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House Judiciary Subcommittee to Consider Sensenbrenner Bill Tomorrow

The No Regulation Without Representation Act of 2017 (NRWRA) is scheduled for a hearing before the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law on Tuesday, July 25 at 10:00 am EDT in 2141 Rayburn House Office Building. The bill was introduced by Congressman Jim Sensenbrenner (R-WI) last month with House Judiciary Chairman Bob Goodlatte (R-VA) as one of seven original co-sponsors. As described in more detail below, the bill would codify the Bellas Hess “physical presence” requirement upheld by the US Supreme Court in Quill and make that requirement applicable to sales, use and other similar transactional taxes, notice and reporting requirements, net income taxes and other business activity taxes. Extending the concept to an area far beyond state taxation, the bill would also require the same physical presence for a state or locality to regulate the out-of-state production, manufacturing or post-sale disposal of any good or...

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What Is Minimal Substantial Nexus?

Can a seller have nexus with a state – so as to be obligated to collect and remit that state’s sales and use taxes - only in connection with certain sales that seller makes into that state?  In this article, the authors explore the concept that only certain transactions may be subject to that obligation, depending on the extent of the seller’s connection with that state. Read the full article. Originally published in State Tax Notes, July 3, 2017.

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BREAKING NEWS: Expanded “Physical Presence” Codification Bill Introduced in House

On, June 12, 2017, the No Regulation Without Representation Act of 2017 was introduced by Congressman Jim Sensenbrenner (R-WI) with House Judiciary Chairman Bob Goodlatte (R-VA) as one of seven original co-sponsors. As described in detail below, the scope and applicability of the “physical presence” requirement in the 2017 bill is significantly broader than the first iteration of the bill that was introduced last year. Not only does the bill expand the physical presence rule to all taxes, it expands the rule to all regulations. 2016 Bill In July 2016, Congressman Sensenbrenner introduced the No Regulation Without Representation Act of 2016 (H.R. 5893) in the US House of Representatives. The bill provided that states and localities could not: (1) obligate a person to collect a sales, use or similar tax; (2) obligate a person to report sales; (3) assess a tax on a person; or (4) treat the person as doing business in a state or locality for purposes of such tax...

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Nexus is Crucial, Complex Connection for State Tax Professionals

With multiple state lawsuits, competing federal legislation, many state bills, and several rulings and regulations, the physical presence rule remains an important and contentious issue.  In this article for the TEI magazine, Mark Yopp takes a practical approach for practitioners to deal with the ever-evolving landscape. Read the full article. Reprinted with permission. Originally published in TEI Magazine, ©2017.

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BREAKING NEWS: Sales Tax Battle Breaks Out in South Dakota; Quill’s Last Stand?

This post is a follow-up to a previous post from April 21, 2016. Introduction On March 22, 2016, South Dakota Governor Dennis Daugaard signed into law Senate Bill 106, which requires any person making more than $100,000 of South Dakota sales or more than 200 separate South Dakota sales transactions to collect and remit sales tax. The requirement applies to sales made on or after May 1, 2016. The law clearly challenges the physical presence requirement under Quill, and that’s precisely what the legislature intended. The law seeks to force a challenge to the physical presence rule as soon as possible and speed that challenge through the courts. As we discussed in our earlier post, the big question in response to the legislation was whether taxpayers should register to collect tax.  For those who did not register, an injunction is now in place barring enforcement of the provisions until the litigation is resolved. Last night and this morning two different...

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California’s Harley-Davidson Decision Rides over Nexus Lines

On May 28 2015, The California Court of Appeals issued a decision in Harley-Davidson, Inc. v. Franchise Tax Board, 187 Cal.Rptr.3d 672; and it was ultimately about much more than the validity of an election within California’s combined-reporting regime. It also tackled issues and, perhaps most importantly, blurred lines surrounding the Commerce Clause’s substantial nexus requirement. In Harley-Davidson, the court concluded that two corporations with no California physical presence had substantial nexus with California due to non-sales-related activities conducted by an in-state agent. The court applied an “integral and crucial” standard for purposes of determining whether the activities conducted by an in-state agent satisfy Commerce Clause nexus requirements. The corporations at issue were established as bankruptcy-remote special purpose entities (SPEs) and were engaged in securing loans for their parent and affiliated corporations that conducted business in...

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A Year’s Review of Massachusetts Tax Cases

Allied Domecq Spirits & Wines USA, Inc. v. Comm’r of Revenue, 85 Mass. App. Ct. 1125 (2014) In a unique case, the Massachusetts Appeals Court affirmed a ruling of the Appellate Tax Board (ATB) that two corporations could not be combined for corporation excise tax purposes for 1996 through 2004. The distinctive aspect of this case was that a company was found not to have nexus with Massachusetts even though it rented property in the state and had employees in the state. If the company had been found to have nexus, it could have applied its losses to offset the income of an affiliated Massachusetts taxpayer in a combined report. The Appeals Court pointed to factual findings of the ATB that the transfer of employees located in Massachusetts to the company “had no practical economic effect other than the creation of a tax benefit and that tax avoidance was its motivating factor and only purpose.” The Massachusetts Supreme Judicial Court denied the taxpayer...

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Delaware’s Unclaimed Property Audit Program Dealt Blow

The judge in a case challenging Delaware’s use of sampling and extrapolation to determine unclaimed property liability denied the state’s motion to dismiss and in doing so, seriously questioned the State’s approach.  Temple-Inland v. Cook, U.S. Dist. Ct. (DE), Civ. No. 14-654-SLR (3/11/2015).  Temple-Inland brought a suit against the State following an unclaimed property audit of its accounts payable balances and before the audit of other property types was completed.  Delaware found Temple-Inland liable for unclaimed property going back to 1986 based on the use of sampling and extrapolation.  On March 11, 2015, Judge Robinson ruled on the Temple-Inland’s summary judgment motion and the State’s motion to dismiss for failure to state a claim.  While the State won one issue, Temple-Inland certainly came out ahead overall. Let’s start with the bad news first: the one dark spot in the opinion for holders is that the judge decided that the U.S. Supreme Court’s...

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Arizona’s 2015 TPT Amendments Have 99 Problems, but Origin Sourcing ain’t One

Actually, there are really only two issues, but they are big issues. Arizona’s Transaction Privilege Tax has always been an anomaly in the traditional state sales tax system.  Contrary to some commentators, however, the recent amendments do not, and could not, impose an origin tax on Arizona retailers for remote sales delivered out-of-state.  That is not to say that these amendments are benign.  Oddly, the amendments provide incentives for Arizona residents shipping items out-of-state to purchase these items over the internet rather than visit Arizona retailers in person.  Furthermore, these amendments create complexities for Arizona vendors shipping to foreign jurisdictions.   Finally, these amendments create additional administrative problems for retailers that are difficult to address with existing software and invite double taxation problems that should not exist in a transaction tax world. Background: Arizona Transaction Privilege and Use Tax For retail...

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The New “Click-Through”?: New York Budget Proposal Requires Marketplace Providers to Collect Tax

On January 21, Governor Cuomo delivered his State of the State address, along with proposing the new budget. The budget has a number of new tax proposals. One of those proposals would have a significant impact on e-commerce companies. Part X of the budget proposal amends the sales tax statutes to require marketplace providers to collect and remit sales tax on sales to New York customers. A marketplace provider is a person who, pursuant to an agreement with a seller, “facilitates a sale, occupancy, or admission” by the seller. A person can be a marketplace provider if they facilitate the sale, or are an affiliate of a person facilitating the sale. For purposes of this definition, affiliate companies are companies that have common ownership of 5 percent. “Facilitates a sale, occupancy, or admission” means: (1) such person, or an affiliated person, collects the receipts, rent or amusement charge paid by a customer, occupant or patron to a marketplace seller; and...

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