Articles Posted in Sales and Use Tax

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Co-authored by Malcolm A. Brudigam

In Alaska, a state and local sales tax class action survived a motion to dismiss and motion to strike class allegations after a federal judge determined the plaintiff’s alleged claims were plausible. In Van v. LLR, INC., d/b/a LuLaRoe et al., the plaintiff—an Alaska resident and customer of the defendant retailer—alleged she was improperly charged sales tax on clothing purchased from the out-of-state retailer’s “remote consultants” and shipped to her residence in Anchorage, Alaska. With no state sales tax in Alaska and few local sales taxes, the plaintiff claimed defendant retailer unlawfully collected sales tax on transactions shipped to Alaska for over a year.

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https://seesalt.pillsburylaw.com/files/2020/04/Seal_of_New_York.svg_-300x300.pngA New York trial court held that charges for storage services rendered in New Jersey were not subject to New York sales tax despite the fact that the property was originally picked up in New York. Vital Records, Inc. v. New York State Dep’t of Taxation & Finance, No. 900088-19 (N.Y. Sup. Ct. Albany Cty. Aug. 19, 2020). The case was not heard by the New York State Division of Tax Appeals, which is the typical venue for state tax disputes. Instead, the vendor brought an action against the New York State Department of Taxation and Finance (“Department”) and its executive deputy commissioner in a New York Supreme Court (trial court) seeking declaratory, injunctive, and other relief.

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https://seesalt.pillsburylaw.com/files/2020/07/1200px-Seal_of_the_District_of_Columbia.svg_-300x300.pngThe District of Columbia Council finalized the 2021 fiscal year budget yesterday, which removed the recently enacted digital advertising tax. The Council’s July 28 vote formalized the elimination of a proposed 3% sales tax on gross receipts from traditional and digital advertising services and from the sale of personal information (e.g., IP addresses, , names, phone numbers, biometric data etc.). The proposal defined “digital advertising services” as “advertising services related to advertisements displayed on a digital interface, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, or other comparable advertising.” “Digital interface” was defined as “any combination of hardware and software that an individual may use to access internet-based platforms such as websites, parts of websites, or applications.”

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SealofTennessee-Seal-300x300The Tennessee Court of Appeals held that a single member limited liability company (SMLLC) that is disregarded for federal income tax purposes is regarded for Tennessee excise tax purposes unless its single member is classified as a corporation for federal income tax purposes.  The court also held that proceeds from the settlement of a legal malpractice claim constitute “business earnings” subject to excise tax where the proceeds represent lost business revenue.  EmeraChem Power, LLC v. Gerregano, No. E2019-00292-COA-R3-CV (Tenn. Ct. App. June 1, 2020). Continue Reading ›

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sealofmissouristateseal1-300x300On March 17, 2020, the Missouri Supreme Court held that the use tax definition of “sale” cannot be applied to sales tax cases, turning more than two decades of precedent on its head.  In DI Supply I, LLC v. Director of Revenue, DI Supply sold hotel room furnishings to its parent, Drury Hotels Company (DHC), which operates hotels.  The issue before the court was whether DI Supply’s sales to DHC were nontaxable sales for resale.  DI Supply argued the sales were for resale because DHC transferred the right to use the hotel room furnishings to its guests and included the cost of such items in the nightly room rate. Continue Reading ›

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In a letter ruling published March 16, 2020, the Tennessee Department of Revenue concluded that a contractor’s purchase of materials and equipment for use in the construction and installation of a new steam production facility at a federally owned manufacturing plant was exempt from Tennessee sales and use tax.  Tenn. Letter Rul. No. 20-02 (issued Feb. 10, 2020).

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arizona-state-seal-color-e1582833598849There have been two interesting developments in Arizona as a result of Wayfair. First, the Arizona House of Representatives pushed forward a resolution, H.C.M. 2006, last week to formally ask Congress to enact uniform national legislation to simplify sales tax or similar tax collection by all states and to reduce the burden of tax compliance on remote sellers. In addition, the Arizona Senate pushed forward S.C.M. 1003, requesting Congress to do the same, on February 13. Each bill needs to be sent to the other chamber for final passage. If either bill is passed, the measure would be transmitted to the federal government. Arizona would be the first state requesting federal intervention to ensure sales tax compliance simplicity in all states by passing state legislation.

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iStock-182174100-massachusetts-300x227The Massachusetts Supreme Judicial Court held that sales tax applied to subscription fees for three online Citrix products, “GoToMyPC,” “GoToAssist” and “GoToMeeting,” which allow users to remotely access other users’ computers. Citrix Systems, Inc. v. Comm’r of Revenue, No. SJC-12741 (Mass. Feb. 5, 2020). In so holding, the Court affirmed the Massachusetts Appellate Tax Board’s determination that Citrix made taxable sales of tangible personal property, rather than nontaxable sales of services.

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Louisiana-Supreme-Court-Seal-300x300On January 29, 2020, the Louisiana Supreme Court issued a 4-3 decision in Normand v. Wal-Mart.com USA, reversing in full two lower courts and holding Walmart.com was not required to collect local sales tax on third-party sales facilitated through its online marketplace. The majority concluded Walmart.com was not a “dealer” under Louisiana law for purposes of such sales and the company’s contracts with third-party marketplace retailers did not transfer the third-party retailers’ sales tax obligation to Walmart.com.

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Washington-Court-of-AppealsThe Washington Court of Appeals held that Gartner, Inc.’s online research service was a digital automated service subject to the state’s retail sales tax and retailing Business and Occupation (B&O) Tax. Gartner, Inc. v. Washington Department of Revenue, No. 51637-3-II (Wash. App. Div. 2 Jan. 13, 2020). This decision addressed the scope of Washington’s “human effort” exclusion from the retail sales tax, the applicability of the “bundled transaction” and “true object” tests to offerings that contain taxable and nontaxable components, and the Internet Tax Freedom Act.

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