Justia Tax Law Opinion Summaries

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In this dispute over the amount of franchise tax owed by a taxpayer the Supreme Court reversed in part the judgment of the court of appeals reversing in part the trial court's judgment for the taxpayer, holding that, with respect to the taxpayer's inclusion of certain costs in its "cost of goods sold" (COGS) subtraction, the calculation method accepted by the trial court was improper, and the taxpayer was not entitled to include the costs in calculating its COGS subtraction. The Comptroller concluded that Gulf Copper and Manufacturing Corporation paid an insufficient amount of franchise taxes for the 2009 year. At issue was whether Gulf Copper could exclude certain payments from its revenue under Texas Tax Code 171.1011(g)(3) and include certain costs in its COGS subtraction under Texas Tax Code 171.1012. Gulf Copper paid additional taxes and sued to recover the disputed amount. The trial court rendered judgment in favor of Gulf Copper. The court of appeals reversed in part. The Supreme Court reversed in part, holding (1) the Comptroller incorrectly disallowed the revenue exclusion; (2) with regard to the COGS subtraction, the calculation method accepted by the trial court was improper; and (3) the taxpayer was not entitled to include costs under subsection 171.1012(i) in calculating its COGS subtraction. View "Hegar v. Gulf Copper & Manufacturing Corp." on Justia Law

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The Supreme Court reversed the decision of the court of appeals affirming the judgment of the trial court concluding that Tex. Tax Code 171.1012 permitted a movie theater to subtract exhibition costs as cost of goods sold, holding that film exhibitions are not tangible personal property that is sold, and therefore, the theater was not entitled to include exhibition-related costs in its cost of goods sold. The Comptroller disallowed the movie theater's subtraction of exhibition costs in calculating its franchise tax liability for 2008 and 2009. The theater paid the additional franchise taxes requested by the Comptroller and sued to recover the disputed amount, arguing that its exhibition costs were property subtracted as cost of goods sold (COGS). The trial court concluded that the theater's film exhibitions were tangible personal property and thus goods for sale in the ordinary course of the theater's business under section 171.1012. The court of appeals affirmed. The Supreme Court reversed, holding that section 171.1012 did not permit the movie theater to subtract is exhibition costs as COGS because no tangible personal property was transferred through the film exhibitions. View "Hegar v. American Multi-Cinema, Inc." on Justia Law

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The Supreme Court affirmed the judgment of the court of appeals affirming the Texas Comptroller's audit of Sunstate Equipment, a heavy construction equipment renal company, on the grounds that Sunstate was not entitled to subtract certain delivery and pick-up costs as cost of goods sold (COGS) under Tex. Tax Code 171.1012, holding that Sunstate was not entitled to the subtraction it claimed under either section 171.1012(k-1) nor section 171.1012(i). After the Comptroller assessed deficiencies, penalties and interest totaling $140,495 Sunstate brought suit for a refund. The district court ordered a full refund of the amount paid, including interest. The court of appeals reversed, concluding that Sunstate was not entitled to subtract costs under section 171.1012(k-1) and that section 171.1012(i) did not independently authorize the cost subtractions. The Supreme Court affirmed, holding that neither statutory provision authorized Sunstate to subtract its delivery and pick-up costs as COGS. View "Sunstate Equipment Co. v. Hegar" on Justia Law

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The Supreme Court affirmed the judgment of the tax court concluding that the market value of a distribution-warehouse property in Rogers, Minnesota was $15,638,000 as of January 2, 2014 and $15,597,000 as of January 2, 2015, holding that the tax court did not err in any of the ways asserted by Medline Industries. Specifically, the Supreme Court held that the tax court (1) did not err by crediting some of the county appraiser's opinions despite rejecting his opinion about the highest and best use of the property as a multi-tenant facility; (2) did not clearly err in the sales-comparison approach by relying on four comparable sales other than the May 2017 of a former Walgreens distribution center; (3) did not err in its income approach analysis; and (4) did not err in relying on the cost approach. View "Medline Industries, Inc. v. County of Hennepin" on Justia Law

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The Commission issued the Estate a notice of deficiency, determining that the Estate had a $491,750.00 tax liability which differed from the Estate's tax return valuation. The Fifth Circuit affirmed the tax court's decision sustaining the Commission's determinations. The court held that the Estate holds a substituted limited partnership interest in SILP. The court also held that the Notice of Deficiency (including its attachments) fulfills the statutory requirement under 28 U.S.C. 6212. However, even assuming arguendo that the notice description was inadequate, the court could not invalidate it on that basis because Internal Revenue Code 7522(a) explicitly prohibits it from setting aside a notice for lacking the descriptive element. Finally, the court rejected the Estate's argument under the Administrative Procedure Act as without merit. View "Estate of Frank D. Streightoff v. Commissioner" on Justia Law

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Torres was a long-time employee at Vitale’s Italian Restaurants located throughout Western Michigan. Although Torres and other Vitale’s employees often worked more than 40 hours per week, they allege that they were not paid overtime rates for those hours. Vitale’s required the workers to keep two separate timecards, one reflecting the first 40 hours of work, and the other, reflecting overtime hours. The employees were paid via check for the first card and via cash for the second. The pay was at a straight time rate on the second card. Torres alleged that employees were deprived of overtime pay and that Vitale’s did not pay taxes on the cash payments. Torres sought damages under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961. The district court dismissed, holding that the remedial scheme of the Fair Labor Standards Act (FLSA), 29 U.S.C. 201, precluded the RICO claim. The Sixth Circuit reversed in part. The claims based on lost wages from the alleged “wage theft scheme” cannot proceed. However, the FLSA does not preclude RICO claims when a defendant commits a RICO-predicate offense giving rise to damages distinct from the lost wages available under the FLSA. The court remanded Torres’s claim that Vitale’s is liable under RICO for failure to withhold taxes. View "Torres v. Vitale" on Justia Law

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Oakland requested proposals for franchise contracts regarding garbage and residential recycling services. Following a lawsuit, a settlement provided that WMAC would receive garbage and mixed materials and organics contracts; CWS would receive the residential recycling contract. WMAC and CWS agreed to pay franchise fees to the city, which redesignated part of WMAC’s franchise fee as a fee to compensate the city for the cost of implementing the Alameda County Waste Management Plan, under Public Resource Code 41901. Plaintiffs challenged the fees as improperly imposed taxes under the California Constitution, article XIIIC. The court of appeal affirmed the dismissal of claims concerning the Redesignated Fee as not ripe for adjudication but reversed dismissal as to the franchise fees. A franchise fee, arguably subject to an article XIIIC, section 1(e) exemption, must still be reasonably related to the value of the franchise to be exempt from the “tax” definition. The court cited Proposition 26: To qualify as a nontax ‘fee’ under article XIII C, as amended, a charge must satisfy both the requirement that it be fixed in an amount that is ‘no more than necessary to cover the reasonable costs of the governmental activity,’ and the requirement that ‘the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity. View "Zolly v. City of Oakland" on Justia Law

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At issue in this case was the tax status of a 9.9-acre parcel of land containing an 11,500-square-foot garage that was owned and used by Zlotoff Foundation, Inc., a nonprofit charitable organization, for the purpose of storing and maintaining a collection of classic automobiles that it displayed at its nearby museum. The trial court ruled that the garage and the land were tax-exempt because they were used for a public purpose. However, it denied the Foundation’s request for a refund of property taxes paid to the Town of South Hero from 2016 to 2018 because the Foundation did not obtain a certificate of authority allowing it to transact business in Vermont until 2019. The Foundation and the Town both appealed. Finding no reversible error, the Vermont Supreme Court affirmed judgment. View "Zlotoff Foundation, Inc. v. Town of South Hero" on Justia Law

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The Supreme Court affirmed the decision of the Administrative Hearing Commission determining that DI Supply I, LLC's room furnishing sales to the Drury Hotels were not exempt from sales tax under the resale exemption in Mo. Rev. Stat. 144.010.1(11), holding that DI Supply failed to meet its burden to prove that the items it sold to Drury Hotels were resold by the hotels. An audit determined that DI Supply failed to remit sales tax on more than $11 million in taxable sales of room furnishings to Drury Hotels during the audit period. DI Supply contested the tax liability, arguing that the items of tangible personal property were purchased for resale to hotel guests and not subject to Missouri local sales or use tax. The Commission upheld $613,159 of the assessment for sales tax and interest. On appeal, DI Supply contested its sales tax liability for sales of room furnishings to Drury Hotels. The Supreme Court affirmed, holding that DI Supply failed to show that Drury Hotels transferred title or ownership of the room furnishings and, therefore, failed to show the applicability of the resale exemption by clear and unequivocal proof. View "DI Supply I, LLC v. Director of Revenue" on Justia Law

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Employers Resource Management Company (“Employers”) returned to the Idaho Supreme Court in a second appeal against the Idaho Department of Commerce. In 2014, the Idaho Legislature passed the Idaho Reimbursement Incentive Act (“IRIA”). The Economic Advisory Council (“EAC”), a body created under IRIA to approve or deny tax credit applications, granted a $6.5 million tax credit to the web-based Illinois corporation Paylocity, a competitor to Employers Resource Management Company. Employers claimed Paylocity’s tax credit created an unfair economic advantage. Paylocity, however, had yet to receive the tax credit because it did not satisfy the conditions in the Tax Reimbursement Incentive agreement. Having established competitor standing in Employers Res. Mgmt. Co. v. Ronk, 405 P.3d 33 (2017), Employers argued the Idaho Reimbursement Incentive Act was unconstitutional under the separation of powers doctrine. The district court dismissed Employers’s case upon finding the Act constitutional. Finding no reversible error in that judgment, the Idaho Supreme Court affirmed. View "Employers Resource Mgmt Co v. Kealy" on Justia Law