A Washington state trial judge partially granted the state’s motion to dismiss a lawsuit challenging the validity of a recently enacted Washington tax measure that increases the state’s Business & Occupation Tax (B&O Tax) on large, out-of-state financial institutions. The Plaintiffs, the Washington Bankers Association and American Bankers Association (collectively, the “Bankers Associations”) filed a challenge to invalidate House Bill 2167, which targets large out-of-state financial institutions by increasing Washington’s B&O Tax rate if the institution’s annual net income equals to or exceeds $1 billion. The Bankers Associations sought to invalidate the law, which became effective January 1, 2020, on the grounds that the measure violates: (1) the state’s constitutional requirement to introduce a bill at least 10 days prior to the adjournment of a legislative session; and (2) the U.S. Constitution’s Commerce Clause because it discriminates against out-of-state financial institutions by imposing a higher tax rate on out-of-state financial institutions versus in-state institutions. The state moved to dismiss the complaint, focusing on the procedural issue under the state’s constitution rather than the apparent discriminatory nature of the law. Specifically, the state asserted that the “enrolled bill doctrine” enjoined the Washington trial court from reviewing evidence, other than the final enrolled bill itself, to show that a constitutional violation occurred during the enactment process.
The 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.
On January 29, 2020, the U.S. Court of Appeals for the Seventh Circuit held the Tax Injunction Act did not bar a federal lawsuit challenging property tax assessments on equal protection grounds because the taxpayers that brought the suit did not have a plain, speedy and efficient remedy in the Illinois state courts.
On 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.
Pillsbury SALT is pleased to welcome Zachary Atkins to the team!
Zack previously served as a deputy general counsel to Fitzgerald USA handling a diverse range of projects from tax to corporate matters. Prior to joining Fitzgerald, his practice focused primarily on state and local tax issues as an associate at Eversheds Sutherland from 2010 to 2017.
He will join Pillsbury’s Nashville office as a special counsel, expanding our nationwide SALT practice.
(This article originally was published by Law360 on January 16, 2020.)
The saga continues in Arizona v. California, Arizona’s U.S. Supreme Court challenge of California’s tax reach, but signs are strong it may be ending soon.
Last year, Arizona filed a motion to the court seeking to file a complaint against California under the court’s original and exclusive jurisdiction over controversies between states.1 Arizona contends California assesses and enforces its doing business tax (i.e., an $800 annual and minimum tax imposed on businesses doing business in the state) so expansively that it unconstitutionally “reaches out-of-state companies that do not conduct any actual business in California, and indeed have no connection to the state except for purely passive investment in California companies.”2
The 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.
On December 26, 2019, the New York State Supreme Court Appellate Division issued a strong rebuke to retroactivity by holding that a law with a 97-day retroactivity period violated the taxpayer’s Due Process rights. Matter of Mackenzie Hughes LLP et al. v. New York State Tax Appeals Trib. The Supreme Court Appellate Division, Third Department—New York’s intermediate appellate court—held the taxpayer’s Due Process rights were violated because: 1) the retroactive application of the law did not serve a public purpose; 2) the taxpayer did not have adequate forewarning of the law change; and 3) the application of the law represented a 97-day retroactivity period.
Pillsbury SALT’s Carley Roberts has been named to the 2020 Advisory Board of the industry’s premier publication, Tax Notes State. Published by Tax Analysts, the monthly magazine features news articles and bylined articles written on the hottest trends and developments in state and local taxes. Members of Pillsbury’s SALT practice are frequent contributors.
Carley’s clients comprise a variety of industries, including energy, technology, telecommunications, media, retail and manufacturing. Her practice consists of administrative and judicial
litigation, state and local tax planning, and transactional work involving all U.S. state and local jurisdictions, where she has litigated numerous precedent-setting matters.
Repeatedly recognized for her work in all aspects of state and local tax matters, Carley was named as Tax Analysts’ Outstanding Woman of the Year in 2016, and described by Chambers USA as “…truly one of the best tax lawyers that I have had the privilege to work with. In addition to being extremely intelligent, she is an exceptional advocate for her clients.”
Pillsbury SALT is proud to congratulate Carley for this well-deserved recognition.
For more information, click here.
The Oregon Department of Revenue (DOR) has just released a series of eight draft administrative rules for Oregon’s new Corporate Activity Tax (CAT) that go into effect on January 1, 2020. In “The CAT is Almost Out of the Bag! Oregon Releases First Set of Draft CAT Rules,” SALT team members Carley Roberts, Robert P. Merten III and Afshin Michael Khazaeli examine the rules themselves, what this may mean for companies calculating commercial activity, and more.