The Florida Department of Revenue (the “Department”) recently published Technical Assistance Advisement No. 17C1-004 (decided Apr. 17, 2017, published Aug. 25, 2017) (the “TAA”), which addresses how receipts from “other sales” are sourced under Florida’s apportionment regulation (i.e., Florida Administrative Code Regulation (“Regulation”) 12C-1.0155(2)(l)). Despite the cost-of-performance (“COP”) language explicitly stated in Florida’s Regulation 12C-1.0155(2)(l), the Department applied a market-based sourcing approach, concluding that the receipts from certain services should be sourced to Florida when the taxpayer’s customers are physically located in the state. While Technical Assistance Advisements have no precedential value, the TAA showcases Florida’s propensity to use market-based sourcing for receipts from “other sales,” which appears to be in contrast to the COP directive under Florida Regulation 12C-1.0155(2)(l).
On June 12, 2017, Congressman Jim Sensenbrenner (R-WI) reintroduced into Congress H.R. 2887, also known as the “No Regulation Without Representation Act of 2017” (the “Legislation”), which codifies the physical presence nexus requirement established by the U.S. Supreme Court in Quill v. North Dakota, 504 U.S. 298 (1992) (“Quill”). The Legislation is interesting for several reasons: (1) it proposes to employ a result that is the exact opposite of the recent trend to overturn Quill; (2) it defines “tax” broadly to include net income and business activity taxes; and (3) it expands the law to require a physical presence for states to regulate a person’s activity in interstate commerce outside of the tax context.
In Capital One Auto Finance, Inc. v. Department of Revenue, Dkt. No. TC 5197 (Oregon Tax Ct. Dec. 23, 2016), the Oregon Tax Court held that physical presence was unnecessary to establish nexus for corporate excise and corporate income tax purposes. As we reported last month, the Ohio Supreme Court similarly upheld the constitutionality of Ohio’s factor presence (or, economic nexus) standard for purposes of the Ohio Commercial Activity Tax. Crutchfield Corp. v. Testa, Slip Opinion No. 2016-Ohio-7760 (Ohio 2016). (See our previous post, Ohio Supreme Court Physical Presence Not Required for Commercial Activity Tax.)
The Utah Tax Court recently issued its decision in See’s Candies, Inc. v. Utah State Tax Commission, Case No. 140401556, holding that the “arm’s-length” standard set forth in the federal treasury regulations relating to section 482 of the Internal Revenue Code (“IRC”) controls for purposes of guiding the Utah State Tax Commission (“Commission”) in reallocating income pursuant to Utah Code section 59-7-113 (“Section 59-7-113”), which is nearly identical to section 482 of the IRC.