Weekly Round-Up: The Continuing Impact of the Gillette Decision

During a Bloomberg BNA [BBNA] webinar this week , the implications ofthe California Court of Appeal decision in Gillette were discussed by Kendall L. Houghton , Matthew Hedstrom , of Alston & Bird LLP, and Jeffrey S. Reed , of Mayer Brown LLP . Coverage of the webinar by Bloomberg BNA Correspondent Laura Mahoney is available in the Daily Tax Report.

BBNA conducted a poll of webinar participants which showed that 85 percent felt that Gillette will make it more likely that they will advise their company or clients to pursue a corporate income tax refund claim based on allocation/apportionment in California.

The poll also shows that 78 percent feel that the Gillette decision will make it more likely that they will advise their company or clients to pursue a corporate income tax refund claim based on allocation/apportionment in states other than California.

Finally, in response to a question on the “health” of the Multistate Tax Commission in the wake of California’s Gillette decision, the enactment of S.B. 1015, and the potential actions of other states, 53 percent said that the decision and S.B. 1015 are temporary setbacks that the MTC will likely overcome. However, 33 percent said the decision and S.B. 1015 are likely to lead to the end of the MTC, while 13 percent said it will likely have no impact on the MTC’s future. 

When the California Court of Appeal issued its decision in Gillette, it threw the status of member states' mandatory nonconforming apportionment provisions into question, including market-based sourcing for service receipts and sales of intangibles.

Since then, the court has announced it will revisit its ruling. However, the right to elect the apportionment formula provided by the Multistate Tax Compact, in lieu of California's double-weighted sales factor, as the Gillette rehearing promises, brings with it the Compact's cost-of-performance sourcing provisions for services and intangibles since the likelihood of a uniform market-based sourcing provision seems remote at this time.

How the ‘Gillette' decision impacts sourcing of services, intangibles, and proposed UDITPA revisions is the subject of a new article in this week’s issue of the Weekly State Tax Report by Bloomberg BNA State Tax Law Editor Erin McManus, which can be read in its entirety here.

In other developments…

Taxman Coming for Online Shoppers : With state and local governments strapped for cash, and brick-and-mortar businesses undercut by the lower prices of their online competitors, three Internet sales tax bills are working their way through Congress. 

Whistleblower Tax Suits on the Rise : Jack Trachtenberg, counsel at Sutherland Asbill & Brennan LLP, talks with Bloomberg Law's Spencer Mazyck about the application of the False Claims Act in state taxation and the growing number of state-tax related whistleblower lawsuits. 

The results of Bloomberg BNA's 2012 Survey of State Tax Departments will be analyzed by state tax policy experts on both sides of the nexus debate in a Bloomberg BNA Webinar on August 29 from 12:30 to 2 p.m. ET.

Delhaized and confused: North Carolina Court of Appeals finds forced combination, penalty , Sutherland SALT reports.

Does your state have a marriage penalty? , by Nick Kasprak, o f the Tax Foundation.

State and localities are facing mounting fiscal challenges , according to a new report by the State Budget Crisis Task Force.

Compiled by Priya D. Nair
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