In "Top State & Local Tax Cases of 2020: Midyear Report" by Law360, Chris T. Lutz discusses Honigman Miller Schwartz & Cohn LLP v. City of Detroit.
The closely watched case went to issues currently at the heart of state taxation, the definition of a service and where the income from that service should be sourced. While falling short of expectations that the case would represent the first time a state high court would provide guidance for apportionment under market-based sourcing, the case did affirm the principle that revenue for services must be sourced to where the work is done for state tax purposes. Chris said that although the justices rejected the market-based sourcing framework and few other states employed "rendered" for sourcing, their interpretation of ambiguous statutory language could have far-reaching implications.
"The blow to taxpayers here isn't necessarily the way they construed 'rendered,' it's the way they applied the statutory interpretation in order to sort of get to the department's interpretation and to trump the taxpayer's interpretation."
By restricting a finding of ambiguity as a last resort after an analysis of a statute's context rather than the plain meaning of its provisions, the justices put practitioners at a relative disadvantage compared with state taxing authorities, Chris said. "We just lost an arrow in our quiver, potentially."