Weekly Round-Up: State Tax Litigation Reaches Resolution in Colorado, California and Ohio

Highlights from the 02/24/17 issue of the Weekly State Tax Report :

  • Fight Settled Over Colorado Online Tax Reporting Law
    The Data & Marketing Association reached a settlement today resolving its long-standing court battle with Colorado over the state's 2010 law requiring out-of-state vendors to report certain information on consumer purchases if they don't collect and remit state sales and use taxes.
  • Kansas Passthrough Exemption on Life Support
    A controversial income tax break came back from the dead in the Kansas Legislature, but it appears to have little chance of ultimately surviving the current legislative session. The passthrough exemption, which applies to non-wage income from partnerships, LLCs, sole proprietorships and S-corporations, was targeted in a bill (H.B. 2178) that also would have raised income tax rates and created a third tax bracket for higher income taxpayers.
  • California May Owe Refunds to Out-of-State LLCs
    California tax officials won't appeal an appellate court ruling that an out-of-state corporation with a small interest in a California investment fund doesn't owe the state's $800 minimum franchise tax. The Franchise Tax Board's decision to let a lower court ruling stand on the matter means the board may owe millions of dollars in refunds to limited liability companies that have been waiting for a final outcome in the case.
  • Want Sales Tax Refund? Pennsylvania May Demand Audit First
    Requests for a sales tax refund in Pennsylvania could trigger an audit under a new policy being finalized by the Pennsylvania Department of Revenue. In a draft bulletin obtained by Bloomberg BNA, the DOR suggests changing its procedure for reviewing “large and complex sales and use tax refund petitions” by addressing them “through the field audit process.”
  • Affordable Care Act Tax Survives Sixth Circuit Challenge
    A federal appeals court has turned back a challenge by the state of Ohio to the Affordable Care Act's Transitional Reinsurance Program, a taxing mechanism set up under ACA to reimburse some health insurers for coverage provided to higher risk patients. The affirmance shoots down for now Ohio's claim, supported by 13 other states who filed a brief in support, that the tax encroached upon state sovereignty.

Some notable developments from the State Tax Developments Tracker —Bloomberg BNA’s tool for monitoring important developments in all the states:

  • Arkansas Legislature Enacts Law to Adopt Changes to Internal Revenue Code and to Clarify Provisions Concerning Child Support Payments and Gambling Losses
  • Washington Supreme Court Affirms County Superior Court, Finds Department of Revenue Properly Included Federal Gift Tax Paid in Assessment Against Taxpayer's Estate
  • South Carolina Department of Revenue Publishes Temporary Revenue Procedure Concerning Withholding on South Carolina Income of Nonresident Shareholders and Partners
  • Texas Comptroller of Public Accounts Denies Petition, Finds Taxpayer Retailer of Taxable Items

For more information about this and other state tax issues, sign up for a free trial of the Bloomberg BNA Premier State Tax Library.

In other developments … 

Georgia Tax Tribunal Issues Two New Decisions on Remote Seller Nexus and Georgia Tax Credit Elections by Eversheds Sutherland LLP

Trading Bad Policy for Good Policy in Arkansas by the Tax Foundation

Compiled by Lauren E. Colandreo