Two recent court decisions are helping to quell the effects of the recently-passed Assembly Bill AB 5 (Gonzales, Chaptered September 18, 2019) in regard to California trucking companies, by determining that federal law preempts the most problematic part of both AB 5 and the 2018 California Supreme Court decision Dynamex West Operation v. California Superior Court. Both Dynamex and AB 5 worked to institute the new California worker classification test, the ABC Test, which provides for the following:
The U.S. Supreme Court recently issued a unanimous decision in North Carolina Dept. of Revenue v. The Kimberley Rice Kaestner 1992 Family Trust, ruling that residence in a state is not a sufficient reason to tax an out-of-state trust's undistributed income. Justice Sonia Sotomayer delivered the opinion, explaining the Court's two-step analysis of the case in regards to the 14th Amendment on due process. The judges considered that there must be "some definite link, some minimum connection, between a state and the person, property or transaction it seeks to tax" and that the "income attributed to the State for tax purposes must be rationally related to 'values connected with the taxing State.'" In this instance, "the presence of in-state beneficiaries alone does not empower a State to tax trust income that has not been distributed to the beneficiaries where the beneficiaries have no right to demand that income and are uncertain ever to receive it."
The New Hampshire Senate unanimously approved S.B. 242 last week, a bipartisan bill that aims to protect state businesses from the effects of last year's Wayfair decision, which allows states to impose sales and use tax regulations on e-retailers and other out-of-state sellers that do not have a physical presence in the state but that do meet dollar or transaction thresholds that create an economic nexus.
In a 5-4 decision, the Supreme Court ruled today that states may now require online retailers to collect sales taxes from consumers, regardless of where the business is located or the product is delivered. In 1992, the same court ruled that a business had to have some kind of "physical presence" or "nexus" in order to be required to collect sales tax in a state. With the increased use of online shopping, however, it turns out not all taxpayers report non-taxed purchases to the states in which they reside. In fact, an estimated $33.9 billion goes uncollected in sales taxes each year, costing states a significant sum. Additionally, internet shopping tax-free has hurt the brick-and-mortar stores that already have higher operational costs due to a physical presence in a state, since they must collect sales tax on taxable transactions.