Shaking things up in state and local tax
Shaking things up in state and local tax
By Robert P. Merten III and Open Weaver Banks
The Washington Court of Appeals held that a Honda automobile dealership was subject to state business and occupation (B&O) tax on more than $1 million in “dealer cash” payments the dealership received over a four-year span from manufacturer American Honda as part of an incentive program.
The Washington Department of Revenue finds that video games are not the same kind of property as a video game controller or the video game console for purposes of qualifying for “like kind” property under RCW 82.08.010. Det. No.13-0263, 33 WTD 562 (December 30, 2014).
By Stephanie Do and Timothy Gustafson
The Washington State Department of Revenue determined that a telecommunications company’s leases of dark fiber were competitive telephone services and thus subject to retail sales tax. The taxpayer leased dark fiber – unused, unlit fiber optic cable – from various carriers and subsequently “lit” the dark fiber with its…
By Suzanne Palms and Pilar Mata
The Washington Department of Revenue determined that taxpayers have a right to rely on written but not oral instructions from the Department of Revenue. The taxpayer operated an Internet marketing business and sold its services to customers both inside and outside the state. In June 2011, the taxpayer amended…
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By Kathryn Pittman and Andrew Appleby
A Washington Superior Court held that using leased specialized railroad cars to transport products in Washington did not rise to the level of “substantial nexus.” The taxpayer, a California company, sold food products into the state by transferring its products into specially leased railroad cars that traveled to Washington.
A combined case against Cingular Wireless (now AT&T) has been working its way through state and federal courts for some time now. At issue was Cingular’s practice of passing through to its customers, as a line-item surcharge, the Washington business & occupation (B&O) tax assessed against the company. The plaintiffs sued Cingular on the grounds that its…
In a taxpayer-friendly decision, a Washington State administrative law judge ruled that an out-of-state food products company did not have nexus with the state. The case, however, involved unique circumstances: a sales manager made two visits over a five-year period to an international wholesale buyer in Washington to promote sales of a product, and…
The Washington Department of Revenue (Department) determined that an out-of-state mail order retailer (Taxpayer) had substantial nexus with the state based on the activities of an in-state affiliate (Affiliate), and therefore, upheld an assessment of business and occupation tax (B&O Tax) and sales tax. Determination No. 10-0057 (released Dec. 20, 2011). The Taxpayer sold tangible…
In shocking similarity to the once-popular Amy Winehouse song “Rehab,” the U.S. Supreme Court denied certiorari in two nexus cases: KFC Corp. v. Iowa, 792 N.W.2d 308 (Iowa Dec. 30, 2010) and Lamtec Corp. v. Wash. Dep’t of Revenue, Docket No. 83579-9, en banc (Wash. Jan. 20, 2011) but left open the possibility to hear DIRECTV, Inc. v. Levin, 128 Ohio St.3d 68 (Ohio Dec. 27, 2010).
KFC is an economic nexus case involving the license of intangibles. KFC did not have any employees or property within Iowa; KFC licensed the use of trademarks and other intangibles to independent franchisees in the state in exchange for royalties. The Iowa Supreme Court held that KFC’s license of the intangibles was the “functional equivalent” of physical presence under Quill and that, in the alternative, physical presence was not required to find substantial nexus for corporate income tax purposes.
The Court also denied certiorari in Lamtec, where the taxpayer’s sole presence in the state was irregular employee visits to customers. The Washington Supreme Court determined that Lamtec had nexus with Washington for Business and Occupation (B&O) tax purposes and raised additional questions regarding how Washington views the physical presence test relating to the B&O tax, stating: “We conclude that to the extent there is a physical presence requirement, it can be satisfied by the presence of activities within the state.” (emphasis added).Continue Reading These Cases Tried to Go to the U.S. Supreme Court, But the Court said “No…No…Oh?”
