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TAKEAWAYS

On April 25, 2019, California enacted comprehensive marketplace facilitator legislation. Many said last fall this would be an impossible feat given the divided constituency of the California Legislature on whether all marketplace facilitators should be treated equally for purposes of imposing California’s Sales and Use Tax law. Consider the impossible achieved. California’s sweeping Marketplace Facilitator Act, adopted under Assembly Bill (AB) 147, treats virtually all marketplaces the same.

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(This article was originally published by Law360 on April 16, 2019.)

In recent years, many have openly criticized California for its income tax litigating position involving out-of-state companies that hold passive, minority interests in pass-through entities doing business in California. The state argues these out-of-state companies are doing business in California solely by virtue of their passive, minority investment in pass-throughs that conduct business in California. The state has lost the issue twice in the last two years. Most recently in September 2018 before an administrative appellate body in a nonprecedential decision involving a 25% passive ownership interest and the other in 2017 at the California Court of Appeal in a published decision involving a 0.2% passive ownership interest.

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Three years ago, the U.S. Supreme Court invalidated a portion of Maryland’s personal income tax scheme on grounds that it violated the dormant commerce clause of the U.S. Constitution. In Comptroller of the Treasury of Maryland v Wynne, the Court held that Maryland’s credit mechanism for income taxes paid to other states impermissibly discriminated against interstate commerce because it allowed a credit against state taxes paid but not county taxes, resulting in double taxation on some income earned outside the state.

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Pillsbury attorneys speak on a number of tax-related issues at the TEI Mergers & Acquisitions Seminar on March 7. Topics include Corporate, Sales/Use Tax, State Income Tax, Federal Income Tax, Property/Transfer Taxes, Regulatory, and Employment and Labor.

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(This article originally appeared in the Journal of Multistate Taxation and Incentives, Vol. 28, No. 9.)

The question of whether or not an individual is a resident of a particular state has always been an important issue in the area of state personal income taxation. California, because of its top marginal personal income tax rate of 13.3 percent1, and the large number of high-wealth individuals living in the state, always has been one of the most significant jurisdictions for this issue. Indeed, California, at 13.3 percent, currently has the highest personal income tax rate of any state.2 The significance of the high California rate, and the residency issue in general, recently has taken on added significance as a result of two federal tax law changes.

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In SeeSALT Digest, members of our team examine important issues in play in the State and Local Tax arena. In “Ill-Fated Litigation: Exhausting Administrative Remedies and De Novo Review,” published in State Tax Notes, colleagues Carley Roberts and Jessica Allen take a look at two of the more dangerous pre-litigation pitfalls that can present themselves at any stage of the state or local tax controversy life cycle.