On October 4, 2021, the United States Supreme Court denied certiorari in an appeal from a decision of the Second Circuit which held that New York’s opioid stewardship payment, required as part of the New York Opioid Stewardship Act constituted a tax and not a fee for purposes of the Tax Injunction Act, barring federal court jurisdiction over the case.
Read the full Legal Alert here.
On this episode of the Salt Shaker Podcast, host and Eversheds Sutherland Associate Jeremy Gove continues his discussion of local taxes with Partners Nikki Dobay and Breen Schiller. They expand on their prior discussion of municipal-level economic nexus provisions, the potential issues with their expansion and the potential legal issues regarding the attempt to enforce a local economic nexus standard. They then talk about the myriad of challenges taxpayers face regarding local tax audits and administration, including the hurdles created by localities’ use of third-party auditors.
They wrap their discussion with Jeremy’s favorite question – overrated or underrated? This time, regarding puppets and marionettes vis a vis boy bands.
Questions or comments? Email SALTonline@eversheds-sutherland.com.
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The Maine Board of Tax Appeals (Board) disallowed a resident individual taxpayer’s claim for a Maine income tax credit for taxes paid to Connecticut by the taxpayer’s limited liability company (the Company). The Company, treated as an S corporation for federal purposes, paid Connecticut’s entity-level tax on pass-through entities (a tax that operates as a workaround to the federal state and local tax (SALT) deduction cap, benefiting pass-through entity owners). The taxpayer received an offsetting Connecticut personal income tax credit for the same amount paid by the Company. After that offsetting credit, the taxpayer owed no Connecticut income tax.
First, the Board rejected the taxpayer’s argument that he was entitled to a credit for the Company’s Connecticut tax paid because it was functionally a tax on his own personal income as the owner of, and recipient of flow-through income from, a pass-through entity. Even though the Company’s income passed through to the taxpayer, the Board explained that Maine’s credit is limited to taxes imposed on individuals and cannot be claimed for taxes paid by a separate business entity. Second, the Board dismissed the taxpayer’s argument that he could claim the credit for the amount of Connecticut income tax imposed upon him as an individual. Citing administrative guidance, the Board clarified that Maine’s credit applies to income taxes imposed by another state after application of credits; here, the taxpayer had no Connecticut personal income tax liability after using Connecticut’s offsetting credit for the Company’s tax paid.
This decision highlights a potential issue with many states’ new pass-through entity-level taxes intended as workarounds to the federal SALT deduction cap, namely, paying the entity-level tax in one state may impact an individual’s personal income tax credit for taxes paid in another.
[Individual Taxpayer] v. Maine Revenue Servs., Docket No BTA-2020-1 (Me. Bd. Tax App. Mar. 1, 2021).
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: Which SALT team members recently explored local taxation on an episode of the SALT Shaker Podcast?
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!
Peek-a-boo, or peekapoo? Meet Freddie, an adorable Pekingese Poodle, a breed affectionately known as peekapoo.
Freddie belongs to SALT associate Cyavash Ahmadi and his wife, who brought Freddie home when he was a few months old. It was love at first woof!
Besides mastering the perfect puppy eyes over the years, he loves cheese (especially gouda!) and whipped cream, and prefers sleeping to athletic runs through his neighborhood in New York. He likes to spend his days watching TV, and is a big fan of Bravo.
In addition to watching his favorite shows, he has a funny habit of growling when he’s craving cold water from a red plastic cup.
Freddie’s a cute boy who has made his mark on the Ahmadi household!
Welcome to the SALT Pet of the Month family, Freddie!
This week, members of the Eversheds Sutherland SALT team will continue presentations for key industry organizations:
View and learn more about past and upcoming events and presentations for the SALT team.
The Ohio Supreme Court recently held that Cincinnati’s billboard excise tax is unconstitutional because the tax violated the First Amendment of the United States Constitution, finding that Cincinnati’s need to raise revenue by imposing the tax solely on a small number of billboard operators did not survive strict scrutiny.
In 2018, the Cincinnati City Council passed an ordinance which imposed an excise tax on advertising hosts with advertising signs in the city. Many types of signs were excluded, effectively targeting a small group to bear most of the tax burden. Two billboard operators challenged the ordinance, arguing that the tax violated their First Amendment rights to free speech and freedom of the press.
The Court reviewed US Supreme Court decisions that applied the First Amendment to state taxes and distilled four principles: (1) the press may be subjected to a generally applicable tax; (2) a tax is unconstitutional if an official must look at the content of speech to determine whether the tax applies to it; (3) a tax that selectively singles out the press or targets a small group of speakers creates the danger that the tax will be used to censor speech; and (4) it is not necessary to prove that the purpose of a tax is to suppress or punish speech to establish that the tax violates the First Amendment. Although Cincinnati had an interest in raising money to support local government, the tax did not survive strict scrutiny because it burdened activities protected by the First Amendment, created a potent tool for censorship where the council had already previously requested to remove messages with which they disagreed and there were alternative means of achieving the same interest. Finally, the Ohio Supreme Court acknowledged that Maryland’s high court recently came to the opposite conclusion and upheld Baltimore’s imposition of a tax on billboards. Clear Channel Outdoor, Inc. v. Dir., Dept. of Fin. of Baltimore, 472 Md. 444, 247 A.3d 740, cert. pending, No. 21-219 (2021). The Ohio Court was not persuaded by Clear Channel.
Lamar Advantage GP Co., L.L.C. v. Cincinnati, Slip Opinion No. 2021-Ohio-3155.
In this episode of the SALT Shaker Podcast policy series, host and Eversheds Sutherland Partner Nikki Dobay welcomes Morgan Scarboro, Manager of Tax Policy at MultiState.
Morgan delves into the mission of MultiState as well as her work, including the incredible amount of state legislation she reads annually. Additionally, Morgan speaks to the impact of COVID-19 on state revenues and what taxes she sees as the main topic of conversation in the SALT legislative arena in the next 18 months. In addition, she shares her thoughts on what tax themes are going to take off and other issues to watch.
Their conversation concludes with the surprise nontax question – what is your favorite national park?
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. This series, which is focused on state and local tax policy issues, is hosted by Partner Nikki Dobay, who has an extensive background in tax policy.
Questions or comments? Email SALTonline@eversheds-sutherland.com.
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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: When did the Colorado Department of Revenue issue a private letter ruling regarding subscription fees for an online learning platform?
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 Illinois Department of Revenue recently released General Information Letter ST-21-0025-GIL, providing that an e-commerce retailer’s provision of tangible personal property to its subscribers for sampling prior to deciding whether to buy was not a taxable transaction, while an eventual purchase of the property was taxable. The taxpayer, based outside of Illinois, operates an e-commerce website that offers a month-to-month subscription program, which, in exchange for the subscription fee, allows subscribers to try the taxpayer’s merchandise before deciding whether to purchase it. The Department determined that the subscription receipts were not subject to sales tax because there was no transfer of the ownership of the property. The Department also determined that the subscription receipts were not subject to the Illinois “rental purchase agreement occupation and use tax” which imposes tax on the rental of merchandise under an initial rental-purchase agreement of less than four months, because a subscription model with a separate option to purchase, such as the taxpayer’s, was different than “rent-to-own dealers” contemplated by the rental purchase agreement occupation tax. Lastly, the Department determined that the taxpayer was not making a taxable use of the sample merchandise in the state as the demonstration exemption would apply.
