SALTovation: Making Sense of State and Local Tax

Insights on California Tax Issues with Michael Cataldo (Part 2)

In the second episode of a two-part series, Meredith Smith and Stacey Roberts, from TaxOps’ SALTovation Team, continue their conversation with Michael Cataldo, of Cataldo Tax Law in California. Michael continues to share his insight on the publications released by the Franchise Tax Board, that discuss sales of services and market-based sourcing in California. He also talks about some of his favorite cases outside the state.   Topics discussed in this episode: Recent ruling regarding California’s sales of services and market-based sourcing California’s most recent ruling on sales of service   What You Will Learn: [00:28] California’s policy on alternative proportment [01:51] Sales of services in California [09:51] Michael’s favorite cases outside of California [15:05] Retroactive tax laws [19:05] What creates nexus [21:06] Regulations on market-based sourcing   Quotables:   “It’s very hard to articulate exactly what was going on, what they’re doing. You have to do a lot of reading between the lines, see what they’re trying to do.” - Michael Cataldo [02:21] “The things I get interested in is where’s this going from here? And it takes a long time for things to develop in the state and local tax world to where this is going.” - Michael Cataldo [11:29] “Technology is moving so fast and what’s not going online. There’s going to be some challenges for them to figure out how to comply.” - Michael Cataldo [14:27] “But the constitution applies to all the states, so these constitutional arguments apply to all of them.” - Michael Cataldo [20:11]   Relevant Links: Cataldo Tax Law: cataldotaxlaw.com Michael Cataldo on LinkedIn: linkedin.com/in/michael-cataldo-aaa9205/

Insights on California Tax Issues with Michael Cataldo (Part 1)

In the first episode in a two-part series of the SALTovation podcast, Meredith Smith and Stacey Roberts, from TaxOps’ SALTovation Team, speak with Michael Cataldo, of Cataldo Tax Law in California. Michael shares his insight with his experience on Franchise Tax Board, public accounting and private law on the publications released by the Franchise Tax Board. He also talks about tax issues and cases related to Public Law 86-272 and business versus non-business income.   Topics discussed in this episode: Current issues discussed by Franchise Tax Board including market-based sourcing and multi-state practice Business vs. non-business income and what qualifies as doing business in the state Public Law 86-272 and alternative proportment   What You Will Learn: [00:57] An introduction to Michael Cataldo [03:21] Current tax issues [10:20] Business vs. non-business income [17:55] What qualifies as doing business in the state [22:05] Interpreting Public Law 86-272 [29:28] The procedure for alternative proportment   Quotables:   “Over the years, there’s been this sort of gradual shift where my clients used to be mainly located in California, and now more and more of them are located outside the state.” - Michael Cataldo [04:09] “It used to be a little more debatable and it’s still not completely decided, but is it business or non-business income? You have to look at that question.” - Michael Cataldo [11:38] “Trying to explain that concept of business income vs. non-business income to the unknowing, it’s like ‘But I’m not in the business of selling land.’ But ‘Ok, fine, but did you use that land in order to create your other business income?’ It’s almost a given that if you call something non-business income, you will be audited. Like 100%” - Meredith Smith [14:03] “These issues come all the time and there is room to argue about it. Now California has their rule and regulation on substantial and unusual sales are thrown out of the sales factor but the income is still in there. The question is ‘Hey, is this a fair reflection of income?’ Sometimes it’s not.” - Michael Cataldo [17:00]   Relevant Links: Cataldo Tax Law: cataldotaxlaw.com Michael Cataldo on LinkedIn: linkedin.com/in/michael-cataldo-aaa9205/

Colorado Retail Delivery Fee

In this episode, Meredith Smith and Connie Zoerink, from TaxOps’ SALTovation Team, share their thoughts and key takeaways on Colorado’s Retail Delivery Fee after attending a meeting with the Department of Revenue. The delivery fee that retailers must collect for any deliveries by a motor vehicle in Colorado goes into effect on July 1.

SALT issues that impact Louisiana taxpayers

In this episode of the SALTovation podcast, we speak with Jaye Calhoun, a partner in the New Orleans office of Kean Miller, about some of the challenges businesses face when dealing with state and local tax. They discuss some of the current constitutional amendments and bills advancing through the state legislature and how it could potentially affect taxpayers. Jaye also shares how her broad exposure to many tax organizations has influenced the issues she chooses to dig into as an attorney.   Topics discussed in this episode: How state and local tax issues impact taxpayers who do business in Louisiana What it means to be a remote seller The current constitutional amendment on the ballot called The Louisiana Adjustment of Ad Valorem Tax Rates Amendment The bill advancing through the state legislature that deals with the interest on payments made under protest The leadership position Jaye has held What tax issues to look out for in the future   What You Will Learn: [04:56] How SALT issues impact Louisiana businesses [08:01] Louisiana’s version of uniformity [15:12] City rate differentials [15:43] What are remote sellers  [18:18] How big companies handle home rule city taxes [23:31] The bill that deals with payments made under protest [30:33] Why Jaye likes to the collaborate aspect of tax practice [37:53] The leadership positions Jaye has held [44:18] Tax issues to watch out for   Quotables:   “The real issue that you face when you deal with Louisiana and the sales and use tax area, is that the parishes each get to independently administer and collect their own taxes. So, you don’t really have one centralized collector.” - Jaye Calhoun [05:46] “We don’t want people gaming the system, essentially paying and then we have to pay them back with interest later, but you’re not investing with the tax collector….I can’t even imagine a client coming to me saying, you know, I looked at options in the market and I think I’m going to go invest with the tax collector.” - Jaye Calhoun [27:56] “So we as TaxOps are actively engaged in this Colorado tax auditor coalition….They don’t want to be the bad guy. They want to teach people to do the right thing. But at the same time, they’re there to  collect money for their cities, but it is a lot of like open sharing information resources..So there is a lot of collaboration and inviting in.” - Meredith Smith [32:08] “I think the federal government does a really good job of educating the public as to what the rules are. They do the enforcement, they do the collection, but they understand their mission to educate as well. As Meredith was saying, departments don’t have a lot of money now, but maybe that is where your tax bar or professional organizations can help.” - Jaye Calhoun [34:57]   Relevant Links: Jaye Calhoun at Kean Miller: https://www.keanmiller.com/jaye-a-calhoun.html Jaye Calhoun on LinkedIn: https://www.linkedin.com/in/jaye-calhoun-8b9b459/

Litigating SALT Cases with Leah Robinson (Part 2)

In the second episode of a two-part series, we continue our conversation with Leah Robinson, an attorney and state and local tax partner with Mayer Brown in New York. Leah continues to discuss some of the most interesting tax cases she has litigated, her thoughts on what could be deemed government overreach, and where she has seen some recent state auditor “gotchas” that we should all be aware of.   Questions asked and answered in this Episode: How Leah approaches each case After being at the IRS and then representing clients against the state, how does she feel about the mentality with the IRS and the state?  Where she sees government overreach beyond what is allowable under the constitution   What You Will Discover: [00:24] How Leah decides how to approach each case [02:38] The mentality between the IRS vs the state [06:24] Looking how a product functions from a tech point of view [10:27] Examples of overreach [15:09] Where she sees government overreach [28:06] An interesting thing about the compliance effort   Quotables:   “There definitely are cases where we want an answer. We need the answer, and if we can have a settlement that also gives us a going forward answer, fine, but you can’t always get that.”- Leah Robinson [01:57] “And I get it. The business folks in a company want to describe themselves a certain way. They want to appeal to their client base, but that doesn’t mean that that’s what the technology really is doing.”- Leah Robinson [06:45] “I think post-Wayfair, there’s been an assumption that economic nexus is the end of the story.”- Leah Robinson [15:45] “I still think physical presence is an easier standard, and cookies, even though they are intangibles, they still take up space, right? My hard drive has a limited amount of space. So even things that are intangible like software, they still take up space on the server, on a hard drive, etc.”- Leah Robinson [25:35]

Litigating SALT Cases with Leah Robinson (Part 1)

In the first episode of a two-part series, we chat with Leah Robinson, an attorney and state and local tax partner with Mayer Brown in New York. Leah talks about some of the most interesting tax cases she has litigated, her thoughts on what could be deemed government overreach, and where she has seen some recent state auditor “gotchas” that we should all be aware of.   Questions asked and answered in this Episode: What are some of the most interesting SALT cases that Leah has seen and litigated?   What You Will Discover: [00:43] Leah’s background [05:24] The first case she helped with the litigation [07:48] Her favorite cases to work on [12:58] The decision whether to litigate [20:08] The time it takes for private letter rulings and advisory opinions [24:18] Whether to pay or not pay   Quotables:   “What do they do in some of the other courts when you need to know an answer, but there’s no way to get one?”- Leah Robinson [10:45] “There’s a lot of sensitivities that go into the corporation…, but the business side decision on whether to litigate, not just how likely are we to win, but all of these soft considerations. And often in my experience, those often rule the day.”- Leah Robinson [16:51] “It’s actually why it’s so important for us to get along, right? There are a number of us who are direct competitors, but are also friendly and like connect with each other. Obviously, not breaking confidentiality provisions and closing agreements, but getting a sense of what’s going on and what issues are we seeing go up, where the settlement ranges. We have to talk to each other, because the states know… you know, each individual department of revenue knows what it’s doing with all different taxpayers.”- Leah Robinson [18:32] “It’s a huge issue to pay, but the bigger issue is if you don’t pay, the interest becomes a whole other player in the analysis. And I have changed my story on this, right? I now advise companies for the most part to pay. ‘Let’s pay and seek a refund’ or in some jurisdictions if we’re litigating, we can pay and get an agreement with the state”- Leah Robinson [25:00]

Talking about SALT with Richard Pomp and Jordan Goodman (Part 2)

In the second episode of a two-part series, we continue our conversation with Richard Pomp, Professor at the University of Connecticut Law School and Adjunct Professor at NYU Law in the LLM program in tax, and Jordan Goodman, partner at HMB Legal Counsel. They share their thoughts on prominent tax cases and other state and local tax topics.   Questions asked and answered in this Episode: What are some recent tax decisions that they think are bad policy?   What You Will Discover: [00:31] Tax decisions they think are bad policies [06:48] Their thoughts on the Express Scripts case [10:30] American Honda and Arkansas Supreme Court [14:42] The current case regarding Sirius XM Radio in Texas [18:34] How to impose sales tax through the B&H Photo case   Quotables: “I’ve seen it where they use cost of goods sold because it doesn’t matter for fellow purposes. It’s just a deduction, but the state will jump on it, and the opposite in Texas. Unless you call it cost of goods sold, you don’t get it as cost of goods sold even if it is cost of goods sold.” - Jordan Goodman [08:02] “I don’t care what piece of paper you give the store. What did you pay for out of your cash. That’s the only thing that matters.” - Richard Pomp [23:28]   Relevant Links: Jordan Goodman on LinkedIn: linkedin.com/in/jordanmgoodman HMB Legal Counsel: hmblaw.com Richard Pomp: law.uconn.edu/person/richard-pomp

Discussing SALT with Richard Pomp and Jordan Goodman (Part 1)

In the first episode of a two-part series, we speak with Richard Pomp, Professor at the University of Connecticut Law School and Adjunct Professor at NYU Law in the LLM program in tax, and Jordan Goodman, partner at HMB Legal Counsel. Richard and Jordan tell the backstory of how their Top 10 list regarding state and local taxes came to be and how they determine what to discuss. They also share their thoughts on recent tax issues including the North Carolina tax case against quad graphics and public law 86-272.   Questions asked and answered in this Episode: How “The Big East Brawl” started and why they continue to banter with each other How they determine what to talk about Their thoughts and opinions on recent tax issues including North Carolina’s tax case against Quad Graphics and the MTC’s revised statement regarding Public Law 86-272   What You Will Discover: [00:38] The origin story of “The Big East Brawl” [04:52] How they determine what to talk about [09:14] Their thoughts on North Carolina’s tax case against Quad Graphics [17:42] Contingency and alternative fee arrangements [20:14] Breaking down complex issues to the common man [23:12] Their opinions on MTC’s revised statement for Public Law 86-272   Quotables:   “We go back and forth. Jordan puts together the outline. I always give him credit, and make it clear that all the mistakes are his.” - Richard Pomp [05:47] “Part of Professor Pomp’s genius is the ability to break it down to everybody, right? To the reasonable person, common man, common woman, common person. That’s what his genius is is being able to take our complex, most complex stuff and say ‘Here’s how it is,’ and use general things found in a kitchen to explain it to a judge so they can understand it.” - Jordan Goodman [20:43] “If the law doesn’t make sense anymore, you either got to expand it to include everybody or get rid of it from a policy perspective.” - Jordan Goodman [25:20]   Relevant Links: Jordan Goodman on LinkedIn: linkedin.com/in/jordanmgoodman HMB Legal Counsel: hmblaw.com Richard Pomp: law.uconn.edu/person/richard-pomp