McDermott extended its popular Tax in the City® program to Seattle, with a meeting on October 12 at the Amazon headquarters. McDermott established Tax in the City® in 2014 as a discussion and networking group for women in tax aimed to foster collaboration and mentorship, and to facilitate in-person connections and roundtable events around the country. The Seattle program was one of the best attended Tax in the City® events to date, featuring a CLE/CPE presentation about Privilege and the Ethics of Social Media by Cate Battin, Kristen Hazel and Jane May, followed by a roundtable discussion in which Elizabeth Chao and Sandra McGill discussed international issues related to income from digital products. Britt Haxton and Kristen Hazel discussed planning considerations related to federal tax reform, and Diann Smith provided the state and local tax considerations related to both issues.
Five Key State & Local Tax Takeaways from Seattle:
1. The effect of federal tax reform on state corporate income tax liability has three high-level components:
- No conformity to lower rates
- Base conformity will flow through to states if states have not already decoupled – such as for depreciation, or do not subsequently decouple
- If items are not included in federal taxable income but essentially have a separate tax imposed, such as a potential minimum tax on foreign earnings, such income may never be included in the state tax base even if ultimately repatriated.
2. States continue to investigate how to broaden their sales tax base to include certain digital goods, such as streamed content. Be aware of state attempts to use existing telecom or cable tax laws to tax streaming.
3. States and taxpayers continue to struggle to define how certain digital goods should be sourced for purposes of the numerator. In some states, defining the product as a service, intangible, or tangible personal property has significant effects on whether receipts from the sale of such product are included in the numerator. In states that have adopted a market approach for all sales, there may still be difficulties determining which state(s) include the receipts in the numerator if the product is something that is accessed by multiple users across numerous states.
4. Privilege Update – Practice discipline with your privileged documents so as to minimize the risk of an inadvertent disclosure. For example, affirmative reliance on an opinion to avoid penalties could waive privilege.
5. Ethics Case Studies – The presentation walked through case studies regarding return errors, documentation retention policies, inadvertent disclosure, social media and more. Attendees used their cell phones to vote on what they would do when faced with these dilemmas, and discussed ethical and legal duties in those scenarios.
The next Tax in the City® meeting will take place in Chicago on December 14.