Multistate corporate tax professionals need to comply with state
and local taxes nationwide. However, it can be challenging to stay up to date
with changes in states far away. DMA's solution is to bring the top state and
local tax talent from across the Western U.S. to the San Francisco Bay Area for this complimentary CPE
accredited seminar. Learning objectives
and discussion topics will include:
- Nationwide Issues and Trends in State & Local Tax
- Sales/Use Tax Updates for:
Arizona, California, Colorado, Utah, and Washington
- Property tax updates for:
Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah, and
- Using Tax
Technology to Adapt to Change
Practices in Sales/Use Tax Compliance
Practices in Property Tax Compliance
Commodity Tax Update
California – June 18, 2013 – 8:30am to 3:30pm
Rey Marriott Hotel
WA – June 20, 2013 – 8:00am to 3:30pm
Bellevue Way NE
Clara, CA – June 25, 2013 – 8:30am to 3:30pm
Mission College Blvd.
From the Sutherland SALT team:
The Streamlined Sales Tax Governing Board, as well as its State and
Local Advisory Council and Business Advisory Council, assembled in Minneapolis
this week to discuss a number of policy matters related to Streamlined Sales
and Use Tax Agreement. The overarching theme, however, was the continued viability
of the Agreement in light of the Marketplace Fairness Act as it moves through
Congress. This Legal Alert summarizes the more notable issues addressed in
Minneapolis, particularly how the SSTGB plans to hit “refresh” on the Agreement
if the Marketplace Fairness Act is signed into law.
Sutherland’s legal alert, "SST Governing Board Considers 'Best Practices' Matrix and Marketplace
Fairness Implementation; SLAC Contemplates Digital Goods Sourcing."
From the SALT group at KPMG:
a California superior court held that two Harley Davidson special purpose
entities (SPEs) created for the purpose of bundling and selling securitized
loans had substantial nexus with California, despite their lack of physical
presence in the state. Harley Davidson, through its financing subsidiaries,
originated loans to customers in all 50 states. After the financing
subsidiaries originated loans with customers, certain loans were transferred to
the SPEs to be bundled and sold. The financing subsidiaries, however, continued
to earn fees from servicing the loans. The SPEs were created to function as
“bankruptcy remote” entities for financial statement purposes, meaning that the
assets and liabilities of the SPEs were not consolidated on the Harley Davidson
group’s financial statements.
Although the SPEs had no physical presence in
California, the court held that they had nexus with the state because of their
deeply integrated relationship with the financing subsidiaries, as demonstrated
by the interdependence and circular flow of funds among the entities. In the
court’s view, the SPEs were an integral part of an overall corporate enterprise
that was engaged in offering loans to buyers of Harley Davidson motorcycles,
equipment, clothing, insurance, and extended warranties. Although the SPEs were
separate corporations, the court concluded that they were doing business in
California through their agents (the financing subsidiaries and dealers). The
fact that the SPEs were created to be “bankruptcy remote” was irrelevant to the
determination of whether nexus existed. The next issue before the court was
whether the SPEs were considered “financial corporations,” which are entities
that predominantly deal in money or moneyed capital in substantial competition
with the business of national banks. Entities meeting the definition of a
financial corporation are, among other things, subject to a higher rate of
income tax and are required to use specific financial corporation apportionment
provisions. Although the taxpayers argued that the SPEs were not in substantial
competition with national banks, the court observed that federal banking
regulations allow national banks to deal in, purchase, and sell asset backed
securities, which were essentially the same activities as the SPEs. As
such, the court concluded that the SPEs had nexus with California and were
required to be taxed as financial corporations.
Read the full case summary
of Harley Davidson, Inc. v. Franchise Tax Board (May 1, 2013) here.
York, May 14, 2013 —
Thomson Reuters today announced a new version of ONESOURCE Indirect Tax
Integration for SAP designed to meet the indirect tax needs of global companies
doing cross border business in the regions of EMEA, Asia Pacific, Latin
America, and North America. Already known as the global indirect tax
innovators, with the first and only patented Universal Tax Engine®, this latest
news builds upon the company’s ten years of global SAP indirect tax
implementation expertise, which has resulted in successful SAP implementations
with some of the largest companies in the world. In addition, Thomson Reuters
has in-house, worldwide tax experts to maintain the broadest and deepest
coverage of tax content in more than 14,500 U.S. tax jurisdictions in more than
to a recent survey titled, “The 2013 Benchmark Survey on VAT/GST” by KPMG International,
two-thirds of respondents in Europe, Middle East and Africa and one-third in
the rest of the world believe that VAT/GST rates will increase in the next
three years indicating government’s continued reliance on indirect tax
revenue. For businesses charted with collecting this tax on behalf of
government, VAT/GST changes directly impact the operational resources required
to achieve compliance.
the past, it was sufficient to keep abreast of in-country developments,
however, as businesses increasingly go global, and with more countries relying
on VAT and GST for revenue, companies must now be aware of what is happening
worldwide,” said Eric Ruud, managing director of ONESOURCE Indirect &
Property Tax at Thomson Reuters. “This latest version of ONESOURCE Indirect Tax
Integration for SAP underscores our commitment to providing global integration
solutions with the most widely used ERP systems. This is just one of the many
ways we are helping global businesses achieve confidence and global transparency
into their indirect tax compliance processes across all business entities and
systems generally provide comprehensive and highly configurable tax code-based
reporting that can be extended to provide box-level tax return reports, these
systems are often limited when it comes to determining and calculating
particular types of tax and offering reports that comply with specific rules
and regulations. ONESOURCE Indirect Tax integrated with ERP systems:
tax calculation, determination, reconciliation, reporting, and audit
preparation with a single, intuitive interface.
indirect tax planning so companies can identify and assess the overall impact
of new tax configurations, as well as document their tax systems, policies, and
data integrity by working in conjunction with ERP Financials to ensure that the
latest data is available for tax calculation.
interprets government indirect tax policies then calculates and returns
detailed tax results for over 175 countries.
determines tax liability, eliminating tax penalties and interest costs, while
reducing overall cost of compliance.
comprehensive audit trails to ensure Sarbanes-Oxley 404 compliance.
ONESOURCE Indirect Tax Integration for SAP is
part of the Thomson Reuters end-to-end indirect tax solution that delivers
initial tax determination, and calculation to final compliance reporting, all
supported by highly skilled CPAs and legal experts who maintain the widest
coverage of global tax content. This newest version of ONESOURCE Indirect
Tax Integration for SAP is currently being released to a limited number of SAP
clients and will be generally available in the latter half of 2013. For
more information on ONESOURCE Indirect Tax, visit: http://onesourceindirecttax.com.
From Jack Trachtenberg and Kathryn Pittman at Sutherland:
On April 17, 2013, Select Medical Corporation
(Select Medical) filed suit in federal district court seeking to enjoin
Delaware from enforcing an unclaimed property assessment issued for years that
had been resolved already through the state’s voluntary disclosure program. In
2006, Select Medical entered into Delaware’s voluntary disclosure program for
the years 1997-2001. As part of the voluntary disclosure process, Select
Medical escheated approximately $17,000 to Delaware and paid approximately
$300,000 in unclaimed property to states other than Delaware. On the same day
that Delaware cashed Select Medical’s escheatment check, it notified the
company that it was being placed under audit. Using a third-party auditor,
Delaware demanded payment of $297,436 for the period 1997-2001 based on an
estimate that looked to the amount of property owed to other states from
2002-2008. Unable to resolve the matter with the state, Select Medical
commenced a lawsuit and sought injunctive relief against the demand for
payment, alleging that Delaware exceeded its authority under state law by
estimating an unclaimed property liability through extrapolation of amounts
paid to other states for a different period, even though Select Medical had
actual records from which any liability could be determined and the owners of
any unclaimed property identified. Select Medical also alleged a variety of
federal common law and constitutional violations. Given Delaware’s position as
one of the most aggressive states in enforcing unclaimed property law, the
trajectory of this litigation will be important, especially given the recent
trend toward more aggressive unclaimed property enforcement in all states.
Taxpayers who have previously entered into voluntary disclosure agreements or
who are contemplating doing so should pay close attention to this case as it
may frame new powers for the states with respect to escheatment. Select Medical Corp. v. Del. Sec’y
of Finance, Del. Dir. Of Rev., & Del. State Escheator, Case No.
1:13-cv-00694-UNA (D. Del. Apr. 17, 2013).
Read more from the team at Sutherland on their blog here.
From the SALT group at Deloitte:
New Mexico Governor Susana Martinez recently signed House Bill 641 ("H.B. 641"), which includes the following modifications to New Mexico tax law:
- Phases in, over five years, corporate income tax rate reductions
- Requires combined reporting for certain unitary corporations engaged in retail sales
- Phases in, over five years, elective single sales factor apportionment for eligible manufacturing corporations and eliminates throwback for electing corporations
- Amends the gross receipts tax deduction for tangible property consumed in the manufacturing process
- Extends the high-wage jobs tax credit and tightens the criteria for qualification
- Allows municipalities and counties to impose a local option gross receipts tax
- Expands the scope of the film production tax credit and requirements for eligibility
Read the rest of this alert with great details on these recent law changes here.
DMA published its latest edition of the Texas Legislative Update from DMA on April 24. This edition includes a summary of bills introduced that would amend the Texas Margin Tax in ways that could have significant effects on many taxpayers.. Stay tuned as things continue to evolve in Texas. To read the entire publication and access earlier editions, click here.
From the SALT team at Sutherland:
In this edition of A Pinch of SALT, Jeff Friedman, Pilar Mata and Mary Alexander examine
the requirements and ramifications of states’ attempts to apply
prospective-only remedies to unconstitutional taxes and explore why Maryland State Comptroller of the
Treasury v. Wynne is not an appropriate case for prospective-only
Read "Wynne-ing Isn't Everything: Remedies for
Unconstitutional Taxes," reprinted with permission from the
April 1, 2013 issue of State
From Ed Goff of Birns & Goff in Philadelphia posted yesterday on the Birns & Goff blog:
On April 22, 2103 the U.S. Senate voted to move forward with consideration of the Marketplace Fairness Act of 2013, a bill designed to allow states to force internet vendors to collect sales and use taxes all across the country. Since 1954, the states have been effectively prohibited from requiring remote sellers to collect and remit sales and use taxes. The rule requires a seller to have a physical presence in the state, either through physical stores located in the state or through a sales staff that regularly visits the state. This physical presence rule is sometimes called the rule of Bellas Hess, because it was upheld by the U.S. Supreme Court in 1992 in Quill v. North Dakota on the basis of “settled expectations” that come from the earlier case.
Quill makes clear that Congress has the authority to change the physical presence rule because it arises under the Commerce Clause of the U.S. Constitution. However Congress doesn’t have the power to allow states to “deprive any person of life, liberty or property without due process.” So will the Marketplace Fairness Act of 2013 violate Due Process? The answer depends on the particular remote seller.
State taxes meet the requirements of the Due Process clause when the remote seller has “certain minimum contacts” with the state such that the maintenance of a law suit against the remote seller would not offend “traditional notions of fair play and substantial justice.”According to Justices Kennedy, Scalia and Thomas and Chief Justice Roberts, those minimum contacts will be enough when the remote seller “targets” the state:
“The defendant’s transmission of goods [into a state] permits the exercise of jurisdiction only where the defendant can said to have targeted the forum; as a general rule it is not enough that the defendant might have predicted that its goods will reach the forum state.”
J. McIntyre Machinery Ltd. v. Nicastro, 131 S. Ct. 2780, 2788 (2011).
In that case Justices Breyer and Alito had a similar but slightly different opinion. They said that the established rule was enough. It would only require a seller to purposely avail itself of the privilege of conducting activities within the state or requiring that the seller delivered the goods in the stream of commerce “with the expectation that they will be purchased” in the state. Id. at 2792.
It is easy for remote sellers to decide whether they will “target” particular states but when can a remote seller say that it does not expect sellers from a particular state? I would suggest that where there are only one or two sales with a destination state, those would be sales that meet both the “targeted” test of Justice Kennedy, and the “expectation” test mentioned by Justice Breyer.
The risk, however, is with the remote seller. If it collects and remits the tax, the destination state is satisfied but at a price disadvantage that may turn its buyers away. If it choses not to collect and remit, it takes the risk that the destination state will come to him to collect the unremitted tax. At that point the remote seller may or may not have to pay the tax and/or pay to defend a lawsuit, but by then it will have no opportunity to go back and recoup the tax from the original buyer.
. The record of the vote is here. The text of the bill is here.
. Miller Bros Co. v. Maryland, 347 U.S. 340 347 (1954) (Delaware furniture store not required to collect and remit Maryland sales tax despite Maryland advertisements and Maryland deliveries absent “active and aggressive operation within a taxing state.”), available here.
. Nelson v. Sears Roebuck & Co., 312 U.S. 359, (1951) (physical stores) availablehere; Scripto v. Carson, 362 U.S. 207 (1960) (continuous local solicitation by independent sales agents) available here.
. National Bellas Hess v. Dept. of Rev. of Illinois, 386 U.S. 753 (1967) available here
. 504 U.S. 298 (1992) available here.
. U.S. Const. art. 1 §8, cl.3 (“The Congress shall have the power … To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.”)
. U.S. Const. Amend. 14 §1 (“nor shall any State deprive any person of life, liberty or property without due process of law ….”)
. International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) available here, quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940) available here.
. Quoting Worldwide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297-298 (1980) available here.
From David Pope and Timothy Gustafson at Sutherland:
Pursuant to a letter ruling request, the Massachusetts Department of Revenue determined that a taxpayer’s bundled sale of software and services related to Internet-based marketing and customer communications solutions was subject to Massachusetts sales tax. The taxpayer provided different types of software to its subscribers, which organized customer reviews, questions, answers, stories of the taxpayer’s subscribers, and extracted insights on customer preferences. The taxpayer provided the software either by embedding it on a subscriber’s website or as “software-as-a-service.” As part of the bundled transaction, the taxpayer also provided certain non-taxable services, including a monitoring service that filtered any obscene or illegal customer inputs and a social media marketing advisor service. The Department first determined that all of the taxpayer’s software was subject to sales tax regardless of the method of delivery pursuant to Computer Industry Services and Products Regulation, 830 CMR 64H.1.3(3). Then, applying Massachusetts’s “object of the transaction” test to determine whether the bundled sale was taxable, the Department stated that the non-taxable services were deemed inconsequential when bundled with the taxable software. Although the Department concluded that sales tax applied to the total bundled product, it stated that the non-taxable services would not be subject to sales tax if the taxpayer sold such services as a separate, unbundled option. Massachusetts Letter Ruling No. 13-2 (Mar. 11, 2013).
To read more, check out the Sutherland SALT Online blog.