Shaking things up in state and local tax
Shaking things up in state and local tax
By Madison Barnett and Prentiss Willson
The Indiana Department of Revenue determined in a Letter of Finding that an out-of-state information service provider must apportion its receipts from sales to Indiana customers to Indiana in a market-sourcing-like manner, even though the majority of its costs were incurred outside Indiana. The taxpayer provided information services electronically…
By Mary Alexander and Andrew Appleby
The Indiana Department of Revenue disallowed a taxpayer’s deduction for interest expenses accrued to a subsidiary because the Department considered the loan a sham. Unless eligible for an exemption under Ind. Code § 6-3-2-20(c), a taxpayer that is subject to Indiana’s adjusted gross income tax is required to add…
By Madison Barnett and Timothy Gustafson
In a case involving the exclusion of captive insurance companies from combined reporting groups, the Indiana Tax Court held that a captive must be physically present in Indiana to be “subject to” the insurance premiums tax and therefore exempt from the corporate income tax. The Tax Court initially…
By Todd Betor and Andrew Appleby
The Indiana Department of Revenue issued a Letter of Findings denying a taxpayer’s deductions for certain intercompany payments to a subsidiary management company. The taxpayer and its subsidiary management company (Management Co.) entered into an intercompany agreement based on a federal income tax transfer pricing study, which endorsed the…
By Todd Betor and Pilar Mata
In a Letter of Findings, the Indiana Department of Revenue disallowed a corporate partner’s attempt to deduct flow-through income from a limited liability company as “foreign source dividends and other adjustments” on its Indiana corporate income tax return. Indiana requires corporate partners to report their share of partnership income,…
By Shane Lord and Andrew Appleby
The Indiana Department of State Revenue issued a Letter of Findings concluding that a taxpayer’s sales of tangible personal property from Indiana to foreign countries were attributable to Indiana for income tax purposes because the taxpayer did not show that its activities in the foreign countries exceeded the protections…
We are pleased to provide the following updates on state tax issues impacting the digital economy. The Sutherland SALT Team will continue to monitor these and other Digital Economy developments. Please visit the Sutherland SALT Digital Economy Forum to learn more, and please contact one of us if you have questions regarding the Forum.
Texas…
The U.S. Supreme Court held in Armour v. City of Indianapolis, 132 S.Ct. 2073 (June 4, 2012), that a city’s refusal to refund sewer taxes prepaid by some homeowners while relieving taxes paid by other homeowners who elected to pay the tax by installment did not violate the Equal Protection Clause. Applying a rational basis standard, the Court upheld the tax forgiveness scheme because it was rationally related to the city’s legitimate interest of avoiding the administrative costs associated with issuing refunds.
The opinion reflects the difficulty of applying the Equal Protection Clause. The Court provided that laws treating similarly situated taxpayers differently are constitutional as long as there is a “plausible policy reason for the classification . . . and the relationship of the classification to its goal is not so attenuated so as to render the distinction arbitrary or irrational.” The Court noted that the only instance where it has found a rational basis lacking in this context is where a state law requiring equal assessment was “dramatically violated” by gross disparity in assessments. Here, the sewer project financing assessments were equally distributed, as required by state law. Whether the tax should be forgiven and how such a tax forgiveness program should be implemented are separate questions which are not addressed by state law.Continue Reading Administrative Convenience Justifies Inequality in Tax Forgiveness Program
The Indiana Tax Court held that a retailer was permitted to seek sales and use tax refunds of tax collected from its customers before refunding the tax to its customers. In Fresenius USA Marketing, Inc. v. Indiana Dep’t of State Revenue, No. 49T10-1008-TA45 (Ind. Tax Ct. 2012), a retailer sold dialysis equipment to customers…
The Indiana Supreme Court issued another taxpayer-averse decision, holding that Miller Brewing Company’s sales to Indiana customers are considered Indiana sales even if they are picked up out of state and delivered into Indiana by common carrier. The Indiana Supreme Court reversed the Indiana Tax Court, which relied on an administrative rule example to exclude…
