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“Taxing Times Ahead: Top SALT Cases to Watch in 2024", Tax Notes State

January 8, 2024

Jennifer Karpchuk, Thu Lam and Olivia Klein’s article, “Taxing Times Ahead: Top SALT Cases to Watch in 2024,” in Tax Notes State

Tax Notes State

In an article published in Tax Notes State on January 8, 2024, Philadelphia-based S.A.L.T. Co-Chair Jennifer W. Karpchuk, Senior Counsel Thu N. Lam and Associate Olivia Y. Klein review some of the key state and local tax cases to follow in the new year.

The first three paragraphs of the article are included below with permission from the publication. To read the full article, subscribers may click here.

Like every year, 2023 offered many interesting state and local tax decisions. The upcoming year will also not disappoint for those looking for more fascinating SALT cases, some of which are discussed here.

Recently, the South Carolina Department of Revenue issued a number of assessments imposing forced combined reporting through the use of alternative apportionment. Some of those cases have made their way to the South Carolina Administrative Law Court (ALC). The first ALC decision, Tractor Supply Co. v. South Carolina Department of Revenue, was issued in August 2023.

Tractor Supply Co. is a retailer with two subsidiaries, Michigan Tractor Supply Co. and Texas Tractor Supply Co. On audit, the DOR argued that the taxpayer’s income was being distorted by the intercompany transactions and asserted its right to invoke alternative apportionment. The department ultimately issued an assessment using combined reporting to recalculate the company’s South Carolina tax liability. On appeal, the ALC sided with the DOR, pointing to facts that it viewed as problematic. For instance, Texas Tractor Supply and Tractor Supply entered into a procurement agreement in which the procurement services cost approximately $13 million, but generated earnings of $300 million to $400 million. The court also took issue with the taxpayer’s transfer pricing study and 9.7 percent markup, which will be discussed further.

To view the full article, subscribers may click here.