Shaking things up in state and local tax
Shaking things up in state and local tax
On November 18, 2010, the New York Division of Tax Appeals held that Dann Ocean Towing (Dann), a Florida corporation with no employees or property in New York State, was liable for New York’s petroleum business tax. In re Dann Ocean Towing, Inc., Determination DTA No. 822683 (Nov. 18, 2010).
Dann owned 12…
The Michigan Court of Appeals ruled that two in-state visits per year by representatives of an out-of-state taxpayer could create nexus sufficient to impose the Single Business Tax (SBT). Barr Labs., Inc. v. Dep’t of Treasury, 2010 Mich. App. LEXIS 2033 (Oct. 21, 2010). At trial, the taxpayer offered an affidavit by its vice president of taxation stating that its employees did not solicit sales during their infrequent trips to Michigan, but rather visited to “gather information.” The Department of Treasury, however, introduced the nexus questionnaires completed by Barr Labs indicating that its employees entered Michigan between two and nine times a year to solicit sales. The trial court found the affidavit to be the most credible evidence and held that Barr Labs’ contacts with Michigan were insufficient to establish the requisite substantial nexus under the Commerce Clause and granted summary judgment in favor of the taxpayer.Continue Reading Taxpayer’s Solicitation Activities Could Establish Michigan SBT Nexus
A taxpayer has filed a petition for certiorari, asking the U.S. Supreme Court to rule on whether an out-of-state corporation has nexus with Kentucky by virtue of its ownership interest in a limited partnership that does business in the state. Asworth LLC (f/k/a Asworth Corp) v. Kentucky Dep’t of Revenue, Docket No. 10-662 (Nov.
In an unfortunate misapplication of the constitutional nexus rules, the New York Tax Appeals Tribunal has found that two corporations had franchise tax nexus with New York solely because the corporations received income from ownership interests in a seven-plus tier entity structure culminating in a pass-through entity that was doing business and earning income in the State. Matter of Shell Gas Gathering Corp. No. 2 et al., DTA Nos. 821569 and 821570 (Sept. 23, 2010). The taxpayers, Shell Gas Gathering Corp. No. 2 and Shell Gas Pipeline Corp. No. 2, were both holding companies that were not themselves doing business in New York. To make a really long story short, the taxpayers, through approximately seven tiers of various ownership interests in various types of pass-through entities, had an indirect interest in an entity, Coral Energy Resources LP, that did business in New York. Coral Energy was a seller and marketer of natural resources and conducted business, owned property, and made sales in New York. A distributive share of the income from Coral Energy’s business was ultimately passed-through to the taxpayers.Continue Reading New York Tax Appeals Tribunal Confuses Nexus Rules With Income Sourcing Rules–Constitutional Mashup Ensues
The Connecticut Department of Revenue recently issued an Informational Publication (Publication) on September 23, 2010, to provide guidance on its new “economic nexus” standard, effective for tax years beginning on or after January 1, 2010. Connecticut’s new economic nexus standard states that:
Any company that derives income from sources within this state, or that has
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On August 10, the Ohio Department of Taxation issued a decision upholding the Commercial Activities Tax’s (CAT) statutory “bright-line presence” nexus test and concluded that L.L. Bean had substantial nexus with the state solely based upon the volume of its sales to Ohio customers. This is the first known ruling addressing a taxpayer’s challenge to the constitutionality of Ohio’s statutory bright-line imposition.
The CAT’s bright-line test is similar to the model rule adopted by the Multistate Tax Commission and provides that taxpayers are subject to the CAT if they meet any one of the following thresholds:
