Monthly Archives: December 2013


Once again the Supreme Court of our fine nation shows that they don’t have the temerity to even hear a case regarding state taxes, as the Court has denied certiorari in the controversial click through nexus sales tax case. So in effect, the click through nexus or “Amazon” law now becomes the law of the land, as any state can now adopt it without fear of it being overturned by the Court. Now it’s too bad the US Supreme Court didn’t act like the Illinois Supreme Court who recently properly held this same law unconstitutional. Unfortunately, now that the Federal threat has been removed, the door is now wide open for a substantial amount of new jurisdictions to enact this ridiculous legislation. Well at least sanity remains in the Land of Lincoln. Enjoy the rest of your December and the rest of the holiday season.

Arizona – Corporate Income Tax – Gain from Sale of Subsidiary Was Business Income

The Arizona Court of Appeals recently held that a taxpayer’s gains from the sale of a wholly-owned subsidiary, with which it was engaged in a unitary business, were apportionable business income for Arizona corporate income tax purposes, despite the taxpayer’s election to treat the sale as a deemed asset sale under IRC §338(h)(10). The Court held that under the functional test for determining whether gain from a transaction is business income, income arising from property constitutes business income if the control and use of the property are closely related to the taxpayer’s regular trade or business. Prior to sale, the subsidiary’s assets were used to produce business income for the taxpayer. Also, in previous years, the taxpayer reported the income that the subsidiary produced as business income on its combined corporate income tax return. First Data Corp. v. Arizona Department of Revenue, Court of Appeals of Arizona, Division One, No. 1 CA-TX 11-0008 (November 26, 2013).

California – Personal Income Tax – Retroactively Reinstating Qualified Small Business Stock Gain Deferral and Exclusion

California recently enacted Assembly Bill 1412 which retroactively provides for individual taxpayers, capital gain deferral and exclusion regarding the sale of Qualified Small Business Stock (“QSBS”) in tax years 2008 through 2012. The new law reverses California Franchise Tax Board (“FTB”) procedures set forth in FTB Notice 2012-03, which provided for the retroactive assessment of tax for tax years 2008 through 2012.

Illinois – Sales and Use Tax – Provisions of Click-Through Nexus Law Held Void

The Illinois Supreme Court held that the definition provisions the sales tax click-through nexus law, are void and unenforceable because they impose a discriminatory tax on electronic commerce under the meaning of the federal Internet Tax Freedom Act. The Court held that the click-through nexus law is discriminatory because it imposes a use tax collection obligation on out-of-state retailers who maintain clickable links on websites while it does not impose a similar obligation on similar types of advertising, such as promotional codes, made available by out-of-state retailers through newspapers or other printed publications or over-the-air broadcasting. In addition, no other Illinois law imposes a similar obligation on other out-of-state retailers. The court did not address the question of whether the click-through nexus law violated the Commerce Clause of the U.S. Constitution. Performance Marketing Ass’n, Inc. v. Hamer, Illinois Supreme Court, No. 114496 (October 18, 2013).

Massachusetts – Sales and Use Tax – Cloud Computing Ruling Revised

The Massachusetts Department of Revenue has revised and reissued a letter ruling that addresses the sales and use taxability of cloud computing products due to additional information provided by the taxpayer. The products provide customers with the use of infrastructure, a platform, and an operating system software with which customers can perform a variety of activities, including, but not limited to, running the customers’ software applications. Customers must use an operating system to access the cloud computing products. Charges for cloud computing products sold by the taxpayer are not subject to tax when the products are used with the customer’s own application software or open-source (free) operating system software because there is no sale of prewritten software. Products that include operating system software licensed by the taxpayer from a third party are also not subject to tax. Massachusetts Letter Ruling 12-8.

New York – Sales Tax – US Supreme Court Denies Certiorari on Click Through Nexus Sales Tax Case

The U.S. Supreme Court recently declined to hear appeals by Internet retailers Amazon and related to New York State’s Internet sales tax law, which utilizes the concept of “click-through nexus.”, LLC v. New York State Department of Taxation and Finance, U.S. Supreme Court, Dkt. 13-252, petition for certiorari denied December 2, 2013; LLC v. New York State Department of Taxation and Finance, U.S. Supreme Court, Dkt. 13-259, petition for certiorari denied December 2, 2013.

Ohio – All Taxes – Guidance Issued for Domestic For-Profit Corporations Involved in Merger, Consolidation, or Conversion

The Ohio Department of Taxation (DOT) has issued a reminder for taxpayers regarding the new procedure for domestic for-profit corporations involved in a merger, consolidation, or conversion. Domestic for-profit corporations that are dissolving as a result of a merger, consolidation, or conversion will need to obtain a Certificate of Tax Clearance from the DOT. If a domestic for-profit corporation enters into a merger, consolidation, or conversion transaction and the new or surviving entity is not a corporation that is an Ohio chartered or foreign licensed corporation that is registered with the Ohio Secretary of State, then the domestic for-profit corporation must first obtain a Certificate of Tax Clearance from the DOT prior to the merger, consolidation, or conversion. Press Release, Ohio Department of Taxation, November 25, 2013.