Tax Authorities, Experts, Practitioners Gather at Georgetown SALT Conference

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

 State tax authorities and expert tax practitioners from 37 states gathered at Georgetown University Law Center for two days to present and discuss current and evolving state and local tax issues.

A lively discussion between Frederick J. Nicely (Council On State Taxaton), Carolynn Iafrate Kranz (Kranz & Associates PLLC), and Jeremiah T. Lynch (Ryan, LLC) covered trendy sales and use tax developments. Following an explanation of the approaches the states use to determine the sales price attributable to transactions when a deal-of-the-day instrument is redeemed, the group agreed the best approach is probably to treat the amount as a discount—the sales price would be measured by the amount paid by the consumer for the deal. Nicely noted a concern of class actions arising for overcollection, and issues for undercollection of tax due, to uncertainty in state policy.

Lynch highlighted the click-through nexus provisions enacted by Connecticut and Illinois which contain no presumption language, as compared to those of other states. Iafrate Kranz explained that Colorado's use tax reporting regime, which was found unconstitutional by the U.S. District Court in Colorado, required significant actions for businesses and harsh penalties for failure to comply, and seemed like an effort to encourage businesses to collect sales tax rather than face compliance with the notice requirements.

State Tax Commissioners Speak Out

Joe Huddleston (Multistate Tax Commission), Stephen Cordi (Deputy Chief Financial Officer, head of the D.C. Office of Tax and Revenue), Cory Fong (North Dakota Tax Commissioner), and Marshall Stranburg (Deputy General Counsel, Florida Department of Revenue), discussed priorities for state tax commissioners for this year. Cordi noted the District's struggle with the taxation of nonresidents, and cited the enactment of a combined reporting regime as a prime example of success in this area. He explained that the enactment of requirements for street vendors to collect sales and use tax will also help close budget gaps, as the “the tax collected on lobster rolls sold by street vendors for $18.50 will probably amount to more than the $375 vendors are required to pay quarterly.”

In light of North Dakota being labeled as “an outlier for the country” with respect to the state having the fastest growing economy in the country and its excess of revenue generated from the expansion of oil and gas industries, Fong explained failed efforts to eliminate property tax in the state. Fong said he sees two plans forming: build in more tax relief, and the homestead credit. Additionally, he said he opposes efforts to repeal the state income tax, as it would be better to reduce the rate in preparation for a plateau or decline in economic growth. “It's a good problem to have,” he said with respect to determining how best to allocate revenue. “It's a unique time to be the tax commissioner in North Dakota,” he added.

Stranburg explained that sales tax is the biggest source of revenue for Florida. To demonstrate the economic climate in Florida, he said the state is collecting about $20 billion in sales tax right now, with the high point reaching about $22 billion before the economic crisis, which sent the state to a collection low point of about $17 billion. Stranburg also outlined the efforts the state is taking to further streamline its property tax regime, in light of steps that have already been taken to reduce confusion for taxpayers.

District of Columbia, Combined Reporting

The new combined reporting regime enacted in the District of Columbia was a hot topic of debate as well. Aaishah Hashmi (Assistant General Counsel at the D.C. Office of Tax & Revenue) fielded a seemingly endless line of questions regarding final regulations, which she said are expected to be released before the due date for returns that would be subject to combined reporting. Comments for the proposed regulations helped the District revise the regulations to resolve gaps in coverage and address any need for clarification. In response to one such instance relating to the Joyce Rule, Hashmi said “we are a Joyce state... and the redraft will state we are a Joyce state.”

Attendees sat on the edge of their seats as Hashmi explained how and where the District will elaborate on policies for special apportionment formulas, the prohibition on post-combination sharing of net operating losses and credits, and the rationale for making water's edge reporting the default.

By Christine Boeckel