The Panama Papers: Taking a New Look at an Old Problem

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On April 3, 2016, the International Consortium of Investigative Journalists (“ICIJ”) published more than 11.5 million documents connected to Mossack Fonseca, a Panama law firm that helped establish offshore financial operations for some of the world’s wealthiest power players. The implicated offshore operations allegedly failed to adhere to transparency and beneficial ownership reporting requirements thereby permitting some corporations to operate behind a veil of secrecy and avoid taxing authorities around the world. The release of the Panama Papers has prompted a new firestorm of international [...]Read more

Vermont Proposes Colorado-style Use Tax Reporting Law

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As we discussed in February, the Tenth Circuit upheld the constitutionality of Colorado’s use tax notification law with its decision in Direct Marketing Association v. Brohl (DMA II). In his concurrence to the decision, Judge Gorsuch predicted that “many (all?) states can be expected to follow Colorado’s lead and enact statutes like the one now before us.” (See Gorsuch, J., concurring, at 9). It appears that Vermont may be the first Colorado follower. Vermont is a seasoned player in the game of sales and use tax nexus and collection. In 2011, the state began requiring retailers who make [...]Read more

South Dakota Takes NCSL Challenge, Enacts Sales Tax Nexus Law

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In February, we discussed how the National Conference of State Legislatures (NCSL) circulated a letter to all the states encouraging them to enact laws to challenge the physical-presence standard for sales tax nexus articulated in Quill v. North Dakota. On March 22, South Dakota heeded the NCLS's call when Gov. Dennis Daugaard signed SB 106. SB 106 imposes a sales tax collection obligation on out-of-state sellers "as if the seller had physical presence in the state," provided that the seller meets one of two conditions: (1) the seller's gross revenue from taxable products or services delivered [...]Read more

Closing California’s Perceived Prop 13 Corporate Loophole

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SB 259, a bill that includes language to close the perceived loophole in the portion of Proposition 13 which governs “changes of ownership” in entities that own real property located in California, has been returned to the Secretary of the Senate and will not be moving forward. California’s Proposition 13 (“Prop 13”) was famously passed in the 1970’s in an effort to protect property owners from dramatic rises in their annual property tax bills.  It limits the ad valorem taxes on real property to 1% of the full cash value of the property at acquisition, with a 2% annual cap on assessment [...]Read more

Clouded laws: taxing of cloud services is not uniform

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Mary Benton, partner at Alston & Bird and a member of the firm’s State & Local Tax Group, was recently featured in an Atlanta Business Chronicle article on the taxation of cloud-based services. Mary discusses the complex tax laws governing cloud services and the significant impact these taxes could have on a company’s bottom line. She goes on to say that the taxes vary state-by-state so it is important for companies to know the landscape in which they do business and to be aware of how they will be taxed; some states tax cloud transactions as a tangible personal property while others [...]Read more

Tenth Circuit Questions Quill’s Endurance

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Last month, we discussed states’ efforts underway to attack Quill Corp. v. North Dakota, which provides a bright-line safe-harbor from sales and use tax collection for taxpayers without physical presence in a state. We discussed Alabama’s regulation requiring out-of-state sellers with sufficient sales to collect sales tax regardless of physical presence, as well as draft legislation circulated to the states by the National Conference of State Legislatures (NCSL). Since then, a federal appellate court decision has given the states new ammunition. On February 22, the U.S. Court of Appeals [...]Read more

Memo to the Tennessee Supreme Court: Read This Before You Decide Vodafone

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On June 2, 2015, the Tennessee Supreme Court heard oral argument in Vodafone’s appeal from an assertion of alternative apportionment by the Tennessee Department of Revenue in Vodafone, in which the Tennessee DOR asserted that the state’s statutorily-mandated costs-of-performance (COP) sourcing method unfairly under-represented the out-of-state service provider’s Tennessee receipts. On Sept. 3, 2015, a Virginia circuit court heard oral argument in a case in which the Virginia-based taxpayer argued that the state’s statutory COP method unfairly over-represented the taxpayer’s Virginia receipts. In [...]Read more

States Continue to Challenge Quill’s Physical Presence Standard

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When a client calls us to inquire about sales tax exposure, we instinctively start asking questions about people and possessions: “Do you have property in other states? Where do you have employees? Have you sent any sales representatives to any states where you have made sales?” For decades, tax practitioners have known that a proper sales tax nexus analysis begins with physical presence. It’s black-letter law, after all. States can’t levy sales tax on someone who isn’t there. We know this because of Quill Corp. v. North Dakota and National Bellas Hess v. Illinois before it. [...]Read more

PATH Act Brings FIRPTA Changes

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The Protecting Americans from Tax Hikes Act of 2015 (the “PATH Act”), signed December 18, 2015, introduces significant changes to the Foreign Investment in Real Property Tax Act (FIRPTA), particularly concerning REITs. The reforms are generally intended to make foreign investment in U.S. real estate more attractive, though some revenue-raising measures are thrown in the mix. Among the PATH Act's taxpayer-friendly FIRPTA updates: The ownership threshold for foreign “portfolio investors” in publicly traded REITs increases from 5% to 10%. These investors are exempt from FIRPTA tax [...]Read more

State & Local Tax Advisory – Gillette Overturned: One Test, Two Decisions in California

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On Thursday, December 31, 2015, the Supreme Court of California issued its decision in Gillette Co. v. Franchise Tax Board, reversing the California Court of Appeal and holding that the Multistate Tax Compact is not a binding compact between its member states.  Accordingly, the California legislature had the authority to, and did in fact, replace the state’s equally weighted apportionment formula with a double-weighted-sales formula in 1993.  This highly anticipated decision by the California high court will undoubtedly have a significant impact on the landscape of ongoing disputes among taxpayers [...]Read more