States and local jurisdictions continue to grapple with novel tax issues in response to the COVID-19 outbreak. On Friday, March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), a $2 trillion federal stimulus package to provide fiscal relief in response to the COVID-19 outbreak. The CARES Act includes numerous tax relief provisions. States will need to consider whether, and how, they will conform to the federal provisions.
The World Health Organization has officially declared the coronavirus outbreak to be a pandemic. In addition to the cost on human life, the rapid spread of COVID-19 has left a trail of economic damage affecting business revenues. COVID-19 has caused complete or partial shutdown of factories, supply chain disruptions, and labor shortages, and has impacted demand in certain industries. This impact will also be felt by U.S. state, and local governments.
Baker McKenzie attended the U.S. Supreme Court’s oral arguments yesterday in South Dakota v. Wayfair, Docket No. 17-494. At issue in the case is whether the Court should abrogate the physical presence nexus standard that it first articulated in National Bellas Hess v. Dep’t of Revenue, 386 U.S. 753 (1967), and later affirmed in Quill Corp. v. North Dakota, 504 U.S. 298 (1992). The Court’s decision could have a profound impact on sales and use tax nexus in the United States by altering the limitations currently imposed on a state’s ability to require out-of-state retailers to collect such tax.
ExxonMobil Oil Corporation, Hess Corporation, and Shell Oil Company (collectively, the “Oil Companies”) were recently dealt another blow in their ongoing transfer pricing dispute with the District of Columbia Office of Tax and Revenue (“OTR”). The Oil Companies are among several taxpayers that have been fighting the validity of the transfer pricing methodology employed by Chainbridge Software LLC (“Chainbridge”), the OTR’s third-party transfer pricing consultant. Just last year, the Oil Companies unsuccessfully sought to estop the OTR from relitigating the validity of the controversial Chainbridge methodology in light of the OAH’s holding in Microsoft Corp. v. Office of Tax and Revenue (2012) that the Chainbridge methodology was arbitrary, capricious and unreasonable (for prior coverage, see DC Office of Tax and Revenue Set to Relitigate Chainbridge Methodology in Oil Company Cases). In a January 26, 2018 Order, Office of Administrative Hearings (“OAH”) Administrative Law Judge Bernard H. Weberman denied the Oil Companies’ motion for summary judgment, holding that they failed to establish that the transfer pricing method employed by Chainbridge was arbitrary, capricious and unreasonable as a matter of law. Hess Corp., et. al. v. D.C. Office of Tax & Revenue, Case Nos. 2012-OTR-00027, 2011-OTR-00047, 2011-OTR-00049 (Jan. 26, 2018).