Retail & Consumer Products Law Observer

Retail & Consumer Products Law Observer

Legal Insight for the Retail and Consumer Products Industry

Category Archives: Taxes

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IRS Rules that “Image Upgrade” Payments by Manufacturers to Franchisees Are Taxable

Posted in Taxes
The IRS Office of Chief Counsel has informally ruled (General Legal Advice Memorandum 2014-004; the “GLAM”)[1] that payments made by manufacturers to their franchisees under “facility image upgrade programs” are immediately includible in the taxable income of the franchisees.  The franchisees then may obtain an offsetting deduction only through depreciation of the property upgrades, typically… Continue Reading

Baucus Tax Reform Proposals Affecting Retailers

Posted in Taxes
U.S. Senate Finance Committee Chairman Max Baucus recently released “discussion drafts” of several tax reform proposals. In the current political climate, tax reform may be a long way off, and a discussion draft is a long way from a formal proposal. However, it is never too early to pay attention to ideas that have actually… Continue Reading

Delaware Unclaimed Property: Three Weeks Remain To Eliminate 15 Years of Liability

Posted in Taxes
Companies incorporated in Delaware have until June 30 to enter into Delaware’s recent Voluntary Disclosure Agreement (VDA) program and become compliant with their unclaimed property reporting obligations. Under Delaware law, holders of unclaimed property are subject to audit for all open periods: over 30 years! However, holders that enroll in the Secretary of State’s VDA program… Continue Reading

Relief for Payment Card Reporting Set to Expire Soon

Posted in Taxes
Many businesses became subject to new payment card reporting requirements (Form 1099-K) in early 2012 for payments made in 2011. Starting on January 1, 2013, those businesses will become subject to new backup withholding requirements and potential penalties for incorrect filing of Forms 1099-K. The purpose of the new rules was to improve tax compliance among… Continue Reading

Pending Federal Legislation Would Regulate State Taxation of Digital Goods and Services

Posted in Taxes
Bipartisan legislation has been introduced that would regulate state taxation of digital goods and services that are delivered electronically (i.e., not through tangible storage media). Digital goods would include, for example, downloads of software, music, and e-books. The professed goal is to prevent multiple taxation of these products and services as well as to prevent… Continue Reading

How’s Your Sales Tax Software? The SEC May Be Interested

Posted in Taxes
Any retailer, even one operating in just one locality, knows that sales tax collection can quickly become complicated. Different goods and services may be subject to different rates or exempt from tax, and some purchasers may be exempt. Operating in multiple localities with different regimes only compounds the problem. As if it were not enough… Continue Reading

IRS Denies Deduction for Worthless Goodwill When Retailer’s Franchise Is Terminated

Posted in Taxes
The IRS recently concluded in internal legal advice (available at http://www.irs.gov/pub/irs-lafa/111101f.pdf) that an automobile dealer could not deduct the cost of acquired goodwill when an automobile manufacturer terminated the dealer’s franchise. Although the advice specifically applied to a car dealer, it could apply equally in any franchise situation. As internal legal advice, it is not… Continue Reading

“Amazon” Sales Tax Developments

Posted in Taxes
There have been several recent developments in the continuing efforts by states to make out-of-state Internet retailers collect and remit sales taxes. Brick-and-mortar retailers are required to collect sales taxes. However, where an out-of-state Internet seller ships goods into the state but has no other in-state contacts, the transaction is not subject to sales tax.… Continue Reading

Court Upholds New York Law Requiring Out-of-State Retailers to Collect New York Sales Tax

Posted in Taxes
Case: Amazon.com LLC and Amazon Services LLC v. New York State Department of Taxation and Finance, Index No. 601247/08 (Sup. Ct. N.Y. 2009) The One Sentence Summary: A New York court dismissed Amazon.com’s suit challenging the constitutionality of a recently enacted New York State law requiring out-of-state companies, including those engaging exclusively in e-commerce, to… Continue Reading

Retailer’s Calculation of “Gross Receipts” for California Tax Purposes Successfully Challenged by Franchise Tax Board

Posted in Taxes
Case: The Limited Stores, Inc. v. Franchise Tax Board, No. A102915 (Cal. Ct. App. 6/8/07) The One Sentence Summary: Because national retailer’s inclusion of short-term securities’ full redemption price as “gross receipts” unfairly represented the extent of its business activity in California, Franchise Tax Board prevailed on challenge to retailer’s calculation of California taxes. What… Continue Reading