ACMA Lawsuit Challenging Cal. State Tax Guidance to Go Forward

On November 17, 2022, shortly after hearing oral argument from partner Nathaniel Bessey, San Francisco Superior Court Judge Richard B. Ulmer Jr. issued an order in favor of Brann & Isaacson client the American Catalog Mailers Association (ACMA), paving the way for high-profile tax litigation to proceed. The case centers on whether the California Franchise Tax Board (FTB) had the legal authority to publish tax guidance that, the ACMA contends, directly conflicts with a federal statute, Public Law 86-272, which protects out-of-state businesses from certain tax obligations in states where they do nothing more than solicit orders.

In response to the ACMA’s complaint, the FTB sought to dismiss the case on procedural grounds. In denying the FTB’s request, Judge Ulmer rejected each of the agency’s three arguments, concluding that the ACMA was not improperly seeking to challenge a tax assessment; the dispute was sufficiently concrete to be decided now; and the ACMA had standing to bring the lawsuit on behalf of its members. That decision allows the case to proceed to the merits.

In addition to Bessey, the ACMA is represented by George Isaacson, Martin Eisenstein, and David Swetnam-Burland.