TWIST - November 9, 2020

Welcome to TWIST for the week of November 9, featuring Sarah McGahan from the Washington National Tax State and Local Tax practice.

Our first development today is recently-enacted legislation in Louisiana that establishes a one-time state sales tax holiday to provide relief for citizens recovering from Hurricanes Laura and Delta, as well as the COVID-19 pandemic. Specifically, the first $2,500 of any consumer purchase that occurs on November 20^th and 21^st will not be subject to Louisiana sales tax.

 In B&O Tax news, a Washington Tax Review Officer recently concluded that a taxpayer making sales through a facilitator had Washington B&O tax nexus because it had inventory in the state. The taxpayer used the marketplace facilitator’s inventory management system that commingled inventory items between sellers making sales of the same items across the facilitator’s warehouses.    The taxpayer argued that because it did not ship the goods into Washington and the facilitator had complete control over the goods, it had no inventory in Washington and did not have nexus. The Tax Review Officer rejected this argument, noting that the taxpayer had agreed to the inventory management program and was provided information regarding the location of its inventory. 

On the corporate franchise tax side, the Tennessee Department of Revenue ruled that a foreign corporation with no effectively connected income was not subject to Tennessee’s franchise tax. Under Tennessee law, a taxpayer that has no income effectively connected with a United States trade or business” is considered not to have “substantial nexus” with Tennessee. As such, although the taxpayer was doing business in Tennessee, it lacked substantial nexus. Further, the Department determined that the taxpayer was not exercising its corporate franchise, as that term was intended to capture only Tennessee-chartered and Tennessee organized business entities.

Finally, on Election Day, voters in certain states were asked to decide on certain significant state and local tax measures. Voters rejected measures in Illinois and California that would have increased income and property taxes respectively, but many other measures were approved. We’ve got a summary of those for you. 

Thank you for listening to TWIST and stay well.