Glenn Hegar, Comptroller of Public Accounts of the State of Texas v. Texas Entertainment Association, Inc. On April 15, the MTC filed an amicus brief on petition for certiorari in the United States Supreme Court in the case of Glenn Hegar, Comptroller of Public Accounts of the State of Texas v. Texas Entertainment Association, Inc. The issue in the case is how to distinguish taxes from fees under the Tax Injunction Act (TIA). The case concerns the Texas Sexually Oriented Business Fee and whether, regardless of its name, it should be treated as a tax for purposes of the TIA, thus denying the federal courts jurisdiction. The Texas petition highlights the current split between the federal circuits and why the Fifth Circuit analysis is an outlier. The MTC brief supports Texas’s petition for certiorari and argues in favor of the Court granting the petition to implement a uniform interpretation of the TIA that emphasizes state tax sovereignty and results in a narrow approach to granting jurisdiction to the federal courts under the Act. Read more
VAS Holdings v. Commonwealth The question of whether states can tax a non-resident investors on the capital gain they receive from selling their interests in an LLC operating within taxing state is currently under consideration by the Massachusetts Supreme Judicial Court, in the appeal of VAS Holdings and Investments LLC v. Commissioner of Revenue , SJC No. 13139. While that court considers the matter, tax practitioners have not been hesitant in expressing their belief that the states’ authority to tax the gain on a source basis depends on the non-resident investor having a “unitary business” relationship to the underlying investment. On February 17 and 18 of this year Bloomberg Law’s Daily Tax Report printed a two-part response prepared by the Commission’s legal staff to one such article that had previously appeared in the Daily Tax Report. The Commission’s legal staff argues that there is no recognized constitutional basis to differentiate between a state’s admitted authority to tax non-resident owners on distributive share income derived from an LLC’s activities in the state and taxation of capital gains arising from the sale of the owners’ interests in that same LLC. A decision is expected in the VAS Holdings appeal in April of this year, although that likely will not be the final word on the issue. Read more
Quad Graphics, Inc. v. North Carolina Department of RevenueThe Multistate Tax Commission has filed an amicus brief in support of the North Carolina Department of Revenue’s appeal to the North Carolina Supreme Court in Quad Graphics, Inc. v. North Carolina Department of Revenue , Docket No. 407A21, of the North Carolina Business Court’s dismissal for a commerce clause violation of the Department’s sales tax assessment against the taxpayer on its sales of printed material delivered to North Carolina addresses provided to the taxpayer by its customers. To read the amicus brief, click the "Read More" button below.Read more
VAS Holdings & Investments LLC v. Commissioner of RevenueThe Multistate Tax Commission has filed an amicus brief in the case of VAS Holdings and Investments LLC v. Commissioner of Revenue , Massachusetts Supreme Judicial Court No. SJC-13139. At issue in the case is whether Massachusetts had the statutory and constitutional authority to impose its income tax on the capital gain income recognized by an out of state investor on the sale of its ownership interest in a Massachusetts’-based LLC. The taxpayer concedes that the state had sufficient “nexus” to impose tax on its income derived from operations of the LLC within the state but argues that the absence of a unitary business relationship between the out of state owner and the in-state LLC precludes taxation of capital gain income. To read the amicus brief, click the "Read More" button below.Read more
Santa Fe Natural Tobacco Co. v. Dept. of RevenueThe Multistate Tax Commission has filed an amicus brief with the Oregon Tax Court in Santa Fe Natural Tobacco Co. v. Dept. of Revenue. This case considers whether in-state activities conducted by an independent contractor pursuant to a contract with an out-of-state seller negates the seller’s P.L. 86-272 income tax immunity. The Commission’s brief, filed in support of the Oregon Department of Revenue, sets forth the legislative history of P.L. 86-272 and Congress’s narrow intent when enacting the statute. The brief also describes U.S. Supreme Court preemption jurisprudence, which provides that federal preemptions should be narrowly construed and that courts should not interpret federal statutes to preempt state taxing powers unless that is the clear and manifest purpose of Congress. You can read the brief by clicking here . Read more
Mobile Workforce Proposals – A Comparison – November 2021 UpdateIn 2011, the MTC developed model legislation addressing the issue of workers temporarily in the state for short time-periods (“mobile workers”). This was a response to federal legislation that would have preempted state law and which contained provisions that would have created administrative problems for the states. The Council On State Taxation (COST), long a proponent of this federal legislation, has developed a draft state legislative proposal which contains provisions similar to current federal proposals. During the 2021 state legislative sessions, states have considered, and in some cases passed, bills addressing mobile workers. MTC staff has prepared analysis and a detailed comparison of the MTC model, the COST draft, and the latest federal bill from the current 117th Congress, which shows the significant differences. The Commission has recommended that states wanting to address this issue consider the MTC model. Click here , to access the analysis. Read more
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