The California Office of Tax Appeals (OTA) reversed the Franchise Tax Board’s (FTB) determination that an out-of-state limited liability company (LLC) had taxable nexus with California solely because it held an ownership interest in an LLC operating in the state that ranged from 1.12% to 4.75%. California imposes an annual $800 tax on LLCs “doing
Virtual Pets and the Reality of Taxes – Texas Comptroller Affirms Sales Tax Assessment on Online Gaming Company
The Texas Comptroller adopted a proposed decision issued by an Administrative Law Judge (ALJ) finding that a company owed sales tax on its sales of online gaming services to Texas residents. The company, who had at least one employee in Texas, developed and maintained online interactive social gaming experiences for its registered users, including those
Marketplace Monday: How States Protect Marketplace Facilitators from Tax Overcollection Lawsuits
States have enacted new marketplace facilitator laws designed to impose sales tax obligations on marketplace facilitators related to sales made by third-party sellers. These new sales tax collection obligations on marketplace facilitators create the potential for class-action lawsuits arising out of unintended overcollection of tax.
Today’s Marketplace Monday explores two legislative solutions to overcoming this
Where’s the Substance? Maryland Court of Special Appeals Upholds Assessment of Tax Against Out-of-State Holding Company Based on Parent Company Nexus
The Maryland Court of Special Appeals upheld the Maryland Tax Court’s decision holding that the State Comptroller can subject an out-of-state holding company to tax because the holding company did not have economic substance apart from its parent, which was conducting business in the state. In addition to upholding the assessment of tax, the Court
Maryland Tax Court Strikes Again: Out-of-State LLCs Liable for Maryland Income Tax
The Maryland Tax Court held that six nonresident Limited Liability Companies (LLCs) wholly-owned by another out-of-state limited liability company owed Maryland income tax despite the fact that the LLCs, as disregarded entities, had no federal income tax liability. Maryland law imposes an income tax “on each pass-through entity that has . . . any member
Unboxing the New Jersey Tax Court’s Decision in IP Holding Company Nexus Case
The New Jersey Tax Court denied a holding company’s motion for partial summary judgment seeking a determination that the taxpayer lacked nexus with New Jersey and would not be required to file corporation business tax returns. The taxpayer’s only connection to the state of New Jersey was the receipt of royalties from an affiliate doing
New York City Tax Tribunal finds that ownership of a flow-through interest can create nexus.
The New York City Tax Tribunal held that an out-of-state corporate taxpayer, with an indirect interest in a limited liability company investment fund engaged in business in New York City, had nexus with the City and was subject to tax on capital gain from its sale of the fund. The taxpayer had no property, employees,
Missouri Director of Revenue Finds Sales Fulfilled and Shipped from Warehouse in Missouri Subject to Sales Tax.
The Missouri Department of Revenue, in a letter ruling, found that a taxpayer’s sales of exercise products were subject to state and local sales taxes because the transactions were not in commerce, since the orders were fulfilled and shipped to Missouri customers by a third-party warehouse in Missouri. The Department of Revenue also found that
California FTB Confirms Delivery by Private Vehicles Is Protected Under P.L. 86-272
In a Technical Advice Memorandum issued on December 4, 2018, the California Franchise Tax Board (FTB) concluded that delivery of tangible personal property via private truck is a protected activity under P.L. 86-272. However, any activity that goes beyond the scope of delivery, such as backhauling, is not protected. The FTB explained that Congress, when
Physical Presence Standard Still Applies for Texas Franchise Tax After Wayfair
The Texas Comptroller of Public Accounts recently ruled that the physical presence nexus standard continues to apply for the Texas Franchise Tax, even after South Dakota v. Wayfair, Inc., 585 U.S. ___ (2018). As a result, a California company whose only contacts with Texas were sales of digital products, software and e-commerce transaction processing and