Monday, June 28, 2010

Supreme Court Hands Down Decision in Bilski

After many months of waiting, the Supreme Court has finally issued its decision in Bilski v. Kappos. The decision addresses the patentability of “business methods.” Read more about the decision and its impact on retailers at our sister blog, Eyes on IP.

UPDATE: Our friends have moved -- you can now visit our sister blog at IP Wise

Thursday, June 24, 2010

Oklahoma’s New “Colorado-Like” Statute

As we have written in several previous posts, Colorado enacted an onerous reporting requirement for those remote sellers that do not collect and remit the Colorado sales and use tax. The Colorado statute requires such remote sellers to provide three types of notices that they do not collect the Colorado sales and use tax, even though they do not have nexus with Colorado under the Quill standardBrann & Isaacson, on behalf of the Direct Marketing Association, will be challenging the constitutionality of the statute in a suit to be filed shortly, because the Colorado statute applies to companies that lack nexus.

On June 9, Oklahoma enacted a “Colorado-like” statute, HB 2359, that requires that any retailer that sells tangible personal property to Oklahoma residents must “provide notification on its retail Internet web site or retail catalog and invoices provided to its customers that use tax is imposed and must be paid by the purchaser.” (emphasis added). The statute is Colorado-like in the sense that retailers without nexus are required to provide notice regarding the fact that sales and use tax is due on purchases, but it does not contain the Colorado provisions requiring retailers to provide annual notice (i) to purchasers of the volume of their purchases and that tax should be remitted to the Department of Revenue; and (ii) to the Department of Revenue of their Colorado purchasers and the volume of purchases made during the preceding year. Thus, the Oklahoma statute does not require annual notice to customers of their purchases in the preceding year or an annual report to the Oklahoma Tax Commission, the agency responsible for enforcing the sales tax law, of Oklahoma purchasers from the retailer.

Monday, June 21, 2010

California Reinserts Reporting Requirements; Tennessee’s Proposal to Expand Nexus Dies in Committee

We’ve been tracking developments in affiliate nexus legislation and attempts to impose Colorado-style reporting requirements on vendors in other states. Since our last updates (here and here), there have been further developments of note:


On May 14, we wrote that the California Assembly nixed proposed affiliate nexus legislation and Colorado-style reporting requirements before passing its bill onto the State’s Senate.  As in the Assembly’s version, the current iteration of the bill provides that retailers not required to collect use tax provide readily visible notice on their websites and catalogues that use tax is due from the purchaser.  Last week, however, the California Senate amended the bill to reinsert reporting requirements.

Under the amended bill, the “[State Board of Equalization] may require the filing of reports” by any person having possession or custody of information relating to sales of tangible personal property (“TPP”) subject to the tax. § 7055(a) (as proposed) (emphasis added). It is unclear to whom, exactly, this possible reporting requirement applies, but the reports “shall be filed when the board requires” and must include names and addresses of purchasers of TPP, the sales price of the TPP, the date of the sale and “such other information as the board may require.”

Monday, June 14, 2010

The Incredible Shrinking Jurisdiction?

On June 1, 2010, the United States Supreme Court in Levin v. Commerce Energy, Inc., 560 U.S. __ (2010), issued as close as it gets these days to a unanimous decision. Though fractured into four separate opinions, all of the Justices reached the same conclusion: that the United States District Court for the Southern District of Ohio correctly dismissed a state tax-related case. But, the distinction between the majority opinion and a concurrence by the Court’s most conservative Justices reveals that the door to federal court involvement in state tax matters remains open.

For direct marketers, access to federal courts for challenges to the constitutionality of state and local taxes and related enforcement efforts by the states is especially important. Not only are federal courts often more experienced in regards to federal constitutional issues, including Commerce Clause disputes, but they offer at least the appearance of a more neutral playing field since the federal courts are not funded by state tax revenue and are often called upon to play the role of arbiter in jurisdictional battles between the states. Thus, any decision that appears to restrict access to federal courts needs to be reviewed very closely.

Wednesday, June 9, 2010

Maine Voters Repeal Tax Legislation

Although some votes remain to be counted, it now seems clear that Maine voters have repealed tax legislation in a statewide referendum held yesterday. In a quirk of Maine law, under the State’s Constitution, voters are able to act as a fourth branch of the State’s government by introducing “people’s veto referenda” to repeal previously enacted legislation.

Last Spring, the State enacted tax reform legislation that lowered income tax rates and expanded the sales and use tax to new goods and services, while increasing the meals and lodging tax. The effective date of the legislation was stayed pending yesterday’s vote on the referendum. With over 70% of precincts now reporting in, the referendum seeking repeal of the new law is projected to win approval, and thus it appears none of the provisions of the new law will become effective. Tax professionals can hold off updating their Maine tax research for now…