State Tax Alerts - This Week's Stories Worth a Second Look

Rusty Little

In case you missed them, the following is a summary of a few key state tax developments, news articles, and observations during the past week:

• Two cases were decided in the ongoing sales tax saga between the online travel companies and the states. One in Texas and one in the District of Columbia.
• On the same topic of online travel company sales taxation, South Carolina issued a directive to online travel companies to collect sales tax on gross proceeds and stated that the online travel companies must issue resale certificates to the hotels (kind of interesting when the agreements between the travel companies and the hotels do not require an inventory of rooms to be purchased).
• Interesting case in Indiana where it was decided that the Indiana Department of Revenue must apply all available methods under the statutes before attempting force combination of a taxpayer. AE Outfitters Retail Co. v. Indiana Dept. of State Revenue
• Yet another online retailer sales tax collection bill is about to be introduced (this will be the third) – from the Puget Sound Business Journal

REMINDER: Upcoming Audio Teleconference: EMERGING STATE TAX BATTLEFIELDS Thursday, November 10, 2011 2:00 p.m. - 3:00 p.m. CLICK HERE to register.

A Perspective on Change - Where Does Fair Apportionment Stand?

In the November/December issue of Journal of State Taxation, Geoffrey Christian and James Helms explore the concept of fair apportionment in light of Media General Communications, Inc. et al. v. South Carolina Department of Revenue and other recent decisions.

Click here to view full article.

Reprinted with permission by Journal of State Taxation.

Digging Deep [WebCPA]

The reality of the recession has affected the tax policies of nearly every state, as dwindling receipts coupled with constant or increased expenses have left most states in a budgetary crisis mode.


In this article, Geoff Christian discusses the difference in filing methods can amount to several million dollars.

Read full story here at Accounting Today for the WebCPA.

South Carolina Supreme Court Media General Decision Alters the Landscape for Combined Reporting by Taxpayers

On June 14, 2010, the South Carolina Supreme Court reversed a long-standing policy in the state and ruled that a communications company and its subsidiaries could file on a combined basis. In Media General Communications v. South Carolina Dept. of Rev., the court held that the state's relief statute, incorporating UDITPA § 18, provided the department the necessary authority to permit combined reporting. In this interview, BNA speaks with Geoffrey J. Christian, member of Dow Lohnes Price Tax Consulting Group LLC, in Greenville, S.C., about the decision. Dow Lohnes Price served as a consultant to the taxpayer and helped to develop its tax strategy.

Read Geoffrey J. Christian's interview by Dolores W. Gregory here.


Reproduced with permission from Tax Management Multistate Tax Report, Vol. 17 No. 8 (August 27, 2010). Copyright 2010 The Bureau of National Affairs, Inc. (800-372-1033) www.bna.com

Court Rules on Entity Apportionment in Tax Case [WebCPA]

A case decided on June 14, 2010, by the South Carolina Supreme Court may have nationwide implications on tax reporting.


Geoff Christian discusses the decision.

Full story here at Accounting Today for the WebCPA.

South Carolina Supreme Court Decision Reached in Alternative Apportionment Case

This announcement provides a description of the recent ruling handed down by the South Carolina Supreme Court in Media General, Inc. et al. v. South Carolina Department of Revenue. Dow Lohnes Price developed an alternative apportionment position to fairly reflect the apportionment of taxpayer’s income to South Carolina and provided legal, computational, and analytical expertise in this case beginning with the audit phase through litigation.

See complete announcement here.

SALT To Taste: It Serves an Operational Function to Whom? Many States are Applying 'Operational Function' in the Wrong Direction

One of the many areas of confusion and misapplication that we see, when states assert taxation of income based on an operational function concept, is determining in which taxing jurisdiction the operational function is served, thereby resulting in that state’s ability to tax non-domiciliary income earned from a separate asset.  In evaluating application of the operational function concept, the basic questions with which to begin are who or what is serving the operational function; to whom is the operational function being served; and where is the recipient of this benefit located?  It’s very possible the state has itself turned around and is lost on the operational function path.

Read this SALT To Taste newsletter here.

SC Supreme Court Hears Oral Arguments on Combined Filing Case

On March 16, 2010, the South Carolina Supreme Court heard oral arguments in the appeal of Media General Communications, Inc. & Media General Broadcasting of South Carolina Holdings, Inc. v. S.C. Dept. of Rev. & Media General, Inc. v. S.C. Dept. of Rev., Admin. Law Ct. Docket Nos. 07-ALJ-17-0089-CC, 07-ALJ-17-0090-CC (May 4, 2009).


View announcement here.