Week in Insights: Processing Fees Blur Limits of Corporate Power

Curated by Daniel Xu

The way we perceive major corporations’ influence in our lives appears to have changed in recent years. A clear example is the language we use to describe the processing fees charged by technology companies for the use of their app stores.

The fees have commonly been referred to, quite matter-of-factly, as “taxes.” Taxes generally are enforced by a government, but now they appear to be imposed by technology companies and device manufacturers. As more of our economic lives are played out online, the term “tax” appears to be more than a semantic shift.

When one thinks of taxes, one imagines a state levying taxes to fund public services and infrastructure. There usually isn’t a line-item invoice that shows which taxes paid for which services.

In a similar vein, the processing fees charged by technology companies don’t explain what costs are being offset—they’re simply subtracted from sales revenue before the remainder is paid to the seller. This process mirrors the way most employees receive their paychecks.

The evolving way corporations view themselves—and the public’s tacit acceptance of that perception—raises important questions about governance in the digital era. It should prompt reflection on the roles and responsibilities we understand corporate entities to have, which correspond to the power and influence we allow them to wield.

Here at Bloomberg Tax, we aim to simplify the complexities of tax policy, however expansive the definition may become. Whether it’s unraveling the intricacies of corporate tax or the implications of ubiquitous service fees, we aim to ensure our readers are informed where tax law meets daily life.

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Look for Leahey’s column on Bloomberg Tax, and follow him on Mastodon at @andrew@esq.social

Customers look at products inside a new store in the Hongdae district of Seoul on Jan. 20, 2024.

Photographer: SeongJoon Cho/Bloomberg via Getty Images

State Insights

New York Gov. Kathy Hochul’s proposal to replace the state’s cannabis potency tax with an excise tax will help lower taxes for the legal cannabis industry as a whole, ABFinWright’s Rachel Wright, Abraham Finberg, and Simon Menkes say.

Vanst Law’s Allison Soares and RJS Law’s Lauren Suarez give an overview of California’s recent tax developments, including single-sales factor apportionment, affordable housing, and a law about internet-based activities.

Federal Insights

As the 2024 tax filing season approaches, AICPA’s Eva Simpson advises practitioners and firm leaders how to manage stress and feelings of being overwhelmed.

Cooley partners Adam Gershenson, Nicolas Dumont, and Liza Cotter explore the most pressing legal considerations for companies using AI meeting transcription services.

RSM’s Cindy Hull and Karen Field analyze federal tax code provisions that provide relief to victims of financial scams—and their limitations in addressing fraud that differs from Ponzi-type schemes.

Ogletree Deakins’ Stephanie Smithey and Carly Grey examine factors that may affect whether retirement plan sponsors continue their wait-and-see approach on the SECURE Acts or amend their plans before further guidance is released.

New IRS guidance for transactions and restructurings of multinational groups has wide-reaching implications but won’t change how tax advisers should assist their clients, Andersen’s Marek Krawczyk and Certa Insurance’s Ben Furtick say.

Nonresidents who make US investments need to be aware of the tax consequences, particularly when it comes to the US estate tax, Esquire Group’s Jimmy Sexton says.

Orrick’s Rachel Patterson says that law firm associates seeking to advance should ask themselves if they are performing consistently, being proactive about professional development, and meeting expectations on billable hours.

Columnist Corner

Tax breaks for corporations have driven increasing executive compensation, which undermines broader economic policies designed to improve equity, Andrew Leahey says in his Technically Speaking column. He argues that executive compensation thresholds should be introduced under Section 174 of the tax code.

Career Moves

David Makso has joined Foley & Lardner as a partner in its taxation practice group in New York.

Peter Rodwick, CPA, has joined CohnReznick as a tax partner in its financial services practice.

Christopher Haws has been made a member of the trusts and estates planning practice group at Sherman & Howard.

Adam Arikat has joined the Simpson Thacher as a partner in the tax practice in the Houston office.

Nicole Mann has joined Loeb & Loeb as a partner in the trust and estate department in Chicago.

Chris Wootten has joined Jones Walker as a partner in the tax practice group in New Orleans.

If you’re changing jobs or being promoted, email your submission to TaxMoves@bloombergindustry.com for consideration.

News Roundup

It’s been another busy week in tax news from state capitals to Washington. Here are some stories you might have missed from our Bloomberg Tax news team (login required).

• From some tax practitioners’ perspective, Australia’s new guidance on the potential risks related to companies’ trademarks, patents, and other intangible assets might cause as many problems as it solves.
• Sports teams and their owners are being targeted by a new IRS campaign, as the agency ramps up its efforts to audit partnerships using an infusion of funds from the 2022 tax-and-climate law.
• Four law and consulting firms and a former official of the Organization for Economic Cooperation and Development are competing for a million-dollar contract to advise Puerto Rico on the impact of the global minimum tax in the US territory.
• Amazon Services LLC could be forced to write a check for much more than the $12.5 million in unpaid taxes a South Carolina appeals court affirmed in a ruling that found the company had failed to collect and remit sales tax on third-party sales into the state.

A football sits by a pylon before the start of the Baltimore Ravens and Houston Texans AFC Divisional Playoff game at M&T Bank Stadium in Baltimore, on Jan. 20, 2024.

Photographer: Rob Carr/Getty Images

Tax Journals

(Bloomberg Tax login required)

Tax Management Memorandum

Baker Donelson’s Chuck Goldberg highlights guidance points in the IRS’s proposed regulations for the clean energy credit under Section 45X of the tax code.

The key to an oil and gas company’s compliance with US tax reporting requirements is performing impartial valuations of the fair market value of its assets, KPMG’s Kevin Kennison, Kellie Adkins, Julie Chapel, Max Raev, Francis Dorrego, and Brad Holinbeck say.

Our Team

We talk about tax a lot. But you would hear much more if you popped into one of our Teams meetings. Here’s a quick look at what some of us are watching, reading, and listening to this week.

Watching
Rebecca Baker (Editor-at-Large): “Lady Oscar: The Rose of Versailles,” an anime series about a young woman assigned to protect a young Marie Antoinette in 18th century France.

Reading
Melanie Cohen (Content Editor): “Lessons in Chemistry” by Bonnie Garmus, about a female chemist in the 1960s who starts a cooking show on TV.

Listening
Andrew Leahey (Columnist): Glenn Gould’s interpretation of Johann Sebastian Bach’s “Goldberg Variations,” a fantastic example of classical music.

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