SeeSALT Blog
The Regular Division of the Oregon Tax Court just handed down a nexus decision with respect to the collection of an emergency telecommunications tax (E911 Tax). In Ooma, Inc. v. Department of Revenue, TC 5331 Tax Court, 03/02/2020, the Court concluded that notwithstanding the absence of physical presence in Oregon, a company which provided VOIP services to Oregon customers, was required to collect the E911 Tax.
The Court found no Due Process violation since the Court concluded that the taxpayer purposefully availed itself of the Oregon market and the value to the taxpayer of the emergency telecommunications network was rationally related to the E911 Tax at issue.
More importantly, the Court held that the tax did not violate the Commerce Clause since the Court concluded there was substantial nexus. The Court relied on Wayfair and held that no physical presence was required to impose the collection requirements on the taxpayer. This decision is troubling since the case involved tax years which preceded the Wayfair decision and thus the Court retroactively applied that decision, arguably inconsistent with what the United States Supreme Court held in Wayfair itself. Perhaps even more troubling is the imposition of 100 percent penalties for failure to file returns for a three year period. According to the Court, there is no reasonable cause exception for that penalty.
Ooma is significant for at least a couple of reasons. First, it involves the application of Wayfair to taxes other than sales or use taxes. Second, it does so retroactively which is arguably at odds with Wayfair itself. Stay tuned. It is likely that the taxpayer may seek review in the Oregon Supreme Court.