Recent Cases and Challenges in Tax Litigation with Jordan Goodman

Hosts & Guests

Judy Vorndran, Partner, State and Local Tax

Meredith Smith, State and Local Tax Senior Manager

Jordan Goodman, State and Local Tax Partner at Horwood Marcus & Berk Chtd.

What You Will Discover:

This week on the SALTovation podcast we discuss the ever-changing landscape of state and local tax with guest Jordan Goodman, Attorney at HMB Law. Jordan highlights the rapid pace of developments in SALT and the challenges faced by businesses and taxpayers. Jordan talks about the need to understand the impact of changing policies and regulations on businesses and individuals. He also discusses recent court cases and their implications for taxpayers. Jordan raises concerns about retroactivity in tax laws and the need for fair and transparent processes in tax administration. Listen as Jordan shares his thoughts on the taxation of digital advertising and the evolving nature of nexus rules. 


Topics Discussed in this Episode:

  • States’ competition and the need to expand tax bases
  • How retroactivity in tax laws creates challenges for taxpayers and may violate due process
  • Challenges faced by smaller retailers in dealing with compliance burdens
  • Alternative apportionment and the court’s role in determining its applicability
  • The need for a more comprehensive approach to apportionment
  • How taxpayers can engage with state and local jurisdictions to address tax issues and work towards fair and reasonable solutions.


    • “I think the competition among the states and the locals now are really emphasized because everybody went to a single sales factor. You have to import it. But now they’re realizing there’s limitations to that and they’ve got to look at things differently. ” -Jordan Goodman [04:30]
    • “The government is looking for the ability to raise revenue without offending the electorate by putting it on people. Whether it’s corporations, which always was the tag, but now it’s wealthy individuals. They don’t pay their fair share, so you’re kind of pushing the burden out to other people. And the wealthy people only get one vote. So it’s a very good common man type argument.” -Jordan Goodman [08:06]

    • “If you’re going to pass a regulation it has to go through a certain process and you have to have open comments and time for it and meetings and it’s got to go for a first reading and a second reading and all the states are different. It’s a unique way to challenge things but it can be very effective.” -Jordan Goodman [16:04]
    • “I was raised with this principle that as an advocate, I can argue both sides of any issue and I actually think I’m obligated to do it. The state should pick a side, right? They have to decide what side they’re on and go with it. Now, you may make half the people angry and half the people sad, but that’s the choice they have to make for advocates. We can argue both sides and in fact makes my wife very angry when I just play devil’s advocate because that’s.” -Jordan Goodman [24:15]

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    [00:00:00] Meredith: Welcome to SALTovation. The SALTovation Show is a podcast

    [00:00:05] Meredith: 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. All right, Jordan, thank you so much for being with us today on the Saltivation podcast. It's nice to have you back.

    [00:00:19] Meredith: You are our first repeat guest.

    [00:00:23] Jordan: Wow. I am quite honored. It was, uh, great to do the first time to do it the second time. The best thing about it, it's probably been a couple of years. There's so much going on. You would think in most fields, it like it goes at this glacial base. No, right. It's always moving.

    [00:00:42] Jordan: It's great.

    [00:00:43] Meredith: Certainly not right now. So for, you know, anyone who might be new, can you just give us. You have a very long, successful, great history. Could you just give us a brief overview of what you're doing, how you got there, and then we'll [00:01:00] dig into the new.

    [00:01:02] Jordan: Sure. No, Meredith, that's a very kind way of saying, given your own, but I appreciate that.

    [00:01:08] Jordan: It's all good. It's a matter of how you feel. So it's all good. Uh, let's see. I, Started my career in Arthur Anderson back in the mid 80s when state and local taxes was just getting started Um, in fact, I was part of the first state local tax team for Arthur Anderson back in Chicago in 1985 86 year And so it was something they said for attorneys in particular.

    [00:01:32] Jordan: It'd be a fun area Lots of growth lots of constitutional laws things that we studied And you know in many ways They were absolutely right. It's been a great career choice. Um, I left there after a couple of years and went to McDermott, Will and Emery, a large firm, um, was on the team that argued the quill case, um, before the US Supreme Court, intimately involved in all the mechanisms.

    [00:01:55] Jordan: Around that it was a lot of fun learned a lot Uh, and then made the second [00:02:00] best decision of my life other than marrying my wife Came to hmb What formerly known as ford marcus and burke now hmb legal counsel? And uh worked with fred marcus and marilyn withicam and a bunch of other people and just had phenomenal clients friends Growth of the area has been great.

    [00:02:17] Jordan: We do just about anything in the tax field And it's we're just talking about there's just so much going on. It's always challenging and I still love it And it's just great. There's so much to do still love

    [00:02:28] Judy: it That's a good sign for those of you considering a career like

    [00:02:31] Jordan: this, which most people don't Oh my god, I know no, but think about it.

    [00:02:36] Jordan: I mean, it was a every day. I remember when wayfair came out Really? Oh my god, half my work is going to go away next is for sales tax and all it's done has been Busier since then I mean it wasn't Right, and then we talk about Public 86272 going away. That's a whole different field. That's potentially open now to defend and fight against that There's always business remember judy business and [00:03:00] non business income right a huge issue And now we fight about not whether it's business income, but about factual representation And there's you know, and that's what we're seeing right now.

    [00:03:09] Jordan: There's always something new and fun that's going on Keeping it interesting and different. We're not doing the same thing over and over again

    [00:03:16] Meredith: When I think on that too, right? At the, at the end of the day, states are led by people and humans can change and legislate, legislators can change and policy can change.

    [00:03:26] Meredith: And so when you're right, when you're governed by people, you have an opportunity for change and, you know, there could be a different department. You know, uh, leader of the Department of Revenue, and they decide to change XYZ, right? Colorado used to be pretty easy ish when it came to, like, income tax, even, we're gonna ignore sales tax.

    [00:03:47] Meredith: But then over the last couple years, they've decoupled from everything, they've, you know, I think it, a lot of it really started with Oracle and talking about, like, the unity and the foreign activity. And so. Yeah. At the end of [00:04:00] the day, people change, policy changes, and therefore we have to adjust.

    [00:04:04] Judy: Yeah. And then our business has changed though, don't you think?

    [00:04:07] Judy: I mean, all of us are talking right now because of the internet, because of Wi Fi. I mean, that is a crazy pivot. And, and anybody can touch anybody and have a client just about anywhere now. If you're willing to do it via zoom or teams or whatever, right? So that has really changed the character of how people can market And increase their business their customer profile

    [00:04:32] Jordan: and I even think the competition among the states and the locals now you know really emphasize because Everybody went to a single sales factor because there's a way that could be competitive with the iowa that had it from the beginning, right?

    [00:04:44] Jordan: You know, you're gonna import it, but now they're realizing there's there's limitations to that and they've got to look at things differently and then You know, increasing the rates becomes a challenge. You can't do it beyond a certain amount. Inelasticity of demand with tax rates, gotta expand the base.

    [00:04:58] Jordan: Well, what's expanding? [00:05:00] Stuff related to the internet, services, digital products. You know, the future, I won't say looks bright, but the future for SALT practitioners, there's gonna be plenty to do and plenty to figure out. Over the next generation of people

    [00:05:14] Meredith: like you said, because we had a conversation very recently with, you know, a senior tax policy analyst at the tax foundation.

    [00:05:20] Meredith: And she, we were talking about some of the states that had done rate reductions and, you know, why maybe some of that is, and it's because of competition. And you never kind of like think about, I guess, you know, being vulnerable, right? I hadn't necessarily thought about that. I was like, well, yeah, there is a lot of, there is a lot to that

    [00:05:40] Jordan: right now.

    [00:05:40] Jordan: And, and, you know, and. And the thing that's interesting is that governments are run by politicians politicians run for re election How do you get re elected at least the olden days was based upon Lowering the tax burden or doing this or whatever else, right? So if you could campaign with saying we're going to get rid of the corporate net income tax [00:06:00] Oh, but by the way, we're going to have to raise other taxes to balance that out In state budgets or state budgets, but now they're saying we want to reduce the rate It seems attractive but state spending rarely goes down and this is you know This is what the cyclical nature of it is we're coming off the post pandemic years in 21 22 where the uh Excess the reserves were refilled at all the states and so they're reducing everything But now we're like before this year got to august september.

    [00:06:33] Jordan: We're supposed to be in recession Everybody got nervous about it. It's got to start looking at new ways, right? So it's be driven by the economy And how much they have in there and who they want to benefit, really, just. We had Jordan

    [00:06:44] Meredith: as he spoke to kind of state coffers, right? We were at IPT in Dallas and what the comptroller of Texas came and liked to, and spoke very highly of the amount of excess that Texas had.

    [00:06:55] Meredith: And so very shortly thereafter. There was the announcement that they [00:07:00] increased the minimum tax or the no tax due threshold. I think they doubled it. They got rid of the no tax due return. So just from a franchise tax perspective, you know, Texas did some things to modify that. I don't know if, you know, that was a result of excess or it was a coincidence, but I don't know that there are much things that are coincidences when it comes to.

    [00:07:21] Meredith: Fiscal policy.

    [00:07:24] Jordan: Where was the election year? And when you do right and when you do things for small businesses and individuals They vote right and outside of citizens united They're the ones who are ultimately deciding who gets put in the office and you make things a little bit better for them in a year For the year before

    [00:07:40] Judy: election lower rates or take away base.

    [00:07:42] Judy: That's a big deal I feel like we've been seeing more adding to the base, you know, the digital advertising nevada commerce what eight nine years ago That was sort of like are you kidding me? You know, and now we're seeing the digital ads taken now, it's getting some legs wayfair, obviously, which I think, you know, we knew that was needed to happen because we were [00:08:00] paying too much e commerce eviscerating main street America, but still.

    [00:08:05] Jordan: Capital gains in Washington or excise tax, whatever you want to call it, right? Uh, we'll find out that's you know, one of the cases we'll get an answer in hopefully in 2024 if they take the case Um, but you're right. No, and that's that's that's that creativity between you know, whether It's the government looking for an ability To raise revenue without offending the electorate by putting it on people that you could point to whether it's corporations Which always was the tag, but now it's wealthy individuals.

    [00:08:35] Jordan: They don't pay their fair share So you're kind of pushing the burden out to other people and the wealthy people they only get one vote. So You know, that's it's it's a very Good common man type argument uh, but it's you know, and we're not done because States are only limited by what their state constitution and the federal constitution or the state federal statute say, right?

    [00:08:57] Jordan: So there's a lot more base out there that we [00:09:00] haven't tapped into and you're right judy the whole digital world We're just tapping it. I mean i've read how many articles in the last month about cryptocurrency and why aren't we taxing it now? I I'm not I will never lecture on what cryptocurrency is or is not I kind of accept what everybody else has said and just go with that I I but it seems to me it's it is a area where there is profit loss and certainly Proceeds and why wouldn't it be taxed?

    [00:09:30] Judy: Well, even sales tax. I mean a token a token You know a gaming token could be a fungible thing I mean, I don't know there's some even sales tax world world is impacted by that crypto. Um, and again All kinds of things and the app world is uh digital that is Potentially taxable for some

    [00:09:50] Jordan: reason or another it'll be interesting because I do have a client that is a um, a precious metal [00:10:00] exchange.

    [00:10:01] Jordan: Okay. And they've done a really good job of going around the country and getting lost to, to, to remove it from sales tax, likening to currency. And then you've got crypto even that has currency in the world, right? Cryptocurrency. And it's a question of, well, is it really currency? Is it not? It's traded back in the olden days.

    [00:10:23] Jordan: We had sheep and cows and goats that we traded to as currency. Okay. Certainly no one would say that it was currency, you know, certainly represents a value. It's not issued by any government It's not regulated by any government um per se so There's a there is a vast amount of Base still out there to be taxed either on a grocery tax sales tax

    [00:10:45] Judy: And the payroll taxes seem to be rearing their ugly heads.

    [00:10:48] Judy: I was just reading, you know we've got that going on in washington state where they're kind of going after the um, The payroll like just to get a little extra cash, you know, let's go after your payroll

    [00:10:58] Jordan: And yeah, no it [00:11:00] here our new mayor, Brandon Johnson in Chicago has talked about reinstating, what we used to call the head tax.

    [00:11:06] Jordan: You have more than 40 employees in the city and then you pay $5 a quarter on every employee over the city, which is the reason why they got rid of it is so anti-competitive. Move us, move your thousand people into the city and you'll pay on 960 of 'em, which is just. Bizarre, but again, uh, certainly city of Chicago, state of Illinois does have some budgetary concerns and that's a way to go at it.

    [00:11:31] Judy: No, because we have one in Denver, we have an OP, occupational privilege tax, and we have five cities in Colorado, some of which no one's even heard of that has one. So 68 bucks a year, some diminutive amounts, not a lot, but it is one of those annoyances for large employers that they do or do not know about it.

    [00:11:47] Meredith: Well, it's not even large employers, it's small employers. So you can have, I

    [00:11:51] Judy: think there's

    [00:11:52] Meredith: an income, well, and like contractors, I think if you earn like, uh, there's a minimum threshold that if you earn X amount of money [00:12:00] as a contractor in Denver, you're subject to the OPT, um, 400 bucks.

    [00:12:04] Judy: Pretty de minimis.

    [00:12:05] Judy: So,

    [00:12:06] Jordan: yeah, right. It's not the dollars necessarily. It's the compliance burdens. And then, right, then the penalties associated with the failure to comply where they get the money. It may be 60 in tax, but 100 minimum fine for penalties for not

    [00:12:21] Judy: filing. I call them nuisance taxes because they really get you.

    [00:12:24] Judy: And they're one of those gotchas that you're like, Oh, I didn't even know. And then you've got a lot of like ADP kind of knows a lot of this, but I'll tell you some of these small to medium software companies or whether they're trying to outsource payroll. They didn't know about them. They're trying to get in that game because it's a big market for payroll compliance, but they don't know about these ancillary taxes.

    [00:12:42] Judy: So we, you end up going to this cheaper provider and then missing the ball on some of your local compliance issues. So taxpayers are like, what? So

    [00:12:52] Meredith: then kind of transitioning that kind of using that gotcha as our transition point. And kind of litigation, [00:13:00] Jordan, what do you think have been some of the key court cases in 2023 or maybe tail end of 2022 within the last kind of 12, 15, 18 months that have been decided that, you know, are may even be continued on or, you know, that we should all make sure that we're reading and add to the repertoire of make sure you know what you're talking

    [00:13:23] Jordan: about.

    [00:13:25] Jordan: Yeah, I mean, and I put down a couple, I thought about a couple of them, and they're all different, but one of them, U. S. Auto Parts out of Massachusetts. I thought was a great decision forget about the fact that they're going only back a year from where they're allowed to Impose a wayfare standard it goes a lot to retroactivity what the supreme court said about nexus and passing laws and not Agreeing to go backwards with some maybe some constitutional restraints about it.

    [00:13:49] Jordan: It was um states taking positions kind of Randomly not by that whole process where they adopted a regulation and it got challenged on procedural grounds Got [00:14:00] kicked out. They reinstated it correctly imposed it and the court still said no It's more of a retroactive and the old laws still apply even though they were overruled So I kind of like that So I think one of the things that we have to be careful of in particular these taxes Is the retroactivity nature of them.

    [00:14:16] Jordan: We'll see that In public law 86272, it's a real big concern for me, but I like the fact and it was a well reasoned decision saying Here's what the court said. So people at this time This is what they relied upon forget about it's overruled. There's no way they can be clairvoyant and anticipate change in nexus rules and therefore mass you're out of luck and I think that was I I understood mass's position I understand the arguments and I do think the court got it right is that you can't expect people just to comply because the state says it's right, you know, our jobs are based upon saying, well, wait a second.

    [00:14:52] Jordan: Is that not? And I think the way that that worked procedurally first with the improper publication of [00:15:00] the right proposed regulations. First and then ultimately they did it correctly I think those are some of the challenges that we're going to be have to looking to Is not just is the law valid especially at state and local levels in particular Is the process by which they impose them?

    [00:15:17] Jordan: Valid and we're starting to see that Uh, and and things being kicked out and you know, another one the american catalog mailer case out of california pl86278 california adopted it by bulletin Write the MCC position. Questions about what that meant. Well, the court on a motion for summary judgment, which they rejected said, well, first off, there's not enough facts in the record for me to grant motion for summary judgment on behalf of American Mailer Catalog as to whether 86272 is being a supremacy clause applied retroactively, some of the issues associated with it.

    [00:15:53] Jordan: But what they did find, again, very important, is that by passing a bulletin under California law, [00:16:00] that's the equivalent of a regulation, as it is in a lot of states. Instructions to forms, bulletins, notes, memorandums of law, they're considered to be regulations. And if you're going to pass a regulation, it has to go through a certain process.

    [00:16:15] Jordan: And you have to have open comment and time for do it and and uh, Meetings and it's got to go for a first reading and a second reading and all the states are different It's a unique way to challenge things, but it can be very effective and that's what american catalog Mailer catalog did in california on a very big topic whether public law 86272 can be changed They have a temporary win in that it might be invalid In that it didn't follow the process.

    [00:16:43] Jordan: So we have a couple of those and then the last one I put down which I love Was the online merchant's guild out of pennsylvania Again, it was challenging uh, the More or less retroactive application of wayfair to some of the smaller remote [00:17:00] sellers And it wasn't the fact that they won and weren't And this has to do with Uh, one of my favorite topics of Property in a state what's de minimis what's not so it has to do with the marketplace It has inventory control of the inventory Ships the inventory receives it back and damaged goods collects all the money, but the online seller still has title to it And the question before the court is well, yes, that is an indice of ownership But let's look at all the indices of ownership And title just title without control all the other things risk of loss Um shipping it out getting it back, you know some merchantability Warranties really isn't much of anything and found that the deminus amount of inventory Based upon just having title wasn't enough And I think as we go forward physical presence is no longer enough, but it's still the standard, right?

    [00:17:57] Jordan: If you have physical presence in the state That [00:18:00] was always it but freeway fare and here what the card said is it's got to be a bit more than even just title And then he went even beyond saying it's not enough presence and I don't know if I agree with this It's not enough presence even for you guys to send them nexus questionnaires There's a due process violation.

    [00:18:15] Jordan: It's not fair. You're asking a bunch of questions in this case So not only are they don't have physical presence. You guys have to leave them alone if they're small enough And their presence is small enough which you know The pennsylvania department of revenue did a pretty nifty litigation type trick at the commonwealth court It's non precedential and they didn't appeal it.

    [00:18:39] Jordan: So they have a non precedential adverse decision But I in a practice like us go out there and say hey, this is a great decision This there's some really good stuff in here Non presidential, but we still fight to it. We still bring it up. Well, I think

    [00:18:53] Judy: about some things we're seeing in Colorado. We've got home rule cities and we have this sucks system for sales tax.

    [00:18:58] Judy: Okay. Well, not all the [00:19:00] cities are in it yet. So we're 70 cities. I think we got 59, 60, and it's we're 10 away from full. So now we've got cities coming out and saying, we have a wayfare law because you have to comply with the state. Now you have to comply with our city. How the heck do you deal with that as a taxpayer when you can't get everybody in the system?

    [00:19:15] Judy: The system is still a little clunky. So why would you be able to put, and is that really going to be allowed? So I think we're going to, you know, taxpayers are going to lose by a thousand cuts. Because they're like, whatever, it's a small little town, let you go, but it's the bigger holistic view. And then we, the other thing we have in our home rules is this, what we call tabor violations, where we have this situation where our home rule cities put a new law in place, via reg, without a vote of the people, completely turn something upside down and say, now we're going to treat it this way.

    [00:19:44] Judy: Well, that's not okay, but who's, who's watching that? Not taxpayers. There, unless they have an ability to talk to someone like that, they get beholden to these notices and they go, Oh my gosh, what do I do? Right.

    [00:19:58] Jordan: So. You know, and [00:20:00] from our perspective, I think it brings up a whole host of different type defenses.

    [00:20:05] Jordan: Remember after Um after quill everybody thought due process would be dead in the state and local tax arena but that's really what we're talking about the whole reason why the there's notices for regulations and public hearings and readings Is to put people on notice right and they fail to do that with whatever pronouncement they put out It's a due process violation.

    [00:20:25] Jordan: Tabor is adopting saying to let everybody know fair notice, right? You've got to follow these rules. That's what they try to do The other thing that in particularly colorado in no offense to your hometown in the local jurisdictions out there One of the things that we've had problems with is Finding what the rights are, right?

    [00:20:44] Jordan: You got, you got written ordinances that are not really accessible online and yet you're subject to them and you're trying to figure out what they are, when does it apply, when did it go into effect and so we have a project that you'd be so interested [00:21:00] in. We're trying to comply with local jurisdictions and we say, do you have a VEA program?

    [00:21:05] Jordan: We are literally trying to raise the congress people, the local council people, to find the right person to find out. Who runs that? And if they accept

    [00:21:15] Judy: it ourselves, finally. And I shamed one of our cities just recently because several years ago, they did not have a program. And they right away said, Oh, we do now.

    [00:21:25] Judy: We have a program. Don't shame us publicly in this hearing. But, you know, it's funny. Or they've changed the rules on the programs. Like, oh, we're all going to do this. Or we're going to do that. Okay, wait a minute. We participated, you let us in based on a certain set of facts, and now you're going to say something different on an audit later?

    [00:21:43] Judy: No, no, no, no, no. That's not good tax policy. Yeah,

    [00:21:48] Jordan: no, and we we did get a couple of these which is probably the worst answer you can get is um, we might have one but don't worry about it because We don't [00:22:00] have enough people at the city to do any audits. So just go ahead and start filing And then you go to your, what do you tell your client?

    [00:22:06] Jordan: You say, well, I kind of talked to somebody who seems like they knew and they said, don't worry about it. I can't give that advice.

    [00:22:13] Judy: No, no, no. And then we have this group called RRG, Revenue Recovery Group, which is a bunch of, um, retired auditors that there's a couple of groups like this out there. So they have captive auditors that run out on behalf of these cities and take pretty extreme positions against taxpayers.

    [00:22:28] Judy: Eight, nine year look backs. I mean, it's brutal. You know, as you know, when it comes to this, we're not talking enough material tax at stake to actually litigate you can 20, 50, 000 of a rearage. You're not going to litigate that. You're just going to feel raped and pillaged a little bit. I'm extorted is the way I feel like some of this happens to our clients.

    [00:22:49] Judy: It's not, it's not good tax compliance driving. No, no,

    [00:22:53] Jordan: you know, this is, this is, that's, that's exactly right. It's, it's the. You know the [00:23:00] million dollars for the fortune 500 is something that they can deal with and they can afford to litigate if they want Or they just pay it and everybody like, you know, sorry to do it.

    [00:23:07] Jordan: It's the fifty thousand dollars for a smaller retailer It's coming right out of the pocket. They didn't reserve for it. They don't understand reserve. They didn't do it We certainly didn't understand this compliance burden and cell was the ones that are really painful and that's you know That's the hardest part about it.

    [00:23:23] Jordan: It's like you got to tell somebody we can fight you It's going to cost you a hundred grand to fight this twenty five thousand dollar issue. We may win

    [00:23:30] Judy: We're fighting on principle. So thank you very much for being willing to Raise the mantle and go after it, you know, and raise a charge, but you know, who's going to absorb that cost?

    [00:23:40] Judy: Yeah, it's a it's a really interesting death by account thousand cuts and some of the locals especially but just some of these contrary positions And like you said with pennsylvania they don't really want it out there because I feel sometimes you find these regulators saying we don't really want it out in public forum because Then we have to stick to it

    [00:23:59] Jordan: Then we're on the [00:24:00] record Exactly

    [00:24:02] Judy: not anymore.

    [00:24:02] Meredith: It's going to be used against on either position. Was it a good position? Was it a bad position? But somehow it's going to come back to bite you in the ass that, you know, by someone, somewhere.

    [00:24:14] Jordan: No, I was raised with this principle is that as an advocate, I can argue both sides of the issue. And I actually think I'm obligated to do it.

    [00:24:22] Jordan: The state should pick a side. They have to decide what side they're on and go with it. Now, you may make half the people angry and half the people sad, but that's the choice they have to do. For advocates, we can argue both sides. And in fact, it makes my wife very angry when I just play devil's advocate because that's what we do.

    [00:24:41] Jordan: Yeah,

    [00:24:41] Judy: I know. It's a way of thinking for sure. But I just had a Tabor, you know, I said to this auditor, I said, it's a city issue. And I said, I'm just going to make you aware, like put it to assessment. We think you violated Tabor and we're going to bring it up. Through the system, because we cannot comport to this, you basically change the character of our business and it impacts [00:25:00] everybody in the same business like us.

    [00:25:01] Judy: And is this how you're treating this one versus us? We're not here to make an example of this and, and, and by doing some of these things, it actually creates a larger tax consequence to the taxpayer. So did your voters really want to pay tax that way on labor and in the inputs? I don't know that they knew that.

    [00:25:20] Judy: Right.

    [00:25:20] Meredith: Well, and with that, are there, Jordan, do you have any recent tax decisions that come to mind that you think were just bad? Like the outcome was bad. It was bad policy. It was just, you know, not

    [00:25:32] Jordan: great. Yeah. Well, yeah. Yeah. The one that really the most recent and really one that stuck to my craw because it was a really good decision up until it was decided by the Michigan Supreme Court is the vectoring decision because it is an alternative apportionment.

    [00:25:47] Jordan: And just real briefly, the facts are. It's a Minnesota based company. Uh, they do 10 percent of their work in Michigan every year in the year at issue. They've got a major job there and 70 percent of [00:26:00] their revenue for the years of Michigan. So it's 10, And in the 70 year they sell their business And michigan says, okay, you've got we're not even arguing whether it's business or non business income business income.

    [00:26:14] Jordan: What's your apportionment factor for this year? You know, we're going to exclude extraordinary gain out of the factor So it's not where your intangibles are back in minnesota. So we're just going on your normal operational business It becomes 70 in the year of disposition Michigan said we got to tax 70 So it went up on two on two things.

    [00:26:33] Jordan: One is the apportionment Methodology makes sense excluding the extraordinary gain And two if it is okay under the statute to extort to exclude extraordinary gain Is this something that should be handled through alternative apportionment? And this has gone up and down to the michigan supreme court a couple times and in each time they said Regardless of where we end up, the law says you exclude it.

    [00:26:54] Jordan: This is an extraordinary situation. You need to come up with a methodology for alternate [00:27:00] enforcement. The Supreme Court remanded back down, worked its way back up, taxpayer win, taxpayer win, goes back before the Michigan Supreme Court, and they go. You know what? We really don't see a problem. Sales factor is the way that we've decided to apportion income And therefore a 70 factor in the year of disposition Even though it's extraordinary to every other year before and after the year of sale.

    [00:27:23] Jordan: That's enough. No alternative apportionment needed And like this is the definition of alternative enforcement, right? It's this is you know Forget about what you do whether the the gain the proceeds or the net gain is included in the factor Denominator if it's if it's we'll get to those cases in just a bit.

    [00:27:42] Jordan: Let's exclude them go for go up 700 Right. That's how's reese on steroids. That was 260. This is 700 Increase in what's due to the state Because of an extraordinary transaction And so and in the dissent [00:28:00] Actually raised the issue That I think is most prevalent that I want to see litigation. I know we're going to get to it But litigation in the future Is why is the sales factor alone?

    [00:28:11] Jordan: Determinative of your income attributable to the state, right? Originally under your diploma, right? We had three factor apportionment equally weighted dollar of people dollar of property dollar of customer all equally weighted to contribute to income For political reasons we've gone to sales factor because it encourages Businesses to move into your state because you don't count property or payroll But now with this and then excluding gain from disposition Which generates income to the base?

    [00:28:39] Jordan: You've got a mismatch right there and it's been thought about and will continue to be thought about but now It's just on sales and the thing is most of these gains in 2021 22. We had a lot of large gains large gains are generally represented by Something that doesn't exist until the sale, which is goodwill, right?

    [00:28:59] Jordan: They [00:29:00] say our assets are worth a hundred million dollars, but I got a billion dollars for the sale. Why good? Well, it's category seven on the appraisal list, right? It's the last thing catch all You can't put on any other ass and it goes into goodwill. And then the theory that I'm Pushing for is what they're saying is that goodwill is only associated with where the customers are located It's not the fact that your people are great.

    [00:29:26] Jordan: It's not the fact that you've produced property. That's great It's the fact your customers are great and we all love our customers but to take All of that gain and say it's attributable to where our customers are is just yeah. No, it's a false narrative It's been an evolution It's been an evolution through the whole adoption of single sales factor.

    [00:29:47] Jordan: Now we get these extraordinary gains and we're saying it's all, all the goodwill goes to where your customers are. And to me, that's a complete mismatch. And something we're going to do in a

    [00:29:56] Judy: large contract. There's no way it all goes to where you bill it. [00:30:00] Most things are broad, right? If you think about a multinational company with a shared service center, you're building one place.

    [00:30:06] Judy: It's being used across the company. So it's not even accurately reflective of like where it's the benefit is. Yeah, it's a really interesting world in this e economy. Um,

    [00:30:18] Jordan: and you raise, you raise one of my bugaboos, which is billing address. That's what the statutes

    [00:30:23] Meredith: say. If for nothing else, where did you

    [00:30:25] Jordan: send your bill?

    [00:30:26] Jordan: When was the last time you sent out a paper bill? People

    [00:30:31] Judy: don't even get addresses anymore. I mean, really, like small businesses, they just need a credit card. They don't even need

    [00:30:38] Jordan: an address. When was the last time you bought a book of stamps? Nothing is, it's delivered electronically. And to your point, my service center can be anywhere.

    [00:30:48] Jordan: It could be anywhere. 100 people to any every state or it

    [00:30:52] Judy: could be in india, but we all have access to you know, I mean Right to process

    [00:30:57] Jordan: invoices And we're relying [00:31:00] upon this old fashioned. Well, what are your books and records show what your billing address is? It's not relevant anymore. It is a point in place.

    [00:31:06] Jordan: It's a point in time It is something that exists but with respect to matching up Where the benefit is received where the service is received where it's enjoyed. It's completely random Completely random. You know, the other one in in you hit me on my I look at these cases. One is making me crazy is the whole Comcast out of Maryland.

    [00:31:26] Jordan: This is one of those things and I love my partners, but sometimes we talk around the issues and we don't get to a resolution and what they did here, not blaming the Maryland Department of Revenue for their arguments with the AG there. Get to the issue. Is your law constitutional? National. They went on you didn't raise it administrative act.

    [00:31:49] Jordan: You did not raise it properly You raised it because you didn't have a controversy in place and you need to Be assessed or pay the tax Answer the damn question right answer the damn [00:32:00] question We all want to know and all they've been able to do is great strategy in their parts Now this will go back square one take us another three to five years to litigate it properly And then we'll have an answer what happens during that time Certain taxpayers are going to pay certain taxpayers are not going to pay they're going to assess them All the stuff's going to be backed up if they ultimately win they got interest in penalties All this stuff going back up, it's great strategically what they did, but from a try to answer the question, try to resolve the problem, it was the worst

    [00:32:33] Judy: possible decision.

    [00:32:35] Judy: That's such an interesting political and administrative issues that we

    [00:32:39] Jordan: see so much, and it takes so long to resolve some of these cases. No, no, and I think they can do this right. There are ways to tax advertising. Uniformly fairly beyond the internet tax rate of x You just got to do it that way and maryland's hasn't been done that way when when you say digital ads You know, the argument that they made was digital was digital digital advertising is different And the [00:33:00] judge who wrote the decision which was ultimately tossed out a puppy's a puppy Right puppies and puppy All the same dog's a dog you call it digital you call it, you know a greyhound versus a Poodle, but they're both dogs and advertising's advertising.

    [00:33:16] Jordan: So yes, you're doing it, but there's ways to do it, right? Maryland has chosen not to do it What I would consider in a constitutional way. Um, but right now

    [00:33:26] Judy: I feel like oil and gas was kind of a punitive tax, you know the all the xis and the Whatever they were ad valorem taxes on that industry because it was so pervasive and then you just see these little taxes coming after large Moneymakers and they're like, well, you're not paying enough.

    [00:33:42] Judy: Like we need more because you're making too much money Um, why is that what's wrong with that if they can use their good their money for goodwill, right? Yeah, so I I think it's punitive

    [00:33:53] Jordan: policy making I it is I mean I I understand and one of the things that we do have to do as a [00:34:00] country is get creative And how we're taxing stuff as new products do come up.

    [00:34:04] Jordan: I think you're the states are entitled to tax it Well, let's figure out a way, you know, i've always I've never, I've, I've applauded Ohio because Ohio generally does, let's sit down with the taxpayers. Let's sit down with taxpayer representatives and hash out a system that we can all live with. Okay. No one's really happy at the end of the day.

    [00:34:23] Jordan: You know, I forget who the wise person who said he was one of the probably judges, you know, the perfect settlement is where both sides walk away dissatisfied. Okay, but they walk away and you have resolution Ohio has done a pretty good job of getting together with taxpayers taxpayers representatives and worked out a solution that nobody's happy with But they've got buy in right and when a state does it uniformly without that buy in You have these challenges you have the things going on.

    [00:34:50] Jordan: It just gets litigated out Whereas you could take care of it the ounce of was it an ounce of preventions worth a ton of cure, you know I think states would be [00:35:00] Best served by actually working with the taxpayer community before they make radical changes And then get to a solution that we can still like fight about some points 80 of it 70 of it is agreed to And let's

    [00:35:13] Judy: move on but you don't find the tax community getting involved as much as you I would like to see right everybody complains But nobody puts their neck out to help.

    [00:35:20] Judy: I mean a lot of people like I don't want to testify I don't want to have my name showing up. Like I don't want to get audited. There's this there's this Lack of a personal, this, there is something to be said about grassroots efforts getting traction, but you got to get some grass, you know, and sometimes people just aren't willing to put themselves out there unless significant money is at stake.

    [00:35:40] Judy: They'd rather complain than take action.

    [00:35:43] Jordan: So no, no, we've lost a whole generation of those advocates that were in house that would say, we're going to fight this. We're going to fight this. And now it's, and I understand it. I mean, litigation has gotten very expensive and so they don't fight everything, but you know, there are some, [00:36:00] some organizations that as coalitions.

    [00:36:02] Jordan: Which may be the way to do things. It's, you know, we've got that out in California with BL 86272. They have it in federal court in Maryland for, with the digital advertising. There are coalitions where you have somebody draws a short straw and they're the name litigant on behalf of a coalition and the courts seem to be accepting that.

    [00:36:20] Jordan: So that's a way

    [00:36:21] Judy: to get joint fortunes, you know, and have somebody take that reins for that.

    [00:36:25] Jordan: Yeah. Because I think you're right. We don't have those one entity that's always fighting everybody, right? There's, there's, we just corporate America has, and for a lot of good reasons, knowledge affecting customer base, a bunch of different things.

    [00:36:40] Jordan: You know, you don't know what's going to anger your base, your, your customers. And so you try to keep a lower profile with those And we've seen in the news, um, you know, The ramifications of sticking your hand up in the air and saying, I don't agree with that policy. And then, you know, one half of the country's angry with you and half love you, or the other half loves [00:37:00] you and the other half hates you.

    [00:37:01] Jordan: So it's, it's, it's difficult, but as a coalition, I think that's something we can work on on a go forward basis.

    [00:37:07] Meredith: This podcast is for educational purposes only and is not intended, nor should it be relied upon as legal, tax, accounting, or investment advice. To consult with a competent professional to discuss specifics of your situation and the applicability of the information presented.