Weekly Round-Up: Due Process Takes Center Stage at NYU SALT Conference

As business transactions continue to move online and involve affiliates based in other locations, or are conducted using out-of-state pass-through entities, geographical borders can appear blurry at times, Bloomberg BNA State Tax Law Editor Rebecca Helmes writes in a Weekly State Tax Reportstory providing coverage of New York University's 32nd Institute on State and Local Taxation.  As a result, the U.S. Constitution's due process clause seems to be taking center stage in state tax disputes over the past few years.

Cloud computing remains one of the most debated issues in state taxation. States are being more aggressive in taking the position that cloud-computing sellers are “present” wherever their website is accessed, wherever their software is used, and wherever the benefits of their services are delivered, Leah Robinson, a partner at McDermott Will & Emery LLP, said at the conference. As a result, Robinson said, there has been a renewed interest in whether state taxes on certain cloud-based transactions satisfy due process clause requirements.

In recent years, taxpayer advocates have also been particularly attuned to U.S. Supreme Court due process jurisprudence regarding a state court's right to impose general jurisdiction over a foreign defendant. Two non-tax related decisions in this area, which some believe have favorable implications for multistate taxpayers, are Goodyear Dunlap Tires Operations S.A. v. Brown, 131 S. Ct. 2846 (2011) and J. McIntyre Machinery LTD v. Nicastro, 131 S. Ct. 2780 (2011).

A similar ruling is expected in 2014, when the U.S. Supreme Court is expected to issue its opinion in Daimler AG v. Bauman, U.S. No. 11-965. The case addresses the question of whether a state court can exercise general personal jurisdiction over a foreign corporation based solely on the performance of services in the forum state by an indirect corporate subsidiary on behalf of the foreign defendant, and whether the exercise of jurisdiction violates due process.

Helmes also covers recent developments in sales tax nexus, taxing services, and income tax nexus rulings. Helmes’s article can be read in its entirety here.
In other developments…

Major Tax Savings That May Expire Next Year, by the National Center for Policy Analysis

Compiled by Priya D. Nair
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