Supreme Court won't stop Iowa from requiring that KFC pay taxes

[Little-Acorn]

Somehow I get the feeling that this is not the first time this scenario has come up. What other companies charge people in other states to use their name, logo, secret recipies (or plans or patents maybe?), without the company having an actual physical presence in the state? And how have taxes for those other companies gotten worked out?

This is a little odd.

What say ye?

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http://www.businessweek.com/ap/financialnews/D9Q4SNFO0.htm

Court won't stop Iowa from forcing KFC to pay tax

The Associated Press
October 3, 2011, 10:50AM ET

WASHINGTON - The Supreme Court won't stop Iowa from forcing KFC Corp. to pay nearly $250,000 in corporate income taxes, even though it had no restaurants or employees in the state.

The high court on Monday refused to hear an appeal from the fried-chicken giant, which a decision by that state's Supreme Court overturned.

All KFC restaurants in Iowa are independent franchises, whose owners pay KFC for the use of its logo and systems. But the Iowa Department of Revenue and Finance assessed the company more than $248,000 in unpaid corporate income taxes, including interest and penalties, in 2001. The taxes were for 1997 to 1999.

KFC says it doesn't owe Iowa taxes because it doesn't have property in the state. But Iowa judges have not agreed with that argument.

 

[dogtowner]

I wish the article had said why. I suspect not a fed thing but it IS interstate commerce. Of course one would need to see the franchise agreements.

 

[Dr.Who]

The franchise is in Iowa and it sends money to KFC from Iowa. That is akin to Borders selling a book to a person in Iowa and then having to pay tax to Iowa because they sold a book to a person in Iowa. In other words I think the tax is legit.

 

[dogtowner]

The franchise is in Iowa and it sends money to KFC from Iowa. That is akin to Borders selling a book to a person in Iowa and then having to pay tax to Iowa because they sold a book to a person in Iowa. In other words I think the tax is legit.

Hmmm.... yes, the franchise is in Iowa and it does pay franchise fees to KFC it may also be required to purchase things from KFC as well but that means it's out of state (ergo interstate commerce). So wherever the KFC is certainly has profit subject to taxation there. But not at the originating state. Now it is also true that when I buy a product ny state may require that sales tax be collected from the retailer. If it is this that is in question then I could see it. Far too little information to go on.