Trial Court WIns
| The Issue | Did Strata lease medical lasers to physicians (taxable) or did Strata sell integrated skin therapy services (non-taxable)? |
| The Outcome | After a full day of trial and three witnesses, ALJ Connolly issued an extensive decision in favor of Strata. He held Strata’s “provision of the device itself under the usage agreement is best viewed as just a part of the overall service of managing the non-medical aspects of providing XTRAC laser therapy.” [Note: the administrative Tax Appeals Tribunal reversed and the case is on appeal to the Appellate Division.] |
| How We Won | The facts were critical. First, the usage agreement did not contain terms indicative of a lease contract. In fact, the Division’s lease characterization was contrary to its own guidance following the EchoStar decision. Second, Strata provided its physician clients a broad range of services that went far beyond just leasing a piece of equipment (help with marketing, arranging patient appointments, facilitating patient medical insurance coverage). And Strata was not paid based on possession of the laser, but rather paid based on treatments purchased – receiving nothing if no treatments were bought. |
| The Issue | Could NJ Division rely on a regulation to tax Infosys’ worldwide income? Or was NJ limited to taxing the portion of global income that was taxable on a US federal tax return (excluding treaty-protected income and income not effectively connected with the US trade or business)? |
| The Outcome | The NJ Tax Court awarded a $6M refund to Infosys on summary judgment (without trial), rejecting the Division’s attempt to tax all global income. Generalized language in the NJ statute about taxing worldwide income was not enough to trump the specific incorporation of the federal tax base, and could not support adding treaty-protected or non-effectively connected income to the US federal income tax base. |
| How We Won | The path to summary judgment was careful explanation of how the federal income tax system came to exclude certain types of global income and tie that into the NJ corporation business tax statutory scheme, building off of the prior good authority in the IBM case. The key was that if the NJ statutes did not authorize the broad global taxation that the Division sought, it simply could not be done by regulation. |
| The Issue | A week-long trial was needed to resolve the factual and legal issues surrounding whether wireless Internet tax access was a taxable service and whether an abatement was owed. |
| The Outcome | Massachusetts Appellate Tax Board ruled in favor of New Cingular Wireless and determined that its sales of Internet access services were shielded from taxation by the Internet Tax Freedom Act. |
| How We Won | The Department put us through our paces, disputing every legal and factual element of our abatement claim. Careful briefing and detailed trial testimony (including refuting the DOR’s expert witness) convinced the ATB that New Cingular met its burden of proof with respect to the nature of the service, the support for the abatement amount, and the adequacy of the mechanism for returning refunded tax to New Cingular’s customers. |
| The Issue | Whether the Division could insist that a vendor advance a tax refund to its customers before making an application for refund on the customers’ behalf, or whether the Director was required to acknowledge the statutory right to seek a refund by reviewing the claim without first requiring the vendor to pay an uncertain refund to its customers? |
| The Outcome | The Tax Court rejected the Division’s position on summary judgment: “A contrary interpretation of the statute also would impose an unreasonable requirement on persons required to collect the tax. A person required to collect the tax, without any assurance of success on its refund claim, would have to repay to each of its customers all of the sales tax it collected before it could even ask the Director whether the refund was warranted. In the event that its refund claim ultimately was denied, the person required to collect the tax would be left unable to recoup the taxes it returned to its customers.” |
| How We Won | The Tax Court embraced our careful construction of the NJ sales tax refund statute and our description of the unfairness of requiring a vendor to advance refunds to its customers without knowing if the Division would even approve a refund to the vendor. The Division held the cash, which had been remitted by the vendor, and the Division was obligated to analyze the claim before insisting that the customer be repaid. |