MoFo New York Tax Insights - Volume 7, Issue 8

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ALJ holds that a Retailer Must File on a Combined Basis with a Related Intellectual Property Licensing Company -

A New York State Administrative Law Judge has held that a retailer must file combined corporate franchise tax returns with a related company to which it paid royalties. Matter of Whole Foods Market Group, Inc., DTA No. 826409 (N.Y.S. Div. of Tax App., July 14, 2016). In reaching his conclusion, the ALJ rejected the retailer’s contention that it should instead add back to its taxable income the deductions associated with the royalties paid to the related company.

Facts. Petitioner, Whole Foods Market Group, Inc. (“WFMG”), operated retail stores selling natural and organic food products throughout the United States, including in New York. WFMG licensed certain trademarks and intellectual property from Whole Foods Market IP, LP (“WFMIP”), a limited partnership that elected to be treated as a corporation for income tax purposes. WFMG and WFMIP were brother-sister entities owned by a common parent corporation. WFMG had nexus in New York, but the Department stipulated that WFMIP did not have New York nexus.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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