramark acquired the reimbursements for itself.
The majority also rejected Aramark’s argument that, based on Willoughby Hills Dev. & Distribution, Inc. v Testa, 2018-Ohio-4488, Aramark was an “agent.” The Court in Willoughby Hills interpreted the term “agent” for CAT purposes, relying on another decision, Cincinnati Golf Mgt., Inc. v. Testa, 2012-Ohio-2846. Cincinnatti Golf Mgt.was a use tax case where the Ohio Supreme Court held that, an agent could claim a principal’s tax exemption, even though the agent may not itself be exempt, if the agent had actual authority to act on the principal’s behalf. The Ohio Supreme Court in Willoughby Hills relied on that reasoning, determining that for purposes of the CAT, a person is “authorized” to act on behalf of another when that person has actual authority to do so. The Aramark Court found that the reliance on Cincinnatti Golf Mgt. in Willoughby Hills was misplaced. Instead, the Court observed, because the CAT defines “agent” (whereas the use tax does not), any interpretation of that term should be restricted to the statutory language. Accordingly, the Court noted that, for CAT purposes application of the agency exclusion should be focused on the meaning of the statutory language.
The Court further rejected Aramark’s claim that administrative guidance supported its position. The administrative guidance Aramark relied on established that a “conduit” for payments could exclude the money it receives as a conduit. Here, however, the Court determined that Aramark was not acting as a conduit. Aramark was found to incur expenses on behalf of its management-fee clients and then receive a reimbursement from them.
Finally, the Court rejected Aramark’s argument that the reimbursements did not contribute to the production of gross income. The Court determined that Aramark received the reimbursements in exchange for performing services for others and, therefore, the reimbursements contributed to the production of gross income.
This case illustrates the need to carefully evaluate whether taxpayers fall under one of the enumerated exclusions under the Ohio CAT. Although as a matter of economic logic, receipts may fall under one of those exclusions, taxpayers should examine whether those economics are also aligned with the relevant statutory language.
Aramark Corp. v. Harris, Slip Op. No. 2025-OHIO-2114.
The New Jersey Superior Court, Appellate Division upheld the application of New Jersey’s 2020 amendment to its royalty addback regulation retroactively to tax years prior to the regulation’s amendment. In 2020, New Jersey amended its regulation (N.J. Admin. Code § 18:7-5.18) to delete geographical limitations in the addback exception for royalty payments made to a related member because – as the Tax Court ruled – the pre-amendment language violated external consistency and the dormant commerce clause. The taxpayer argued that because the pre-amendment regulation was unconstitutional, it should not apply to allow the denial of its refund claims for pre-2020 tax years. The court rejected the taxpayer’s argument, finding that the 2020 amendment regulation cured the constitutional problems, and the cured regulation could be applied to the pre-amendment tax years. The court noted that the New Jersey Supreme Court has recognized an exception to the general rule against retroactive laws when a retroactive change to a regulation is “ameliorative or curative.” Accordingly, the court upheld the retroactive application of the cured regulation to pre-amendment tax years and upheld the denial of taxpayer’s refund claims based on that regulation.
Lorillard Tobacco Co. v. Dir., Div. of Tax’n, No. A-0595-23, 2025 WL 1226968 (N.J. Super. Ct. App. Div. Apr. 29, 2025).
Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!
We will award a prize for the smartest (and fastest) participant.
This week’s question: What type of income is now eligible for a personal income tax deduction in Missouri?
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 included in our SALT Shaker Weekly Digest, distributed on Saturday. Be sure to check back then!
Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!
We will award a prize for the smartest (and fastest) participant.
This week’s question: Which state recently modified the apportionment formula for banks and financial institutions from a three-factor formula to a single sales factor formula for tax years beginning on or after January 1, 2025?
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 included in our SALT Shaker Weekly Digest, distributed on Saturday. Be sure to check back then!
