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June 29, 2021

State and Local Tax Weekly for June 18

Ernst & Young's State and Local Tax Weekly newsletter for June 18 is now available. Prepared by Ernst & Young's State and Local Taxation group, this weekly update summarizes important news, cases, and other developments in U.S. state and local taxation.


US Supreme Court leaves ACA in place, dismisses latest constitutional challenge on procedural grounds

For the third time, the U.S. Supreme Court (Court) has maintained the status of the Affordable Care Act (ACA) as the law of the land.1 Holding that the parties bringing the latest case did not have standing under Article III of the US Constitution to challenge the ACA, the Court reversed and remanded the ruling of the lower courts and order the dismissal of the suit originally brought by Texas, which sought to have the ACA declared unconstitutional.

Background: In National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012), the Court first upheld a challenge to the constitutionality of the ACA, holding that Congress could penalize individuals for failing to obtain health insurance coverage (the individual mandate penalty) under its taxing authority. The Tax Cuts and Jobs Act of 2017, however, dropped the individual mandate penalty in IRC § 5000A to $0, beginning in 2019. With zero tax associated with the individual mandate, the plaintiffs (18 states and 2 individuals) sued to have the ACA declared unconstitutional. The defendants were several states that sought to have the ACA upheld.

In December 2019, the Fifth Circuit held in favor of the plaintiff states that the ACA's individual mandate was unconstitutional because it was no longer a tax and no other provision justified the exercise of congressional power.2

Specifically, in the opinion that was appealed to the Court, the Fifth Circuit found:

  1. A live case or controversy exists because the states have standing to appeal. Even if they did not, a live case or controversy remains between the plaintiffs and the federal government.
  2. The plaintiffs have Article III standing to challenge the ACA — the individual mandate injures both the individual plaintiffs, by requiring them to buy insurance they do not want, and the state plaintiffs, by increasing their costs of complying with the reporting requirements that accompany the individual mandate.
  3. The individual mandate is unconstitutional because it can no longer be read as a tax, and no other constitutional provision justifies this exercise of congressional power.

The Fifth Circuit remanded the question of severability to the district court to provide additional analysis of the current ACA provisions.

Supreme Court ruling: In its June 17, 2021 opinion, the Court held that both the individual and state plaintiffs lacked standing to challenge the constitutionality of the ACA. To bring a suit, a party must have "standing," meaning the party must show that it has suffered or would likely suffer an injury. The Court held, in a 7-2 decision, that none of the parties showed any injury traceable to an individual mandate with a $0 penalty.

The Court reasoned that the individual plaintiffs could not show injury because the federal government was not attempting to enforce an individual mandate under IRC § 5000A after the penalty was dropped to $0. "Without a penalty for noncompliance, [IRC Section] 5000A(a) is unenforceable. The individuals have not shown that any kind of [federal]Government action or conduct has caused or will cause the injury they attribute to [IRC Section] 5000A(a)," the Court explained.

The Court found that the state plaintiffs, which claimed injury due to (1) the increased use of and cost of state-operated medical insurance programs such as Medicaid and (2) the burdens of employer reporting, lacked standing because the perceived burdens could not be traced to the unenforceable individual mandate. For state-operated programs, the Court found individuals sought coverage for its benefits, not because of an individual mandate with $0 penalty. Regarding the states' burdens of employer reporting, the Court found those provisions stood apart from the individual mandate. The Court found that the state plaintiffs had not suffered injury traceable to the individual mandate provision of IRC § 5000A.

For additional information on this development, see Tax Alert 2021-1212.

Massachusetts high court allows corporation to retroactively apportion sales tax based on the location of multistate software use

The Massachusetts Supreme Judicial Court (MA SJC) affirmed a decision by the Massachusetts Appellate Tax Board (MA ATB) allowing software vendors to use the state's abatement process to apportion sales tax on software sold to a customer for multistate use despite the vendors not complying with the express terms of a regulation promulgated by the Massachusetts Department of Revenue (MA DOR). Oracle USA, Inc. v. Commissioner of RevenueNo. SJC-13013 (Mass. Sup. Jud. Ct. May 21, 2021).

Background: Three software vendors sold or licensed software to a Massachusetts-based company (Company) and remitted tax to the commonwealth based on the full value of the transactions. When the Company notified the vendors that only a portion of the software would be used in Massachusetts, the vendors submitted refund claims for the portion of the sales tax attributable to the software's out-of-state use. In doing so, the vendors followed the general abatement process of the MA DOR set forth in Mass. Gen. Laws ch. 62C, § 37, which allows "any person aggrieved by the assessment of a tax … [to] apply in writing to the commissioner [of the MA DOR], on a form approved by the commissioner [of the MA DOR], for an abatement thereof" within a specified time.

Although the Commissioner of the MA DOR (Commissioner) did not dispute that the vendors' abatement applications "reflected the correct amount of sales tax that would have been due if the vendors had been permitted to apportion their remittances based on in-state use," the Commissioner nevertheless denied the vendors' claims on the ground that the vendors did not follow the apportionment procedure outlined in the MA DOR's regulations. Specifically, the Commissioner claimed that the vendors could not apportion their remittances because they had failed to comply with 830 Code Mass. Regs. § 64H.1.3(15)(a), which requires a purchaser (e.g., the vendor) to submit a "multiple points of use" certificate to the seller at the time of purchase or "no later than the time the transaction is reported for sales or use tax purposes."

On appeal, the MA ATB ruled in favor of the vendors, finding that Massachusetts sales tax law provides a statutory right to apportion software transferred for use in more than one state and the commonwealth's general abatement process is "available to the vendors who paid sales tax in excess of that properly apportioned to sales in [Massachusetts]."

MA SJC allows apportionment based on multistate use: In affirming the MA ATB's decision, the MA SJC noted that the relevant regulation3 does not expressly prohibit the tax from being apportioned through abatement. Rather, the MA SJC held that the provision merely requires the seller to pay the tax when due, as if there were no apportionment, and that this requirement does not preclude a seller from later seeking a timely abatement once the apportionment between software users in various states has been determined.

Further, the MA SJC explained, interpreting the regulations as providing nonexclusive ways in which a taxpayer may obtain apportionment does not render them meaningless, as the regulations merely provide a simple, efficient process for taxpayers to use in seeking apportionment at the time the sales tax is due. To the extent a taxpayer wanted to avail itself of the benefits of paying only the apportioned tax when the tax is due, the MA SJC continued, then the procedures set forth in the regulations must be followed or a presumption will apply that the full amount paid is subject to tax. In these instances, the seller must pay tax on the entirety of the sale when the tax becomes due and later seek an abatement for the apportioned amount.

For additional information on this development, see Tax Alert 2021-1251.


Illinois: New law (SB 2017) decouples Illinois's income tax law from the federal 100% bonus depreciation rule. As a rolling conformity state, Illinois incorporates changes to the Internal Revenue Code (IRC) as they are enacted unless the Legislature decouples Illinois's income tax law from the federal provisions. Historically, Illinois decoupled from the federal 30% and 50% bonus depreciation rules but had taken no action to decouple from (and therefore, conformed to) the 100% bonus depreciation rules under the IRC. Under SB 2017, for tax years ending on or after Dec. 31, 2021, Illinois will also decouple from the 100% bonus depreciation rule. As a result, the state depreciation deduction on assets for which the 100% federal bonus was elected will equal the federal depreciation deduction that would have been allowed under IRC §168 if no 100% federal bonus election had been made. In addition, SB 2017 adds a formula to compute the allowed state depreciation deduction amount on federal bonus assets other than 30%, 50% or 100%. Ill. Laws 2021, Pub. Act 102-0016 (2021 IL SB 2017), signed by the governor on June 17, 2021.

Illinois: New law (SB 2017), effective for tax years ending on or after June 30, 2021, modifies the Illinois income tax treatment of federal deductions for certain dividend income, as well as the IRC § 250 deduction for global intangible low-taxed income (GILTI, described under IRC §951A) to add back: (1) the GILTI deduction under IRC § 250(a)(1)(B)(i), and (2) the deduction for dividends received from foreign corporations under IRC § 243(e) and the foreign-source portion of dividends received by domestic corporations under IRC § 245A(a). The state subtraction modification for foreign dividends, including the deductibility of GILTI, was not changed. Thus, these addback modifications change the amount of income included in the Illinois income tax base before foreign dividends are subtracted. SB 2017, however, amends the subtraction modification's definition of "dividend" for tax years ending on or after Dec. 31, 2021, to exclude amounts treated as dividends under IRC §1248 (i.e., gains from certain sales or exchanges of stock in certain foreign corporations). Also, for tax years ending on or after Dec. 31, 2021, dividends that have already been deducted under IRC § 245(a) do not qualify for the state subtraction. Ill. Laws 2021, Pub. Act 102-0016 (2021 IL SB 2017), signed by the governor on June 17, 2021.

Illinois: New law (SB 2017) places a $100,000 annual cap on the net loss deduction (NLD) allowed for corporations (other than S corporations) for each tax year ending on or after Dec. 31, 2021 and before Dec. 31, 2024. For purposes of the carryover period for NLDs, taxpayers will not count any year in which the NLD to be used would have exceeded $100,000. Ill. Laws 2021, Pub. Act 102-0016 (2021 IL SB 2017), signed by the governor on June 17, 2021.

Illinois: New law (SB 2017) eliminates the sunset of the state's franchise tax based on apportioned paid-in capital (essentially, net worth). The franchise tax, which is administered by the Secretary of State, exempts specific tax amounts based on the year the annual report is due. Legislation enacted in June 2019 (Ill. P.A. 101-0009 (SB 689)) phased out the franchise tax, with an expected sunset of the tax for annual reports due in 2024. SB 2017 eliminates this sunset provision but retains the exemption for the first $1,000 of franchise tax. A previously enacted increases in the exemption amount to $10,000 in 2022 and $100,000 in 2023 have also been eliminated by the new law. Ill. Laws 2021, Pub. Act 102-0016 (SB 2017), signed by the governor on June 17, 2021.

Maine: New law (LD 1216), effective for tax years beginning on and after Jan. 1, 2022, establishes a factor presence nexus standard for corporate income tax purposes. Under the revised nexus provisions, a corporation has nexus with Maine (A) if it is organized or commercially domiciled in Maine, or (B) if its property, payroll or sales in Maine exceed any of the following thresholds for the taxable year: (1) $250,000 in property; (2) $250,000 in payroll; (3) $500,000 in sales; or (4) 25% of the corporation's property, payroll or sales (each, the "nexus threshold"). For purposes of this provision, property, payroll and sales are calculated as provided under Maine's apportionment provisions (Me. Rev. Stat., tit. 36, ch. 821 and associated rules), except that the sales factor calculation does not exclude tangible personal property under Maine's throw-out rule.4 Taxpayers permitted or required to use any special apportionment method under 36 MRSA §5211, sub-§17, will use these special methods to determine whether the nexus threshold has been met for them. A corporation that holds a direct or indirect interest in a partnership will have nexus with Maine if the partnership is organized or commercially domiciled in the state or if the partnership's property, payroll or sales in the state exceed the nexus threshold. Lastly, a taxpayer will not lose its P.L. 86-272 protection if its property, payroll or sales exceed the nexus threshold. Maine Laws 2021, ch. 181 (2021 Me. LD 1216), signed by the governor on June 11, 2021.

Vermont: New law (HB 436) updates the state's date of conformity to the Internal Revenue Code to March 31, 2021 (from Dec. 31, 2020). The law causes Vermont to fully conform to the US federal income tax treatment of Paycheck Protection Program (PPP) loans. Accordingly, income from forgiven PPP loans is excluded from Vermont income tax and business expenses paid with PPP loans can be deducted if excluded and deducted for US federal income tax purposes. (Prior to enactment of HB 436, the income exclusion only applied to income from PPP loans forgiven in 2020.) This change applies retroactively to tax years beginning on and after Jan. 1, 2021. Vt. Laws 2021, Act 73 (HB 436), signed by the governor on June 8, 2021.


Illinois: New law (SB 2017) expands Illinois' 1% tax rate on food prepared for immediate consumption and transferred as part of a sales of a service to include such sales made by an entity licensed under the Assisted Living and Shared Housing Act or an entity that holds a permit issued under the Life Care Facilities Act. The new law also applies a sunset date of Dec. 31, 2026 to exemptions for sales of menstrual pads, tampons and menstrual cups from the use tax, service use tax, service occupation use tax and retail occupation tax. Ill. Laws 2021, Pub. Act 102-0016 (SB 2017), signed by the governor on June 17, 2021.

Maine: New law (LD 1216) expands the definition of "in this state or in the state" to include sales of tangible personal property and taxable services sourced to Maine pursuant to 36 MRSA §1819. The law also modifies the sourcing provisions under 36 MRSA §1819, removing the word "retail" so that the sourcing rules apply to the "sales of tangible personal property or a taxable service" instead of a "retail sale" of such property and services. The law also modifies the definition of "persons required to register" for sales and use tax, notably eliminating the "200 separate transaction" threshold under the economic nexus and marketplace facilitator provisions of the Maine sales and use tax law as well as modifying language regarding sales. Under the revised provisions, the economic nexus thresholds will be met when a person making sales of tangible personal property or taxable services in Maine has gross sales from delivery of such property or services into Maine in the current or prior calendar year exceeding $100,000. A marketplace facilitator will meet the threshold if its gross sales of tangible personal property or taxable services in Maine in the current or prior year exceed $100,000. According to the bill analysis accompanying the new law, this change in law is intended to "clarify[y] that the remote seller and marketplace registration requirements apply based on sales in [Maine] and not the location from which they are delivered." These changes apply to sales occurring on or after Jan. 1, 2022. Maine Laws 2021, ch. 181 (2021 Me. LD 1216), signed by the governor on June 11, 2021.

Maryland: The Office of the Comptroller of Maryland issued updated guidance on the application of the state's sales and use to sales of digital products and digital codes to reflect recent law changes. The guidance addresses the following topics: (1) the retail sale and use of a digital product or a digital code; (2) the definitions of digital product and digital code; (3) the definitions of subscriptions, advertising agencies, education, entertainment, ringtones, software, video games, electronic communications, data and documents, and photography and videography; (4) the treatment of services performed electronically; (5) the determination of the taxable price of a digital product or a digital code; (6) the sales tax treatment of books, magazines, newspapers, periodicals and other products; (7) exclusions for resale, and exemptions to the sale of, digital codes or digital products; (8) the treatment of marketplace facilitators and determinations of nexus for out-of-state vendors; and (9) the sourcing of sales of digital codes or digital products. Md. Comp. of Treas., Business Tax Tip #29 "Sales of Digital Products and Digital Codes" (updated June 3, 2021).

Tennessee: A company that has an online platform where it offers taxable tangible personal property for sale is not a marketplace facilitator because even though the platform is a "marketplace" the company's role is limited to listing dealer users' inventory information on the platform and confirming a preliminary order for approval or rejection, regardless of the payment method selected. Tennessee law defines a "marketplace facilitator" as "a person who, for consideration, facilitates sales subject to sales and use tax through a physical or electronic marketplace, and 'either directly or indirectly through contracts, agreements, or other arrangements with third parties, collects the payment from the purchaser … and transmits payment to the marketplace seller.'" The Tennessee Department of Revenue (TN DOR) found that under various transactions where payment is submitted by dealer account or by credit card processing, the company is not involved in collecting or transmitting payments; rather, it only is involved in electronically displaying the dealer users' inventory and communicating a preliminary order approval or rejection. The TN DOR said this limited role does not fall within the definition of marketplace facilitator. Thus, the company is not required to collect and remit sales and use tax on sales made to Tennessee consumers that use its platform. Tenn. Dept. of Rev., Letter Ruling #21-05 (April 28, 2021).

Texas: New law (SB 296) extends the period in which a seller must provide a resale and exemption certificate to the Texas Comptroller of Public Accounts (TX Comptroller) in connection with a sales and use tax audit to 90 days (from 60 days). The law also allows the seller to deliver the resale or exemption certificate to the TX Comptroller by a later date agreed to by the seller and the TX Comptroller. This change took effect immediately. Tex. Laws 2021, SB 296, signed by the governor on June 7, 2021.

Vermont: New law (HB 436) makes clear that delivery platforms are responsible for collecting meals and room tax for meals sold on their platforms. The term "operator" is expanded to include booking agents and taxable meal facilitators, and the term "taxable meal" is expanded to include "delivery or other facilitator charge" when the food or beverage is furnished within Vermont by a restaurant or "other than a restaurant". A "taxable meal facilitator" means "a person who facilitates the sale and collects the charge for a taxable meal or alcoholic beverage through an Internet transaction or any other means." This provision takes effect on Aug. 1, 2021. Vt. Laws 2021, Act 73 (HB 436), signed by the governor on June 8, 2021.


Illinois: New law (SB 2017) extends the sunset date of the following tax credits as follows: (1) affordable housing donations extended to Dec. 31, 2026; (2) the Angel investment credit extended to Dec. 31, 2026; (3) the River Edge Redevelopment Zone credit extended to tax years ending before Jan. 1, 2027; and (4) the live theater production credit extended to tax years beginning prior to Jan. 1, 2027. Ill. Laws 2021, Pub. Act 102-0016 (2021 IL SB 2017), signed by the governor on June 17, 2021.

Maine: New law (LD 1216) modifies the renewables chemicals tax credit, modifying the definition of "renewable chemical" to mean a renewable chemical (as defined in 7 USC § 8101(14)) and to make clear that it is not sold as food, feed or fuel (including any biofuel). Taxpayers allowed the credit are required to report to the Maine Department of Economic and Community Development, for each tax credit awarded, the amount of the credit, the number of the direct manufacturing jobs created and the amount of capital investment in manufacturing. Further, the new law establishes information reporting and third-party testing rules. Under this provision, taxpayers claiming the credit are required to provide information to the Maine State Tax Assessor (ME Assessor) regarding the renewable chemicals being produced, including the weight of the renewable chemicals produced during the tax year, the type of renewable biomass used and any other information required by the ME Assessor to determine compliance with this requirement. The ME Assessor is tasked by the new law with adopting rules requiring third-party testing of renewable chemicals to ensure the accuracy of the reported information. These changes apply to tax years beginning on or after Jan. 1, 2021. Maine Laws 2021, ch. 181 (2021 Me. LD 1216), signed by the governor on June 11, 2021.

South Carolina: New law (SB 463) extends the sunset date of the 25% state tax credit for purchase and installation of geothermal machinery and equipment to Jan. 1, 2032 (from Jan. 1, 2022). This provision took effect upon approval. S.C. Laws 2021, Act No. 53 (2021 S.C. SB 463), signed by the governor on May 17, 2021.

Washington: New law (HB 1033) extends the sunset date of the customized employment training program tax credit to July 1, 2026 (from July 1, 2021). This change takes effect July 1, 2021. Wash. Laws 2021, ch. 116 (2021 Wash. HB 1033), signed by the governor on April 26, 2021.


Florida: New law (Fla. Laws ch. 2021-31 , sec. 1 (2021 Fla. HB 7061)) repeals Fla. Stat. 193.019 enacted in April 2020, that would have added certain community benefit reporting requirements for hospitals that apply for a property tax exemption. The repealed law, which would have become effective on Jan. 1, 2022, would have effectively limited a tax-exempt hospital's property tax exemption to the amount of community benefit the hospital provides. Fla. Laws ch. 2021-31 (2021 Fla. HB 7061) signed by the Governor on May 24, 2021. For additional information on this development, see Tax Alert 2021-1181.

Wisconsin: In affirming an appellate court ruling, the Wisconsin Supreme Court (Court) held that two airlines are not entitled to Wisconsin's "hub facility" exemption from property tax for the 2013 or 2014 tax years because neither met the hub facility exemption's requirement of operating at least 45 common carrier departing flights each weekday in the prior year. In so concluding, the Court applied a "strict but reasonable" interpretation to the tax exemption statute and rejected the airlines' arguments that they are entitled to the exemption for 2013 because they substantially complied with the hub facility statute by flying the requisite number of flights each weekday with the exception of bad weather days and holidays and that they are entitled to the exemption for 2014 because they averaged over 45 flights per weekday. Under Wis. Stat. §70.11(42)(a)2.a, in order to qualify for the exemption, an air carrier company must operate at least 45 common carrier departing flights each weekday during the subject year. The Court found that this "unambiguous plain language" of the statute does not provide any exceptions for bad weather or holidays, does not allow for consideration of the average number of weekday flights, and it does not permit use of scheduled flights. Rather, in determining whether the minimum flight threshold has been met, only the number of flights that actually departed are counted. The Court noted that "[i]t would be error for us to read into the statute an exception that the legislature has not set forth." Southwest Airlines Co. and AirTran Airways, Inc. v. Wis. Dept. of Rev. , No. 2019AP818 (Wis. S.Ct. June 8, 2021).


Maine: New law (LD 1216) clarifies Maine's reporting and tax payment requirements related to federal partnership adjustments under the federal centralized partnership audit rules. The definition of "federal adjustment" is modified to provide that a federal adjustment is positive to the extent it increases taxable income and is negative to the extent it decreases taxable income. As modified, the partnership reporting and payment requirements that apply to audited partnerships, will now apply to partnerships that have filed an administrative adjustment request. Amendments also allow a refund directly to the partnership in lieu of a refund to the affected partners to the extent that negative adjustments exceed positive adjustments; modify provisions for determining distributive shares of the remaining final federal adjustments reported to tiered partners to include negative adjustments; and amend provisions for partnership reporting and payment of amounts due specifying that direct or indirect partners may not take a deduction, credit or refund with respect to any negative adjustment accounted for. Maine Laws 2021, ch. 181 (2021 Me. LD 1216), signed by the governor on June 11, 2021.

New Jersey: On June 3, 2021, the New Jersey Division of Taxation (NJ DOT) announced it will offer a unique closing agreement to any corporation that: (1) joined in a New Jersey combined return; (2) indicated it has New Jersey nexus; and (3) did not file separate company returns in prior years, even if it may have been obligated to do so. Under this initiative, NJ DOT offers the following terms to all corporations that apply for a closing agreement between June 15 and Oct. 15, 2021: (1) a limited look-back period to the privilege periods (i.e., return periods) ending after June 30, 2016, or the date nexus was established with New Jersey, whichever is later (returns for prior periods will not be required), and (2) waiver of all penalties. For more on this development, see Tax Alert 2021-1143.

South Carolina: The South Carolina Department of Revenue issued guidance on determining who can apply for a sales or use tax refund — the retailer or purchaser — and the process for filing the claim. Generally, only the taxpayer legally liable for the tax may file for, or receive, a refund, with certain limited exceptions. The guidance addresses who is legally liable for the sales or use tax, how to determine whether the sales or the use tax applies, who may request a refund of sales or use tax, the process for requesting a refund claim and additional information and alternatives for a purchaser to receive a refund of inadvertently paid tax. This guidance applies to all open periods under the statute. S.C. Dept. of Rev., SC Revenue Procedure #21-1 (June 16, 2021).


Maine: New law (LD 1216) extends the ability of Maine residents to claim a credit for income tax paid to another state while teleworking within Maine. Effective Jan. 1, 2021 through Dec. 31, 2021, a credit against Maine's resident income tax is allowed on the wages of Maine residents for telework provided within Maine that are subject to nonresident income tax in another state, provided all the following requirements are met: (1) the employee was engaged in performing services from a location outside of Maine immediately prior to a state of emergency declared by Maine's Governor due to COVID-19 or an emergency declared by the jurisdiction where the employee was engaged in performing those services; (2) the employee commenced working remotely from Maine due to the COVID-19 pandemic and during either Maine's or the other jurisdiction's state of emergency related to the COVID-19 pandemic; (3) the services were performed prior to Jan. 1, 2022 and during either Maine's or the other jurisdiction's state of emergency; (4) the compensation is sourced by the other jurisdiction as derived from or connected with sources in that jurisdiction under the law of that jurisdiction; and (5) the employee does not qualify for an income tax credit in the other jurisdiction for Maine income taxes paid as a result of the compensation. LD 1216 also creates a penalty for persons who fail to provide "returns of information" to the Maine state tax assessor or who willfully furnish to the assessor a false or fraudulent return of information. Generally, returns of information consist of Forms W-2, Forms 1099 and other similar forms containing tax information necessary for filing Maine tax returns. Maine Laws 2021, ch. 181 (2021 Me. LD 1216), signed by the governor on June 11, 2021. For more on this development, see Tax Alert 2021-1267.

Tennessee: The Tennessee Department of Labor & Workforce Development announced that pursuant to Executive Order 77 issued by Governor Bill Lee on Feb. 26, 2021, COVID-19 unemployment insurance (UI) benefits will be charged to employers starting on March 15, 2021; with the period that employers were not charged from COVID-19 UI benefits effective March 15, 2020 through March 14, 2021. For additional information on this development, see Tax Alert 2021-1202.

Seattle, WA: The King County (Washington) Superior Court (court) dismissed the Greater Seattle Chamber of Commerce'smotion for summary judgment challenging the constitutionality of the payroll expense tax (Ordinance No. 126108) of the City of Seattle, which was approved July 6, 2020. The payroll expense tax is imposed on certain entities engaged in business in Seattle that have compensation expense of $7 million or more. Seattle argued the tax is "a constitutionally permissible excise tax on the privilege of doing business," while the Seattle Chamber of Commerce "assert[ed] that the payroll expense tax is a tax on employers' payment of compensation to employees, and therefore a constitutionally impermissible tax on an employee's act of earning a living." In finding in favor of the City of Seattle, the court held "the payroll expense tax is a permissible tax on the privilege of doing business." The court reasoned that the payroll tax is levied on businesses based on their aggregate payroll; businesses are prohibited from passing the expense of the payroll tax on to employees in the form of a wage deduction; and there is "no burden on employees' 'right to earn a living by working for wages.'" Greater Seattle Chamber of Commerce v. City of Seattle, No. 20-2-17576-5 SEA (King Cnty. Super. Ct. of Wash. June 4, 2021). For more on Seattle's payroll expense tax, see Tax Alert 2020-1736.


Wednesday, June 30, 2021. President Biden's executive order on supply chains (1:00 p.m. EDT). In response to President Biden's recent executive order, various US federal governmental agencies have submitted recommendations on how to strengthen the US supply chain to assure continuous production of critical goods. Join our EY team of global trade, supply chain and policy professionals for a 60-minute webcast focused on the agencies' findings and their effects on multinational corporations' supply chains. Topics include the following: supply chain resiliency, specific industry implications and how to prepare for potential government action. Register.

Thursday, July 15. The new elective state pass-through entity taxes: A survey of the latest developments (1:00 p.m. EDT). During this webcast, EY panelists will: (1) provide an overview of various enacted or proposed state pass-through entity (PTE)-level taxes; (2) discuss the US federal income tax considerations of a state PTE tax election; (3) compare the many different state PTE level taxes, focusing on the states that have created an entirely new tax and those that have allowed affected owners to elect to treat PTEs as C corporations for state tax purposes; (4) discuss the ways these new state PTE tax laws mitigate the imposition of the two levels of tax through credits or income exclusions; (5) address the problems multistate PTE owners may face with the "other state tax credits" or "resident tax credits" in their home states for PTE taxes paid to nonresident states; (6) consider how PTE taxes affect corporate PTE owners; and (7) examine selected industry issues and considerations of these state PTE taxes, notably the financial services and real estate sectors, which frequently operate in PTE form. Register.

Tuesday, July 20, 2021. US corporate income tax compliance: Tax year 2020 filing update and multi-year readiness (3:30 p.m. EDT). The corporate tax landscape is more dynamic than ever heading into the tax year 2020 corporate filing season. Please join EY panelists for a webcast where they will provide their insights on preparing for 2020 US federal and state filings and multi-year considerations in this age of "continuous" compliance. The panel discussion will address such topics as key federal and state tax compliance developments arising from multiple state tax policies and regulations, including interdependencies among federal, state and international compliance and filings, among other topics. Register.

Because the matters covered herein are complicated, State and Local Tax Weekly should not be regarded as offering a complete explanation and should not be used for making decisions. Any decision concerning matters covered herein should be reviewed with a qualified tax advisor.


1 California, et al v. Texas, et al., Dkt. No. 19-840 (U.S. S.Ct. June 17, 2021).

2 Texas v. United States, No. 19-10011 (5th Cir. Dec. 18, 2019); see Tax Alert 2019-2280.

3 830 Code Mass. Regs. Section 64H.1.3(15)(c).

4 Under 36 MRSA §5211, sub-§14(B), sales of tangible personal property are thrown out (i.e., excluded from both the numerator and denominator of the Maine sales factor) when delivered or shipped to a purchaser within a state in which the taxpayer is not taxable, unless any member of an affiliate group with which the taxpayer conducts a unitary business is taxable in that state.