Posts Tagged ‘KFC’

U.S. Supreme Court defers to Iowa

Tuesday, October 4th, 2011 by Joe Kristan

The U.S. Supreme Court has declined to hear KFC’s appeal of the Iowa Supreme Court decision saying Iowa can tax their income just because they have Iowa franchisees. The Tax Policy Blog is disappointed:

It is unfortunate that the Court declined to hear the case, as states undermine predictability and disrupt the national economy when they are permitted to reach beyond their borders to tax businesses with no property or payroll in their state. As occurred after the U.S. Supreme Court declined to hear a similar case in 2007 (FIA Card Services fka MBNA America v. West Virginia Tax Commissioner), such state efforts will probably continue. The Tax Foundation’s Center for Legal Reform will continue educational efforts emphasizing the value of the physical presence standard for interstate business taxation.

But what was the Supreme Court supposed to do? After all, the Iowa Supreme Court can overrule the federal courts.
Related: Iowa Supremes reject ‘physical presence’ requirement, stick KFC with income tax.


KFC is taxable in Iowa. Why?

Monday, March 7th, 2011 by Joe Kristan

The Tax Policy Blog looks at the Iowa Supreme Court’s recent ruling forcing KFC to pay Iowa tax even though it has no physical presence here:

I’ve heard it claimed that because this out-of-state company is benefitting from its franchisees’ market in Iowa, it should pay a share of its profits to the state to pay for essential services like roads and courts and such. I have three reactions:
* Iowans are already benefitting from KFC Corp’s brand, in that the Colonel’s chicken dinner sales are voluntary transactions that make both parties better off.
* Iowa government spending is mostly for education, health care, police, parks, etc.: things that overwhelmingly benefit Iowa residents and the KFC franchisees, not KFC Corp and its employees. Residents should be willing to pay for the services they use and want rather than sticking out-of-state corporations with the bill.
* Should it really be the case that because someone in Iowa owes money to a Delaware company (which is essentially the relationship here), the Delaware company is subject to Iowa’s income tax? Does that system have a logical stopping point aside from every state’s corporate income tax being imposed on everyone?

We all benefit from stuff going on in every other state one way or another, even though we rarely notice it. Should we all pay taxes in other states on those “benefits?”
Related: Frying KFC


Frying KFC

Tuesday, January 4th, 2011 by Joe Kristan

Roger McEowen of the ISU Center for Agricultural Law and Taxation is not impressed by last week’s Iowa Supreme Court ruling subjecting KFC to Iowa’s income tax:

That is plainly a policy-based argument. Policy decisions are to be left for elected officials, not the Court. That


Iowa Supremes reject ‘physical presence’ requirement, stick KFC with income tax.

Friday, December 31st, 2010 by Joe Kristan

20101231-1.jpgIn the last batch of opinions for three of its judges, the Iowa Supreme Court yesterday upheld the Department of Revenue’s position that ‘physical presence’ is not required to subject taxpayers to Iowa’s corporation income tax.
KFC owns no Iowa restaurants or employees. It instead licenses franchisees in Iowa. Relying on the U.S. Supreme Court’s Quill decision, KFC argued that it’s lack of physical presence in Iowa exempted it from Iowa’s highest-in-the-nation corporation tax. As noted here last week, the Department of Revenue disagrees.
Quill held that a mail order vendor with no physical presence in North Dakota was exempt from paying sales and use tax there under Commerce Clause case law. Iowa Judge Appel’s 40-page opinion spends most of its time explaining why the same Commerce Clause allows taxation of a corporation with no Iowa physical assets. The opinion addresses the problem of a contrary U.S. Supreme Court opinion that’s less than 20 years old this way:

Finally, we think taxation of the income here is most consistent with the now prevailing substance-over-form approach embraced in most of the modern cases decided by the Supreme Court under the dormant Commerce Clause. When a company earns hundreds of thousands of dollars from sales to Iowa customers arising from the licensing of intangibles associated with the fast-food business, we conclude that the Supreme Court would engage in a realistic substance-over-form assessment that would allow a state legislature to require the payment of the company