Maryland’s controversial Digital Advertising Gross Revenues Tax (the “Digital Ad Tax”) recently shot back to the top of the headlines when Maryland Circuit Court Judge, Alison Asti, ruled from the bench that the tax is unconstitutional and violates the federal Internet Tax Freedom Act (“ITFA”). Judge Asti ruled in favor of Verizon and Comcast that the Digital Ad Tax violates the ITFA, the First Amendment and the Commerce Clause due to its selective taxation, and the fact that it is not content neutral.
Illinois DOR Proposes to Change Income Tax Liability for Businesses that Make Sales to Foreign CountriesPosted in Illinois, Income Tax
The Illinois Department of Revenue (“IDOR” or “Department”) recently issued a Notice of Proposed Amendment to amend its Regulation (86 Ill. Admin. Code § 100.3200) governing the “throwback” and “throwout” apportionment provisions (the “Amendments”). 46 Ill. Reg. ___ (Apr. 15, 2022), at 5856. If adopted, the Amendments would change the Illinois income tax burden imposed on a business by altering the business’ apportionment with respect to sales made into certain foreign countries. Continue Reading
Sirius XM Prevails in Texas Supreme Court on Sourcing of Receipts from Satellite SignalPosted in Texas
In a recently issued taxpayer-favorable opinion, the Texas Supreme Court overturned the court of appeals’ decision holding that the state’s performance-based sourcing statute for service receipts essentially looks to customer location. The Court, relying on the statute’s plain language, then affirmed the taxpayer’s methodology, which sourced its receipts to the location where the taxpayer’s performance occurred. Sirius XM Radio, Inc. v. Comptroller, no. 20-0462 (Tex. Mar. 25, 2022) (“Sirius Op.”). Continue Reading
Texas Supreme Court Rejects Texas Comptroller’s “Receipt-Producing, End-Product” Act Test for Sourcing Receipts from ServicesPosted in Texas
On March 25, the Texas Supreme Court issued a highly-anticipated decision concerning the proper test to source receipts from services for purposes of Texas franchise tax. By statute, receipts from a “service performed in this state” must be sourced to Texas, as the first step in calculating the amount of franchise tax owed by a service provider. See Tex. Tax Code § 171.103(a)(2).
The primary issue before the Court was whether Sirius XM’s receipts from Texas subscribers were receipts from a “service performed in this state.” Sirius XM contended they were not; the Comptroller disagreed and took the position that all subscription receipts from subscribers in Texas must be sourced to Texas. Continue Reading
Louisiana Launches Unique State Transfer Pricing InitiativePosted in Indiana, Louisiana, North Carolina, Transfer Pricing
Joining Indiana and North Carolina, Louisiana last week became the third state to offer an alternative to the burdensome and expensive process of enduring a state transfer pricing audit.
The Louisiana Department of Revenue announced a short-term voluntary initiative (the “Louisiana Transfer Pricing Managed Audit Program”) for taxpayers to come forward to resolve intercompany state transfer pricing issues. The program is open from November 1, 2021 through April 30, 2022 and, according to the Department’s Revenue Information Bulletin announcing the program, is “aimed at proactively and efficiently resolving intercompany transfer pricing issues.” Continue Reading
Updated: Maryland’s Latest Attempt to Fix its Digital Ad Tax May Lead to More LitigationPosted in Maryland
Shortly after the Maryland passed the country’s first “Digital Advertising Gross Revenues Tax”, H.B. 732, the Maryland Senate went to work attempting to fix a few known glitches in the law. Senate Bill 787, which passed the Maryland General Assembly on April 12, 2021, is now headed to the Governor’s desk for signature. If the Governor does not act within 30 days (from April 12th), the bill will automatically become law. Continue Reading
Lights! Camera! Action! Shuttered Venue Operators Grants (SVOG) Takes Center Stage on April 8Posted in Federal Tax
On April 8, The Small Business Administration (SBA) finally opens its Shuttered Venue Operators Grant (SVOG) program, which was established by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, as part of the the Consolidated Appropriations Act, signed into law on December 27, 2020, and as amended by the American Rescue Plan Act on March 11, 2021.
Word Play: The Curious Case of Economic Nexus Legislation in FloridaPosted in Florida
In June 2018, the United States Supreme Court in Wayfair held that the physical presence of the taxpayer was no longer a prerequisite for imposition of a sales tax. In so doing, the Court blessed the concept of “economic nexus” for sales tax purposes. Since that landmark decision, many states seized the opportunity to raise sales tax revenue by enacting economic nexus laws. At this moment, forty-four states have economic nexus laws in place. Of the six states without such laws, four – Delaware, Montana, New Hampshire, and Oregon – do not impose a statewide sales tax. The remaining two states – Florida and Missouri – have long-been holdouts. Recently, Florida economic nexus legislation has gained substantial momentum. So, why now? What has changed? Continue Reading
What Will Come of Maryland’s Unique and Controversial Digital Advertising Tax?Posted in E-Commerce, Maryland
On February 12, 2021, overriding the Governor’s veto, Maryland enacted a first-of-its-kind tax “Digital Advertising Gross Revenues Tax” that has already sent shockwaves through the industry. As widely anticipated, within one week of the enactment four trade associations representing industry leaders filed suit in Maryland federal court to attempt to overturn the tax. Continue Reading
In Search of Revenue – Chicago Issues Bulletin on Economic Nexus For Streaming and Cloud ServicesPosted in Chicago, E-Commerce, Illinois, Nexus, Sales Tax
On January 21, 2021, the City of Chicago’s Department of Finance issued an informational bulletin clarifying its position regarding economic nexus for Chicago’s amusement tax as applied to streamed amusements and Chicago’s personal property lease transaction tax (“PPLTT”). It also announced a “safe harbor” that businesses can rely upon when analyzing nexus. Chicago states that it will utilize the state of Illinois’ thresholds (i.e., (i) the sales of tangible personal property or services to customers in Illinois are $100,000 or more; or (ii) the retailer or service provider enters into 200 or more separate transactions for sales of tangible personal property or services to Illinois customers in the past 12 month period) as applied to customers in the City to analyze whether a business has nexus with the City. Continue Reading