State and Local Tax (SALT) attorney Bruce Ely was quoted in Bloomberg BNA on an Alabama appellate court ruling that a trucking company’s out-of-state leasing arrangements did not subject them to the state’s lease tax or exempt its purchases from sales tax. U.S. Xpress Leasing Inc., a Tennessee-based affiliate of trucking company U.S. Express, had argued its business structure made it liable for Alabama's leasing tax and therefore exempt from sales and use tax. The appeals court disagreed, overturning the previous decision by the Montgomery Circuit Court and agreeing with the earlier ruling of the Alabama Tax Tribunal.
Ely explained the question of the company's lease-tax liability was a tricky one that could have gone either way.
“This was a close case, and one of those rare situations where the taxpayer is arguing for nexus with Alabama and the Department of Revenue in essence is arguing against it, rather than vice versa,” said. The case could serve as a lesson to multistate trucking businesses and equipment leasing businesses in how to avoid Alabama's rental tax in the future, Ely said—by emulating the U.S. Xpress organizational structure, with an out-of-state holding company that purchases the vehicles and then leases them to the operating subsidiary via out-of-state transactions.
“The interstate nature of the trucking business and of the railcar leasing business in the Union Tank Car case makes this fact pattern somewhat unique, but one can foresee other taxpayers trying to shoehorn their facts into this ruling,” he said, referencing a similar 2007 decision by the same Alabama appeals court.
The complete article, “Bridgestone Vendor Loses Alabama Sales Tax Appeal,” appeared in Bloomberg BNA on December 9, 2016. (login required)