The NFIB Small Business Legal Center has filed an amicus brief urging the Mississippi Supreme Court to rule in favor of Mississippi taxpayers seeking a refund for taxes paid on income earned in New York.
In Kansler v. Mississippi Department of Revenue, Michael Kansler was granted stock options in New York, but exercised those options only after moving to Mississippi. The NFIB Small Business Legal Center filed an amicus brief because the outcome of the case will affect small-business owners who commonly earn income on sales or services across state lines, said Karen Harned, the legal center’s executive director.
Since the New York Department of Revenue has concluded definitively that the Kanslers owe taxes on this income in New York, NFIB Legal Center maintains that the couple is constitutionally entitled to a refund in Mississippi because they should not be required to pay taxes twice on the same income.
“Small-business owners can’t afford to pay taxes on the same income in multiple states,” said Harned. “And the U.S. Supreme Court has said that they shouldn’t have to because double taxation violates the federal Constitution.”
In 2015, the U.S. Supreme Court ruled, in Comptroller of the Treasury of Maryland v. Wynne, that businesses should not have to pay taxes on the same income in multiple states; if a tax is definitively owed in one jurisdiction then the taxpayer is entitled to claim credits on that income in any other jurisdiction that may require a tax filing.
The Kanslers initially paid taxes in Mississippi but were later audited by the State of New York, which determined the couple owed taxes on that income in New York.
The couple asked for a refund on their Mississippi income taxes because they cannot legally be taxed on the same income by two different states under Wynne. However, the Mississippi Department of Revenue refused to issue a refund, arguing that the couple had missed the state’s three-year statutory deadline for applying for a refund—a decision that will result in effective double-taxation for similarly situated small businesses.
Michael and Vickie Kansler appealed, but the couple lost in Chancery Court. The case is now before the Mississippi Supreme Court.
In its amicus brief, the NFIB Small Business Legal Center argues that the state law establishing a three-year deadline for requesting a refund violates the dormant Commerce Clause of the U.S. Constitution by inappropriately limiting the deadline for refunds resulting from audits in other states.
“This is a question that can easily affect other taxpayers, not just the Kanslers,” Harned said. “The U.S. Supreme Court has made it clear that small-business owners and other taxpayers must not be subject to double-taxation. We believe the state Department of Revenue’s decision fundamentally contravenes the U.S. Supreme Court’s decision in Wynne.”
The NFIB Small Business Legal Center is the voice of small business in the nation’s courts and the legal resource for small-business owners nationwide. To learn more, visit www.NFIB.com/legal and follow @NFIBlegal on Twitter.