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May 24
California FTB Takes Harley-Davidson for a Ride: Securitization Subsidiaries Are Financial Corporations with Nexus in California
by  Daniel De JongNo presence information  on 5/24/2013 8:02 AM

​From Shane Lord and Andrew Appleby of the Sutherland SALT team:

The California Superior Court ruled that certain special purpose entities (SPEs) owned by Harley-Davidson, Inc. had nexus in California. The taxpayer formed the SPEs as securitization subsidiaries, which the court held were subject to California income taxation because the SPEs: (1) were “financial corporations” under California law; and (2) had substantial nexus with California because the SPEs had agents in the state. The court determined that independent dealerships and the SPEs’ parent and sister corporations were agents of the SPEs. The taxpayer argued that the SPEs were not “financial corporations” because the SPEs were bankruptcy remote subsidiaries of the taxpayer and were not in substantial competition with national banks, as required by Cal. Code Regs. tit. 18, § 23183. The court did not address the implications of the SPEs constituting ban​kruptcy remote subsidiaries. The court ultimately held that the SPEs were in substantial competition with national banks because the SPEs and national banks conducted the same activities of bundling loans and selling securities backed by those loans. In addition to the above issues, the court sustained a demurrer early in the case, dismissing the taxpayer’s two other causes of actions: (1) the Franchise Tax Board discriminated against the taxpayer by not allowing it to file separate returns; and (2) the taxpayer was entitled to use an equal-weighted three-factor apportionment formula (see Gillette Co. v. Franchise Tax Bd., 147 Cal. Rptr. 3d 603 (Cal. Ct. App. Oct. 2, 2012)). Harley-Davidson, Inc. & Subs. v. Franchise Tax Bd., No. 37-2011-00100846-CU-MC-CTL (San Diego Super. Ct. May 1, 2013).

Available on the Sutherland SALT Online blog here.


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May 23
New Jersey’s Proposed Market-Based Sourcing Reg—Invalid Lawmaking
by  Daniel De JongNo presence information  on 5/23/2013 5:11 PM

​From Leah Robinson at McDermott:

On April 15, 2013, the New Jersey Division of Taxation (the Division) released its proposed regulations for sourcing receipts from services.  The proposed regulations reflect a customer-based sourcing approach for most service receipts.  The statue controlling apportionment of service receipts, however, unequivocally requires receipts to be sourced based on where a service is performed.  In many scenarios, where a service is performed and where the customer would be treated as receiving the benefit will differ.  This article, which appeared in the May 13, 2013, edition of State Tax Notes, discusses how in those scenarios the Division will have exceeded its authority by adopting a regulation that reaches a result contrary to that required by the statute.  




Click here to read the full article​
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May 23
N.Y. ALJ Holds Taxpayer’s Motives for Acquiring Stock and How Stock Is Used Irrelevant in Determining Investment Capital
by  Daniel De JongNo presence information  on 5/23/2013 9:03 AM

From Art Rosen and Lidsay LaCava of McDermott:

A New York administrative law judge recently held in Matter of C.V. Starr & Co., Inc. that income received by a taxpayer from its ownership of common stock was investment income.  In so holding, the ALJ addressed an important issue for many New York taxpayers and concluded that a taxpayer’s motive or intent for acquiring and holding stock and the manner in which the taxpayer used that stock are irrelevant to the determination of whether that stock qualifies as investment capital for corporate income tax purposes.



Read the full article here.
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May 20
DuCharme to Host Western States Sales/Use Tax and Property Tax Updates
by  Daniel De JongNo presence information  on 5/20/2013 9:28 AM

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 Washington
  • Using Tax Technology to Adapt to Change
  • Best Practices in Sales/Use Tax Compliance
  • Best Practices in Property Tax Compliance
  • Canadian Commodity Tax Update

Southern California – June 18, 2013 – 8:30am to 3:30pm

Marina del Rey Marriott Hotel

4100 Admiralty Way

Marina del Rey, CA

(Register here)

 

Bellevue, WA – June 20, 2013 – 8:00am to 3:30pm

The Westin Bellevue

600 Bellevue Way NE

Bellevue, WA

(Register here)

 

Santa Clara, CA – June 25, 2013 – 8:30am to 3:30pm

Santa Clara Marriott

2700 Mission College Blvd.

Santa Clara, CA

(Register here)    

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May 20
SST Update: "Best Practices" Matrix, MFA Implementation and Digital Goods Sourcing
by  Daniel De JongNo presence information  on 5/20/2013 9:27 AM
Category: Sales & Use Tax

​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.

Read Sutherland’s legal alert, "SST Governing Board Considers 'Best Practices' Matrix and Marketplace Fairness Implementation; SLAC Contemplates Digital Goods Sourcing."​
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May 20
California: Securitization Entities Had Nexus; Were Considered Financial Corporations
by  Daniel De JongNo presence information  on 5/20/2013 9:26 AM

​From the SALT group at KPMG:

Recently, 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.​
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May 17
Thomson Reuters Reinforces Global Indirect Tax Leadership Position with Limited Release of New Integration for SAP
by  Daniel De JongNo presence information  on 5/17/2013 9:23 AM

​New 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 175 countries.

 According 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.

“In 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 locations.”

While ERP 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:

·        Streamlines tax calculation, determination, reconciliation, reporting, and audit preparation with a single, intuitive interface.

·        Facilitates 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 processes.

·        Guarantees data integrity by working in conjunction with ERP Financials to ensure that the latest data is available for tax calculation.

·        Accurately interprets government indirect tax policies then calculates and returns detailed tax results for over 175 countries.

·        Accurately determines tax liability, eliminating tax penalties and interest costs, while reducing overall cost of compliance.

·        Provides comprehensive audit trails to ensure Sarbanes-Oxley 404 compliance.

Availability

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.​
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May 01
Double-Dipping in Delaware: Delaware Assesses Unclaimed Property Liability for Years Covered by Voluntary Disclosure Agreement
by  Daniel De JongNo presence information  on 5/1/2013 8:12 AM
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​.
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April 26
Multistate Tax Alert: New Mexico Governor Susana Martinez Recently Signed House Bill 641, Modifying New Mexico Tax Law
by  Daniel De JongNo presence information  on 4/26/2013 8:59 AM

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:

  1. Phases in, over five years, corporate income tax rate reductions
  2. Requires combined reporting for certain unitary corporations engaged in retail sales
  3. Phases in, over five years, elective single sales factor apportionment for eligible manufacturing corporations and eliminates throwback for electing corporations
  4. Amends the gross receipts tax deduction for tangible property consumed in the manufacturing process
  5. Extends the high-wage jobs tax credit and tightens the criteria for qualification
  6. Allows municipalities and counties to impose a local option gross receipts tax
  7. 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.


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April 25
DMA Publishes New Edition of its Texas Legislative Update
by  Daniel De JongNo presence information  on 4/25/2013 8:40 AM

​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​.​​​​

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