Archive for the ‘Pennsylvania’ category

Stewart Weintraub Receives Lifetime Achievement Award from The Legal Intelligencer

June 9, 2014

SW at TLI web crop

Chamberlain Hrdlicka tax attorney honored by ALM Media publication

PHILADELPHIA (June 2014) – The Philadelphia office of Chamberlain, Hrdlicka, White, Williams & Aughtry is proud to announce that shareholder Stewart M. Weintraub has been honored with a Lifetime Achievement Award from The Legal Intelligencer, a publication of ALM Media. Presented at a celebratory dinner on May 29, 2014, the award honors a select number of Pennsylvania’s most influential lawyers and jurists.

The Legal Intelligencer selected individuals who have helped to shape the law in Pennsylvania, whether through their work on the bench, their prowess in a courtroom or their dedication to assisting those in need of legal services. The attorney must have had a distinct impact on the legal profession in the state and must still be practicing law.

A well-known and respected state and local tax attorney, Weintraub has been a leader in both the Pennsylvania and the national legal community for more than 40 years.

“I want to thank The Legal Intelligencer and ALM for this recognition,” Weintraub said. “I could not do what I do without the help and support of my family and my firm. I am honored that one of the legal community’s leading publications believes the work I do day to day is considered so meritorious that it should be recognized.”

Since being admitted to the Pennsylvania bar in 1971, Weintraub has focused his practice upon state and local taxation. From audits through trials and appeals to the appellate courts, Weintraub represents clients in all aspects of state and local tax compliance and litigation. His practice also includes helping clients’ plan and structure transactions so that all state and local tax obligations are minimized.

Weintraub began his career with the City of Philadelphia Law Department where he rose to be chief of tax litigation and where he served as chief counsel of former Mayor William Green’s Tax Reform Commission. In 2003, Weintraub was appointed to serve as a member of a new voter-approved Tax Reform Commission. He also has held leadership positions for the American Bar Association and the Philadelphia Bar Association and has chaired or co-chaired the state and local tax committee for the Greater Philadelphia Chamber of Commerce since 1983. Now in private practice, Weintraub has been a shareholder at Chamberlain Hrdlicka since 2010.

About Chamberlain Hrdlicka – Chamberlain Hrdlicka is a diversified business law firm with offices in Houston, Atlanta, Philadelphia, Denver and San Antonio. The firm represents both public and private companies as well as individuals and family-owned businesses across the nation. In addition to tax planning and tax controversy, the firm offers corporate, securities and finance, employment law and employee benefits, energy law, estate planning and administration, intellectual property, international and immigration law, commercial and business litigation, real estate and construction law.

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.

Weekly Update for 3/16

March 19, 2012

 by Jennifer Weidler

ARIZONA

Arizona Court Holds that Cooperative Direct Mail Advertising is Not Subject to Use Tax

The Arizona Appeals Court held that cooperative direct mail advertising was not subject to the state’s use tax, since the dominant purpose of the taxpayer’s business was to obtain nontaxable design, mailing and printing services, and not tangible personal property.

INDIANA

Indiana Legislature Passes Bill to Phase Out Inheritance Tax

The Indiana General Assembly has passed legislation, SB 293, which will phase out the state’s inheritance tax, gradually reducing the rate until it hits zero during 2022.   The phase out would be retroactive to January 1st.

KANSAS

Kansas House Approves Bill to Alter State Income Tax Structure

The Kansas House approved legislation, SB 177, which would make several modifications to the state’s income tax structure.  The legislation includes changes to the state’s sales tax exemption and business income exemption provisions, formulaic individual income tax rate reductions, Rural Opportunity Zone expansions, tax credits and more.

MARYLAND

Maryland Senate Approves “Amazon” Law

The Maryland Senate has approved legislation, SB 523, which includes an “Amazon” law and an income tax increase.  The bill would add three additional tax brackets and rates and would impose a flat tax on those filers making more than $500,000.  The bill also contains affiliate nexus/”Amazon” language.

MICHIGAN

Michigan Court of Appeals Finds Taxpayer Could Not Collaterally Attack Underlying Assessment

The Michigan Court of Appeals held that a taxpayer could not appeal a use tax assessment, as the sole shareholder and responsible corporate officer of a retailer, where the taxpayer’s appeal was untimely and where he was statutorily precluded from collaterally attacking the underlying assessment.

NEW JERSEY

New Jersey Legislature Passes “Amazon” Law

The New Jersey Assembly has passed legislation, A 2608, which would give Amazon.com a temporary sales tax collection exemption in exchange for job creation.  Pursuant to the bill, those retailers that make capital investments of at least $130 million and create at least 1,500 full-time jobs in the state would not have nexus until July 1, 2013.

New Jersey Legislature Passes Bill Expanding State’s Nexus Rules

The New Jersey Assembly passed legislation, A 2608, which would expand the state’s nexus rules by creating nexus for sellers that use in-state affiliates to perform activities to aid in business development or to maintain a New Jersey business market.  Moreover, the bill would create nexus for out-of-state businesses with distribution centers or subsidiaries in the state.

PENNSYLVANIA

Philadelphia DOR Releases 2012 KOZ Booklet

The Philadelphia Department of Revenue has released its 2012 Philadelphia Keystone Opportunity Zone Programs Booklet, which provides guidance on calculations, credits, two-factor apportionment formula, and more.

TENNESSEE

Tennessee General Assembly Approves Bill to Exempt Amazon from Tax

The Tennessee General Assembly passed legislation, HB 2370, which would temporarily exempt Amazon.com from collecting state sales tax.  Pursuant to the legislation, Amazon.com will build new facilities in the state and create thousands of jobs, in exchange for sales tax exemption through January 1, 2014.  The bill is now awaiting the Governor’s signature.

TEXAS

Texas Announces Amnesty Program Slated for June 2012

Texas has announced that it will offer a tax amnesty program for businesses, during which it will waive all interest and penalties for taxpayers that file or amend delinquent tax reports and pay all taxes due.  Reports originally due prior to April 1, 2012 are eligible, and the amnesty program will run from June 12 through August 17, 2012.

Weekly Update for 3/9: Arizona Rejects Amazon Legislation, While New Jersey Considers Implementing Amazon Law; Missouri Considers Amnesty Legislation; Pennsylvania Considers Closing the “Delaware Loophole”…and more.

March 12, 2012

 by Jennifer Weidler

ARIZONA

Arizona Senate Rejects Proposed Amazon Legislation

The Arizona Senate rejected proposed Amazon legislation, SB 1338, which would have broadened Arizona’s definition of retailer to include any company with a warehouse in the state.

CALIFORNIA

California Revises Publication on Internet Sales, Incorporating eBooks and Apps

The California State Board of Equalization revised Publication 109 regarding Internet Sales, in order to provide guidance on the tax treatment of eBooks and apps.  According to the Publication, the transfer of a downloadable file such as an eBook or app is not a taxable transaction, without purchasing any physical storage medium.

GEORGIA

Georgia House Approves Legislation to Establish Tax Tribunal

The Georgia House of Representatives approved legislation, HB 100, which would establish a state Tax Tribunal in the state’s judicial branch.

ILLINOIS

Illinois Releases Information Letter of “Deal-of-the-Day” Transactions

The Illinois Department of Revenue issued an Information Letter providing guidance on the treatment of “Deal-of-the-Day” transactions.  For more detailed information, see the Information Letter.

IOWA

Iowa Court Grants Refund Relief for Illegal Taxation

The Iowa District Court ordered a refund of franchise fees that were collected in excess of the amount determined to be allowable for which the City of Des Moines could impose.  The court found that the refund was a constitutional remedy for the illegal taxation of the city’s residents.  The fact that the funds gathered from the illegal taxation were used wisely, legally and with the best intentions was not a defense.

MISSOURI

Missouri House Approves Amnesty Legislation

The Missouri House has approved legislation, HB 1030, which would offer a tax amnesty period, slated to run from August 1 to October 31, 2012.  The amnesty program would cover all taxes administered by the Department of Revenue and would waive penalties.  The amnesty program is projected to raise $75 million for the state.

NEW JERSEY

New Jersey Finds Nexus Based on Telecommuting Employee

The New Jersey Superior Court upheld a Tax Court ruling, which found that a foreign corporation was subject to the New Jersey Corporate Income Tax because it regularly and consistently permitted one of its employees to telecommute from her New Jersey residence.  Her full-time telecommuting was viewed as doing business in the state, thereby requiring the payment of the tax as well as the filing of corporate income tax returns in New Jersey.

New Jersey Introduces Amazon Legislation

Legislation, S 1762, has been introduced in New Jersey that would grant Amazon.com a temporary state sales tax collection exemption if it builds warehouses within the state.   Pursuant to the bill, distribution facilities built in the state after January 1, 2012 would not create nexus with the state until July 1, 2013, provided that Amazon.com creates at least 1,500 full-time jobs in the state and makes a capital investment exceeding $130 million.

New Jersey Court Affirms Value of Residential Property Where Owner’s Evidence was Insufficient

The New Jersey Tax Court affirmed the value of a residential property established by the assessment after finding that the owner’s evidence regarding comparable sales was insufficient to establish the true market value of the property.  Although the owner overcame the presumption of validity attached to the assessment of his property, he was unable meet his burden of proof with regard to establishing the true market value of the property.

NEW MEXICO

New Mexico Governor Vetoes Combined Reporting Legislation

New Mexico’s Governor vetoed legislation, SB 9, which would have established combined reporting in the state.  The bill would have required combined reporting for multistate retailers with a 30,000 square feet or large facility in New Mexico.  Additionally, it would have lowered the top corporate income tax rate from 7.6 percent to 7.5 percent.

PENNSYLVANIA

Pennsylvania Considers Legislation to Allow Counties to Institute Local Taxes to Reduce or Eliminate Property Tax

The Pennsylvania legislature is considering legislation, HB 2230, which would allow counties in the state to institute a local sales or income tax in order to reduce or eliminate the property tax.  Pursuant to the bill, county governments could ask voters to approve a sales or income tax, which would ultimately provide property tax relief.

Pennsylvania Considers Competing Legislation to Close “Delaware Loophole”

During January, legislation, HB 2150, was introduced that suggested a close to the “Delaware loophole.” For previous coverage of that bill, please click here.  Competing legislation is currently being drafted that will seek to create a broader add-back provision than that contained in HB 2150.

VIRGINIA

Virginia Governor Approves Legislation Phasing in Single-Sales-Factor

Virginia’s Governor has approved legislation, HB 154, which creates a phase-in of single-sales-factor apportionment for retailers.  The bill requires retailers to begin utilizing a triple-weighted sales factor beginning July 1, 2012 and a quadruple-weighted sales factor beginning July 1, 2012.  Finally, a single-sales-factor would be implemented beginning July 1, 2015.

WISCONSIN

Wisconsin Rules that Individual is Responsible for Portion of Company’s Tax Liabilities

The Wisconsin Tax Appeals Commission held that an individual was responsible for a portion of a company’s sales tax and withholding tax liabilities.  The Commission reasoned that the evidence established that the individual maintained the title of president of the company, retained check-writing authority and participated on the board of directors.  As such the Commission found the individual to be a “responsible” person.

Pennsylvania Commonwealth Court Holds Expedia Not Subject to Philadelphia Hotel Tax

February 6, 2012

  by Stewart Weintraub and Jennifer Weidler

On February 2, 2012, the Pennsylvania Commonwealth Court (“Commonwealth Court”) affirmed the decisions of the Philadelphia County Common Pleas Court and the City of Philadelphia Tax Review Board (“TRB”),finding Expedia, Inc. (“Expedia”)was not an operator of a hotel and was not subject to the City of Philadelphia’s (“City”) Hotel Room Rental Tax (“Hotel Tax”).

Expedia is an online travel company that allows travelers to make reservations for hotel rooms, flights, rental cars, events and other travel arrangements through its website.  With respect to hotels, Expedia operates through contracts with various hotels in many cities throughout the United States and abroad, including the City.  The contracts between Expedia and the hotels allow Expedia to book room reservations for travelers at the hotels.  The contracted room rate billed to Expedia by the hotels is a discounted net rate.  The room rate quoted by Expedia to the traveler includes the discounted room rate, a facilitation fee, service fees and a tax recovery charge representing an estimate of the City’s Hotel Tax (and other hotel taxes,if applicable) based upon the net rate charged for the room by the hotel.  The hotel calculates the City’s Hotel Tax based solely upon the net room rate, not inclusive of any extra fees.

During 2007, the City attempted to assert the Hotel Tax upon Expedia for the actual rate that it charges to the traveler, inclusive of its fees.  The assessment brought by the City alleged an amount due of $1,053,447.40 for unpaid Hotel Tax for the period from 2001 through 2005, inclusive of interest and penalties.  Expedia appealed the assessment to the TRB, alleging that: (1) it was not subject to the Hotel Tax because it was not a hotel operator; (2) that the fees it charged and retained were not subject to the Hotel Tax; and (3) that the imposition of the Hotel Tax was prohibited by the Commerce Clause of the United States Constitution.[1]

The TRB held in favor of Expedia, reasoning that Expedia was not a hotel “operator” as defined by the Philadelphia Code, that it could not, independent of hotel management, reserve and rent hotel rooms and that its only activities were to provide information about hotel availability, amenities, and rates to potential travelers and collect payment from the travelers.  Thereafter, the City appealed to the Common Pleas Court, which denied the City’s appeal and affirmed the TRB’s decision.  Subsequently, the City appealed to the Commonwealth Court.

The Commonwealth Court affirmed the TRB decision, finding in favor of Expedia.  On appeal,the City first argued that the TRB committed legal error in concluding that only a hotel can be an “operator” under the Philadelphia Code.  The Commonwealth Court examined the Philadelphia Code’s definition of “operator” as it relates to the Hotel Tax.  The Philadelphia Code defines “operator” as:

Any individual, partnership, non-profit or profit-making association or corporation or other person or group of persons who maintain, operate, manage, own, have custody of, or otherwise possess the right to rent or lease overnight accommodations in any hotel to the public for consideration. § 19-2401(7).

 The Commonwealth Court reasoned that the above definition clearly infers ownership or control of the premises and in the case at hand, the hotel, not Expedia, controls access to the hotel rooms, the right to rent those rooms and any accompanying amenities.

The City next argued that the TRB erred by misinterpreting the Philadelphia Code to hold that a taxable rental “transaction” only occurs at the traveler’s point of arrival at the hotel.  Section 19-2401(14) of the Philadelphia Code defines “transaction” as the “activity involving the obtaining by a transient or patron of the use or occupancy of a hotel room.”  Section 19-2401(6) defines “occupancy” to include “use or possession or the right to the use or possession…of any room in a hotel.”  The City’s argument necessarily failed because Expedia does not provide its customers with the use or possession of a room or the right to the use or possession of a room.  Moreover, the hotel ultimately receives the consideration for the room rental, not Expedia, since Expedia remits to the hotel the quoted room rate along with the applicable Hotel Tax.  Thus, the Commonwealth Court found that Expedia could not be subject to the Hotel Tax based upon the full amount of its fees charged to travelers and, therefore, affirmed the TRB decision.

Notably, there was a single dissentingopinion.  The dissent stated it would have held that the Hotel Tax should be imposed upon the consideration Expedia received from the travelers, not the amount that it pays its hotels. The dissent believed that Expedia fit within the definition of an “operator,” since he interpreted the contractual language between Expedia and the hotels to mean that Expedia has the right to a number of rooms to rent to its customers.The same or similar issues have been presented by numerous state or local taxing authorities throughout the United States.  While a few courts, for various and different reasons, sustained the taxing jurisdictions claims, the vast majority of jurisdictions ruled that Expedia is not subject to state and local hotel room rental taxes.


[1] Stewart M. Weintraub, Esquire, represented Expedia at the Tax Review Board and subsequently assisted with the appeals to the Philadelphia County Common Pleas Court as well as to the Pennsylvania Commonwealth Court.

Pennsylvania Considering Legislation that Would Amend Corporate Tax and Abolish Delaware Holding Company Loophole

January 31, 2012

  by Stewart Weintraub and Jennifer Weidler

Pennsylvania is now attempting to join the list of states which have challenged the use of the so-called Delaware Loophole.  In the past, other states have challenged the Delaware Loophole by litigation or by legislation.  The legislative remedies involved enacting either combined reporting or disallowing the deduction for the royalty payments.  OnWednesday January 25th, House Bill 2150, Printer’s No. 3019 (“Bill 2150”), was introduced into the Pennsylvania Legislature.  If enacted,Bill 2150 would amend the Pennsylvania Corporate Net Income Tax and address, among other thing, theso-called Delaware Loophole by disallowing the deduction that the parent operating corporation claims for the royalty payments made to its Delaware Holding Company (“DHC”). (more…)

2011 Year-End SALT Update

January 6, 2012

 by Jennifer Weidler

ARIZONA

Arizona DOR Finds Nexus for Sales Representatives Providing Customer Support and Training

Of course it had nexus: Arizona DOR rules that corporation has substantial nexus due to presence of sales representatives who provide customer support and training.

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Questions Raised Over City of Philadelphia’s Continued Use of Ratio for Real Estate Tax Assessments

October 31, 2011

  by Stewart Weintraub and Jennifer Weidler

Each year the Pennsylvania State Tax Equalization Board (“STEB”) calculates and publishes the common level ratio (“CLR”) for each county in the state.  The Pennsylvania General County Assessment Law provides that there cannot be more than a 15% differential between the STEB CLR and the county’s Established Predetermined Ratio (“EPR”). 72 P.S. § 5020-511(c).  For decades the STEB CLR for Philadelphia County fell slightly below, but within 15% of the county’s EPR of 32%.  This year marked a drastic change for Philadelphia.  For tax year 2012, the STEB CLR fell to 18.1%, a differential significantly greater than 15%.

Since the STEB CLR and the EPR differ my more than 15%, questions have been raised concerning how the City Philadelphia (“City”) will address the issue.  Recently, inquiries were made regarding the City’s position during the Philadelphia Local Taxes CLE program sponsored by the Pennsylvania Bar Institute and the Philadelphia Bar Association Tax Section.  However, representatives from the City did not directly respond to questions.    Instead of adjusting the EPR to conform with the STEB CLR, the City plans to maintain the same 32% EPR it has used for decades.  The program also addressed updates from the City and practitioners relating to various Philadelphia taxes, including the wage and net profit tax, business privilege tax, transfer tax, and use and occupancy tax.  For an audio copy of the program, click here.