On April 17, 2025, the Michigan Tax Tribunal held that a business with only one brick and mortar location was entitled to apportion its income on its city income tax return because it engaged in business activities outside of the city. In this case, a business with only one brick-and-mortar location (located in Lapeer, Michigan)
income tax
Illinois appellate court holds subsidiary not an 80/20 company
By Alla Raykin on
Posted in Income Tax
An Illinois appellate court held that a PepsiCo, Inc. subsidiary—Frito-Lay North America, Inc. (FLNA)—was not an 80/20 company excluded from PepsiCo’s unitary group. Illinois excludes 80/20 companies for the unitary group, where such companies have over 80% of their payroll and property from outside the United States. After a restructuring, PepsiCo created a single-member LLC…
Massachusetts ATB upholds income tax on pandemic-era telecommuter
By Timothy Gustafson & Periklis Fokaidis on
Posted in Income Tax, Teleworking and Business Travel
The Massachusetts Appellate Tax Board (ATB) determined that a New Hampshire resident attorney, employed by a Massachusetts-based federal agency, was not entitled to a personal income tax refund for days he did not physically work in Massachusetts during the coronavirus pandemic.
In April 2020, Massachusetts implemented emergency regulation 830 CMR 62.5A.3, which required nonresident employees…
Third Circuit holds that principles of comity bar Federal Court challenge to New Jersey’s partnership filing fee
By Daniel Schlueter & Dennis Jansen on
Posted in Income Tax
The Third Circuit Court of Appeals upheld a District Court’s dismissal of a taxpayer’s challenge to New Jersey’s partnership filing fee under the tax comity doctrine. The partnership filing fee was enacted by New Jersey in 2002 to offset the costs of reviewing and auditing partnership tax returns. The fee is a flat fee computed…
California appellate court rejects single-subject rule challenge to single-sales factor apportionment
By Maria Todorova, Charles Capouet & John Ormonde on
Posted in California, Income Tax
A California appellate court held that Proposition 39, which mandated single-sales factor apportionment, did not violate the single-subject rule. In 2012, California voters enacted Proposition 39, which established a program to promote the creation of clean energy jobs. It funded the program by eliminating the option for taxpayers to apportion its California tax based on…
Virginia Budget Bill introduced, taxes digital products and computer services
By Charlie Kearns & Charles Capouet on
Governor Glenn Youngkin has issued his proposed Virginia 2024 – 2026 Budget Bill. The Budget Bill would make three notable changes to Virginia’s tax structure, all of which would take effect on January 1, 2025: (1) increase the sales and use tax rate; (2) expand the sales and use tax base to digital products; and…
Pennsylvania Supreme Court holds city wage tax not required to credit Delaware state income tax
By Timothy Gustafson & Dennis Jansen on
Posted in Income Tax
The Pennsylvania Supreme Court held that the City of Philadelphia is not required to provide a city wage tax credit for income tax payments that a resident made to another state. For the purposes of a dormant Commerce Clause analysis, the court found that state and local taxes do not need to be considered in…
What the doctor ordered: Maine court apportions drug company’s income on a “market member basis”
By Eric Coffill & Dennis Jansen on
Posted in Income Tax
The Maine Supreme Judicial Court held that a prescription drug company’s income should be apportioned based on the location where its prescription drugs are received, rather than the headquarters locations of the health plans or employers paying for the drugs.
The drug company sought income tax apportionment based on a “market client basis,” arguing that…
South Carolina Court upholds Department’s use of combined reporting under alternative apportionment statute
By Alla Raykin & John Ormonde on
Posted in Income Tax
The South Carolina Administrative Law Court (ALC) held that the South Carolina Department of Revenue could require Tractor Supply and its affiliates to file a combined return notwithstanding that South Carolina law requires corporate taxpayers to file tax returns on a separate-entity basis. In a factually intensive ruling, the ALC found that the Department met…
California Office of Tax Appeals finally drops the beet, holds that activities related to deductible income included in apportionment factor
By Timothy Gustafson & John Ormonde on
Posted in California, Income Tax
In the pending-precedential decision Appeal of Southern Minnesota Beet Sugar Co-op., the California Office of Tax Appeals (OTA) ruled that payroll, property and sales that generated deductible agricultural cooperative income under Cal. Rev. & Tax. Code Section 24404 must be included in the taxpayer’s corresponding payroll, property and sales factors.
The California Franchise Tax…