Hot SALT tax news: Digital advertising tax, unclaimed property and nexus evaluations

Wipfli’s sales and local tax team highlights the hottest topics in tax, including the result of a court case on Maryland’s digital advertising tax, the approaching deadline for Wisconsin’s unclaimed property VDA program and the importance of nexus evaluations.

Is there a future for a tax on digital advertising?

A circuit court judge sided with taxpayers in the Comcast et al. vs Comptroller regarding Maryland’s digital advertising tax (online).

On October 17, 2022, the judge concluded that the tax violated the Internet Tax Freedom Act, the Commerce Clause and the First Amendment. The judge did not agree with Maryland’s law to tax digital advertising when traditional advertising was considered nontaxable. Furthermore, the calculation methodology presented by Maryland in using the taxpayers’ worldwide gross receipts would be a considerable overreach.

After the Maryland Circuit Court found Maryland’s digital advertising tax unconstitutional, the state filed an appeal on November 21, 2022. Oral arguments for the appeal are not yet on the Appellate Court of Maryland’s calendar. The attorney general filed the appeal despite the state comptroller expressing doubts about the constitutionality of the tax and the choice to appeal.  

A separate federal court case heard oral arguments on November 29, 2022, where a federal judge determined the federal case for Maryland’s digital advertising tax was moot since the Maryland Circuit Court found the tax unconstitutional. The order was issued by the federal judge on December 2, 2022. However, on December 13, the U.S. Chamber filed a notice of appeal.

There are currently nine other states, plus Washington, D.C., with current or proposed bills similar to Maryland’s digital advertising tax awaiting the potential future of this case. Those states are Connecticut, Louisiana, Massachusetts, Montana, New York, South Carolina, Texas, Washington and West Virginia.

Wisconsin’s unclaimed property VDA program expires in February

This year Wisconsin rolled out its unclaimed property voluntary disclosure program that allows companies to report its outstanding liability during a limited lookback period and without any negative consequences associated with nonfiling penalties and audit risks.

However, this program is set to expire on February 28, 2023.

The application must be submitted online and approved by the Wisconsin Department of Revenue before proceeding. Holders will have 120 days from the execution date to submit the final report, but this date could possibly be extended if requested. Holders of abandoned property should use this opportunity to become compliant with the unclaimed property laws. It’s important to note that other states have similar amnesty programs.

Nexus evaluations: A key part of 2022 year-end planning for businesses

Between the pandemic-motivated expansion of telework and the widespread adoption of economic nexus laws since the 2018 Wayfair decision, it’s crucial for businesses to continually reevaluate their nexus profile. Also, because businesses will be taxable on all of their 2023 income in a state even if they only had nexus there for a few days in early 2023, year-end is a great time for businesses to inspect their nexus footprint to identify risks and opportunities.

Wipfli’s economic nexus resources and telework nexus resources can help, and our SALT resources are always happy to speak with you. Reach out to learn more.

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