Presentation on theme: "Sham, Due Process, & More – Trends in Sales Tax"— Presentation transcript:
1 Sham, Due Process, & More – Trends in Sales Tax SEATA63rdAnnual Southeastern Association of Tax Administrators Conference Hilton Head, South Carolina July 28 – 31, 2013Donald M. Griswold, Crowell & Moring LLP_2
2 Trends in Sales Tax Nexus Common Law Doctrines & Sales Tax Intrastate TransactionsStatutory DiscriminationSEC Actions
4 Nexus “Click-Through” Nexus Litigation Legislative Developments Attributional NexusDue Process – PACT ActDue Process -- SCOTUS
5 Click-Through Nexus Litigation Overstock.com, Inc. (N.Y. Ct. App. 2013) & Amazon.com, LLCFacial challenge to the constitutionality of NY’s “click-through” nexus statuteHeld: statute was not unconstitutional on its faceTaxpayers will petition the U.S. Supreme Court for review
6 Legislative Developments Fifteen states have recently proposed or enacted nexus legislation:Florida, Hawaii, Indiana, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Jersey, Oklahoma, Pennsylvania, Utah, Virginia
7 Attributional Nexus Barnesandnoble.comLLC (N.M. 2013) Supreme Court of New Mexico affirmed:For GRT purposes, the in-state activities of an affiliate could be imputed to a “dot com” out-of-state retailer
8 Due Process Nexus – PACT Act Red Earth LLC (2d Cir. 2011Gordon(DC Cir. 2013)PACT Act’s requirement – retailers must prepay excise taxes on out-of-state sales – denies due process
9 Due Process – US Supreme Ct Goodyear (2011)Due Process “minimum contacts” for tax may be tougher standard after all !“. . . attenuated connections to the state fall far short of the ‘continuous & systematic general business contacts’ necessary to empower [the state] to entertain suit against them on claims unrelated to anything that connects them to the state.”
10 Due Process – US Supreme Ct McIntyre (2011)“The principal inquiry in cases of this sort is whether the defendant’s activities manifest an intention to submit to the power of the sovereign … and to have that … you must have purposeful availment … In this way, sovereignty prevails over metaphor as authority replaces fairness.”
14 Intrastate Transactions Hartney Fuel Oil (Ill. App. Sept. 2012)Held: must follow statutory sourcing ruleSource sales to jurisdiction where POs are receivedRejected Department’s argument for sourcing based on “totality of circumstances”
15 Intrastate Transactions RTA v. UnitedRegional Transportation Authority has accused United & American Airlines of operating small sham offices outside Chicago to avoid paying sales tax on fuel in Chicago.
16 Intrastate Transactions California Enterprise Zone CreditsDiCon Fiberoptics (Cal. S.Ct. 2012)Elimination of Enterprise Zone ProgramA.B. 93 signed by Gov. Brown (July 2013
18 4-R Act CSX v. Ala. (11th Cir. July 2013) Sales tax on interstate rail carriers is discriminatoryAlabama did not provide a sufficient justification for exempting interstate motor and water carriers
19 Internet Tax Freedom Act Chicago v. StubHub! (IL 2011)Chicago overstepped its home rule authority by attempting to impose a tax obligation under Illinois law.
20 Internet Tax Freedom Act Performance Marketing (Ill. Cir. Ct. May 2012)Illinois’ “Amazon” law:violated the Commerce Clause because it required retailers with no substantial nexus with the state to register and collect the state’s sales &use taxesviolated the ITFA as a “discriminatory tax” on e-commerce