Ohio State Tax Blog

Current developments, commentary and helpful resources regarding Ohio state and multistate taxes from attorneys Steven A. Dimengo and Richard Fry. We concentrate on all aspects of Ohio state taxation, including sales/use tax, income tax and commercial activity tax, from audits to appeals before the Ohio Board of Tax Appeals and Ohio Supreme Court, and have significant experience in multistate tax planning. Contact us.

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Multistate Taxation: New York's Highest Court Upholds Click-Through Nexus Law Amid Facial Constitutional Challenge PDF Print E-mail
Tuesday, 30 April 2013 13:12

“Click-through nexus” laws generally attribute the presence of in-state representatives who refer sales to an out-of-state retailer, including via web links, in exchange for a commission for determining sales tax nexus. See e.g., New York Tax Law § 1101(b)(8)(vi). New York was the first state to enact such a “click-through nexus” or Amazon law. Predictably, Amazon.com and Overstock.com challenged the constitutionality of New York’s click-through nexus law. After making its way through the trial court and initial appellate court, the New York Court of Appeals (the state’s highest court) recently held that the statute did not violate the U.S. Constitution on its face.

The Court found that it was reasonable to impose sales tax collection burdens on out-of-state retailer, such as Amazon.com and Overstock.com, that have effectively established an in-state sales force through affiliate programs. Despite the affiliates’ primary activity being simply posting links to the retailers’ online marketplaces, evidence in the record supported active solicitation of New York residents by the affiliates to justify the presumption that such arrangements created nexus. “The bottom line is that if a vendor is paying New York residents to actively solicit business in this State, there is no reason why that vendor should not shoulder the appropriate tax burden.” Overstock.com, Inc. v. N.Y. State Dept. of Tax. and Fin., 2013 WL 1234823 (N.Y. Ct. of Apps., Mar. 28, 2013).

Additionally, the opinion specified that substantial nexus would not result if the New York resident was paid merely to post passive advertisements on their website, relying upon the Department of Taxation and Finance’s published guidance that the statute is only triggered if the compensation paid to the New York resident is tied to a completed sale. N.Y. St. Dept. of Tax. & Fin. Memorandum No. TSB-M-08(3)S (May 8, 2008).

Justice Robert Smith wrote an interesting dissent whereby he concludes that the statute is unconstitutional since, based upon its literal wording, it covers online (passive) advertisements linking to the advertiser’s website. This fight may not be over as Overstock.com has indicated that it will likely file an appeal to the U.S. Supreme Court.

Last Updated on Tuesday, 30 April 2013 13:18
 
OSBA Taxation Committee Sales and Use Tax Subcommittee Report PDF Print E-mail
Monday, 30 September 2013 17:43

Click here to read the report Steve submitted on September 26 to the Ohio State Bar Association Taxation Committee, as Chair of the Sales and Use Tax Subcommittee. Of particular interest is the Board of Tax Appeal’s decision in Schlegel v. Levin (May 23, 2013), BTA Case No. 2010-A-1757 where the Board notes that the casual sale exemption must be supported by evidence of the seller’s use of the property. This is consistent with the statutory language which only requires that the property had been subject to the state sales tax jurisdiction of the selling party, regardless of whether tax had been paid. This issue arises frequently in the context of an airplane purchase. Let us know if you have any questions.

Last Updated on Tuesday, 01 October 2013 15:16
 
Supplemental Executive Retirement Plan ("SERP") Was A Pension Exempt from City Income Tax PDF Print E-mail
Monday, 31 March 2014 00:00

The Tenth District Court of Appeals affirmed the Ohio Board of Tax Appeals (“BTA”) determination that a SERP provided a pension benefit even though it was part of a nonqualified deferred compensation plan. See McDonald v. City of Shaker Heights Income Tax Board of Review, Court of Appeals of Ohio, Tenth District, No. 13 AP-71, February 27, 2014.

The SERP benefit at issue was not a salary deferral and was unfunded before the taxpayer’s retirement. The benefit was intended to replace a portion of the taxpayer’s pre-retirement income after taking into consideration other benefits to be received through a qualified plan and Social Security. It was received in the form of joint and survivorship annuity measured by the joint lives of the taxpayer and his wife.

The City of Shaker Heights (“City”) sought to tax the present value of the SERP benefit, even though “pension” income was specifically exempted from taxation under the City’s Codified Ordinances. However, the Ordinances failed to define what constituted a pension. So, the BTA used the common meaning of pension – “any plan sponsored by an employer that provides for post-retirement income that’ s designed to support their income for life.”  The SERP benefit at issue met this definition and was, therefore, not subject to city income tax. Particularly important appears to be the fact that no portion of the taxpayer’s salary had been deferred and the SERP had not been funded prior to retirement. The Court of Appeals concluded that the BTA’s decision was sufficiently supported and was not unreasonable or unlawful.

Many municipalities have similar taxing statutes, but have also taxed these types of SERP benefits. Refund claims may be available if the tax was paid within the recent past. This decision can also be relied upon in addressing the taxability of other post-employment benefits paid by an employer, especially where the taxing authority does not explicitly define the nature of its nontaxable income, such as pension income.

 
Small Business Owners Receive 50% Deduction for Ohio Personal Income Tax PDF Print E-mail
Tuesday, 18 February 2014 00:00

Last year’s budget bill added a 50% deduction for Ohio personal income tax for small business owners up to $125,000. R.C. 5747.01(A)(31). This broad deduction applies to business income created by nearly all Ohio small businesses, regardless of form, including S corporations, limited liability companies, partnerships, and sole proprietorships. All small business owners (Ohio residents, part-time residents, and non-residents) are entitled to the deduction, as long as they have business income sourced to Ohio. Further, the full deduction may be claimed by multiple owners of the same qualifying business, although limited to $125,000 per taxpayer even if he/she owns multiple small businesses. 

The Tax Commissioner’s recent Alert to All Ohio Small Businesses provides further details on this deduction, which is claimed on Part I.D. of Form IT SBD.

 
Steve Dimengo Interviewed by WKSU Regarding Recent Property Tax Victory PDF Print E-mail
Wednesday, 17 August 2011 20:01

The Ohio Supreme Court in WCI Steel, Inc. v. Testa recently held that a taxpayer was permitted to introduce a new property valuation at the Board of Tax Appeals, provided the proper objections were preserved. In an interview with WKSU, Steve explains that this holding applies to real property tax cases too, even though WCI Steel, Inc. involved Ohio personal property tax.

 

For more information regarding this case, check out our previous post Taxpayer Allowed To Present New Appraisal In Property Tax Appeal.

Last Updated on Wednesday, 17 August 2011 20:08
 
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Ohio State Tax Attorney, Steven A. Dimengo

Steve Dimengo is recognized as one of the leading tax attorneys in Ohio, where he has been serving clients for over twenty-five years. Full Profile. Cases. Email.

 

Ohio State Tax Attorney, Richard B. Fry III

Richard Fry is an Associate focusing on business law, specifically taxation. He holds a J.D. and Masters of Taxation from the University of Akron. Full Profile. Email.

News

Steve will be speaking at the Lorman Sales and Use Tax in Ohio Seminar to be held in Akron on January 21, 2014.  He will be discussing Manufacturing Exemptions, Transfer of Business and Personal Liability for Sales tax.  Click here to see more (and register).

 

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