State and Local Taxation

In a nation of nearly 10,000 taxing jurisdictions, companies doing business across state lines encounter a dizzying array of state and local tax laws.  The varied, ever–changing, and often conflicting tax obligations imposed by different states and localities present challenges for businesses of all sizes.  Understanding how state and local tax regimes designed for traditional markets apply to modern electronic commerce adds further complexity.  These problems create significant risks for businesses. The prospect of federal sales tax legislation that may expand state taxing authority over remote sellers, without requiring meaningful simplification of state and local sales tax codes, only increases those risks.  A company that misinterprets its state and local tax obligations can face potentially crippling liabilities that undermine its business strategies and jeopardize its profit margins.  For public companies, failing properly to investigate and to disclose the risks associated with state and local tax obligations, or to provide adequate reserves for purposes of financial reporting, may further subject the company, and its executives, to liability. The advice of professionals who understand the complexities of ― and limitations on ― state and local taxing authority and the environment in which businesses operate is essential.

Brann & Isaacson’s attorneys are nationally–recognized experts in state and local tax law, including unclaimed property.  Our clients include over a dozen of the Top 100 Internet retailers, as well as major media and online companies, large  IT service, cloud computing and direct marketing service providers, and prominent trade associations. As the tax professionals of choice for both large and small corporations, manufacturers and publishers, multi–channel retailers, service providers and pure e–commerce vendors, Brann & Isaacson has the skills, experience, and acumen that businesses require in a global economy.  We advise clients on a wide range of state and local tax matters including transaction taxes (e.g., sales/use taxes), business activity taxes (e.g., corporate income, gross receipts, and franchise taxes), and taxes affecting specific industries (e.g., Internet access and telecommunications taxes).  We are experts on state taxation of digital goods and services and cloud computing.  We are also leading authorities on the limitations on state taxing power under the United States Constitution, having brought challenges to state tax statutes on constitutional grounds in both state and federal courts.  Indeed, we recently successfully argued that the U.S. Supreme Court should review a Federal Court tax jurisdiction issue. We will thus be arguing in the 2014-2015 term, one of the few State tax cases to be heard by the court in the last 20 years. From proactive tax planning to vigorous advocacy in contested audits and appeal proceedings, we pride ourselves on combining a deep knowledge of fundamental tax principles with innovative, “outside–the–box” problem solving to provide successful representation that advances not only a client’s tax position, but its business objectives as well.

From our offices in Maine, we assist clients in understanding their tax obligations in states and localities throughout the United States.  We have represented clients in connection with tax issues in every state, including contested tax proceedings in more than 40 states.  Because Brann & Isaacson has a national tax practice, we excel in helping clients doing business anywhere in the United States to understand the tax laws that may affect them.  And as a smaller firm removed from a major metropolitan market, we can provide first–rate services far more cost–effectively than larger firms with less expertise in the field. 

An important part our practice is assisting clients in determining whether, and where, the nature of their businesses subjects them to state and local tax obligations outside of their home states.  Brann & Isaacson’s attorneys are among a handful of leading experts on the issue of constitutional “nexus” ― the question of whether a state or locality has the power, under the United States Constitution, to impose its tax obligations upon an out–of–state business.   We have more than 25 years of experience on nexus issues, including scoring early victories in Pennsylvania and California as well as briefing the question of “substantial nexus” on behalf of amicus curiae Direct Marketing Association to the United States Supreme Court, in the landmark case, Quill Corp. v. North Dakota.

Since the Quill decision, Brann & Isaacson has been at the forefront of the evolving jurisprudence in the area of nexus, including through our representation of the Direct Marketing Association and the Performance Marketing Association in constitutional challenges to state  “Amazon laws” enacted in 2010 in Colorado  and in 2011 in Illinois.  No firm is better suited than Brann & Isaacson to advise companies about the ramifications to their businesses of developing legal doctrines such as “representational nexus” and, more recently, “click through nexus” and “economic presence nexus.”  We are also actively engaged in the ongoing debate about potential federal legislation to supersede the Quill standard.  Our attorneys pride themselves on providing invaluable guidance and advice to clients about the changing nexus landscape.

Brann & Isaacson specializes in representing clients in connection with formal appeals from state and local tax assessments through the administrative appeal process and in court.  Our attorneys have appeared in contested proceedings in more than 40 states.  The tax appeal process is, in many ways, unlike any other kind of legal proceeding, combining elements of both administrative law and traditional civil litigation.  Our expertise in state tax law, coupled with our unparalleled experience in handling tax litigation, allows us to provide more successful representation in most cases than either pure tax firms or pure litigation firms, including local firms practicing in the state or region from which an assessment has issued.  Unlike many larger firms that use their standard, litigation “playbook” for all contested cases, we pride ourselves on finding imaginative approaches that take advantage of procedural avenues and substantive legal doctrines that other lawyers may not even consider.  

By empowering clients through our knowledge and understanding of diverse state and local tax requirements, in addition to our experience with business and accounting principles, Brann & Isaacson’s attorneys are better able to assist our clients’ tax planning efforts.  We consult with clients before the launch of new business initiatives to identify the risks and benefits of a project from a state and local tax perspective.  We also work with clients whose past or ongoing business activities may have resulted in potential tax liability in order to correct course and manage those risks, including establishing adequate reserves.  Whether preparing contracts with potential business partners, reviewing proposed new ventures, advising on corporate structures, or approaching state revenue departments to negotiate arrangements for resolving potential tax exposures, we work creatively to promote our clients’ interests.  We recognize that providing effective legal representation means finding the proper balance between sound tax strategies and broader business goals. 

Brann & Isaacson routinely assists clients who have been contacted by state revenue departments regarding potential state or local tax liabilities in managing both the communications which precede an audit, and the audit process itself.  Our representation runs the gamut from working with a client to craft a response to a state “nexus questionnaire” to handling complex audits involving millions of dollars of potential sales and use tax liability for companies that maintain facilities in many states and sell goods and services throughout the world.  We understand how the dynamics of communications with tax auditors differ from the more formal procedures that govern an appeal, and because we recognize that tax liabilities are most effectively managed by striving to prevent them from ever arising, we bring the same innovative approach to working with auditors that we do to every area of our practice.  A strategic perspective, coupled with a deep understanding of the law, often gives us an advantage over other professionals in reducing audit exposure; at the same time, our lawyers and paralegals understand the mechanics and mathematics of an audit, and can “crunch the numbers” when a more technical approach will work to our clients’ advantage. 

Our clients include companies such as  L.L. Bean, Talbots, Computer Sciences Corporation, AOL, EarthLink, Scholastic, HCL Technologies, Guthy–Renker, Random House, Bertelsmann Inc., Arvato Distribution Services, Newegg, Crutchfield, Vermont Country Store, Time, HSN, National Business Furniture, C & H Distributors, Christian Books, iRobot, The Metropolitan Museum of Art, Revinate, King Arthur Flour, J. Jill, Potpourri, Orchard Brands, Johnny Appleseeds, Draper’s and Damon, California Wine Basket, RentPath, Primedia, Computershare, Cuddledown, J. Jill, Bookspan, George Patton Associates, Choice Communications and Nutraceutical, as well as trade associations including the Direct Marketing Association, the American Catalog Mailers Association and the New England Mail Order Association.

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