from Gowrylow, Mike (DOR) <
[email protected]> to Jeff Reifman date Fri, Nov 13, 2009 at 10:55 AM Jeff, Many of your questions obviously relate to the operations of a specific company in the software industry. While we could attempt to provide general answers to these questions, you have been applying our answers to a specific company in your blog postings. Your apparent goal is to narrow the line of questioning down to a single company. We regret that we cannot answer such specific questions because of the need to protect confidential taxpayer information. We also cannot comment on what we do with any information you provide to us that may bear on the taxability of a business. We do act on any information we receive. We can assure you that the Department regularly audits large taxpayers in the state to ensure full compliance with applicable tax laws. This includes examining transactions between affiliate corporations. Any such activity would be taxable as provided under the appropriate classification of the B&O tax. To go into further detail about the taxability of such transactions would risk violation of the confidentiality laws. The Department can only enforce taxes where they are legally enforceable. It cannot impose taxes on a company if it reasonably believes that such enforcement would be overruled by the courts. This would be a waste of state resources. Regarding legal protections, the parties' choice of which jurisdiction's law will govern interpretation of a contract are standard choice-‐of-‐law clauses. It does not impact tax results, which are determined according to applicable statutes and agency rules. Regarding the use of the Estep decision, The Department follows its published determination in 3 WTD 259. This determination applies the Estep decision's analysis on step transactions to excise taxes. We believe this is an appropriate use of this decision. Mike