Read our February 2016 posts on stateandlocaltax.com or read each article by clicking on the title. For the latest coverage and commentary on state and local tax developments delivered directly to your phone, download the latest version of the Sutherland SALT Shaker mobile app.
- Alabama Tax Tribunal Rules That Freight Charges Not Subject to Sales Tax
The Alabama Tax Tribunal ruled that freight charges paid by the seller but passed through on an invoice to the customer are not subject to sales tax.
- SALT Pet of the Month: Cush
Meet Cush, the handsome five-year-old dachshund-corgi mix belonging to Sutherland SALT Partner, Carley Roberts, and her husband Jeremy.
- Not So Sweet Home Alabama: Tax Injunction Act Bars Federal Court Challenge of Alabama State Income Tax
The U.S. Court of Appeals for the Eleventh Circuit affirmed dismissal of a taxpayer’s complaint, arising from the Alabama Department of Revenue’s assessment and collection of state income tax, for lack of subject matter jurisdiction under the Tax Injunction Act (TIA).
- Arizona Un-Commonly Understands That Database Fees Are Sales of Tangible Personal Property
The Director of the Arizona Department of Revenue affirmed an Administrative Law Judge determination that a taxpayer must pay the Transaction Privilege Tax on sales of access to the taxpayer’s subscription-based online research service.
- Sourcing the Ticker Tape: California Ruling Addresses Sourcing of Financial Information Provider’s Services
In a Chief Counsel Ruling, the California Franchise Tax Board (FTB) ruled that, for purposes of determining its sale factor, a financial information provider should source the sales of its information services based on where the taxpayer’s customer receives the benefit of the service, and not where the ultimate customer (the taxpayer’s customer’s customer) receives the benefit.
- Holding Company Gets Factored Out of Parent’s Colorado Combined Return on the Reg.
On January 20, a Denver trial court ruled that Agilent Technologies World Trade, Inc. (World Trade), a holding company with no property or payroll of its own, cannot be included in its parent’s combined corporate income tax return.
- For Your Health: Health-Related Information Service Not Subject to Georgia Sales and Use Tax
The Georgia Department of Revenue released a letter ruling stating that a taxpayer’s health-related information service was not subject to sales and use tax.
- A Direct Shot: Georgia Department of Revenue Proposes Regulation Eliminating Refund Interest for Direct Pay Permit Holders
The Georgia Department of Revenue issued a proposed regulation amending the use of direct pay permits for state and local sales and use taxes.
- So Misunderstood? Illinois DOR Adopts Special Sales Factor Rules for Hedging and Foreign Currency Transactions
Effective for tax years beginning on or after January 5, 2016, the Illinois Department of Revenue adopted amendments to 86 Ill. Adm. Code Sec. 100.3380 that establish special rules for the inclusion in the Illinois sales factor of certain (1) income, gains and losses from hedging transactions; and (2) gains and losses from foreign currency exchanges.
- Kentucky Must Ride on Noah’s Ark: Denial of Tax Incentives to Religious-Based Theme Park Reversed
The U.S. District Court for the Eastern District of Kentucky preliminarily enjoined Kentucky from denying tax incentives to a religious-based theme park.
- The Complete Package: Chemicals Used to Manufacture Paperboard Products Not Subject to Louisiana Sales Tax
The Louisiana Court of Appeals held that a paperboard products manufacturer was entitled to refunds of sales tax it paid on purchases of chemicals it used in the manufacturing process under the “further processing” exclusion.
- Keep On Truckin’ … Around Massachusetts: MA High Court Declares Unapportioned Use Tax on Motor Vehicles Constitutional
The Massachusetts Supreme Judicial Court denied a freight company’s Commerce Clause challenge to the application of an unapportioned use tax on its vehicles purchased out-of-state but used in Massachusetts.
- Victory for Transformers and Taxpayers: ALJ Holds “Step-up Transformers” Qualify for NY Sales Tax Production Exemption
A New York Division of Tax Appeals Administrative Law Judge (ALJ) held that an electricity producer’s purchases, installations and repairs of “step-up transformers” were not subject to sales and use tax because the transformers were “used directly” in the production of electricity.
- Roadkill: New York Court Finds Flat Vehicle Registration Fees Unconstitutional
The New York Supreme Court, Albany County, held that New York’s unapportioned vehicle registration fees violated the Commerce Clause.
- Open for Nonbusiness: Oregon Tax Court Holds Insurance Company’s Gain Was Nonbusiness Income
The Magistrate Division of the Oregon Tax Court held that an insurance company’s gain from the sale of a subsidiary and income from a holding company both constituted nonbusiness income.
- Look But Don’t Touch: Tennessee DOR Ruling Analyzes Web-Based Software and Service
Applying the “true object” test to the taxpayer’s web-based services, the Tennessee Department of Revenue ruled that charges for granting access to the taxpayer’s website for purposes of obtaining information would not be subject to sales tax.
- Technical Support: Tennessee Publishes Guidance on Sales Tax Treatment of Computer Software Maintenance Contracts
The Tennessee Department of Revenue has issued guidance explaining that the retail sale of, use of, or subscription to a computer software maintenance contract is subject to sales and use tax when: (1) the maintenance contract is sold as part of a taxable sale of computer software; (2) the underlying software is installed on a computer located in Tennessee; or (3) the location of the underlying software is unknown by the seller, but the purchaser’s residential or primary business address is located in Tennessee.
- Texas Court of Appeals Chops Machete’s Hope for Texas Film Production Incentives
The Texas Court of Appeals held that sovereign immunity bars Machete’s Chop Shop’s declaratory judgment action because Machete failed to plead that the Texas Film Commission acted ultra vires when it denied Machete’s grant application for the 2010 film, Machete.
- Virginia Trial Court’s Addback Decision Surely “Subject to” Future Appeal
A Virginia trial court held that royalties paid to related members that are reported to, but not taxed by, other states do not qualify for the exception to the state’s corporate income tax addback statute.
- Pump the Brakes: West Virginia OTA Finds Nexus Exists for Garage Equipment Seller
The West Virginia Office of Tax Appeals (OTA) ruled that an out-of-state corporation, with no physical location or employees in West Virginia, owed sales and use tax on sales of garage equipment in the state.
- West Virginia Office of Tax Appeals Rules That the Presence of Independent Contractors Establishes Sales Tax Nexus
The West Virginia Office of Tax Appeals (OTA) upheld a sales tax assessment against an out-of-state company that provided taxable outside maintenance services such as snow removal and window cleaning in the state via independent contractors.
- WV Tax Department’s Application of Tax Credit for Sales Tax Paid to Other States Not Supported by Statute, Violated Internal Consistency
The West Virginia Office of Tax Appeals (OTA) ruled in favor of a rail transportation company subject to use tax on fuel used in West Virginia because the West Virginia State Tax Department (Department) incorrectly applied the credit against use tax for sales tax paid to “another state.”