Shaking things up in state and local tax
Shaking things up in state and local tax
By David Pope and Timothy Gustafson
The Virginia Tax Commissioner determined that an out-of-state manufacturer was subject to use tax on “local marketing group” fees charged to its customers because the true object of the transaction was the sale of tangible personal property. The taxpayer manufactured heating, ventilating and air conditioning (HVAC) systems for sale…
By Saabir Kapoor and Prentiss Willson
Virginia’s Tax Commissioner denied a taxpayer’s request for alternative apportionment because the taxpayer did not demonstrate by clear and cogent evidence that the statutory apportionment methodology led to an unconstitutional and inequitable result. The taxpayer, a limited partnership headquartered outside Virginia, sold real estate located in its home state…
By Sahang-Hee Hahn and Prentiss Willson
The New York State Department of Taxation and Finance ruled in an Advisory Opinion that a Virginia corporation was subject to New York corporation franchise tax because it hired independent contractors to store its consigned inventory and to solicit orders from and deliver products to New York customers. In…
The Virginia Tax Commissioner overturned the Department of Taxation’s adjustments to a taxpayer’s nonresident Virginia income tax return based on a determination that certain transactions between related entities were indeed conducted at arm’s-length, contrary to the Department’s prior findings. The nonresident taxpayer was the majority owner of both an out-of-state LLC as well as a…
We recently launched the Sutherland SALT Digital Economy Forum, which provides comprehensive state tax resources regarding the taxation of the digital economy. Following is a summary of recent digital economy administrative guidance, noteworthy cases and legislation. If you would like to learn more about the Sutherland SALT Digital Economy Forum or any of the issues covered here, please contact us.
Administrative Guidance
Continue Reading Digital Economy Update: Administrative Guidance, Noteworthy Cases and Legislation
The Virginia Tax Commissioner concluded in two recent rulings that a reseller of mobile telephone services is not a “telephone company” for purposes of the Virginia Business, Professional and Occupational License (BPOL) tax and therefore is not subject to the higher BPOL tax rate levied against telephone companies. Va. Dept. of Taxation, Pub. Doc. Nos. 12-182 & 12-183 (Nov. 13, 2012). The taxpayer, a limited partnership, is not licensed by the FCC or the state regulatory agency, though its two partners are licensed by the FCC.Continue Reading Virginia Commissioner: Reseller of Mobile Telephone Services Not a “Telephone Company”
On October 16, 2012, the Virginia Department of Taxation issued two identical determinations in which it found cable set-top boxes (a/k/a “converters”) exempt from the Business Tangible Personal Property (BTPP) tax (Ruling Nos. PD 12-162 and PD 12-163). Intangible personal property generally is exempt from the BTPP tax. Section 58.1-1101 of the Virginia Code classifies certain…
Virginia released a ruling discussing the right to apportion and how to source sales when the ultimate destination of the sale is outside of Virginia. The Taxpayer was a manufacturer whose headquarters and only production facility were located in Virginia. However, the Taxpayer’s business was largely comprised of sales of its products to the U.S. Government, which in turn exported the products from the Taxpayer’s Virginia facility to various foreign countries. The Taxpayer would then send employees to the product locations for set up and installation.
First, the Tax Commissioner discussed whether the Taxpayer had the right to apportion its income for Virginia income tax purposes. Noting that in Virginia a corporation has the right to apportion its income if it is subject to a tax on net income in another jurisdiction, the Commissioner determined that it needed further information about the Taxpayer’s activities in other jurisdictions to determine if the Taxpayer had a right to apportion.Continue Reading Virginia Ruling Appears to Reach Right Outcome on “Right to Apportion” and Sourcing of Sales…But Perhaps for the Wrong Reason
The Virginia Department of Taxation refused to consider whether a taxpayer was entitled to claim an exception from the state’s addback statute because the taxpayer failed to follow the statutory procedure. P.D. 11-174 (Oct. 12, 2011).
Virginia law requires the addback of intangible expenses and costs, which includes losses related to, or incurred in…
The Virginia Department of Revenue (i) applied its narrow interpretation of the State’s related member add-back provision to disallow a taxpayer’s factoring company discount losses, and (ii) prohibited the taxpayer and its affiliated factoring company from filing a combined return because the factoring company did not have nexus with the State. Va. Public Document No. 11-162 (Sept. 26, 2011).
The taxpayer sold, or “factored,” its account receivables to a bankruptcy remote affiliate at a discounted price and claimed deductions for its losses on the discounted sales. The taxpayer did not add back its factoring discount losses paid to a related party because the add-back statute provides a “subject to tax” exception from the add-back requirement if the related party was subject to tax in any other state. In this case, the factoring company was subject to tax in one state. Notwithstanding the literal language of the exception, the Department interprets the subject to tax exception narrowly to allow an exception only for the amount actually apportioned to and taxed by other states and, on audit, reduced the taxpayer’s losses accordingly. The Commissioner upheld the auditor’s narrow interpretation of the subject to tax exception, limiting it to post-apportionment amounts, consistent with prior rulings (See Va. Pub. Doc. Nos. 09-49, 09-115).Continue Reading Who Lost the Remote?: Virginia Disallowed Losses and Combined Reporting
