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NCSL Task Force on SALT Meets in Anticipation of Active Legislative Sessions

On Saturday, January 14, the National Conference of State Legislatures (NCSL) Task Force on State and Local Taxation (Task Force) met in Scottsdale, Arizona to discuss many of the key legislative issues that are likely to be considered by states in 2017. The Task Force consists of state legislators and staff from 33 states and serves as an open forum to discuss tax policy issues and trends with legislators and staff from other states, tax practitioners and industry representatives. Below is a short summary of the key sessions and takeaways from the first Task Force meeting of 2017. PowerPoints from all sessions are available on the Task Force website. Nexus Expansion Legislation Expected to Continue With lawsuits pending in South Dakota and Alabama over actions taken by states in 2016, MultiState Associate’s Joe Crosby provided an overview of 2016 nexus expansion legislation (as well as legislation introduced thus far in 2017), with NCSL’s Max Behlke pointing...

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BREAKING NEWS: US Supreme Court Denies Cert in Direct Marketing Association v. Brohl

This morning, the US Supreme Court announced that it denied certiorari in Direct Marketing Association v. Brohl, which was on appeal from the US Court of Appeals for the Tenth Circuit. The denied petitions were filed this fall by both the Direct Marketing Association (DMA) and Colorado, with the Colorado cross-petition explicitly asking the Court to broadly reconsider Quill. In light of this, many viewed this case a potential vehicle to judicially overturn the Quill physical presence standard. Practice Note:  Going forward, the Tenth Circuit decision upholding the constitutionality of Colorado’s notice and reporting law stands, and is binding in the Tenth Circuit (which includes Wyoming, Utah, New Mexico, Kansas and Oklahoma as well). While this development puts an end to this particular kill-Quill movement, there are a number of other challenges in the pipeline that continue to move forward. In particular, the Ohio Supreme Court recently decided that the...

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BREAKING NEWS: No Physical Presence Required for Ohio CAT Imposition

Today, the Ohio Supreme Court issued its much-anticipated slip opinions in the three companion cases challenging Ohio’s Commercial Activity Tax (CAT) economic nexus standard. See Crutchfield Corp. v. Testa, Slip Op. No. 2016-Ohio-7760; Newegg, Inc. v. Testa, Slip Op. No. 2016-Ohio-7762; and Mason Cos., Inc. v. Testa, Slip Op. No. 2016-Ohio-7768. In ruling 5-2 in favor of the state, the Ohio Supreme Court first held that physical presence is not a necessary condition for imposing the CAT because the CAT’s $500,000 sales-receipts threshold is adequate quantitative standard that ensures that taxpayer’s nexus with Ohio is substantial under the dormant Commerce Clause. In reaching this conclusion, the court specifically stated that “[o]ur reading of the case law indicates that the physical-presence requirement recognized and preserved by the United States Supreme Court for purposes of use-tax collection does not extend to business-privilege taxes such as the CAT.”...

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Breaking News: Tennessee Submits Proposed Economic Nexus Regulation for Publication

Earlier today, the Tennessee Department of Revenue (DOR) submitted a new sales and use tax regulation for publication titled “Out-of-State Dealers” (Rule 1320-06-01-.129) that would administratively create an economic nexus threshold. With the submission, Tennessee becomes the most recent addition to the growing list of states seeking to directly attack the Quill physical presence standard.  As detailed in our prior blog, both Alabama and South Dakota are already litigating whether their economic nexus standards are sufficient to satisfy the dormant commerce clause substantial nexus requirement.  Additionally, at least 11 different bills in eight different states have been introduced in state legislatures so far in 2016.  With states continuing to attack Quill from all angles, remote sellers are scrambling to keep up with the increasingly volatile nexus landscape. The Proposed Regulation The proposed regulation provides that “[o]ut-of-state dealers who engage...

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Alabama Issues Remote Sellers Use Tax Assessments, Newegg Inc. Appeals

Ever since Alabama’s new economic nexus regulation went into effect, litigation over its constitutionality has been expected given that Alabama Commissioner Julie Magee and Governor Bentley said as much when announcing it (Rule 810-6-2-.90.03, effective January 1, 2016).  It appears that they finally got their wish. On June 8, 2016, Newegg Inc. (Newegg) filed a Notice of Appeal in the Alabama Tax Tribunal challenging the Alabama Department of Revenue (DOR) Notice of Final Assessment of Sellers Use Tax (Assessment) that was entered on May 12, 2016. The Assessment is for seller’s use tax, interest and penalties for the months of January and February 2016 (the Assessment Period), which represent the first two months the new regulation was in effect. The Alabama litigation comes on the heels of the litigation in South Dakota, which also involves Newegg and other retailers. Although the critical issue in both is whether economic nexus is constitutional, given that...

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