Articles Posted in California

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(This article originally was published by Law360 on July 22, 2019.)

On July 5, the San Francisco Superior Court issued a pair of rulings in favor of the city and county of San Francisco, finding that two local special taxes introduced by voter initiatives were valid even though they passed with a simple majority vote and not a two-thirds supermajority vote.

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On July 23-24, members of Pillsbury SALT will lead discussions at COST’s much anticipated state and local tax technology workshop in Foster City, Calif. This one-and-a-half day event promises to deliver in-depth state and local tax content tailored to technology businesses—everything from startups to long established companies. The varied presentations are for those new to tax and those who are tax savvy.

Pillsbury SALT members will lead discussions on a number of topics, including:

  • “Market-Based Sourcing for Tech Companies: Identifying ‘Customers’ and Locating Their ‘Benefits'” (Marc Simonetti)
  • “Beware of the Locals—They Might Take You by Surprise” (Carley Roberts)
  • “All Things Property Tax for Tech Companies” (Craig Becker)
  • “Ask The Experts” (Jeffrey Vesely)

For more information and to register, please visit the event page.

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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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Despite the narrow issue it originally addressed, the August 2017 decision by the California Supreme Court in California Cannabis Coal. v. City of Upland has sparked a much larger debate regarding whether local special taxes introduced by voter initiative are subject to the long-standing requirement in the California Constitution that local special taxes must be passed with a two-thirds supermajority vote by the electorate

In “The Sequel to Upland: A Calif. Supermajority Tax Showdown,” an article that originally appeared in Law360 Robert P. Merten III and Richard E. Nielsen recap the pertinent Upland background, identify the local special taxes currently at issue and discuss an important consideration courts will need to address when deciding these cases: the over 40-year history of California’s two-thirds supermajority voting requirement for the passage of local special taxes.

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(This article was originally published by Law360 on January 15, 2019.)

The growing tension between government promises of transparency and taxpayers’ right to confidentiality is likely to continue in 2019. Although the spirit of government transparency to enhance public access is well-meaning, this lofty goal often conflicts with taxpayer confidentiality and the associated expectation of privacy. Striking the appropriate balance between these two often conflicting positions can prove difficult, as highlighted by two recent developments, namely, the Pennsylvania Board of Finance and Revenue’s push to record and publish hearings on its website and the California Office of Tax Appeals’ attempts to address concerns regarding closed hearings and sealed records.

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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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