SALT Technology Checklist

Highlights of the 1^st Quarter 2024 checklist include:

• California: The California Court of Appeals upheld the dismissal of the City of Lancaster’s lawsuit to collect franchise fees from two streaming video service providers under the state’s Digital Infrastructure and Video Competition Act. The court ruled that local governments were not authorized to sue non-franchise holders under the Act, and that such issues could only be enforced by the state Public Utilities Commission.
• New York: The New York Supreme Court found that a taxpayer’s service in measuring the effectiveness of clients’ advertising campaigns was a taxable information service. The service involved surveying consumers, comparing the results to industry-specific benchmarking data, and providing reports to clients. The service was not a consulting service because the primary function of the service was the collection and analysis of information. Further, the service was not eligible for an exclusion from tax because the collected information was incorporated into the taxpayer’s database and used for benchmarking purposes in other reports provided to clients.
• South Carolina: The South Carolina Department of Revenue ruled that charges for digital textbooks are not subject to sales and use tax as communication services. The Department applied the “true object test” to determine that students were not purchasing the digital textbooks in order to access a communication system; instead, the true object was the purchase of a digital textbook. Additionally, the Department concluded that digital textbooks, as with printed textbooks, qualify for the sales and use tax exemption applicable to “textbooks.”
• Washington: The Washington Supreme Court recently ruled that the Universal Service Administrative Company (USAC), which administers the Lifeline program that provides subsidized wireless services for low-income consumers, is a tax-immune instrumentality of the federal government. The court noted that despite not being directly overseen by government officials, federal regulations narrowly define USAC's activities, and it was established to implement government telecommunications policy. The court also highlighted that the Federal Communications Commission controls USAC's funding and governance, and Congress has recognized its role. Despite some differences from other tax-exempt entities, the court concluded that USAC is tax-immune due to its function as a federal instrumentality.

More developments are covered in the Techlist, download it below.