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All Jurisprudence based

0 tracked cards Commercial and Taxation Laws

A city enacts Ordinance No. 23-101 imposing a local tax of 4% on gross receipts earned by online professional-services marketplaces for contracts that include substantial in-city performance, such as real-time support, coordination of delivery, or on-site consultations within the city boundaries, regardless of where the platform is registered or domiciled. The tax bases the amount on the total receipts from such contracts, even though a substantial portion of the performance occurs outside the city. A platform headquartered outside the city challenges the ordinance as invalid extraterritorial taxation. Analyze: (a) Identify the controlling doctrine under Sec. 133; (b) Is the ordinance a valid exercise of the city’s taxing power given that it taxes receipts that include in-city performance? (c) If the ordinance is valid, discuss whether the city must adopt a reasonable apportionment method and how that affects uniformity.

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The controlling doctrine under Sec. 133 is that a local government may tax only receipts earned from activities within its territorial jurisdiction, and extraterritorial taxation is not permissible; when a contract includes in-city performance, the city may validly tax the portion of receipts attributable to the in-city performance by adopting a reasonable apportionment method, and uniformity is achieved through that apportionment. The ordinance is valid only if the platform has a physical presence in the city; mere in-city performance is insufficient to establish taxable nexus. The ordinance may be valid but only to the extent of the receipts attributable to in-city performance if and only if the city adopts a reasonable apportionment method; otherwise it violates Sec. 133. The ordinance is valid if it taxes the entire gross receipts from such contracts, without apportionment, on the theory that in-city performance is enough to justify full taxation; uniformity is not a concern.

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