West Virginia Tries To Stretch Its Taxing Authority Far And Wide

from the take-and-grab dept

Thu, Dec 21st 2006 11:58am — Joseph Weisenthal

Yesterday we brought attention to Baltimore's shameless scheme to line its coffers by trying to impose a large telecom tax on VoIP providers, like Vonage. It seems that government just can't resist putting its hands in whatever cookie jars it can find. But at least Baltimore's scheme seems to be rooted in a legitimate law (however misguided it may be). Compare that to West Virginia, which would like to tax the profits (via Hit & Run) of any company that has customers in the state. Right now it's going after Delaware-based credit card company MBNA, in a move that appears to be in blatant violation of the law. MBNA may take the case to the Supreme Court, but if the Supreme Court refuses to hear it, or rules in favor of of West Virginia, it could set off a major round of states trying to tax the profits of companies that sell in their state. Obviously, this would have major implications for all kinds of companies, including tech firms, whose business is often unrelated to their specific geography. The big winner in this has to be Baltimore, which looks much better in light of what its neighbor is doing.

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24 Comments

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Anonymous Coward, 21 Dec 2006 @ 12:18pm

guurrrgleslarp
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Rick, 21 Dec 2006 @ 12:21pm

Didn't Bank of America just buy MBNA's credit card business?

So they're suing a company with no customers anymore?
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dataguy, 21 Dec 2006 @ 12:40pm

While this move would be bad for interstate commerce - I say give MBNA hell! I am so glad I don't have to deal with them any more (I went the Credit Union route).
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Joe Smith, 21 Dec 2006 @ 1:10pm

borders
Why stop at the border. Why not tax Nokia on the profits it makes from its cellphones being sold in the state, why not tax Hollywood on the profits it makes from movies shown in the state, why not tax Las Vegas casinos on the profit they make when state residents go to Vegas. All of those make as much sense as taxing MBNA.
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Susheel Daswani, 21 Dec 2006 @ 1:14pm

Shiva analogy not in the best taste....
Analogizing Shiva, a revered god of Hinduism, to a greedy state that may be breaking the law, is not something I'd expect from TechDirt.
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Susheel Daswani, 21 Dec 2006 @ 1:15pm

Shiva analogy not in the best taste....
Analogizing Shiva, a revered god of Hinduism, to a greedy state that may be breaking the law, is not something I'd expect from TechDirt.
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Bumbling old fool, 21 Dec 2006 @ 1:38pm

Re: Shiva analogy not in the best taste....
Never assume conspiracy where simple incompetence can suffice. (badly quoted).

Interesting, many americans think Shiva is a symbol of greed with many arms to reach and grab/hoard with.

The context used was not in bad taste, it was just plain incorrect.

(BTW- I don't think Joe is incompetent, just that he made a rather common mistake)
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Anonymous Coward, 21 Dec 2006 @ 1:46pm

Re: Re: Shiva analogy not in the best taste....
It didn't make any sense to me either, but then I thought Shiva was the god of death and destruction.
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Anonymous Coward, 21 Dec 2006 @ 1:52pm

What's really amusing about all the venom being spewed about this is that now that they're owned by Bank of America, they have a physical presence in the state, and thus have to pay these taxes going forward anyways.
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Anonymous Coward, 21 Dec 2006 @ 1:59pm

As noted above, the two tax years at issue are 1998 and 1999. In 1998, MBNA's gross receipts attributable to West Virginia customers amounted to $8,419,431.00, and in 1999, its gross receipts amounted to $10,163,788.00. For tax year 1998, MBNA paid a West Virginia Business Franchise Tax (See footnote 1) of $32,010.00 and a West Virginia Corporation Net Income tax (See footnote 2) of $168,034.00. For tax year 1999, MBNA paid a Business Franchise Tax in the amount of $42,339.00 and a Corporation Net Income Tax in the amount of $220,897.00.

Did you read the actual case or did you did just read the rantings of the tax opponent on the Baltimore Sun. Come on. The company does substantial business in West Virginia and should pay taxes on the proceeds it gathers there. It is not like they are getting tax revenue from transactions from other states, they getting tax revenue from the income they earned and solicited in West Virginia.

Still feel the same? If so, I guess you are a bigger fan of coporate tax shelters than I am. The Commerce Clause was not to be used to prevent a state from collecting revenue earned and generated within the state, but to prevent tariffs. In this instance, they are not treating an out of state company different than they are treating a company whose HQ happens to be in West Virginia.

"in a move that appears to be in blatant violation of the law" Really? How? What precedent are they violating? What federal statute on the books are they violating? I guess it easier to make baseless accusations than actually back it up.

If you actually read the lawsuit, they will explain their reasoning. Did you consider that the company may not appeal because they think their facts are bad. From the numbers listed, they had a fairly large business going on in West Virginia.
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Susheel Daswani, 21 Dec 2006 @ 2:00pm

Shiva
"Death and Destruction" is but an incomplete conception of Shiva. Change is both destructive and creative:

"Shiva is responsible for change both in the form of death and destruction and in the positive sense of the shedding of old habits. In Satyam, Shivam, Sundaram or Truth, Goodness and Beauty, Shiva also represents the most essential goodness."

From http://www.sanatansociety.org/hindu_gods_and_goddesses/shiva.htm
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Opinionated, 21 Dec 2006 @ 2:10pm

The tax is on profiteering giants who drain the state's economy, taking much needed dollars out of state. A part of that should remain in the state. It's a sale so why let corporate cutthroats waltz out with much needed state revenue??
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Opinionated, 21 Dec 2006 @ 2:18pm

Re: Shiva
...a lie by any other name...
Not exactly on topic here.
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T.K., 21 Dec 2006 @ 2:50pm

Re: Re: Shiva
If you HAD to use a reference, you could change the title to '... Arms of Midas', since Midas was known for his greed of wanting gold.
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NetJD, 21 Dec 2006 @ 2:56pm

Re: Shiva analogy not in the best taste....
Susheel,

When most people hear Shiva, at least those unfamiliar with Hinduism, most would envision a multiple armed goddess, which may be why the author used Shiva as an analogy. I really dont feel the author's intention was to slight or disrespect anyone's beliefs or feelings, or Shiva for that matter.

May the coming year bring you Peace and Prosperity
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Susheel Daswani, 21 Dec 2006 @ 3:22pm

Re: Shiva
NetJD,
May you too have a happy holidays and good luck in the new year.

This said, regardless of the author's intention, his use of 'Shiva' is based on misinformation and only serves to perpetuate this misinformation. I don't think Joe needs to conflate Shiva with 'take-and-grab' tactics in order to make his point. He has every right to, of course, but it it is in bad taste and wholly unnecessary.
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Mike (profile), 21 Dec 2006 @ 4:53pm

Re: Shiva analogy not in the best taste....
Analogizing Shiva, a revered god of Hinduism, to a greedy state that may be breaking the law, is not something I'd expect from TechDirt.

Susheel, it certainly wasn't intentional. We've changed the headline. Apologies for any offense.
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Susheel Daswani, 21 Dec 2006 @ 5:13pm

Shiva
Mike and the TechDirt crew,
Thanks for changing the headline. I knew it wasn't intentional, so I hope I came across as respectful in my objections.

Thanks again!
Susheel
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TonyaRashcan, 21 Dec 2006 @ 10:44pm

So if I am reading this right the state wants to get taxes off of any sales that occur in that state. OK, makes sense as it helps get back some of the money that corps try to avoid paying by putting their HQ in the Bahamas. Doesn't seem any different then a sales tax.

Question is, what happens when I go to a different state or country? Are charges that were added on while I was vacationing in Vegas taxed by the state I live in, or does what happens in Vegas stay in Vegas?
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Brad, 22 Dec 2006 @ 2:16am

Taxes
The reason this is dangerous is because (at least in California, where I live) tax must be collected on any income generated by a company that has employees, service people, or equipment in the state. As I understand it, this credit card company doesn't. That's why this is bad.

Think of Amazon. They do millions of dollars of business every week in various states, and pay no sales tax (and charge none) because the product is shipped to you, but the actual "sale" takes place online, outside of any state's jurisdiction.

So being able to tax a company that doesn't have employees in your state sets a dangerous precedent for any company that conducts business online. And it opens the flood gates.
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Vincent Clement, 22 Dec 2006 @ 6:18am

Re:
It's a sale so why let corporate cutthroats waltz out with much needed state revenue??

Then charge a sales tax on each sale. What West Virginia is proposing is an income tax on companies located outside of West Virginia. I'm sure you see a problem with that, right?
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Balla, 22 Dec 2006 @ 6:52am

that shit is wack
why they hatin on us we all farmers ne ways a brotha cant get no love in the big WV why they need to hate on us?
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steveH, 22 Dec 2006 @ 10:47am

Taxing MBNA for sales in WV would be the same as taxing the post office for delivering goods bought from someone else. The concept is just silly. Both MBNA and the USPS are mere facilitators of other transactions, although both profit from their respective services.
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Wizard Prang, 22 Dec 2006 @ 12:48pm

You have no idea...
...how true that statement is. I had two cards with MBNA. After a few short months BofA successfully annoyed me into closing both of them.

http://wizardprang.wordpress.com/2006/11/15/bofa/
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