From November 14 through 17, the Multistate Tax Commission (MTC) held its annual Fall Meetings in Little Rock, Arkansas. The MTC’s Uniformity, Executive, Strategic Planning, Audit, Litigation, and Nexus Committees met during the week. Below is a summary of some of the discussions.

The Uniformity Committee meeting included the following topics:

  • Sales Taxation of Digital Products Working Group: Nancy Prosser, MTC General Counsel, confirmed that the working group will develop a white paper outlining various approaches to taxing digital products. She stressed that the working group will: (1) be constrained by the Internet Tax Freedom Act’s (ITFA’s) federal prohibition on multiple or discriminatory taxes on electronic commerce, and (2) communicate with the Streamlined Sales Tax Governing Board during the drafting process. Gil Brewer, Chair of the working group and Senior Assistant Director of Tax Policy, Washington Department of Revenue, explained that the group planned to share draft definitions at the next MTC Uniformity Committee on December 8. Eversheds Sutherland will be closely monitoring the working group’s activities given its potential significant ramifications to expanding states’ taxability of digital product transactions.
  • Partnership Working Group: Laurie McElhatton, Attorney for the California Franchise Tax Board, Vice Chair of the Uniformity Committee, and work group Chair, provided a general update of the project, which currently consists of a comprehensive issue outline, draft model rules applicable to investment partnerships, research on sourcing for partnerships, and MTC-sponsored trainings for state representatives. State participants confirmed that they continue to receive feedback on the investment partnership draft model rules while moving to a new focus—sourcing. MTC Staff acknowledged that the project would have to pay special attention to pass through entity regimes and credits, as they have become an important issue. The update wrapped up with MTC Counsel Chris Barber’s education and entertaining “partnership tax quiz.”
  • Sourcing Regulation Review Report: Katie Frank, Tax Counsel for the California Franchise Tax Board and work group Chair for the project, provided a brief update of the project. Currently, the work group is focusing on the transportation and airline special industry model apportionment rules, which will continue to be the focus on the next work group call. MTC staff noted the purpose of the work group is to review the special industry model rules to determine whether the models should be updated. Many of those rules have not been reviewed in detail since they were adopted—some of these rules were adopted decades ago—nor in light of the MTC’s market-based sourcing model rules. The MTC originally adopted its general allocation and apportionment rule regulations in 1973, and last adopted amendments for such regulations in 2017.
  • Multistate POA: Eversheds Sutherland’s Nikki Dobay presented on the Multistate Power Of Attorney (POA) Forms, providing insights on the project’s inception and progress. Business representatives continuously expressed the desire for a multistate POA form to be created in pursuit of efficiency and uniformity. As a result, the project officially began several months back. Bruce Fort, Senior Counsel of the MTC, has helped facilitate and moderate conversations between state and business sectors. The POA in question would be accepted by states in addition to their existing POA forms, and would not require the states to pass any legislation. The states have been receptive to the idea. During the meeting, Helen Hecht and Bruce Fort from the MTC asked the states to communicate with either MTC Staff or Nikki if they believed the Multistate POA Form would not be accepted in their states. Thus far, no states have reported any such comments. The project will now begin its second phase: one-on-one meetings with the states to attempt to solicit feedback and encourage widespread adoption of the form. Stay tuned!
  • Marketplace Implementation Issues: To close the meeting, Eversheds Sutherland’s Jeff Friedman and Michele Borens provided the Uniformity Committee with a presentation on several marketplace facilitator issues. They discussed several double-tax scenarios that are arising under the states’ relatively new marketplace collection laws adopted in the wake of Wayfair. The conversation turned lively, and Jeff ate a lot of MTC-provided mints (before, during, and after the presentation). Representatives from several state departments of revenue have followed up with a sincere interest to work through double tax problems.
  • State Roundtable: The states provided updates on significant legislative and regulatory issues. Of note was Washington’s update, which highlighted that the State was considering the possibility of replacing its 1930’s era Business and Occupation Tax with a Texas-styled gross margins tax. An Oregon representative noted that the State’s attempts to enact a pass through entity tax had failed. Additionally, several states noted that: (1) states were issuing refund checks or other incentives because of unusually large budget surpluses (e.g., Illinois, Utah, Colorado); (2) states had adopted legislation related to the use of marijuana (e.g., Missouri, Arkansas); (3) states were enacting (or enacted) pass-through entity taxes (e.g., Arkansas, California); and (4) states were in the process of enacting (or enacted) legislation to reduce income tax rates (e.g., Missouri, Arkansas, Kansas, Iowa).

The event wrapped up with the Executive Committee Meeting on Thursday. During the meeting, MTC Staff announced that the State Intercompany Transactions Advisory Service Committee would dissolve. Instead, transfer pricing issues will now be overseen by the MTC’s Audit and Litigation Committees. Eversheds Sutherland wrote a detailed legal alert on this issue. Click here for more information.