Hosts & Guests

Judy Vorndran, Leading Partner, SALT

Meredith Smith, Senior Tax Manager

Leah Robinson, Attorney, State and local Tax Partner with Mayer Brown in New York


Litigating SALT Cases with Leah Robinson (Part 1)

[00:00:00] Introduction: Welcome to SALTovation. The SALTovation show is a podcast series featuring the leading voices in SALT, where we talk about the issues and strategies to help you make sense of state and local tax. Today, we share with you our conversation with Leah Robinson, an attorney and state and local tax partner with Mayer Brown in New York.

In this episode, Leah notes some of the most interesting tax cases she has litigated and her thoughts on what could be deemed government overreach and some state tax auditor gotchas that we should all be aware of.

[00:00:37] Meredith Smith: Thank you so much for being with us today, and we're really excited to get this chance to talk to you and pick your brain.

And I guess to start, so you worked in government for a couple of years in private practice for various firms, what are some of the most interesting cases that you've seen and you've litigated in the kind of state and local tax area?

[00:00:58] Leah Robinson: Yeah. You know, it's interesting. I've in the 20 years I've been doing tax work.

I've, I've worked in four places. I started off at the IRS office of chief counsel and then have spent time in three different firms. And each one has been such a different experience. Working at IRS chief counsel was right out of the LLM program. I didn't know anything. And after being there for two weeks, I got put on the strategic trial attorney team.

Or what was at the time, the world's biggest transfer pricing case in history. It was a $6 billion case. It was like, so SmithKline litigation since then there has there have been bigger transfer practices in cases, but at the time that was the biggest tax case that the us had ever had. And there were 20 of us on it, and it was all of these really great experiences.

And the main takeaway for me from that case was that I wanted nothing to do with transfer pricing.

So I, I left the federal government. I picked up the phone and called the one attorney I knew in New York, uh, who wasn't on the Glaxo Smith Kline case. And he happened to be a partner at McDermott will and Emery. Um, and I called him up. He had been one of my professors, Satan, local attorney, Richard Levy.

And I, I said, do you know anybody in New York who's hiring? And he said, oh yeah, I'll hire you. Come in tomorrow. And I, you know, two weeks later, president McDermott and thought to myself, this is great. I went from federal work where all I did for a couple of years was transfer pricing, which is international, right, domestic to international. And I'm like, now

I get to do state and local, which means I'll never see transfer pricing again. It's perfect.

What's transfer pricing, and I made it about a month before there was any transfer pricing work dropped on my desk. I did, but I really forgot, man. I was so happy and right around then was when New Jersey, um, started using what later was disclosed to beaching bridge for transfer pricing work, and a few Southern states, Alabama and Louisiana.

They were also also using it. And I was asked to start looking at it. You know, one of our clients got like a a hundred million dollar assessment, um, transfer pricing, and I started looking at it cause I had just come from, you know, the, the federal practice of using it. So I did have that wonderful month of, of no transfer pricing.

Um, and now it's huge. So, so to sort of, you know, exactly come full circle earlier this year, um, one of my partners and I want a transfer pricing case. In New Jersey, where having the experience from the federal background was really helpful. You know, I worked a lot when I was with the IRS officer chief counsel, I was working with the experts, you know, there were 20 of us on the case and everybody had their role.

Obviously there was the mastermind of the overall strategy who did everything on the case, but the rest of us each had a designated role. And my role was to work with a couple of our experts. Send it back to those are experts that you now see regularly in the state transfer pricing cases. So it's interesting.

It's all world, you know, it's a very, very small world, but then after, after there I went to McDermott and I was at McDermott for nine years and I loved working there and it really was wonderful. I had. Great experience of working with two of the best known state tax attorneys at the time, our Rosen and Peter favor.

And they were really great mentors and teachers. And then I left there and went to what's now Eversheds, which was like really incredible being at a dynamic practice that really understood. Business development and connecting with the market, you know, parties, right. For nine years, I wasn't invited to this then Sutherland parties.

And all of a sudden I was there and it was, it was great. Um, and I, you know, I learned a lot at both of those places, but then I had the opportunity to build a state and local practice that affirmed that didn't have one, which is why I, uh, Left, you know, probably the fastest growing practice there was, um, to do it on our own.

And it's been great. So, you know what your, your, I think your specific question was, what are some of the more interesting cases that I've worked on? I think all of us always remember like the first. You know, case that we got to litigate, um, or at least those of us who do litigation, you know, the first case that I got to see through, you know, help with the audit, work on the litigation, actually get a decision and win for me, that was an IBM case in New Jersey on extra territorial income.

And that was a fun case because I, there was an argument I really wanted to make. And the partner in charge on that case, I was an associate at the time. The partner in charge. Didn't like my argument. So, you know, we, I wrote the brief and I had the argument in there and the partner crossed it out. We don't need this argument.

Let's go with the other. So I made all the other changes, gave it back. I lost my argument in there and he crosses it out again. And like, I really know it's a good argument. But on the third draft, he said, fine, leave it then. Um, and in fact, we won the case, both on the argument, the primary argument, which was the one that, you know, we always knew we were going to make, but the judge also addressed my secondary argument and we went on that too.

And what was great about that was primary argument was a statutory argument, you know, about the law and how a particular regulation meshed with the statute. Okay. My argument was a fact argument about how, how that company's, SPACs applied to the provision and we went on both. And what was important is when, when cases go up on appeal, Right.

There is in many states, the legal issues are reviewed de Novo, meaning the appellate division, right. Looks at it with fresh new eyes, but factual issues. There's deference to the decision below. So had the state appealed, which they didn't appeal, that that case is still still on the books as a win, but had they appealed, we would have had like a presumption in our favorite.

For the decision because of the factual argument that I, you know, kept, kept pushing and pushing. Now I would give to associates to ignore when the partner tells you to take it out, you know, in retrospect, Maybe not, you know, I don't know. I mean, I guess in retrospect it was the right thing to do, but, um, so that was one of the, you know, your first win, I think always, you know, sort of resonates, but I think probably my favorite case that I've ever worked on, although there's a lot that I've loved working on.

Um, I think I fall in love with every project I'm on to be perfectly honest. Well, I guess two, she would be tied for favorite. I got to argue in front of the Missouri Supreme court at the beginning of 2020. And that was like, Mind blowing or was that 2019? I screwed up everything for me. It was January before the world shut down.

I wasn't wearing a mask.

[00:08:17] Meredith Smith: How about that?

[00:08:22] Leah Robinson: That's her concern was whether I was checking my firearm because there were signs about checking your firearm. Um, I did not have a firearm. Um, you know, there weren't mask signs right now. You walk into a building and they're signs about masks back then. And in Missouri signs on the door where, you know, declare your firearm before. So worried about a map that doesn't exist yet. So like that was a really fun case arguing in front of the Missouri Supreme court. But I think like my favorite favorite is if I'm really honest and hopefully the other companies that I worked for aren't listening, but my favorite favorite case was, um, a case that, uh, I litigated along with Peter Faber for a company called labor ready.

And it had nothing to do with really with the substance of the case, but it was a procedural issue. We had had an odd. And the audit got resolved in New Jersey at the time had an amnesty and the audit got resolved through the amnesty, but then we knew that the taxpayer and the state had not reached an agreement, the issues for future periods, it was state, it was a sales tax space.

And the question was for temporary help services. Do you look at the temporary help services, its own category and therefore either taxable or not, or do you look through, and if the temp is cleaning floors, it's taxable because that's, you know, janitorial services or property, or if they are filing, right.

They go to an office and they're filing, it's not tax, but like, Is it its own service or do you sort of look through that was the issue. We had a really big disagreement, right? They solved old years because the amnesty New Jersey had had this great interest break. And so how could we not settle, but we didn't know what to do going forward.

And it wasn't an audit, but we knew we were on the state's radar. So we filed a declaratory judgment action. So in other words, there wasn't an audit. There was no assessment. There was no refund claim denial. There was no assessment. There was nothing, there was no traditional ticket to court and a decision.

Um, but we sort of went outside of normal tax procedure and decided to look, you know, what w what are big court rules? I used big court to describe non-tax squirt. I maybe I shouldn't.

What do they do in some of the other courts when you need to know an answer, but there's no way to get one. And so we filed a declaratory judgment action into tax court, which basically said, we know that there's a judicial controversy, meaning we disagree with the state, but we don't have another option to get an answer.

And so we filed that. State very much protested. You can't do this. You don't have a refund denial. You don't have an assessment. You have administrative remedies that you haven't exhausted. And ultimately we got to briefed, it had oral argument and the judge agreed with us. The judge agreed, but no way for that taxpayer.

To resolve this disagreement other than jumping to tax. And so like that case me is my favorite because we thought really far outside of the box completely supported it. Right. Sometimes you get great ideas

[00:11:40] Judy Vorndran: to pay for it.

[00:11:40] Leah Robinson: Right, right. Like they don't want their names associated with something or the money or whatever that particular company was very.

Um, we worked directly with the general council and they were very willing to, they wanted an answer. Um, so we ended up getting the, you know, a win on the declaratory judgment. Now, interestingly, lots of other taxpayers have tried to do declaratory judgment actions since then. And every single

one has failed.

[00:12:40] Judy Vorndran: Wow. It's a very narrow set of facts. Where you can do it. Um, and I think that some, some folks have tried to read that a bit more broadly and even the same judge who, who granted our declaratory judgment action has denied several others. So, you know, don't want, don't want to plant in people's heads as like, here's a way to get a quick answer on an issue.

Cause it, it does not always get you there, but when the fact why not, it's a really great tool that empowers the taxpayer. Why. Three years for an audit, right? And Latina search and chief forever. It's very

[00:12:48] Leah Robinson: stressful actually in sales tax liability, but you don't want to overcharge your customers. So if there's way to get the answer quickly, well, that's the answer.

Look through line by line or treat the items taxable.

[00:13:03] Leah Robinson: So we never got an answer from the court judgment action got us into court. This really frustrating twist. Um, the judge said, I can grant you access to the court through the declaratory judgment. Right. I said, come here, but I can't stop the division of taxation from doing an audit now.

Okay. So the state ended up starting an audit. Wouldn't respond to discovery. Wouldn't do anything because they said, well, we're in the middle of an audit. We don't have him answer. So what it really ended up doing in that case was a kick-started the audit, which. It got resolved without a court decision.

So I think they're still in, that was a New Jersey case. I think there's still no New Jersey answer on that particular issue. I mean, to me, the answer is clear. It is its own enumerated. It's its own separate service and it's not listed in the enumerated services, so it's not taxable, right. It's not practical to look through, but what if you're a temp half of the day, you're going to be doing the filing and the other half of the day, you're going to.

I don't know, it'd be wiping down white board, right. That's service to TPP, but the, like, it's just not. It's just not practical to expect temps to report or, or, or the customer or the temp agency to keep track on an hour, you know, their

[00:14:28] Meredith Smith: general am I going to do like task my day as to like what you did?

[00:14:33] Leah Robinson: I'm in the analogy I really, really liked, um, particularly because our judge had had younger children at the time was to a babysitter. Right. And like I've babies, you know, not anymore. Um, but you know, I've babysat when you babysit half the time you're looking at the kid. And then I used to do the dishes that were in the sink.

Cause that drove me nuts. If there were still dishes in the sink and I would do some other things. So like as a babysitter, the babysitter two days ago to go pick my kids up from school. So it's like, is that a ride share service in addition to like, I set her up to like kid my kids, cold pizza. So not a whole lot of chef preparation, deliberate and cleaning.

And like,

[00:15:17] Leah Robinson: yeah. Say that when your babysitter comes, you should parse it out and pay sales tax for the hour that they're driving your kid or cleaning, but not for the hour that they're sitting on the floor playing with. Like it's, it's just not lot of all it's babysitting is its own. Activity. I mean, I always thought that was the right answer, but we never got the answer from the court, but we did get the prestigious oral mechanism, which, you know, I think, I think it should be used more often.

And like I said, it's not always available. You have to really have the right facts for it. But when you have those facts, why, why wait? You know,

[00:15:55] Judy Vorndran: it's just the state to take action, make decisions. This is, I think the hardest thing where taxpayers really struggle with whether to take it to litigation, the money needs to be there, but it's the time, the expense, the effort, the uncertainty of living with the in-between moments.

And then government's not willing to concede or deny or whatever. Right. And it really makes business hard to work through it.

[00:16:17] Leah Robinson: It's tough because for government often. It doesn't cost them that much more to just say, we're drawing our line in the sand. If you don't like it, take it to court. Right. Right.

But on the, on the payer side or the tax, you know, on the vendor side, if it's sales tax, it's a huge decision. Right? It's expensive. It's internal resources. It's soft costs. It's like a reputational hit like, oh, this big profitable company. Is challenging this state during a down economic period, right? Like, like, you know, there's a lot of sensitivities that go into the corporate or I guess not just corporations, but like the business side decision on whether to litigate, not just how likely are we to win.

Yeah, all


[00:17:06] Leah Robinson: the soft considerations. And often I, you know, in my experience, those often rule the day and often what makes the decision, not our likelihood to win, but the impact on our internal resources, the public, you know, if this gets publicized, you know, various things, I do work for one company who will not leave.

They just have a corporate policy of, they're not going to litigate tax issues. They'll take things to see how far they can go and subtle, but they are not going to litigate. I had worked with another company that was like, we are not going to settle the gate and they do. And you know, we're, we're in court for them.

Um, the other one, they won't, they won't litigate. It doesn't matter how right they are. So we'll, as far as we can, we'll go to inform. Peels, but they won't go further. Which means, you know, I know we're going to settle when we get there. And you know, that makes a lot of sense for the company, for their internal policy purposes.

But you know, it doesn't mean that we're getting to the right answer, which is what, and leave something

[00:18:11] Judy Vorndran: out there for people to follow. So there's no, no breadcrumb trail of what do we do next taxpayer. I know that's kind of the frustration. I feel like there's all the secrets stuff that happens that you know about.

Cause you settle that case, but it was never published anywhere. So it makes it very difficult to combat what I will call an

[00:18:30] Leah Robinson: unruly auditor. It's actually why it's so important for us to get along, right? Like there, there are a number of us who are direct competitors. But are also friendly and like connect with each other and like, what are, you know, obviously not breaking confidentiality provisions, including your group, but getting a sense of what's, you know, what's going on and, and you know, what issues are we seeing go up where the settlement ranges, we have to talk to each other because the states know, you know, each individual department of revenue knows what it's doing with all different taxpayers and various departments of revenue.

You know, not to say all 50 of them sit down and chat, but. Uh, roof some of the regional groups, likeness, Stella, or seed, or I can never pronounce. With Sada. I hope I'm not. Let's say the Western state, whatever they get together and talk. And then through the MTC, they get together and talk. But I think not often enough are taxpayers getting together to talk or their, or their advisors.

And I think we often can find, and there's reasons not to, right. They have competitive issues, et cetera. But you know, when, when we, when, when the, when the representatives and advisors can get together and share information, we can deliver a better service to our.

[00:19:48] Judy Vorndran: Right. I get a better idea about like, well, have you thought about this approach?

It may not be like the typical path, but maybe you want to pivot, like you said, getting a declaratory judgment. Very interesting. Um, legal strategy. Yeah.

[00:20:00] Meredith Smith: Well, cause it's the answer from the state. It's like, well then you should just get, like, if, if there's ambiguity, you should just request like a private

[00:20:06] Leah Robinson: letter ruling that

[00:20:07] Judy Vorndran: takes a while.

Well, that

[00:20:09] Meredith Smith: takes a while, but then I'm like, I

[00:20:11] Leah Robinson: there's no

[00:20:12] Meredith Smith: opportunity for disagreement. Right. Cause if it's, if you get like a private letter ruling

[00:20:18] Leah Robinson: isn't that it, you know, from the state's perspective. Yeah. In some states that private letter ruling would be another ticket to court. Right. You, you know, you would have the right to challenge that in court, but not, you know, I don't know that that's always true.

I know it's sometimes true, but you know, the biggest problem, I think it's what, you know, W what Judy was just saying is the time to take, I got an advisory opinion for a company in New York. It took us four years to get the advisory opinion,

but more importantly, the company was acquired during that period. It was a sales tax advisory opinion, and it related to New York. Very in my mind, overly aggressive position regarding sales tax on SAS software as a service, which I've been very vocal in challenging since 2008, um, when they came out with it.

And so I had advised the company that I did not think that their proposal was under New York law and they were not collecting. And we went out and we sought an advisory opinion, right. That's the right thing to do, right. The states always say, if you're not sure, go get an advisory opinion. So we filed it in 2016, December, 2016, and we got it a year ago in November.

And, but here's the ironic thing in that period of time, the company was acquired and the escrowed diligence report concluded that that service was taxable. So they started collecting tax on it. And for years they were collecting tax. And now we get an advisory opinion that says, no, Pricey opinion agreed with us that it was not possible.

Oh wow. They were collecting. Right. They started off not collecting that's when it was, you know, the advice that I had given them. And then the new owner started collecting based on a big for due diligence, you know, study. And then, so, so I call it an, I didn't know this at the time, but I called them up and I'm like, oh, we finally had our advisory opinion.

We were right. I'm emailing you a copy right now. And I was like, great. What do we do now? We've been collecting. And the other problem is their product evolved in that time. Right? It wasn't exactly the same product. It was pretty similar. And I, you know, my opinion was still that it wasn't taxable, but the guy was like, well, wait a minute.

Are we now concerned about false claims act? Is somebody going to come after us? Because we've been collecting and there's an advisory opinion that says we shouldn't have been collecting. You know, and it's just, so the amount of time it takes to get an advisory opinion now not to say, you know, Our soccer really long time.

I mean, not to say they always do. And some states are incredibly efficient in getting them out the door, but, you know, again, it's just, it's not a perfect solution either. It takes so long that you've changed your position or your product has changed. And if your product is different enough, that set of facts that was described, right.

Is it even binding anymore? Does it even give you the protection that you need?

[00:23:27] Judy Vorndran: Well, and it's interesting. You say that because you went out, you went to the effort, they would've said, oh, well, we're just going to take the position of deferring the tax so that, you know, once you get to the customer, which means we all pay more, you know, so now we've got more tax go into the government that they're entitled to.

And yet, what do you do with that? You felt, you say I'm embarrassed to say overtax. You like now you got to go get refund claims. I mean, what a mess. And you know, it's interesting. You find governments on audit saying to you, we can always tax it and the customer can apply for it.

[00:23:55] Leah Robinson: Right. It does that because we are also very efficient.

I know that.

[00:24:01] Judy Vorndran: Oh yeah. Right. Like they don't get done right away. Yeah. Anyway, really, it's just an unfortunate, isn't it? And these sort of gray areas about the time it takes to litigate them and how you try to do the right thing for your clients and for the taxpayer, you know, including myself whose creates war costs and consumption.

[00:24:18] Leah Robinson: Right. And that, that brings up an issue where my view has changed a lot over time. And that is whether to pay. Or not pay, right? Like we all have heard don't pay, don't pay, don't pay, right. One of the godfathers of our field, that was his slogan. And you know, for many years, the common wisdom was not to pay your right, not pay assessments.

Now some states you have to pay to play Washington, for example, but other states you don't have to. So we just changed that rule in Colorado. Yeah. So now you have to pay, or you don't have to pay, don't have to pay, but that's a huge issue to pay. It's a huge issue to pay. But the bigger issue is if you don't pay the interest because it becomes a whole other player in the analysis.

And I have changed my story on this. Right. I now advise companies for the most part. To pay let's pay and seek a refund or in some jurisdictions, if we're litigating, we can pay and get an agreement with the state, like a deposit type agreement where it's not really paying and seeking a refund, but it's making arrangements with the state where the payment is made to stop the additional.

Accrual of


[00:25:36] Leah Robinson: but it's not converting it to a refund claim. Like, you know, a few things have changed my mind on that. The amount of time it takes to litigate in the very high interest rates that states are charging. I mean, let's not just talk about Wisconsin, right,


[00:25:52] Leah Robinson: It's like 15%. An outlet liar.

Um, but for the most part, we're looking at five, six, 7% interest, you know, not every company is going to go invest that money conservatively and do that well. Right. So sure some can, but, um, th the way I really seeing it become a problem is so we have our audit. Right. And so years are going by an interest, you know, is, is accruing because nothing is paid.

And we still think we have a really good chance of winning this. And the audit is, is being conducted by the tax department at the company. Right. And they're, they're fully on board. We get the issue. We're, we're good with this. We feel strongly, we're emotionally connected to the issue we're going to win.

And so they're fine. Not paying. And interest is sort of out there in the back of everybody's mind, but we move forward. Okay. Now we get to litigation and what I see happening more and more is once we get to litigation, the role of the tax department Oaks at the company. Is is reduced at least a little bit because the general council folks at the company are getting involved.

You know, I've seen this much more in the last two or three or four years versus 15 years ago where we'd litigate, just interacting with the tax folks. So interacting with the general council folks, and they're looking at the numbers and they're seeing this liable. Plus this big interest number if federal law changes, right?

The job duct stability of interest has changed. And we are often, you know, the audit starts a couple of years after the tax period, the audit takes two or three years. The litigation takes two or three years, you know, what do they say? Seven years is that magic number where the interest might double, you know, might match your assessment.

And so now we're looking at matters where. Even if we got a 50% settlement now, they could've just paid a hundred percent. Back then, and then the same exact spot and not have had all of these resources and, and whatnot. And when I'm finding, especially now, when I'm dealing more with the general council folks, that accompany is they look at that interest number and the reserve.

And they're saying, if we can just get rid of that. For those, you know, for the reserve, let's just get rid of it rather than focusing on what's the right answer. What do you mean going forward? Like, are we right? Or are we just going to pay to be done and I'm speaking largely in generalities? No,

[00:28:24] Judy Vorndran: I used to say all was extended audit.

I used to say, you always want to send the fit waiver out of the gate. I have sort of said, maybe we don't want to do that at all. Maybe we want a number. Maybe we want to work against what they're going to throw our way, as opposed to being on the backend of some crazy thing they make up. Like once they look at our stuff.

So I have really, I've just found, you can always have a one size fits all and you have to make different decisions about how you manage some of this and the expectations, you know? Cause everybody's all riled up, right? Oh, we gotta do this. It's the raw right thing and blah, blah, blah. We're being taken advantage of as a business.

Which is, I feel unfortunately often true, but the time it takes to get there is disheartening at most.

[00:29:07] Closing: This concludes the first part of our episode with Leah Robinson and make sure to tune in next week for the rest of this conversation. This podcast is for educational purposes only and is not intended, nor should it be relied upon as legal tax accounting or investment in.

You should consult with a competent professional to discuss specifics of your situation and the applicability of the information presented.

Questions asked and answered in this Episode:

  • What are some of the most interesting SALT cases that Leah has seen and litigated?

What You Will Discover:

  • [00:43] Leah’s background
  • [05:24] The first case she helped with the litigation
  • [07:48] Her favorite cases to work on
  • [12:58] The decision whether to litigate
  • [20:08] The time it takes for private letter rulings and advisory opinions
  • [24:18] Whether to pay or not pay


  • “What do they do in some of the other courts when you need to know an answer, but there’s no way to get one?”– Leah Robinson [10:45]
  • “There’s a lot of sensitivities that go into the corporation…, but the business side decision on whether to litigate, not just how likely are we to win, but all of these soft considerations. And often in my experience, those often rule the day.”– Leah Robinson [16:51]
  • “It’s actually why it’s so important for us to get along, right? There are a number of us who are direct competitors, but are also friendly and like connect with each other. Obviously, not breaking confidentiality provisions and closing agreements, but getting a sense of what’s going on and what issues are we seeing go up, where the settlement ranges. We have to talk to each other, because the states know… you know, each individual department of revenue knows what it’s doing with all different taxpayers.”– Leah Robinson [18:32]
  • “It’s a huge issue to pay, but the bigger issue is if you don’t pay, the interest becomes a whole other player in the analysis. And I have changed my story on this, right? I now advise companies for the most part to pay. ‘Let’s pay and seek a refund’ or in some jurisdictions if we’re litigating, we can pay and get an agreement with the state”– Leah Robinson [25:00]



Relevant Links:

  • Leah Robinson on LinkedIn: