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February 11, 2014
What's In and What's Out for SALT in 2014
by Stephen P. Kranz, Diann L. Smith, and Charles C. Capouet

Full Text Published by Tax Analysts®

Stephen P. Kranz, Diann L. Smith, and Charles C. CapouetStephen P. Kranz is a partner, Diann L. Smith is counsel, and Charles C. Capouet is an associate with McDermott Will & Emery. Kranz and Smith were both previous general counsels for the Council On State Taxation. Kranz is former president of the Business Advisory Council of the Streamlined Sales Tax Governing Board.

This article is intended as a lighthearted look at the world of state and local tax by lawyers in MWE's state and local tax group. The authors predict coming trends and how the state tax profession will change in light of last year's major events. They include developments from 2013 that some practitioners hope have come to an end. If you have a different view of the landscape, the authors welcome comments at

* * * * *

With 2013 in the rearview mirror, we think it's fair to say that it was a year when what was in and what was out for state and local taxation often were the same, or at least the state and local tax world did and undid itself at what seemed like an unprecedented rate.

We saw the New York click-through law upheld and the Illinois click-through law struck down. The Multistate Tax Compact was repealed in numerous states and partially reenacted. Mark Udinski left his role managing Delaware's contingent fee audits and came back as a contingent fee auditor. Massachusetts adopted and then repealed a tax on computer software services. Colorado's reporting regime was struck down and un-struck by different courts of competent jurisdiction. Cloud and tech taxes were adopted and repealed. Gillette litigation grew a beard and shaved it. And the Multistate Tax Commission rejected uniform apportionment while its own hearing officer told the commission that it should be required; even our SALT organizations can't seem to decide a direction.

With this comic-bookish, Harvey Dent/Two-Face environment as our guide, we've put together our list of what's in and what's out for SALT in 2014. As before, the article is intended to be a mostly lighthearted overview of recent developments and predictions. Our potshots and plaudits are meant in earnest or in jest; you decide.

One thing is certain for 2014: Everyone hopes the year will help iron out the herky-jerky back and forth of 2013. How can any state tax professional predict whether the trends that started -- and possibly lost ground -- in 2013 will pick up speed, and which direction they will go? Would you bet money on the outcome of Colorado's reporting regime challenge? Would you tell a friend at a Council On State Taxation cocktail reception that Udinski's departure signaled great things for Delaware? Would you?

The collective we stopped betting on the outcome of predictions like these years ago and now enjoy just tossing out the possibilities and waiting to hear the voices of readers responding in agreement or disagreement.

We appreciate the many e-mails sent by readers last year and hope that this year's list generates as much feedback. If you agree or disagree, let us know. And put a reminder on your calendar for next January to send us your nominations for the list.

         What's In?                          What's Out?

  Colorado use tax snitching     Self-reporting use tax

  Open season on statutory       Following statutory apportionment
       apportionmenta                        formulas

  Richard Pomp's                 Wishy-washy MTC "uniform"
       "pick-one-and-be-done"                apportionment

  Look-through market sourcing   Cost of performance for
                                             receipts from intangibles

  Burden of proof                Presumption of correctness

  Exempting the cloud            Taxing the cloud

  Shirley Sicilian, national     Shirley Sicilian, MTC
       director of state and                 general counsel
       local tax controversy,
       KPMG LLP

  Challenging patents on         Section 482 transfer
       section 482 audit                     pricing audits

  Required disclosure of         Taxpayer confidentiality
       taxpayer information

  Equifax v. Mississippi         Due process in Mississippi
       Department of Revenue
       at the U.S. Supreme

  State tax reform               Federal tax reform

  Gimmicks and other junk        State tax reform
       ways of collecting

  New York click-through law     Illinois click-through law

  Uniform Unclaimed Property     Uniform Unclaimed Property
       Act of 2014 (2015,                    Act of 1995
       2016, or. . .)

  A wise man learns from         Massachusetts's "tech tax"
       others' mistakes. An
       average man learns from
       his own. And then there
       is Massachusetts.

  Mark Udinski, employee of      Mark Udinski, employer of
       auditing firm Kelmar                  auditing firm Kelmar

  States adopting SSUTA to       States adopting the
       prepare for the                       Streamlined Sales and
       Marketplace Fairness Act              Use Tax Agreement to
                                             simplify their sales tax

  District of Columbia           SkyNet
       Office of Tax and
       Revenue computer systemc

  Qui Tam False Claims Act       DOR audits for
       suits for undercollection             undercollection of tax
       of tax

  Class action suits for         Refund claims for
       overcollection of tax                 overpaid tax

  Joining the MTCC               Multistate Tax Compact
       (Multistate Tax Cult                  membership

  Members of Congress            Nine justices

  Tax Foundation                 TBD

  North Dakota Tax               North Dakota Tax
       Commissioner Ryan                     Commissioner Cory Fong

  Reporting news                 Making news

  Tax expenditure reporting      Credits and incentives

  Composting                     Bag taxes

  Marijuana edibles tax          Snack taxes

  Drone taxes                    Gas taxes

  Seeking injunctive relief      Rolling over for unclaimed
                                             property audits

  Marketplace Fairness Act:      Marketplace Fairness Act:
       Episode VII                           Electric Boogaloo

  Maryland State Comptroller     Local government dominion
       of the Treasury v. Wynne              and control

  Deputy Secretary John Doyle,   West Virginia Del. John Doyle
       West Virginia Department
       of Revenue

  David Brunori, the             David Brunori, the
       unrequited libertine                  irritable libertarian

  Richard Pomp,                  Professor Richard Pomp,
       Person of the Year                    reporter


                               FOOTNOTES TO TABLE

      a Kranz, Smith, and Capouet, "Open Season on State Statutory
 Apportionment," State Tax Notes, Aug. 12, 2013, p. 429.

      b David Brunori, "Tax Reform Advice for 2014: Think About Spending,"
 State Tax Notes, Jan. 6, 2014, p. 33.

      c See D.C. Office of Tax and Revenue v. Shuman, No. 12-AA-466
 (D.C. 2013).

                           END OF FOOTNOTES TO TABLE

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