State and Local

Market Sourcing or Bust: The Kitchen Sink Approach of COP-Sourcing States
The binary nature of the determination makes COP sourcing controversial

The division of multistate business income among the states is accomplished through formulary apportionment. State formulary apportionment provisions increasingly rely on the receipts factor to divide income, sharpening the focus on the sourcing of receipts. Although many states have transitioned to a market-sourcing (also known as destination sourcing) approach, historically… Read more »

How Remote Workforce Programs Trigger Myriad Tax Problems—Part One
What’s triggered? How about fringe benefits, federal and state tax withholding, and information-reporting issues?

Editor’s note: Given the complexity of this topic, this will be a two-part article. This first part addresses fringe benefits, federal and state tax withholding, and information reporting. The second part, which will appear in the May-June issue of Tax Executive, will address 1) tax reporting and withholding under remote-work… Read more »

Apportionment: Normal Formulas Are Unfair and Can Be Challenged
Let’s acknowledge that companies’ advantages in the market arise partly from their human capital and use of assets—both tangible and intangible

For the 2022 tax year, of the forty-five states (plus the District of Columbia) that impose a corporate income tax, more than thirty require the use of a single sales factor normal apportionment formula; and, when we also consider states that put additional weight on the sales factor, that number… Read more »

The Presumption of Correctness
A pesky problem in state tax law

A common question tax directors ask when considering whether to litigate a state tax case is, What is the likelihood we will win? It’s an obvious question to ask, but an impossible one to answer. In our own experience, we have won cases we’d thought were stacked against us and… Read more »

Demystifying the Settlement of California Tax Controversies
Perhaps the most unique—and surprising—aspect of the California administrative settlement process is the designated agency settlement bureau structure

California is a state of overflowing abundance. From technology to entertainment to produce, the state has it all and then some. So when it comes to tax agencies, why would California stop at one? Most states have a single department of revenue, finance, or taxation, but California has five tax… Read more »

You’ve Been Served: Defending Against a State Tax Class Action
Are you prepared for this rising threat to your business?

An email comes from the general counsel: your company has been sued by a customer who alleges that the company systematically overcharges sales tax.1 The complaint—the legal document that starts the lawsuit—contains multiple counts for various violations of state statutes and common law doctrines and demands damages, attorney’s fees, and… Read more »

Disrupting the Norm: Using Technology to Reinvent State Tax Compliance
It’s time to free up capacity and deal with remote work

In the current business environment, the only constant in the face of major economic and societal shifts is dynamic change. As companies forge ahead, their tax departments increasingly lead the way in sustainably transforming their business models and their digital and strategic footprints. Tax leaders are remaking their technology infrastructures… Read more »

Why Unclaimed Property Risk Management Is on the Menu in 2022
For certain states, unclaimed property represents a significant revenue source

Every state has adopted an unclaimed property (or escheat) law, which generally provides that a holder of unclaimed property must escheat the property to the state after it has remained unclaimed by its owner for a certain period (usually three or five years). The unclaimed property is the legal obligation… Read more »

A Major Development in Corporate Income Tax
What’s New Hampshire v. Massachusetts got to do with it?

The pandemic has caused drastic shifts in employment and business arrangements. Major tax implications have surfaced, and taxpayers have been eager for state guidance or federal legislation to address pandemic-related issues. But with limited state guidance, and with federal legislation completely stalled, one development has become the focus of our… Read more »

The Pandemic’s Effect on Sales Tax Post-Wayfair
Expect even more uncertainty going forward

The COVID-19 pandemic has wrought disruption and change in practically every area in which we operate, and its effects on the sales tax environment are no different. What is particularly interesting about the operation of the sales tax is that states and businesses are still grappling with the groundbreaking developments… Read more »