TWIST - July 26, 2021

Welcome to TWIST for the week of July 26th, featuring Sarah McGahan from the Washington National Tax State and Local Tax practice.

First up today is a decision from the Seventh Circuit Court of Appeals.  The underlying technical tax issue in the case was whether certain streaming companies were “video service providers” required to pay quarterly franchise fees to several Indiana municipalities. Before the Seventh Circuit, the issue was whether the federal district court properly invoked the doctrine of comity abstention to remove the case to state court, as requested by the municipalities. The doctrine counsels lower federal courts to resist engagement in certain cases falling within their jurisdiction that present challenges to "state taxation of commercial activity.” The Seventh Circuit, applying certain factors set forth by the U.S. Supreme Court, concluded that the district court did not abuse its discretion by granting the cities' motion to remand the dispute to Indiana state court.

In an unpublished opinion, the Michigan Court of Appeals held that a retailer’s printed advertising materials were not subject to Michigan use tax. The advertising materials were printed outside of Michigan and sent to a mail vendor outside of Michigan to be processed and prepared for mailing. The court concluded that the retailer did not “use” the materials in Michigan because it lacked control over the materials, despite the fact that it provided the mail vendor with the list of its Michigan customers and directed the dates on which mailings should be distributed. These activities, in the court’s view, did not involve “actual control over the process of delivery of the advertising materials.”

Finally, there have been a few recent marketplace facilitator developments to note. Legislation was enacted in Missouri that adopts an economic nexus standard for sales tax purposes and requires marketplace facilitators to collect and remit sales tax on facilitated sales effective January 1, 2023. The marketplace facilitator statutes enacted this year in Kansas and Florida both became effective July 1, 2021. The Florida Department of Revenue has advised that under certain conditions marketplace providers and persons making remote sales who register by October 1, 2021 will not be held liable for the remittance of sales tax on untaxed remote sales made prior to July 1, 2021.

Finally, the Illinois Department of Revenue issued a new emergency regulation dated July 13^th that revises certain provisions of a previously issued Compliance Alert addressing the obligations of marketplace facilitators that facilitate sales by food service establishments. Under the revised emergency regulation, food delivery services that are considered marketplace facilitators must collect and remit the Metropolitan Pier and Exposition Authority Retailers' Occupation Tax and the Chicago Home Rule Municipal Soft Drink Tax, as well as sales tax on facilitated sales of food.   

Thank you for listening to TWIST and stay well.