do you use a lot of case law?
-- yes
allied signal: most important case she references
-- if you are not unitary with that lower tier, you do not need to combined apportionment
-- unitary is used much more common in a flow-through context
tax incentives are bad tax policy
-- not equitable
-- goes against economy credit: not neutral!
-- however, is it really hurting your state? think about it
❌Amazon gets a huge credit for
choosing to HQ somewhere
❌other businesses might be pissed, but now 20,000 people have jobs / those people are having state taxes withheld / those people are buying homes
do you have to include inventory in your Wayfair calculation?
— no! this deals with sales tax
— however now some are now saying that income tax is affected
as long as we have "substantial authority" to sign a return, we can
-- substantial authority = 34%
FL is currently a
"cost-of-performance" state, but they have applied to use "market-based"
-- they are interpreting cases as if they are a market-based state already, even though the law hasn't been passed
-- ^ states are using this against them who want them to be cost-of-performance ... they're like, it's not official yet!
-- ^ literally not positive if i caught this correct, after she said "Minnesota is saying, no that income isn't from FL, it's from MN (bc it wasn't performed in FL?). FL even gave us
a refund, showing that they're trying to switch to mkt based" - i think
"Greater-of" state:
-- VA and FL are producing an item
-- VA is producing more than FL
-- VA is like, we want ALL sales sourced to us'
You need to put on hats for each state, one at a time
-- have a list of mkt v. cost of production per state
-- have a list of where the services were exactly performed for your client
⭐️sourcing of service revenue
-- mkt-based states vary in their
approach to assigning revenue
-- often apply a hierarchy of 2 or more of the following:
❌1. Where service is performed or delivered
❌2. Billing address of customer
❌3. Commercial domicile of customer
❌4. Where service benefit is received
❌5.
❌6.
-- you are hired to make a good faith effort, not be a detective
⭐️constitutional protection
-- due process
-- commerce clause
-- equal protection
-- EVEN first amendment - privacy issues?
commerce
clause
-- Wayfair: do i have to have physical pres. to have a connection to state? (sales tax)
PL 86-272
-- income tax only
-- super narrow
-- does not apply to foreign commerce: CA does not extent this to foreign corporations ... Canadian company just shipping product into state, owes full tax
MTC
-- trying to make stays have similar laws
-- sadly NY and CA not members - they're big and want to do whatever they want
-- PL 86-272 might be seriously
affected by MTC! they are interpreting in context of internet solicitation
-- ^ if you are just shopping on JCrew.com ... this is solicitation of tangible personal property
-- ^ now also saying, anything happening on screen is activity of company ... cookies showing revolve ads on Quizlet
-- so do they not want PL 86-272 to protect this?
-- this computation unsustainable?
-- substantial amounts of income tax
-- states should consider protections for small businesses - need a
brightline for tangible personal property
sales tax basics
-- if you sell tangible personal property, you have to pay sales tax
-- common exemption: resale exemption
-- other exemption: enhances R&D - exempt sale of some equipment
"click-through" Amazon Laws
-- people can buy things on Amazon and through Amazon Smile donate to a charity
-- states were like Amazon has physical presence through that charity because the charity is receiving a
commission
Wayfair:
-- states were feeling confident that they would get Quill overturned
-- SCOTUS started attacking the states; the reasoning: You have a use tax, just tax people in your state for using the stuff
-- you can never tell how SCOTUS will rule from the oral argument ... a lot of time just trying to talk everything out
-- SCOTUS overturned Quill
-- Wayfair says you have economic nexus if you have $100k in sales OR 200 transactions ... she says transaction
threshold needs to be eliminated (CA already did)
-- Pike "balancing act" case: you can't force a taxpayer to build a $5 million labeling facility when they have one right across the border
-- her argument to protect small business: there are 10-12,000 taxing jurisdictions! this is crazy ... the burden is too big to file all of these for small business (they go out of business)
marketplace facilitator
-- NY: you have to advertise the sale; get a commission
-- CA:
you have to advertise OR get commision
⭐️Wayfair - inbound sellers
-- foreign countries don't have sales tax - they have VAT tax (much simpler)
-- countries are calling us, like what's going on - does this affect us?
Wayfair for income tax
-- is it fair to be taxed on sales and income for selling $600 worth of lip balms to another state? (more than 200k transactions)
⭐️how to we enforce China to pay Wayfair tax?
-- it's a huge issue - we look to see if they have a
warehouse holding inventory (confiscate); we look to see if they have bank accounts
⭐️why can't federal gov just make this simple!?
-- infringes on states' rights - we are United STATES of America
⭐️main focus of tax planning for your current clients, since you were there for boom of tax shelters?
-- you need to have business purpose and reason ... back then what we were doing would not be allowed now
-- you are not obligated to establish businesses to pay the most tax
--
if you restructure though JUST to save taxes - you can't do this
-- NOW: we still want taxes to be tax efficient; look at their facts; if you reason to isolate your sales from manufacturing you can potentially save taxes ... you don't want tax to influence business (tax should FOLLOW book - book first)