Multi-State Sales and Use Tax Attorneys
Multi-State Sales and Use Tax Attorneys
Multi-State Sales and Use Tax Attorneys
Published on:

Florida’s hotel reservation industry recently received an important victory relating to Tourist Development Tax (“TDT”).  TDT is a tax imposed on the privilege of renting, leasing or letting “for consideration any living quarters or accommodations in any hotel . . ., or condominium for a term of six months or less.”  § 125.0104(3)(a)1., Fla. Stat.  Notably, the TDT is due on the consideration paid for occupancy in the county. § 125.0104(3)(a)1., Fla. Stat.

In 2015, the Florida Supreme Court held that the “consideration paid for occupancy” is limited to the actual rental amount paid for occupancy of the room and not to mark-up charges and service charges associated with the reservations.  See Alachua County v. Expedia, Inc., 175 So. 3d 370 (Fla. 2015).

The issue in Sarasota Surf & Racquet Club Condominium Assn., Inc. v. Sarasota County, et al., Case No. 2015 CA 002612 NC (Fla. 12th Cir, July 11, 2016) was whether reservation and cleaning fees charged by a condominium association to guests during the reservation process were subject to TDT.  The County argued that the fees were part of the total consideration paid for occupancy and therefore subject to TDT.  The association argued that, pursuant to Expedia, only the rental amount was subject to TDT, not the reservation and cleaning fees charged in connection with the reservation.

Published on:

On December 14, 2015, the Supreme Court of the State of Utah issued its ruling in the case of DIRECTV and DISH Network v. Utah State Tax Commission. At issue in this case was a tax scheme that provided a sales tax credit for “an amount equal to 50%” of the franchise fees paid by pay-TV providers to local municipalities for use of their public rights-of-way.

The franchise fees were imposed for the running of cable and the construction of hubs on public property. Therefore, it is exclusively cable providers who pay franchise fees and qualify for the credit. Meanwhile, satellite providers such as DIRECTV are not subject to franchise fees and do not qualify for the tax credit.

DIRECTV argued that the tax credit was a violation of the dormant commerce clause of the Constitution. The dormant commerce clause is a legal term that means that states cannot either discriminate against interstate commerce or unduly burden interstate commerce because the power to do is in the hands of Congress. From a practical perspective, allowing 50 states to regulate interstate commerce differently would cause complete chaos, so the federal government wants to reserve that power for itself. Furthermore, states’ motivation to help their own local businesses would weaken the national economy as a whole.
Continue reading

Published on:

Since Quill in 1992, states only have the power to impose taxes on businesses if they have a “physical presence” in the State. For example, in order for a state to be allowed to require a company to charge sales tax, the company must have a place of business in the State, employees in the State or have a representative in the State. However, as the economy has shifted, more and more States are enacting an “economic nexus” to impose a tax on businesses.

But, what is economic nexus?
Continue reading

Published on:

On April 25, 2016 an important decision for the sports world came down from the U.S. 2nd Circuit Court of Appeals involving Tom Brady. Being a sports fan and a tax lawyer, the opinion sparked my interest. Challenging the National Football League seemed to mirror the challenges we launch against government agencies every day. While the case is not exactly analogous for a few reasons, it was not that dissimilar for a taxpayer’s challenge to a government agency.

From a procedural perspective, the case stems from the infamous “deflate gate” scandal of the 2015 AFC Championship Game. During the game Tom Brady, of the four-time Super Bowl champion New England Patriots, allegedly instructed personnel to deflate the footballs below the legal pressure level in order to enhance his ability to grip the football. Specifically, after the game in question, the NFL officials determined that all 11 of the Patriots balls were inflated below the allowable level of 12.5 PSI, while none of the Colts balls were below.
Continue reading

Published on:

Our firm has been extremely involved with Florida’s wholesale tobacco tax for the past several years. Since Micjo in 2012, the Florida wholesale tobacco tax area has been fraught with seemingly endless litigation. In addition to the Micjo litigation, which focused on whether Florida tax applied to Federal Excise Tax (“FET”), there was another parallel of litigation which centered on a product called a blunt wrap or a cigar wrapper. Florida’s 1stDCA spoke loud and clear on April 6, 2016, by determining that the Wrap product is not subject to Florida tax, which appears to be a giant step towards putting an end towards at least 1 important issue for the industry.
Continue reading

Published on:

State and local governments are continually searching for ways to increase revenue through taxation of online companies conducting business within their state or county. One such way is by assessing a rental tax against online travel companies (“OTCs”).

OTCs typically facilitate the rental of a hotel room for vacationers and charge a fee for their services. OTCs play a significant role in the hotel rental business by providing consumers with a variety of choices based on price, location, and other factors. OTCs also provide benefits to hotels through promotion and advertising, and providing the ability for vacationers to rent a room at a lower price. Further, OTCs increase hotel occupancy rates and promote tourism thereby creating revenue for state and counties.
Continue reading

Published on:

Yet another state jumped on the band wagon to force out-of-state companies to collect and remit state tax. Specifically, South Dakota recently passed legislation adding sales and use tax collection requirements for out-of-state businesses conducting sales within the state. The legislation continues the trend of states enacting aggressive nexus statutes aimed at out-of-state online retailers.

The concept of nexus is derived from the Commerce Clause and the Due Process Clause of the United State Constitution. Essentially, these Federal limitations limit the ability of a state to tax business that takes place outside of the state. However, if a business has enough of connection to a state, then the state can force the business to abide by its state and local tax laws.

In Quill Corporation v. North Dakota (U.S. 1992), the U.S. Supreme Court held that nexus required a physical presence of the business within the state to require a business to follow a state’s state and local tax laws. The physical presence requirement has resulted in much litigation throughout the country. Essentially, there has been confusion as to how much of a connection to a state is required before a physical presence is established.

Published on:

I have been writing about the taxability of the online travel companies for some time. Recently, the Florida Supreme Court case of Alachua County v. Expedia, Inc., ruled that the local bed tax should be imposed on the amount the hotel received rather than the higher amount the customer pays the Online Travel Company (“OTC”). Similarly, the Court of Appeal of Wisconsin recently held that reservation facilitation services are not among the taxable services enumerated in section 77.52(2)(a)1, Wisconsin Statutes.

In the Wisconsin case, the Wisconsin Department of Revenue (“WDOR”) attempted to assess tax on any “internet service provider” that provides lodging throughout Wisconsin. The WDOR argued that the markup amount retained by the internet service provider is subject to tax under section 77.52(2)(a)1, Wisconsin Statutes.

However, the law worked very differently. Specifically, in Wisconsin, section 77.52(2)(a)1, Wisconsin Statutes, tax is only imposed on “the furnishing of rooms or lodging to transients by hotelkeepers, motel operators and other persons furnishing accommodations that are available to the public, irrespective of whether membership is required for use of the accommodations.” The crux of this case turns to the word “furnishing.” Is an online travel company “furnishing” a hotel room?

Published on:

A few weeks ago, I discussed the apportionment of NFL Players’ income for state tax purposes in the article “Saturday’s Challenge to Cleveland Income Tax for NFL Players.” The Supreme Court of Ohio determined that the proper allocation of an NFL Player’s salary is to take the number of work days in a state divided by the number of overall work days. For example, if a player spends 7 days in a state for work (more specifically, preparation for a game) and has 206 overall workdays, then the relative percentage of the allocated income to the state is 3.39%. As a result, each state can get their fair share of the NFL Player’s income.

Forbes Business published an interesting article claiming that if the Carolina Panthers were to win in Sunday’s Super Bowl, then Cam Newton’s effective tax rate would be 99.6%. Compare this to the outrageous effective tax rate of 198.8%. This does not even include the 40.5% Cam Newton would owe the IRS.

Taking a step back and looking a Cam Newton’s “incentivized” earnings, if (or “when” for all those optimistic sports fans out there) the Carolina Panthers win the Super Bowl, Cam Newton will earn Super Bowl winning bonuses of $102,000, add this to the mere $58,800 earned for Week 17 of the Regular Season and $71,000 of playoff bonuses to date. If Cam Newton and his Carolina Panthers lose, he will “only” earn a Super Bowl bonus of $51,000. This totals to $231,800 in earnings if Cam Newton were to win the Super Bowl compared to $180,800 if he were to lose. All of this is on top of Cam’s salary of about $10 million per season.