Hartford Business Journal

12 Hartford Business Journal • May 16, 2016 www.HartfordBusiness.com from page 1 Sullivan wants Airbnb — and is currently negotiating with the company — to collect and remit the state's 15 percent lodging tax from its Connecticut customers, a levy that currently brings in about $100 million annu- ally from hotels and other brick-and-mortar lodging businesses in the state. The negotiations, though currently limited to one company, are part of a broader effort by Sullivan and other state officials to collect money they feel Connecticut is owed from online companies that sell to Nutmeg State residents and businesses. It's also a way, Sullivan said, to level the playing field for Connecticut-based businesses that already collect sales, hotel and other taxes. The Airbnb talks also come as Connecticut law- makers, many of whom are averse to further tax hikes on in-state compa- nies and residents, continue to stare down billion-dollar budget deficits in the coming years. Sullivan esti- mates the state could reap $125 million or more per year if online com- panies collect and remit sales taxes on goods and services they sell in Connecticut. "When you're in a situation like this, you want to be sure you're collecting [tax reve- nues] that you're supposed to collect," Sulli- van said in an interview. "It's never a question of whether these sales are taxable. It's only a question of who pays and collects the tax." Though the confidential Airbnb negotia- tions hadn't yielded an agreement as of last week, the nonpartisan Office of Fiscal Analysis has already baked an additional $1 million in lodging-tax revenue into its latest projections for the coming fiscal year, which it released May 4, indicating OFA assumes a deal will get done. Sullivan said he didn't provide OFA with the $1 million revenue estimate. He also declined to discuss specifics of the Airbnb talks. But any resulting agreement could include a pledge from the state not to pursue Airbnb for disputed back taxes, while Airbnb could pledge to collect and remit the lodging tax mov- ing forward. That would be similar to the deal the state hatched with Amazon in 2013, except the Seattle-based company also agreed to build a $50 million distribution center in Windsor. It's not clear if Airbnb would be required to establish a physical presence in the state, which would make it easier for Connecticut to legally levy sales taxes on the company's in-state transactions. Broadening the tax horizon Sullivan is pursuing Airbnb on his own accord, but this year he urged the state legisla- ture to help him target a much broader array of remote companies. Legislation pro- posed in Febru- ary, which died in the Senate during the regular ses- sion, would have required all out-of- state retailers with a certain level of receipts from Con- necticut customers — the bill didn't set a figure — to collect and remit sales tax. As of press time, it was not clear if legislators, who were in special ses- sion late last week, might include that language in the budget implementer bill for fiscal year 2017. The concept of taxing companies based solely on their economic activity in a state, rather than more historically common fac- tors such as local property or payroll, is called "economic nexus." It's a controversial con- cept that's already been adopted in Alabama, South Dakota and several other states. Businesses argue that it flies in the face of a 1992 Supreme Court precedent set in Quill v. North Dakota, which said a state could not collect sales and use tax from a company that didn't have a physical presence in the state. Sullivan and his fellow reformers don't dispute that fact, but they argue both the High Court and Congress have failed to provide states with a sales-tax solution for a modern age, where e-commerce sales have grown to nearly $342 billion per year in the United States. Virtually no one was shopping online at the time of the Quill decision, which came just one year after the first public website was published. Sullivan said sales tax economic nexus wouldn't be a windfall for the state, but it would be fairer for businesses here. "It gives us a stronger hand in terms of arguing for collection and remittance in the state of Connecticut," he said. Game of chicken Through their expansion of economic nexus, state governments are almost daring the Supreme Court to reassess the Quill deci- sion, said Paul Graney, a partner at accounting firm Marcum LLP who has Connecticut clients. More than half of states have already applied the economic nexus principle to their corporate income tax laws, including Connecticut in 2009. That's when the Gen- eral Assembly passed a law that required remote companies that sell more than $500,000 in goods and services to Connecti- cut customers to pay corporation tax. But expanding that concept to sales tax is especially bold, Graney said, because that's the specific levy the Quill ruling addressed. Graney said the mounting trend of sales tax economic nexus is "the next step in overag- gression by the states," adding it's a burden for companies with nexus in multiple states to col- lect and remit sales tax, particularly because some states, though not Connecticut, also allow for local and county-level taxes. He summed up the political calculus for states seeking to assign tax nexus to remote companies this way: "First, I'm taxing a com- pany that isn't in my state, so there is no one to complain I'm hurting in-state businesses," he said. "Next, I get free money without hav- ing to provide any services at the state or local level." Alan Lieberman, managing partner at Hart- ford law firm Shipman & Goodwin, said state governments were further emboldened by a message last year from Supreme Court Justice Anthony Kennedy, who expressed hope that an appropriate case would emerge for the High Court to reexamine the Quill decision and a previous ruling on which it relied. Kennedy made those remarks during a rul- ing last year on a Colorado sales-tax law. Many, including Sullivan, believe Ala- bama's law could be the one the court finally decides to review. n States want sales-tax fix A BETTER COMMUTE. A CLICK AWAY. CTrides Week | May 16 - 20, 2016 Find Your GREEN Ride at CTrides.com ▶ ▶ 'I t's never a question of whether these sales are taxable. It's only a question of who pays and collects the tax.' Kevin Sullivan, Commissioner, Department of Revenue Services ESPN's The Undefeated aims for rebirth By Ahiza Garcia, CNNMoney "Y ou may encounter many defeats, but you must not be defeated." That quote from Maya Angelou serves as the basis for ESPN's new website, The Undefeated, which has already faced its share of defeats. The Bristol sports giant's web- site, which launched May 17, explores the intersection of sports, race and cul- ture. It has been live since August 2013, but had published fewer than 20 stories under the leadership of columnist Jason Whitlock. The Undefeated floundered until Whitlock was replaced in June 2015. Now, under the leadership of Editor-in- Chief Kevin Merida, the site hopes to take off — and live up to its name. The site's target audience is black male sports fans between the ages of 18 and 35. However, Merida is adamant about attracting strong engagement and generating interest across all demographics. One of the first stories on the site will look at how Cleveland Browns quarterback Robert Griffin III was anticipated to be the epitome of the black quarterback and how the role was actu- ally filled by Carolina Panthers QB Cam Newton. The site will rely heavily on multimedia reporting and will feature "Spike Lee Lil' Joints" — short sports videos. It aims to provide a different narrative to its audience with a mix of long- and short- form articles. Merida, a former reporter and editor at the Washington Post who was hired in November, has created several features that will be recurring fixtures on the site. "Uplift" will provide daily tales of inspira- tion. A section called "Show Me the Receipts" will fact check famous or prominent people who claim to have been great athletes in col- lege or high school. "You Got 99 Words" will be a moderated section that allows people to give their take on an issue in 99 words. It's considering a basketball version of the HBO Sports reality show "Hard Knocks." n Kevin Merida, Editor-in- Chief, The Undefeated

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