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Texas has now joined the growing number of states proposing digital advertising taxes that we have covered previously on SALT Savvy, including Maryland’s first-in-the-nation digital advertising tax law and other proposals from Connecticut, New York, and Montana. This new Texas bill—H.B. 4467— would take effect in 2022. The Texas proposal is very similar to the recently-enacted Maryland digital ad tax (H.B. 732) and would impose a new “digital advertising tax” on annual gross revenues derived…

In groundbreaking news, the Texas Third Court of Appeals has withdrawn its earlier opinion and issued a new opinion in the Hegar v. El Paso Electric Co. case. In the case, which has attracted widespread attention, El Paso Electric filed a refund claim with the Texas Comptroller for sales taxes that it had paid on transactions involving “telemetry units that are related to step down transformers,” which are pieces of equipment used to transmit electricity. In its initial redetermination request, which is required in Texas to challenge a denied refund claim, El Paso Electric cited the Texas sales tax manufacturing exemption as one of its grounds for challenging the refund denial. Specifically, El Paso Electric cited Texas Tax Code section 151.318(a)(4), which includes the term “telemetry units that are related to the step-down transformers” among a list of around fifty different items that are exempt from sales tax when used as part of the manufacturing process in Texas. The Texas Comptroller argued that, because El Paso Electric did not explicitly tie the telemetry units related to step-down transformers directly to the code section citation, El Paso Electric was barred from raising those claims during its administrative hearing. The administrative law judge agreed and overruled El Paso Electric’s claim that its telemetry units were exempt under Texas Tax Code section 151.318(a)(4). El Paso Electric then sued in Texas District Court, which overruled the administrative law judge and granted El Paso Electric’s refund claim. The Texas Comptroller later appealed, and the Texas Third Court of Appeals once again overturned the district court, ruling for the Texas Comptroller. This latest opinion withdraws the earlier Third Court of Appeals opinion and issues a new opinion.

A recently published New York State Division of Tax Appeals Administrative Law Judge (“ALJ”) determination, Matter of SecureWorks, Inc., DTA Nos. 828328 & 828329 (N.Y. Div. Tax App. ALJ Div. Jan. 14, 2021) (“SecureWorks”) concluded that New York sales tax applies to certain online security services when such services are provided with respect to devices located in New York. The ALJ concluded that most of the IT security services provided by the taxpayer, SecureWorks, Inc.,…

Last March, the Maryland General Assembly passed House Bill 732, which imposed a new “gross revenues tax” on digital advertising services. Governor Larry Hogan vetoed the bill in May. Earlier today, the Maryland State Senate completed the General Assembly’s override of the Governor’s veto, making the Maryland digital advertising tax the first of its kind in the United States. House Bill 732 adds a new tax (imposed in a new Title 7.5) to the Tax…