Atlanta’s Equifax Credit Services is asking the U.S. Supreme Court to review a Mississippi Supreme Court ruling that last summer went in favor of the state Department of Revenue and bumped Equifax’s annual tax bill from zero to more than $700,000.
In a Feb. 19 petition for certiorari, Equifax argues that the Mississippi tax appeals process all but ensures that assessments and penalties imposed by the Department of Revenue will be upheld.
Trials promised to out-of-state taxpayers are “a charade en route to an affirmation of the (DOR’s) actions,” Equifax claimed in a filing by the Atlanta-based law firm of Alston & Bird.
Equifax said the Mississippi Supreme Court’s decision effectively denied it a Chancery Court trial. In the earlier Chancery trial, the court applied a standard by which the DOR received special deference based on a 1987 state Supreme Court ruling. In that ruling, the deferential standard requires that assessments be upheld unless the assessment is so wrong as to ne “arbitrary and capricious.”
Equifax argues that burden deprived it of the chance to convince the Chancery judge of the incorrectness of the tax assessment based on the facts.
In a June 2012 Baker Donelson blog after the Chancery Court sided with the DOR, the firm said the limited review granted Equifax imposed a concept unique to appeals courts rather than trial courts.
The Mississippi Court of Appeals sided with Equifax, which led to the DOR appeal to the state Supreme Court.
Meanwhile, the prospect of a U.S. Supreme Court review of the ruling which upheld the authority of the DOR to apply a non-statutory revenue-based tax apportionment method has put a national spotlight on Mississippi. A Supreme Court refusal to review the case or a ruling affirming the Mississippi high court’s finding could provide taxing entities around the country grounds for invoking their own alternative methods of tax apportionment.
At the Mississippi Capitol, an overwhelming majority of Mississippi’s legislators worry that the tax ruling portrays Mississippi as unfriendly to multistate businesses. Both houses have passed legislation that requires the DOR to provide a “clear and convincing” need before going outside the state’s statutorily authorized “cost-performance” method of apportionment.
Before this session, the DOR tried unsuccessfully for two consecutive sessions to persuade the Legislature to statutorily authorize a market-based tax standard for multistate service providers. That method would allow the multistate businesses’ taxes to be based on revenues earned in the state.
Current statutes authorize the cost of performance method by which the sale of services are sourced to the state where most of the activity and costs were born. For instance if a Georgia-based company such as Equifax makes 51 percent of its revenue from seals of services in Georgia and the remaining in Mississippi, it would pay taxes to Georgia and no taxes to Mississippi, according to an explanation of the “all-or-nothing’ cost-performance standard provided by the Washington, D.C.-based Tax Foundation.
Mississippi’s Department of Revenue switched to the market-based standard after concluding the state’s statutory standard would not fairly reflect Equifax’s business activity in Mississippi, which consisted of providing credit reporting services to businesses in the state.