Archive for the ‘Alabama’ category

Crutchfield Settles; Eyes Turn to South Dakota and Alabama for Challenge to Quill

April 26, 2017

By: Jennifer Weidler Karpchuk

As our previous post explains, the U.S. Supreme Court had extended the time to file petitions for certiorari in Crutchfield Corp. v. Joseph W. Testa, Tax Commissioner of Ohio (U.S. Supreme Court Docket No. 16A774), involving the Ohio Commercial Activity Tax (“CAT”).  However, prior to the deadline, the parties agreed to forego further litigation and entered into an undisclosed settlement agreement.  As such, the Ohio Supreme Court’s decision upholding the Ohio CAT stands. See Crutchfield Corp. v. Joseph W. Testa, Tax Commissioner of Ohio, 2016 WL 6775765 (2016).

Those hoping the U.S. Supreme Court would revisit Quill through Crutchfield may be disappointed by this settlement, but should look to South Dakota and Alabama as their respective test cases challenging Quill make their way through the courts. See South Dakota v. Wayfair, Inc., et al., S.D. Cir. Ct., 6th Jud. Dist., Dkt. No. 32CIV16-000092, 03/06/2017; Newegg Inc. Notice of Appeal, Alabama Tax Tribunal.

Weekly Blog Update for Week of 4/20: Alabama Rules in Favor of Online Travel Companies; Georgia Enacts “Amazon” Legislation; STEB Announces Revised Ratio for Philadelphia County; New Mexico Finds Barnes & Noble Trademarks Establish Nexus…and more.

April 23, 2012

 by Jennifer Weidler

ALABAMA

Alabama House Approves Legislation to Update Taxpayer’s Bill of Rights

The Alabama House approved a substitute version of a Bill, HB 105, which would update the Alabama Taxpayer’s Bill of Rights with regard to the protocols for handling taxpayer appeals.

Alabama Supreme Court Finds for Online Travel Companies in Tax Suit

The Alabama Supreme Court affirmed a lower court’s summary judgment decision, which held that online travel companies are not engaged in the business of renting rooms or lodgings or furnished accommodations for the purposes of imposing the municipal lodgings tax upon them. For more detailed coverage of this case, click here. We previously discussed a similar holding in the case of Expedia in Philadelphia.

 

ARIZONA

Arizona House Votes to Delete Use Tax Declaration from Income Tax Forms

The Arizona House has voted to delete the use tax declaration line from its state income tax forms.SeeSB 1214.  Pursuant to SB 1214, the use line would be deleted for tax year 2012 forward.  While the specific use tax declaration line would be deleted from the income tax forms, Arizona residents would still owe use tax on their purchases of goods from out-of-state.

 

GEORGIA

Georgia Governor Signs “Amazon” Legislation

The Georgia Governor signed “Amazon” legislation, HB 386, which establishes click-through nexus in the state.

 

MICHIGAN

Michigan Tax Tribunal Finds Corporate Officer Personally Liable for Tax Deficiency of Company

The Michigan Tax Tribunal held that an individual corporate officer was liable for a company’s sales tax deficiency because the individual was a corporate officer during the relevant time period and failed to prove that he resigned, relinquished or otherwise absolved himself of responsibility for filing and paying the taxes.  As such, the court held that there was subject to corporate officer liability for the taxes at issue.

 

NEW MEXICO

New Mexico Court Holds Barnes & Noble Trademarks Sufficient to Establish Nexus

A New Mexico appellate court has held that a taxpayer who was an online bookseller had substantial nexus through the in-state use of Barnes & Noble trademarks.  Barnes & Noble did not own or lease property in the state, nor did it have any temporary or permanent employees therein. Although the taxpayer was a separate limited liability company, the court found that the in-state activities that were performed under Barnes & Noble trademarks were sufficient to establish nexus since Barnes & Noble’s in-state retail stores created goodwill behind the trademarks where the trademarks were used on and in its in-state stores.  Moreover, the online retailer created goodwill by further advertising for Barnes & Noble and selling gift cards which could be used at the online store or at the physical Barnes & Noble locations.

 

PENNSYLVANIA

Commonwealth Court Holds Company Eligible to Compute Franchise Tax Using Holding Company Apportionment Method

The Commonwealth Court held that a company whose activities consisted of providing corporate oversight to twenty-two (22) wholly owned subsidiaries fell within the definition of a “holding company” where the goodwill that it recorded on the corporation’s balance sheets as an asset was included in its subsidiaries’ actual stock value.  As such, the court held that the company was eligible to compute the franchise tax utilizing the 10% holding company apportionment method.

STEB Announces Revised Common Level Ratio for Philadelphia County for 2010

The State Tax Equalization Board (“STEB”) issued an announcement revising its certified Common Level Ratio (“CLR”) for tax year 2010 in relation to Philadelphia County.  STEB revised the CLR to 25.2% from 18.1%.  In order to arrive at the revised figure, STEB used revised data that was submitted by Philadelphia County.

Alabama Supreme Court Rules in Favor of Orbitz and Other Online Travel Companies; Online Travel Companies Not Subject to Lodgings Tax

April 23, 2012

 by Jennifer Weidler

The Alabama Supreme Court recently addressed the issue of whether online travel companies are liable for the payment of municipalities’ lodgings tax.SeeCity of Birmingham, et al. v. Orbitz, LLC, et al., Dkt. No. 1100874 (Ala. S. Ct. 2012).The appellants in the case were nine (9) Alabama municipalities and the appellees were sixteen (16) online travel service companies and related entities.

In their complaint, the municipalities alleged that municipal ordinances were enacted which imposed a lodgings tax on hotels located within their city limits; that the municipal lodgings tax is in addition to a State lodgings tax; and that the tax is calculated as a percentage of the amount charged by such hotels for the use of a room.

The online travel companies’ business model involves a customer making a room reservation through the online service, the customer is charged an amount for (1) the occupancy of the hotel room, (2) a lodgings tax recovery charge, and (3) an additional amount retained as compensation for the services.  Thereafter, the online travel company is billed by the hotel based upon a contract between the on line travel company and the hotel for the right to offer reservation services to guests who would like to make a reservation at the hotel.  The hotel bills the online travel company for the price of the room and the state and local tax thereon.  The hotel then pays the lodgings taxes to the State and the appropriate municipality.

The municipalities alleged that the lodgings tax should be imposed not only upon the hotels for the amount they charge as rent for the occupancy of their hotel rooms, but additionally upon the amount that online travel companies charge the customer for their online services.

The Alabama Supreme Court disagreed with the municipalities and found forthe online travel companies.  In so doing, it reasoned that the statute and ordinances were not ambiguous, and clearly imposed the lodgings tax upon every person, “engaging in the business of renting or furnishing any rooms, in any hotel.”  The tax is fixed as a percentage of “the charge for such room…including the charge of use or rent of personal property and services furnished in such room.”  Additionally, the court found that the DOR specifically promulgated a rule affirming that only persons who operate a hotel are persons who rent or furnish rooms.  As such, the court found that the online travel companies do not operate a hotel in any of the municipalities and cannot be said to have engaged in the business of renting or furnishing rooms for purposes of the lodging tax.

Numerous cases have been brought in various states and jurisdictions throughout the country touching on the same or similar issues with varying results.  For review of a similar holding by a different court, see our detailed posting regarding the Pennsylvania Commonwealth Court’s holding relating to Expedia and the Philadelphia Hotel Tax.

Weekly SALT Update – Jan. 13, 2012

January 13, 2012

 by Jennifer Weidler

ALABAMA

Alabama Retail Association Issues Letter Expressing Support for Alabama Streamlined Sales and Use Tax Commission’s Preliminary Report

The Alabama Retail Association addressed a letter on behalf of its 4,000 members,to the Alabama Streamlined Sales and Use Tax Commission.  The letter expressedthe Alabama Retail Association’s support for the Commission’s preliminary report and recommendations, stating its belief that simplifying the sales and use tax system would increase compliance and revenue. (more…)

Weekly SALT Update – Nov. 3, 2011

November 3, 2011

 By Paul Masters with contributions by Jennifer Weidler in Chamberlain’s Philadelphia office.

State DOR Letters and Policy Rulings

But where’s your paper … New Mexico hearings officer rules that a taxpayer does not qualify for a gross receipts tax deduction merely because the taxpayer did not possess any nontaxable transaction certificates as required by NMSA 1978, Section 7-9-43 (2001). Other states have similar requirements for certificates, but merely because they are “required” does not necessarily mean the courts agree.

Virginia Tax Commissioner rules that an egg tray washer was not “processing” as defined by Virginia Code § 58.1-609.3(2)(iii) as it was used between the processing to maintain cleanliness. Even though the equipment was necessary to operate the actual processing, the equipment itself was not involved in the processing of the eggs for sale. Similarly, a “honey wagon” that was used to collect the bird droppings and then spray the droppings as fertilizer on fields was not part of the processing, even though the droppings came from the waste resulting from the cleaning of the eggs. Finally, the Commissioner rules that pit fans used to dry bird droppings that are then sold to farmers as fertilizer are not processing, but do qualify for the agricultural exemption at Virginia Code § 58.1-609.2(1). Different result should apply in Texas, as drying an item is a physical change, thus processing.

State Regulations and Public Notices

North Carolina updates its taxability matrix for the SSUTA.

The New Jersey Division of Taxation has published answers to frequently asked questions relating to the NJ-1040 e-filing mandate. For the 2011 taxable year forward, tax preparers expecting to prepare eleven (11) or more New Jersey individual income tax returns must electronically file those returns for which an electronic filing option is available.  Those returns not included in the e-filing mandate are New Jersey nonresident, part-year resident, amended and prior year returns.

The Connecticut Department of Revenue issued an Informational Publication (IP 2011(15)) answering frequently asked questions regarding the Connecticut individual use tax.  The Informational Publication addresses changes in legislation affecting Connecticut use tax filing and payment obligations, which occurred during 2011.

Starting January 1, 2011, those tax preparers filing more than five (5) returns per year with New York are now required to e-file.  The New York Department of Taxation may impose a penalty on both the preparer and the taxpayer for a failure to electronically file returns.  Additionally, beginning with the return due on March 20, 2012, sales tax returns for annual filers must be filed electronically.

State Legislative Affairs

Economic nexus comes into play again. Michigan signs into law SB 650 which defines nexus for a financial institution as any of the following: (i) physical presence, (ii) Michigan source receipts of at least $350,000 or (iii) has an ownership interest in a flow through entity.

Judicial and Administrative Decisions and Pleadings

A coalition of public school districts in Texas files suit against the State of Texas on constitutional grounds, arguing that the state tax system funding public schools is unfair, and does not provide the schools with sufficient funding to provide a free education to students.

In another school funding case, a federal district court rules against Lynch, who argued that Alabama’s property tax rates, among the lowest in the country, violate the Civil Rights Act of 1964 and the Equal Protection Clause of the Fourteenth Amendment. How? The tax scheme limits the ability of rural counties to tax wealthy white landowners. The opinion is looooong – really long. In the end, the court focused on its view that the tax structure was based on economics, not race, and therefore passed muster under the rational basis standard.

On further thought … Washington Court of Appeals reverses its decision on remand and finds that a hospital was not entitled to an exemption for amounts collected and paid to a third-party service provider. In its initial decision, the Court of Appeals determined that the payments did not qualify as gross income subject to business and occupation (B&O) tax. But the Supreme Court reversed the Court of Appeals’ ruling in Washington Imaging Services, LLC v. Wash. Dept. of Rev., 252 P3d 885 (Wash. 2011). Because there was no independent obligation for its patients to pay the third-party service provider for services rendered, the hospital did not make payments on behalf of its patients as their agent, the payments made constituted gross income. The exemption under Wash. Admin. Code § 458-20-111 did not apply as they payments were not customary reimbursements or advances made in the ordinary course of business.

NY Division of Tax Appeals rules against the estimated assessment made by an auditor for sales tax. While the taxpayer lacked the records necessary to avoid an estimated audit, the auditor made assumptions not based on reality, used information limited to only one quarter and extrapolated over a multi-year period. Thus the assessment was arbitrary.

Illinois Court of Appeals affirms decision to use income valuation approach because the sales comparison method provided unreliable. The government had used comparisons that included sales resulting from Department of Justice divestiture orders. Such sales necessarily are not defined as arm’s length transactions.

The Texas Court of Appeals for the 14th District (Houston) rules that Hotels.com and other similar online companies need not remit occupancy tax on the full amount received by online customers for the purchase of hotel space through the web site. Rather, the hotel occupancy tax is levied solely on the amount received by the hotel.

Other Documents

None noted.