The U.S. Supreme Court heard oral arguments on December 3, 2019 in Simon E. Rodriguez v. Federal Deposit Insurance Corp., 18-1269 (Sup. Ct.). At dispute in the case is whether a $4.1 million tax refund belongs to a failed bank (the FDIC, as receiver for defunct United Western Bank) or its corporate parent in bankruptcy (Rodriguez, as trustee for United Western Bancorp Inc.). The Supreme Court granted certiorari in Rodriguez to decide whether state law or federal common law decides who owns the tax refund, but at oral argument, it became apparent that the issue may not be the subject of, in the words of Justice Ginsburg, “adversarial confrontation” and thus improper to decide in the context of this case. Continue Reading
Kansas Surprises By Removing Nexus Thresholds and Seeks to Create Rebirth of “Slightest Presence” Nexus
Posted in E-Commerce, NexusThe Kansas Department of Revenue recently released Notice 19-04 (the “Notice”) which provides that all remote sellers making sales into the state are required to register for and begin collecting and remitting sales and use tax effective October 1, 2019, raising significant Constitutional concerns. Notably, the Notice cites no transaction or dollar thresholds for determining remote seller nexus with Kansas. The only predicate for nexus is that the remote seller makes a sale of tangible personal property or services to a customer located in the state. Continue Reading
New Hampshire Passes Anti-Wayfair Remote Tax Legislation
Posted in E-Commerce, Sales TaxMost states impose sales or use tax on tangible personal property sold or consumed in the state. However, five states – Alaska, Delaware Montana, New Hampshire, and Oregon – do not impose such a tax. In its landmark South Dakota v. Wayfair decision, the U.S. Supreme Court ruled that out-of-state sellers can be required to collect and remit tax on sales into another state in which the seller had no physical presence. The response from New Hampshire was swift and to the point. Governor Chris Sununu immediately tweeted that the Court’s ruling was “outrageous” and that “if they think we are just going to take this without a fight, well then they have another thing coming.” Continue Reading
Arizona v. California: A Clear Case of “Passive Aggressiveness” in the State Taxation of Nonresidents
Posted in Arizona, California, U.S. Supreme CourtThe State of Arizona has asked the Supreme Court of the United States to hear a challenge to the State of California’s taxation of nonresident members of California LLCs and nonresident shareholders of California corporations. The crux of the dispute relates to California’s “doing business” tax on all entities that conduct business in the State. The tax is a flat $800 for limited liability companies and is a minimum of $800 for corporations. Arizona asserts that California’s aggressive efforts in taxing nonresident passive investors violates the Due Process Clause and the Commerce Clause of the U.S. Constitution. If the Court decides to hear the case, a ruling in Arizona’s favor would have an unquestioned impact on the state and local taxation of nonresidents. Continue Reading
Nothing to See Here? – Kaestner Trust Decision Leaves Many Unanswered Questions
Posted in North Carolina, ResidencyThe U.S. Supreme Court recently issued its decision in North Carolina Department of Revenue v. Kimberley Rice Kaestner 1992 Trust. The Court unanimously determined that the residency of in-state beneficiaries alone is an insufficient basis for a State’s taxation of trust income where (1) the beneficiary did not receive distributions of trust income, (2) the beneficiary had no right to distributions of trust income, and (3) it was uncertain if the beneficiary would ever receive trust distributions. The Court concluded that a State’s imposition of tax in such circumstances violated the Due Process Clause of the Fourteenth Amendment to the U.S. Constitution. Continue Reading
Notable Changes to Florida Tax Law
Posted in Florida, Sales Tax, Use TaxThe Florida legislature recently wrapped up its 2019 session. Of particular note, the following tax law changes were enacted.
Documentary Stamp Tax – Deeds between Spouses
Florida imposes a surtax – referred to as the “documentary stamp tax” – on real estate deeds based upon the consideration paid for the transfer. Mortgage indebtedness on the property is always treated as consideration paid, even if the debt is not assumed by the acquiror. Exempt from this surtax were deeds of homestead property between spouses. However, this exemption only applied to deeds given during in the first year of marriage. Continue Reading
A Case of History Repeating Itself: State Taxation of Transportation Related Companies
Posted in Georgia, Ohio, Sales Tax, TransportationDuring the Great Depression, the taxi industry boomed in the United States. This growth was fueled, in part, by the fact that the industry was largely unregulated. With many unemployed and underemployed individuals in need of extra money at the time, driving a taxi was a popular pursuit. At that time, drivers used “call boxes” located on city streets to communicate directly with the dispatch center to determine where to pick up the next passenger and what to charge for the ride. Continue Reading
Removing Transaction Thresholds – Where does Wayfair go from here?
Posted in California, Colorado, E-Commerce, Retail, Sales Tax, South Carolina, South Dakota, TexasLast year, the U.S. Supreme Court ruled in South Dakota v. Wayfair that economic nexus is constitutional for sales tax purposes. South Dakota’s economic nexus statute at issue in the case included an economic threshold of at least $100,000 of sales or 200 separate transactions into the state in the prior calendar year. The decision overruled prior decisions by the Supreme Court, including the landmark holding in Quill Corp. v. North Dakota. In the 1992 Quill decision, the Court affirmed a bright-line physical presence rule limiting the imposition of sales and use taxes on remote sellers. The Wayfair ruling created a snowball effect with approximately 40 states jumping on the bandwagon of “economic nexus.” Nearly all of these states enacted laws that mirrored South Dakota’s $100,000/200 separate transaction threshold model. Continue Reading
Annie Get Your Gun: Wayfair and the Unresolved Ambiguities of Sales Tax Nexus
Posted in Nexus, Sales Tax, U.S. Supreme CourtIn the late nineteenth century, Annie Oakley was arguably the most famous woman in the country. She was renowned for her skill as a sharpshooter and traveled the country in Buffalo Bill’s Wild West Show performing mind-blowing feats. She is credited with shooting the ashes off a lit cigarette hanging out of someone’s mouth and hitting objects by looking at them in a mirror. With rare exception, if Annie Oakley targeting something, she hit it.
When the U.S. Supreme Court issued its decision in Wayfair, many viewed the case as resolving all of the outstanding questions of sales tax nexus. To this point, the Court determined that an online retailer could be liable for sales taxes whether or not it was physically present in a state. State and local tax authorities viewed the Wayfair case as granting carte blanche to economic nexus laws that triggered liability based solely on thresholds tied to sales revenue and the number of sales made by the retailer. Despite this unbridled effort by states to expand the scope of their sales tax laws, there remains a certain level of ambiguity regarding sales tax nexus post-Wayfair.
You Can’t Touch This: Sale of Partnership Interest by Nonresident Corporate Partner Deemed Subject to NYC Tax Despite Lack of Unitary Business
Posted in New YorkThe decision by the New York City Tax Appeals Tribunal in Goldman Sachs Petershill Fund Offshore Holdings Corp (“Petershill Fund“), unfortunately, does not involve parachute pants or any reference to the “Running Man” dance. Setting this disappointment aside, the case does address a critical constitutional issue impacting passive investors in partnerships. The crux of the dispute was whether the U.S. Constitution prevented New York City (“NYC”) from imposing its General Corporation Tax on a nonresident corporate partner’s sale of its interest in a partnership actively conducting business in the City.
