FOR IMMEDIATE RELEASE
November 18, 2022
Contact: Paul Miller, 800-509-9514
SAN FRANCISCO — On November 17th, the ACMA cleared a major hurdle in its complaint in the Superior Court in San Francisco that a previously-issued California Franchise Tax Board (FTB) regulation in the form of a technical advisory memorandum wrongly and substantially expanded the reach of income taxes on out-of-state merchants with no physical presence in the Golden State. The Superior Court of California County of San Francisco overruled the FTB’s demurrer to ACMA’s complaint for declaratory relief.
(A demurrer is essentially a motion to dismiss the complaint without a decision on the merits. FTB filed the demurrer shortly after the ACMA filed its complaint. With the Court’s overruling of the demurrer, the case moves on for an adjudication on the merits.)
“This is a significant and positive development in our case,” said ACMA CEO Hamilton Davison. “Although we still have aways to go, we now have a clear path to obtain a decision on the merits.”
At the core of the ACMA complaint, the FTB promulgated a Technical Advisory Memorandum (TAM) on February 14th to address the scope of the exemption from a state’s income tax provided under a federal statute, Public Law 86-272. The federal statute provides that a state may not impose its state income tax on an out-of-state company that engages in no activities in the state other than the solicitation of the sale of tangible personal property.
What This Means to ACMA Members
The TAM states that a business located outside of California that does not step foot in California is not exempt by Public Law 86-272 from the California income tax if it places Internet “cookies” onto the computers or other electronic devices of California customers to gather customer search information to be used to adjust production schedules and inventory amounts, develop new products, or identify new items to offer for sale.
The TAM also provides that a company loses the protection of the federal statute if it regularly provides post-sale assistance to California customers via ether electronic chat or email that customers initiate by clicking on an icon on the business’s website. The TAM as applied meant that the FTB would require virtually every ACMA member that did not engage in any activities in California to pay the California income tax, which is at one of the highest rates in the country.
Initially, the ACMA wrote to the FTB to request that it withdraw the TAM because the use of cookies and email are not in-state activities to cause ACMA members to lose the benefit of Public Law 86-272. The FTB never responded to the ACMA’s letter but instead issued a publication on its website that codified the TAM.
The ACMA then authorized Brann & Isaacson to file the suit on behalf of its members against the FTB for a declaration that the TAM and the publication are invalid.
Declaratory Judgment
Although many in the tax community lauded the ACMA suit, there were some who alleged that the issue could be litigated in an administrative (and not court proceeding) only once specific taxpayers have been assessed and paid the assessment. We thought it was unfair and not based on the applicable law for a state tax agency to take an unprecedented view of a federal statute, and the only remedy for an online retailer was to wait to be assessed, pay the assessment and then seek a refund through a long administrative process before the very agency that promulgated the TAM.
FTB’s Demurrer Overruled Quickly
The demurrer filed by the FTB similarly asserted that ACMA members could litigate the case only once assessed and through an administrative claim for refund process after paying the assessment. After a flurry of briefs, the Superior Court judge held a hearing for both parties to present their positions. Within two hours of the hearing, the judge issued the order and decision rejecting each of the arguments advanced by the FTB.
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Lynn Noble is ACMA’s Vice President, Industry Relations, having joined the ACMA in May 2015, following an extensive direct marketing career in private industry as well as the US Postal Service. He is responsible for leading the membership development efforts for the ACMA through new member acquisitions and providing enhanced member value.
Throughout his career, Lynn has held key marketing & sales positions with several leading direct marketers, as well as several high-level management positions with the US Postal Service.
In 2009, at the request of the ACMA, the US Postal Service initiated a new position of Catalog Manager to lead the Service’s efforts to stabilize and grow the catalog industry. Lynn returned to the USPS to lead those efforts and was instrumental to developing a stronger industry partnership between the Postal Service and the catalog industry. Serving as the product manager for catalogs, Lynn helped to raise the awareness of catalog-specific business challenges within the executive ranks of the USPS. During his tenure, the ACMA and catalog companies enjoyed a collaborative and progressive environment that produced more stabilized rates and inclusion in key USPS promotional opportunities.
Just prior to joining the ACMA Lynn was the USPS’s Manager, Strategic Account Operations, leading a team of senior sales professionals who focused exclusively in the Catalog, Mail Order, and E-commerce arena. In addition to his Postal positions, Lynn previously held key positions with leading direct marketing companies, including Cox Target Media, Market Logic, Catalina Marketing, Freesamples.com, and Advantage Direct.
Named Vice President & Deputy Director in January 2010, Miller came to the ACMA following a lengthy career of more than two decades following the catalog/multichannel/e-commerce/retail businesses. Reporting to ACMA president & executive director Hamilton Davison, Miller oversees marketing and communications, membership development, and organizes and oversees ACMA’s National Catalog Forum, while working with Davison on most of ACMA’s postal-related efforts.
Miller started his career as a reporter with Catalog Showroom Business, following a form of retailing that was led by the likes of the Service Merchandise and Best Products retail chains.
After several years of editor/reporter roles with business magazines that followed the toy and gift industries, Miller was named associate editor of Catalog Age magazine (now Multichannel Merchant) in 1986. He rose up the ranks at Catalog Age over the next 18 years to be the magazine’s senior news editor.
Beginning in the late ’80s, Miller became Catalog Age’s postal beat reporter, where he’d follow key postal events and pull out the key catalog mail-related issues for readers. During that time, he attended many Mailers Technical Advisory Committee (MTAC) meetings and National Postal forums.
After leaving Catalog Age in 2004, Miller consulted with several catalogers and multichannel suppliers for a time, he was named news/website editor at Commercial Property News. Less than a year later, he was asked to take the reigns at Catalog Success (now All About ROI) where he served as editor-in- chief from 2006 till the end of 2009.
ACMA appointed Michael K. Plunkett as its President and Executive Director in January 2024, succeeding founder Hamilton Davison. Mr. Davison moved on to own and run a company. Mr. Plunkett brings years of executive leadership experience having been the President and CEO of the Association for Postal Commerce (PostCom) since 2017. In the newly-formed dual role, he will continue his current role with PostCom and the two organizations will operate separately.
During his tenure, PostCom has continued to lead the mailing and shipping industry on policy and regulatory matters and to work with Government agency partners to advance issues of importance to members. Mr. Plunkett is also President of the Delivery Technology Advocacy Council, a nonprofit launched in 2020 to concentrate on delivery and logistics technologies.
Prior to PostCom, Mr. Plunkett accumulated more than 25 years Postal experience with the United States Postal Service in numerous executive roles in operations, marketing, product development and pricing. As a leader within the Postal Service’s management team, Mr. Plunkett developed a well-earned reputation for innovation by leading efforts to develop pricing agreements for domestic services and in the development of the forever stamp and the priority mail flat rate box.
Mr. Plunkett has testified on pricing and policy issues before the Postal Regulatory Commission and Congressional subcommittees. He has authored and presented papers on postal policies, economics, and operations for National and International conferences.
Mr. Plunkett holds Masters Degrees in Business from the Wharton School at the University of Pennsylvania and the Massachusetts Institute of Technology, where he was a Sloan Fellow. He earned a Bachelor Degrees in Economics and Finance from the Pennsylvania State University.
