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May 20
DuCharme to Host Western States Sales/Use Tax and Property Tax Updates

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)    

May 20
SST Update: "Best Practices" Matrix, MFA Implementation and Digital Goods Sourcing

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."​
May 20
California: Securitization Entities Had Nexus; Were Considered Financial Corporations

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.​
May 17
Thomson Reuters Reinforces Global Indirect Tax Leadership Position with Limited Release of New Integration for SAP

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.​
May 01
Double-Dipping in Delaware: Delaware Assesses Unclaimed Property Liability for Years Covered by Voluntary Disclosure Agreement
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​.
April 26
Multistate Tax Alert: New Mexico Governor Susana Martinez Recently Signed House Bill 641, Modifying New Mexico Tax Law

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.


April 25
DMA Publishes New Edition of its Texas Legislative Update

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.​​​​

April 25
A Pinch of SALT: Wynne-ing Isn't Everything: Remedies for Unconstitutional Taxes

​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 relief.

 

Read "Wynne-ing Isn't Everything: Remedies for Unconstitutional Taxes," reprinted with permission from the April 1, 2013 issue of State Tax Notes.

April 24
Due Process and the Marketplace Fairness Act

​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.[1] Since 1954, the states have been effectively prohibited from requiring remote sellers to collect and remit sales and use taxes.[2] 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.[3] This physical presence rule is sometimes called the rule of Bellas Hess[4], 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.[5]

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.[6] However Congress doesn’t have the power to allow states to “deprive any person of life, liberty or property without due process.”[7] 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.”[8]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).[9]

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.[10]

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.


 

[1].         The record of the vote is here.  The text of the bill  is here.

[2].         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.

[3].         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.

[4].         National Bellas Hess v. Dept. of Rev. of Illinois, 386 U.S. 753 (1967) available here

[5].         504 U.S. 298 (1992) available here.

[6].         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.”)

[7].         U.S. Const. Amend. 14 §1  (“nor shall any State deprive any person of life, liberty or property without due process of law ….”)

[8].         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.

[9].         Available here.

[10].       Quoting Worldwide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297-298 (1980) available here.

April 24
Brr! Bundle Up to Collect Sales Tax on Entire Transaction in Massachusetts

​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​.


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