FEDA Home

224.293.6500 Tel

News

Update and New Action on Overtime Rule

Posted September 29, 2016




Understanding the New Overtime Pay Rules

Posted September 12, 2016




7 Things to Know about the NEW Overtime Regulations

Posted July 19, 2016




NMFC Class Change

Posted October 14, 2015




ALI GROUP TO ACQUIRE INTERMETRO INDUSTRIES CORPORATION

Posted September 22, 2015




CCSB Docket 2015 - 3

Posted September 10, 2015




ReTrans Freight Summary of Proposed CCSB Changes

Posted September 10, 2015




Industry Loses Icon with Passing of Henry Coletti

It is with heavy hearts that FEDA reports the passing of Henry Coletti this past Saturday, June 13, 2015. He was diagnosed with cancer recently and was at home with family and close friends when he passed. He leaves wife Ellen, three children, and five grandchildren.

FEDA Past President Rick Ellingson, of Bargreen Ellingson, said of Henry "He was a strong advocate for distribution and spoke fondly of the industry to the end."

In 2001 Henry was the first recipient of the FEDA President's Dealer-Based Distribution Award.

Mark Suchecki, of Entree Refrigeration, commented that "Henry made Vulcan who they are today; he was one of the great manufacturing icons of our industry."

Anyone interested in sending their condolences to the family should contact the FEDA office for more information.

Posted June 15, 2015




Mike Whiteley Presentation on Dealer - Manufacturer Collaboration

Posted March 2, 2015




Marketplace Fairness: An Idea That's Time Has Come

Posted December 2, 2014




NMFC Notice of Disposition

Posted November 10, 2014




CPG Announces New Entity

Posted October 21, 2014




Industry Mourns Gordon Oates Jr.

Industry Mourns Gordon Oates Jr.
Posted December 11, 2013




Save Last in, first out (LIFO) inventory accounting

Download Document File
Posted October 2, 2013




Employer Responsibilities Under the Patient Protection and Affordable Care Act for 2014

Download PDF File
Posted June 11, 2013




Health Care Reform Requirements and Applicability

Download Word Document
Posted Feb. 19, 2013




Revit Presentation from FEDA 2012 Convention

Posted Apr. 14, 2012




McDaniel College Names Stadium After Ken Gill

View PDF
Posted Feb. 22, 2012




National Restaurant Association seeks innovative operators

The National Restaurant Association is seeking commercial and non-commercial restaurant and foodservice operators - nominate your customers today - who transform the industry with extraordinary creativity, commitment to innovation, and excellence for its new Operator Innovations Awards. Award categories include: Food Safety, Sustainability, Health & Nutrition, Technology Applications and Menu Development. The winners will be announced during the National Restaurant Association Restaurant, Hotel-Motel Show, May 5 through 8, in Chicago. Nominations are due March 7.

Posted Feb. 22, 2012




Chicagoland Food Industry Veterans Unite

As part of an active acquisition campaign, Alliance Paper & Food Service of Franklin Park, Ill. just announced that it has acquired FEDA member firm Schweppe Kitchen Equipment & Supply, based in Lombard, Ill.

"We are pleased to be bringing Schweppe onboard," said Alliance president and CEO Brian Flynn. "Schweppe is a foodservice company with an excellent reputation for integrity, service, quality and fair prices. These are operating guidelines that mirror our own. It was a natural choice for us - one that we are confident will lead to growth for both businesses while providing our customers with even better service and selection."

The Schweppe family will continue to manage the Lombard business, founded in 1932. Customers will notice very little difference aside from the Alliance name on delivery trucks and a broader selection in the store and on the website.

"The two companies clearly share the same operating philosophy," said Schweppe president Jeff Schweppe. "We are very excited to be able to offer our customers an even broader selection of products and expanded delivery capabilities."

With 40,000 square feet of professional-grade kitchen supplies and commercial equipment, Schweppe’s Lombard, Ill. store is one of the only foodservice supply stores in the Chicago area that is always open to the public.

Alliance Paper & Food Service, founded in 1954, is a privately owned full service distributor offering a wide range of food service products that include paper goods, janitorial and sanitation, foodservice disposables, and packaging for restaurants, catering, bakery, coffee shops, food processing, delis and supermarkets. They service the greater Chicagoland area and beyond. In addition to its Franklin Park headquarters and distribution center, Alliance maintains a cash and carry store at 913 W. Randolph in Chicago.

Posted Feb. 22, 2012




MAFSI Business Barometer Records Further Improvement

Third consecutive quarter of growth; Q3 forecast at 4.8%

Overall sales for Q2/11 compared with Q2/10 grew by 5.7%. This performance exceeded the forecast of a 4.9% increase and marked a further improvement to the first quarter gain of 4.0% (as compared to first quarter 2010).

This was the third consecutive quarterly increase after three years of contraction.

While all of the losses of the Great Foodservice Recession have not yet been recovered, the rebound has been quite strong during this upswing.

On a regional basis, growth was led by the Northeast at 7.1%, Canada 7.0%, the Midwest at 6.0%, the West finally rebounding with 5.7%, and the South trailing by 3.2%.

By product categories, growth ranged from 7.9% in furnishings, 6.2% in equipment, 4.1% in supplies, to only 2.2% in tabletop.

MAFSI reps are predicting continued growth for Q3/11 at 4.8%.

Also, for the third consecutive quarter, reps are reporting greater consultant activity and for the sixth quarter, a higher level of quotations, both key indicators of a strengthened pipeline of future business activity.

With possible storm clouds on the horizon as a result of current political events, disappointing economic data, and recent financial market reversals, we will need the benefit of a growing backlog as the economy approaches a "soft patch."

Full report available here.
Posted August 16, 2011




SINGER EQUIPMENT CO., INC. ACQUIRES ASSETS OF M TUCKER CO., INC.

Strategic Acquisition Expands Full Distribution and Market Coverage from Connecticut to Maryland

ELVERSON, PA - June 17, 2011 - FEDA member firm Singer Equipment President and Chief Executive Officer, Fred Singer, announced the acquisition of the assets of the FEDA member firm M Tucker Co., located in Paterson, NJ. M Tucker is the leading foodservice E&S dealer in the greater New York City market, providing a complete offering of foodservice equipment, tabletop, disposables and smallwares to major restaurant and foodservice operators. Stephen Tucker and Marc Fuchs will continue on as the executives leading the new division which will operate as M Tucker, a division of Singer NY, LLC.

"With the addition of the M Tucker distribution center in Paterson to our distribution network, and the addition of the experienced and knowledgeable M Tucker sales force, the combined company will be able to provide distribution solutions to customers over a much broader geography. We strive to be the most responsive and knowledgeable foodservice equipment and supplies distributor in the country. M Tucker is known for a similar focus on delivering outstanding service to its customers. We welcome the M Tucker team and look forward to growing the business," said Singer.

"We look forward to partnering with Singer," said Stephen Tucker, President of M Tucker. "Our customers can expect the same great service and an even broader line of inventory, especially in equipment. This is a wonderful opportunity to recognize greater efficiencies and bring new opportunities to our customers and employees," said Tucker. Executive Vice President Marc Fuchs added, "We are excited about the prospects that this partnership brings to our customers, expanding on our traditions of service, responsiveness and expertise."

Singer Equipment Company, currently the seventh largest foodservice equipment dealer in the United States, is the leading foodservice equipment dealer in the mid-Atlantic market. Singer also provides nationwide service to chain restaurants and contract feeders. With this acquisition, the combined entity will be the fourth largest foodservice equipment and supplies dealer in the country. "Singer will continue to look for other strategic acquisitions that enhance our ability to service key markets and customers," says Singer.

Founded in 1918, Singer is known for its broad inventory, high level of service and excellence in completing new kitchen installation projects. Singer maintains a multi-million dollar inventory of equipment as well as tabletop, kitchen, disposable and janitorial supplies - over 10,000 items available for immediate delivery.

Entrepreneur Partners served as the financial advisor to Singer Equipment. For more information about Singer Equipment visit www.singerequipment.com, or contact Kathy Sawlsville at ksawlsville@singerequipment.com.

Posted June 20, 2011





The State Tax Game of Chicken Continues:

Economic Nexus Claims Another State With 'KFC'

By Stephen W. Long, Jeffrey M. Slade, and Robert H. Albaral

Robert Albaral is a tax partner in the Dallas office of Baker & McKenzie LLP. Stephen Long and Jeff Slade are tax associates in the Dallas office of Baker & McKenzie LLP.

The authors would like to thank their colleague John Paek for his insight and assistance in the drafting of this article.

Recently, the Iowa Supreme Court weighed in on the hotly contested issue of "economic nexus" in KFC Corp. v. Iowa Department of Revenue1 ; the court joined the growing majority of states that have addressed and declined to apply the U.S. Supreme Court's holding in Quill Corp. v. North Dakota2 to income taxes.

  1. KFC Corp. v. Iowa Department of Revenue, 792 N.W.2d 308 (Iowa 2010).
  2. Quill Corp. v. North Dakota, 504 U.S. 298 (1992).

These state courts have ruled that persons and corporations may have "substantial nexus" with a state for income tax purposes, even though they have no physical presence in the state. The KFC decision is the latest twist in the development of "economic nexus" as the Supreme Court of Iowa ruled that a taxpayer had substantial nexus as a result of licenses with unrelated third-party franchisees.

'Quill' and Substantial Nexus

The ultimate question in KFC and these other cases is this: What constitutes substantial nexus for income tax purposes?

The substantial nexus requirement originated in the U.S. Supreme Court's decision in Complete Auto Transit Inc. v. Brady.3 In Quill, the court applied the substantial nexus requirement to an out-of-state retailer that had no employees or property in North Dakota and whose activities in North Dakota were limited to mail orders and delivery by common carrier. North Dakota sought to require Quill to collect use tax on deliveries into the state. However, the court held that the physical presence test, which had been described 10 years prior to Complete Auto in National Bellas Hess Inc. v. Illinois Department of Revenue,4 remained the Commerce Clause substantial nexus standard, at least for sales and use tax purposes.

  1. Complete Auto Transit Inc. v. Brady, 430 U.S. 274 (1977).
  2. National Bellas Hess Inc. v. Illinois Department of Revenue, 386 U.S. 753 (1967).

The 'Geoffrey' Schism and Economic Nexus

KFC is part of the growing line of cases that have interpreted this substantial nexus requirement differently in the context of income-based taxes. These cases have considered whether taxpayers must have a physical presence in a state to satisfy the constitutional requirement for imposing an income tax. And if physical presence is not required, what is the test?

One year after Quill, the South Carolina Supreme Court in Geoffrey Inc. v. South Carolina Tax Commission5 considered whether the bright-line physical presence rule applied in the context of income-based taxes. In Geoffrey, the court considered whether an out-of-state intangible holding company had substantial nexus with South Carolina for income tax purposes if it licensed intellectual property to a related party doing business in the state. The Geoffrey court ruled that Quill was limited to its facts and applied to only sales and use taxes.6 Moreover, it concluded that a taxpayer's economic activity in the state - with or without physical presence - would be sufficient to impose the state's income tax on the taxpayer.

  1. Geoffrey Inc. v. South Carolina Tax Commission, 437 S.E.2d 13 (S.C. 1993), cert. denied, 510 U.S. 992 (1993).
  2. 437 S.E.2d at 23-24.

Courts in Maryland, Louisiana, New Mexico, New Jersey, Oklahoma, West Virginia, Washington, and North Carolina followed suit and have similarly limited the Quill physical presence test to sales and use taxes.7 Moreover, an even larger number of state legislatures and tax authorities have enacted laws and adopted rules establishing economic nexus standards, though most of those new laws have not yet been challenged.8

  1. SYL Inc. v. Maryland Comptroller of the Treasury, 825 A.2d 399 (Md. 2003), rev'g, Baltimore City Cir. Ct., Dkt. No. 24-C-99-002389 AA, 3-17-2000, aff'g, Md. Tax Ct., Dkt. No. C-96-0154-01, 4-26-1999, cert. denied, 124 S. Ct. 478 (2003); Louisiana Department of Revenue v. Gap (Apparel) Inc., 886 So.2d 459 (La. Ct. App. 2004); Kmart Properties Inc. v. New Mexico Taxation and Revenue Department, 131 P.3d 27 (N.M. Ct. App. 2001), rev'd on other issues, 131 P.3d 22 (N.M. 2005); Lanco Inc. v. New Jersey Division of Taxation, 879 A.2d 1234 (N.J. Super. Ct. App. Div. 2005), aff'd, 908 A.2d 176 (N.J. 2006) (per curiam), cert. denied, 127 S. Ct. 2974 (2007); Geoffrey Inc. v. Oklahoma Tax Commission, 132 P.3d 632 (Okla. Ct. App. 2005), cert. denied (March 20, 2006), as corrected (April 12, 2006); Lamtec Corp. v. Washington Department of Revenue, No. 83579-9 (Wash. Jan. 20, 2011); West Virginia Tax Commissioner v. MBNA America Bank N.A., 640 S.E.2d 226 (W.Va. 2006), cert. denied, FIA Card Services Inc. v. West Virginia Tax Commissioner, 127 S. Ct. 2997 (U.S. 2007); A & F Trademark v. Tolson, 605 S.E.2d 187 (N.C. Ct. App. 2004), cert. denied, 126 S. Ct. 353 (2005). But see Rylander v. Bandag Licensing Corp., 18 S.W.3d 296 (Tex. App. 2000); J.C. Penney National Bank v. Tennessee Commissioner of Revenue, 19 S.W.3d 831 (Tenn. Ct. App. 1999), appeal denied, (Tenn. May 8, 2000), cert. denied, 531 U.S. 927 (2000). These cases are discussed below.
  2. See, e.g., Cal. Rev. & Tax Code Section 23101; Colo. Code Regs. Section 39-22-301.1(2); Conn. Dept. of Rev., IP 2010 (29.1), section 4; Mich. Comp. Laws Section 208.1200(1); Or. Admin. R. Section 150-317.010(2); Wash. Rev. Code Section 82.04.220; Wash. Special Notice No. 05/28/2010.

The courts that have rejected the Quill physical presence standard in the context of income-based taxes have instead adopted a standard that is either more flexible or hopelessly nebulous, depending on the viewpoint of the advocate. This standard is typically referred to as "economic nexus", even though not all of the courts have used this particular nomenclature.

The courts that have adopted the economic nexus approach have yet to adopt a widely accepted test to determine when the standard has been met. Those skeptical of economic nexus remark that the lack of a defined, bright-line test has rendered the economic nexus standard no standard at all because without a test taxpayers cannot present a meaningful defense to allegations that the economic nexus standard has been satisfied and cannot adequately determine whether they even have state income tax reporting obligations.

In West Virginia Tax Commissioner v. MBNA America9, for example, the Supreme Court of Appeals of West Virginia articulated its test to establish economic nexus. Its test, which it termed "a significant economic presence test," incorporates "due process 'purposeful direction' towards a state while examining the degree to which a company has exploited a local market." According to the court, the test also involves an examination of both the quality and quantity of the company's economic presence.

  1. West Virginia Tax Commissioner v. MBNA America, 640 S.E.2d 226 (W.Va. 2006) citing Edson, 49 Tax Law. at 945.

Under this test, purposeful direction toward a state is analyzed as it is for Due Process Clause purposes and the Commerce Clause analysis requires the additional examination of "the frequency, quantity and systematic nature of the taxpayer's contacts with the state."

While the other states that have adopted economic nexus have been less precise than West Virginia's high court in defining the standard, the common thread is that nexus should be determined based on a corporation's economic connection to a state rather than its physical presence in the state.

'KFC' and the Scope of the Economic Nexus Doctrine

The recent KFC decision presented the Iowa Supreme Court with the same issue faced by the court in Geoffrey and others. Nonetheless, while the issue was similar, KFC presented a slight twist from the Geoffrey fact pattern and the fact pattern of many of the early economic nexus cases.

The facts of KFC are simple. KFC Corp. primarily owned and licensed intellectual property relating to the Kentucky Fried Chicken restaurant system. KFC Corp. licensed this system to independent franchisees who owned restaurants throughout the United States. The third-party franchisees remitted royalty and/or license income to KFC Corp. for use of its marks. While KFC Corp. licensed its system to related entities, all Kentucky Fried Chicken restaurants in Iowa were owned by independent franchisees. KFC Corp. owned no restaurant properties in Iowa and had no employees in Iowa.

On the other hand, Geoffrey and many of the early economic nexus cases were grappling with "intangible holding companies." The facts of Geoffrey are instructive. In Geoffrey, Toys R Us Inc. created Geoffrey Inc., a wholly owned Delaware subsidiary, to hold Toys R Us Inc.'s intangible property. Geoffrey then licensed the intangibles that it held to its parent, Toys R Us, in exchange for royalties. Thus, many practitioners have been keenly interested in KFC because it involved a licensing agreement between unrelated parties. But would the Iowa Supreme Court conclude this fact significantly distinguished KFC from Geoffrey and the other cases that adopted economic nexus?

The Iowa high court ruled in the negative and found that significant nexus existed because KFC Corp. licensed intellectual property in the state. The court found that the use of these valuable intangibles in the state constituted more than a slight presence in the state. The court also found it was a significant connection to the state. Moreover, because the intangibles were used by franchisees that were "firmly anchored in the state," the court determined that the intangibles had "a sufficient connection to Iowa to amount to the functional equivalent of 'physical presence' under Quill."10

  1. 792 N.W.2d at 324.

Interestingly, the court did not place any significance on the fact that the taxpayer and its franchisees were unrelated. Furthermore, it did not acknowledge that its facts were arguably distinguishable from Geoffrey and its progeny.

In the alternative, the court held that the physical presence requirement under Quill was inapposite to the income taxes at issue. The bulk of the KFC court's legal analysis in this discussion centers around its reading of Quill. The thrust of its reasoning is that Quill was not based on sound legal analysis or even logic; rather, it was based solely on the doctrine of stare decisis. The KFC court, like others that have ruled similarly, found it significant that the U.S. Supreme Court's majority decision in Quill was something less than a full defense of the logic underlying Bellas Hess. Thus, the KFC court concluded that but for the Quill court's unwillingness to upset the settled expectations of taxpayers who had built their business relying on the U.S. Supreme Court's decision in Bellas Hess, Quill would have been decided differently.

The KFC court also reasoned that there was no analogue to Bellas Hess in the realm of state income taxes, and for this reason there was no "reliance interest" in a physical presence standard to protect. Furthermore, to the extent that precedent existed with respect to income-based taxes, the KFC court concluded that it cut against a requirement for a physical presence standard.

In support of this, the KFC court cited to two previous U.S. Supreme Court decisions: International Harvester v. Wisconsin Department of Taxation11 and New York ex. rel. Whitney v. Graves.12 In International Harvester, the U.S. Supreme Court ruled that Wisconsin could tax nonresident stockholders on the portion of a dividend received that represented the corporation's Wisconsin earnings. In Whitney, the court ruled that New York was permitted to tax a Massachusetts taxpayer on the sale of an intangible - a seat on the New York Stock Exchange - because the intangible was sufficiently connected with the state as to acquire local situs in New York. Thus, while there is merit to the KFC court's reliance on these cases, the court itself acknowledges their shortcomings.

  1. International Harvester v. Wisconsin Department of Taxation, 322 U.S. 435 (1944).
  2. New York ex. rel. Whitney v. Graves, 299 U.S. 366 (1937).

While the Supreme Court did allow the states in International Harvester and Whitney to levy a tax on income without physical presence, the Iowa Supreme Court acknowledged that the cases were not directly on point. Both of these cases involved the Due Process Clause and not the Commerce Clause.

While the KFC court attempted to bolster this precedent by noting the cases were decided at a time when the nexus requirements of the Due Process Clause and the dormant Commerce Clause were thought to be interchangeable, upon further examination, this observation actually calls the vitality of these pre-Quill cases into question because the holding in Quill articulated that there is a significant distinction between the two provisions.13 In fact, the court in Quill agreed that the taxpayer did have nexus with the taxing state under the Due Process Clause. It was the Commerce Clause that proved to be the stumbling block for the state in that case.

  1. Or as Justice Byron White noted in the case, concurring in part and dissenting in part, the court "announces the rule" distinguishing the standards. Justice White has the better end of the argument on this point. The Commerce Clause standard described in Quill was unquestionably novel.

The KFC court also noted that the potential compliance burdens associated with sales and use taxes may justify distinguishing sales taxes from income-based taxes. Quoting Quill, the KFC court observed that if a state could force a taxpayer to collect sales and use taxes on its behalf without a physical presence in the state, it might become a virtual agent of more than 6,000 jurisdictions. On the other hand, the KFC court concluded, the burden of complying with state income tax obligations is substantially less because far fewer jurisdictions are involved and taxes are paid less frequently.

The Implications of 'KFC'

For now, it appears that licensing intangibles into the state of Iowa will impose income tax filing obligations on nonresidents, even when licensed to a third party. Only time will tell whether the other economic nexus jurisdictions will embrace the Iowa Supreme Court's view. At least, Connecticut appears to have already taken this position.14

  1. See Conn. Dept. of Rev. Svcs., IP 2010 (29.1), section 4 (noting that the in-state ownership and use of intangible property by a company, partnership, or S corporation in Connecticut would subject it to tax on its income when certain factors are met).
  2. Iowa Policy Letter No. 06240045.
  3. In the Matter of KFC Corp., 07DORFC016 (2008).

One question that remains unresolved in the wake of KFC is whether the ruling applies to all intangibles licensed in the state of Iowa. A previous letter ruling issued by the Iowa Department of Revenue concluded that the mere grant of a license to use a developer's software does not, by itself, create Iowa corporation income tax nexus.15 This letter ruling suggests not all licenses will create nexus. Moreover, the letter ruling was issued a mere two years before the KFC matter was heard by an administrative law judge.16

Unfortunately, the Iowa Supreme Court did not consider whether this ruling was consistent with the position of the state in KFC because the issue was not properly preserved for review. Nonetheless, the court did narrowly tailor its holding with respect to the intangibles. Its conclusion limited its holding to the facts of the case: "[W]e conclude that the Supreme Court would likely find intangibles owned by KFC, but utilized in a fast-food business by its franchisees that are firmly anchored within the state, would be regarded as having a sufficient connection to Iowa to amount to the functional equivalent of 'physical presence' under Quill."17 Therefore, it is possible that the letter ruling survives KFC and that not all intangibles licensed into Iowa create nexus. Nonetheless, taxpayers are left without a definitive answer to what constitutes an intangible that is "firmly anchored" in the state.

  1. 792 N.W.2d at 324.

The Minority View

With KFC, Iowa has adopted the majority view on Quill, but this narrow interpretation of Quill has not been universally accepted. Courts in Tennessee and Texas have applied Quill to income taxes.18 They hold that the Commerce Clause requires that a taxpayer have physical presence in a state before subjecting the taxpayer to state taxes and any distinction between sales, gross receipts, income, revenue, and other taxes is constitutionally irrelevant. These courts have interpreted Complete Auto and its progeny according to a big-picture legal proposition rather than their specific facts.

  1. Rylander v. Bandag Licensing Corp., 18 S.W.3d 296 (Tex. App. 2000); J.C. Penney National Bank v. Tennessee Commissioner of Revenue, 19 S.W.3d 831 (Tenn. Ct. App. 1999), appeal denied (Tenn. S. Ct. May 8, 2000), cert. denied, 531 U.S. 927 (2000).

In Rylander v. Bandag Licensing Corp., the taxpayer, a wholly owned subsidiary of Bandag Corp., maintained a certificate of authority to transact business in Texas, but the company had no physical presence in the state. Although the Texas comptroller argued that a physical presence standard applied only to sales and use taxes, the Court of Appeals of Texas redirected the analysis to taxes generally. It held that "[a]lthough written in the context of sales and use taxes, Quill Corp. and Bellas Hess do not purport to apply a standard other than the 'substantial nexus' test applied in Complete Auto to a 'privilege of doing business' tax."19

  1. 18 S.W.3d at 299.

The court also stated that there was "no principled distinction when the basic issue remains whether the state can tax the corporation at all under the Commerce Clause." Thus, the court ruled, the imposition of the franchise tax on the taxpayer in that case violated the Commerce Clause.

Similarly, the Court of Appeals of Tennessee in J.C. Penney rejected the economic nexus standard. In that case, the court observed the complete lack of U.S. Supreme Court precedent blessing the imposition of any state tax on a taxpayer who has no physical contact or connections with the state. The Tennessee Department of Revenue argued that Complete Auto did not formally require the physical presence standard announced in Quill and Bellas Hess. However, the Tennessee court ruled that the physical presence standard set forth in Quill and Bellas Hess is a fundamental requirement of the "substantial nexus" requirement in Complete Auto, regardless of the type of tax at issue. The court found no basis for concluding that the analysis varied with the tax and ruled that the same standard should apply equally to franchise and excise taxes.

While the KFC and other courts adopting economic nexus have argued that sales taxes impose a greater burden on taxpayers than income taxes due to compliance concerns, taxpayers in other cases have argued that this proposition is contrary to U.S. Supreme Court precedent. In MBNA, the taxpayer put forth an interesting and rather convincing argument that the U.S. Supreme Court in National Geographic Society v. California Board of Equalization20 established that an income tax should face greater - not less - scrutiny than a sales tax.

  1. National Geographic Society v. California Board of Equalization, 430 U.S. 551 (1977).

In its discussion, the court in National Geographic found that there was an increased possibility of double taxation with income-based taxes. Moreover, in the case of income taxes, the taxpayer ultimately must pay the tax from its own coffers. Sales and use taxes, on the other hand, are simply collected from the taxpayer's customers and remitted to the state. Thus, income taxes impose a financial burden whereas sales and use taxes merely impose an administrative one. Unfortunately for the taxpayer, the Supreme Court of West Virginia summarily dismissed this argument by stating the language "was dicta in that it was not necessary to the decision in that case."21

  1. 640 S.E.2d 234-35.

What's Next?

Ultimately, KFC provides cold comfort in an area of the law fraught with uncertainty. Taxpayers cling to hope that other courts will adopt the logic of Bandag and J.C. Penney, but the momentum undeniably favors the economic nexus standard, which has prevailed in the recent cases to consider this issue. While the trends are discouraging, taxpayers still need answers.

The uncertainty created by Quill, especially in states where the issue has not been litigated, can hurt public companies where it matters most - their financial statements. Without certainty as to the law, companies may be required to reserve for uncertain tax positions in accordance with Financial Accounting Standards Board Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," in states where they do not file returns because they cannot conclude that it is more likely than not that they do not have substantial nexus with the state. These reserves can remain on the books indefinitely in states where the company does not file a return.

KFC filed a writ of certiorari with the U.S. Supreme Court April 28, requesting that its appeal be heard. This will present the court with yet another opportunity to settle this important constitutional issue and resolve the split in the states. While it is arguable that the court opened the door to the debate, it has been slow to close it as it has denied certiorari for all prior cases raising the issue.22 Perhaps it has stayed its hand under the belief that the issue "is not only one that Congress may be better qualified to resolve, but also one that Congress has the ultimate power to resolve."23

  1. See West Virginia Tax Commissioner v. MBNA America Bank N.A., 640 S.E.2d 226 (W. Va. 2006), cert. denied, FIA Card Services Inc. v. West Virginia Tax Commissioner, 127 S. Ct. 2997 (2007); Lanco Inc. v. New Jersey Division of Taxation, 879 A. 2d 1234 (N.J. Super. Ct. App. Div. 2005), aff'd, 908 A.2d 176 (N.J. 2006) (per curiam), cert. denied, 127 S. Ct. 2974 (2007); Geoffrey Inc. v. Oklahoma Tax Commission, 132 P.3d 632 (Okla. Ct. App. 2005), cert. denied (2006); A&F Trademark v. Tolson, 605 S.E.2d 187 (N.C. App. 2004), cert. denied, 546 U.S. 821 (2005); J.C. Penney National Bank v. Tennessee Commissioner of Revenue, 19 S.W.3d 831 (Tenn. Ct. App. 1999), appeal denied, (Tenn. May 8, 2000), cert. denied, 531 U.S. 927 (2000); Geoffrey Inc. v. South Carolina Tax Commission, 437 S.E.2d 13 (1993), cert. denied, 510 U.S. 992 (1993).
  2. 792 N.W.2d at 318.

Nonetheless, the uncertainty in this area increases as new states take their best guess at how the Supreme Court would come out on the issue. While it is unknown whether the court will hear KFC on appeal, hope springs eternal.

Posted June 20, 2011








MAFSI Business Barometer Continues to Report Healthy Growth

Report reflects an acceleration of business activity; Q2 forecast at 4.9%

Overall sales for Q1/11 compared with the same time last year recorded a healthy increase of 4.0%, which was exactly what MAFSI reps had previously forecasted. This was the second quarterly increase in a row (Q4/10 increase was 5%).

This continued expansion of the past six months follows three prior years of contraction. Growth was reported from all regions of North America, from 2.5% in the Midwest, 3.5% in Canada, 3.6% in the South, 4.2% in the West, and an impressive 7.8% in the Northeast.

Growth was steady across all categories (see graph: 1st Quarter Overall Sales) from 3.0% in tabletop, 3.5% in furnishings, 4.0% in supplies, and 4.2% in equipment. Additionally, reps are forecasting an acceleration of growth at 4.9% in Q2/11, throughout all regions.

Strong signs of improving health are seen with 64% report more quoting activity (compared to 56% last quarter) and 46% report more consultant activity (compared to 36% last quarter).

A look at the Overall Sales Per Quarter graph reveals the staggering depth and width of the foodservice "Great Recession" and the magnitude of our healthy recovery. Lets pat ourselves on the back for our survival tactics and toast each other for the happier times ahead.

Click here for full report.

Posted May 17, 2011




Memo to FEDA Members:

Outcome of Florida Deregulation Bill

Some questions have come to me regarding the hearing on the deregulation bill and the impact on the foodservice industry.

HB 5005 was a bill which would have repealed the interior design provision in Statue 481 entirely, and would have allowed everyone in the design community to practice all aspects of commercial interior design, including submitting plans for permitting that do not impact lifesafety.

On 5/6/11 the bill passed the House but failed to pass the Senate, so it is dead for this session.

The current licensing law remains in place in Florida. That also means that the amendment which exempts commercial kitchens (HB 425) that was passed in 2009 remains in place. A detailed list of the exemption criteria is listed in the bill, available here.

Dining areas are still off limits to any foodservice equipment company that does not have a licensed interior designer on staff and an officer of the corporation.

ADE, CAPS, DSA, IRIS, NAOEM, NKBA, RESA, RIDE, USGBC-NH
Founder/Director/Lobbyist of the INTERIOR DESIGN PROTECTION COUNCIL
Posted May 11, 2011




In Memoriam: Mike Carpenter

It is with great sadness that we share the passing of former NAFEM president Mike Carpenter, 58, of Cooper-Atkins Corp., Saturday, April 23, in Utah. Mike was a dear friend to many FEDA members. The family has asked that cards and notes be forwarded to Kandi or David Carpenter at NAFEM headquarters, 161 N. Clark St., Suite 2020, Chicago, IL 60601, for distribution to the family. Services are private and donations may be made to the Make-A-Wish Foundation, 4742 N. 24th St., Suite 400, Phoenix, AZ 85016-4862. Deirdre Flynn of NAFEM has forwarded a note that Mike's wife, Kandi Carpenter, has written below. The thoughts and prayers of the FEDA leadership and membership are with Kandi and the entire Carpenter family at this difficult time.

Dearest All -

It is with deepest regrets that I send this email in reference to the passing of Mike. He was the inspiration in my life and my personal guiding light in a world that is sometimes dark and dreary. I have never met a more caring, loving and passionate man. I know he touched many lives and was deeply connected to many of you. He was proud to say he had acquired more friends than business acquaintances over his 35+ years in foodservice. Many knew him as a strong player and one who was willing to do whatever necessary to ensure he did a good job. Mike just wanted to be his best but one that did it with dignity and of the highest ethics. He truly gave more than he ever received.

There will be no formal services as Mike would not have wanted everyone standing around being sad. Instead he would ask everyone to grab their favorite glass of wine or beverage, toast him and remember him for the man, father, husband and friend he was.

I will miss him dearly as I suspect many of you will. He taught me the meaning of true love and patience. He was my best friend! I hope he has reached a much better place where the wine flows free, the elk and all their glory graze the lands and the sun comes up over the mountain each and every day.

The love and support many of you have offered is greatly appreciated and just proves what great people he associated with and more importantly was friends with.

Don't take a moment for granted!

Kandi Carpenter & Family

Added 4/26/11





Florida Close to Passing Interior Design Deregulation

Added 4/11/11





Certain Tax Deductions Set To Expire Soon

Certain tax deductions are set to expire at year’s end. The decisions you make in these final months of 2010 can have a major impact on your taxes next April.

To read an article that identifies some key strategies that should be implemented prior to the end of the year, click here.

Added 11/30/10





ITW Announces Food Equipment Group Organizational Changes

Troy, OH – August 31, 2010 – ITW today announced organizational changes to the ITW Food Equipment Group. Effective immediately, Chris O’Herlihy is appointed President, Food Equipment Group Worldwide, which includes responsibility for all Food Equipment Group operations globally. 

“We are consolidating leadership responsibility for the Food Equipment Group on a worldwide basis to position the organization to fully leverage its technical, operational, and organizational capabilities globally in order to take full advantage of the Group’s significant future growth potential,” said E. Scott Santi, ITW Vice Chairman. “Chris’s proven global leadership capabilities, developed over the course of his 21-year career with ITW, position him well to lead the ITW Food Equipment Group forward.”

Over the course of his career with ITW, O’Herlihy has served in a number of functional, managerial, and leadership roles of increasing responsibility, most recently serving as Group President, Food Equipment Group International.  

Due to this change in the Food Equipment Group’s leadership structure, the Group President, North America and Group President, International positions are being eliminated.  As a result, John McDonough, currently Group President, North America, has decided to leave the company.

“On behalf of the entire organization, we thank John for his many leadership contributions and years of dedicated service to the company, and wish him well in his future endeavors,” said Santi. 

Posted 8/31/10





MAFSI Business Barometer Reports Second Quarter Contraction Less Severe
Reps expect third quarter to improve but still at -2.7%

Overall sales for Q2/10 contracted by -3.3%, which was less severe than the past three quarter contractions of -5.3%, -12.8%, and -11.5% respectively.

Although the marketplace has still not turned positive, the numbers are improving. Nevertheless, this marked the tenth consecutive quarter of negative growth and fourteenth quarter of the current slowdown. Foodservice Equipment Reports estimates that from peak to troth, the market contracted 21% from $9.1 billion in 2007 to $7.2 billion in 2010 By geography, overall sales ranged from -5.1% in the West, -4.9% in the South, -3.8% in the Midwest, and  -2.4% in the Northeast. Once again, Canada showed growth of 2.2%.

By product category, equipment was down by -4.5% (versus -7.5% last quarter), tabletop was down -1.5%, furnishings was down -0.4%, while supplies grew by 0.4%. Once again, we see that smallwares is improving while equipment still lags. Reps are predicting less contraction this next quarter with an expected performance of -2.7% for Q3/10. It would appear that we are still a couple of quarters away from true growth as only 40% of reps report that they are quoting more work and only 23% see more consultant activity.

Fed chairman Bernanke recently described the economic outlook as "unusually uncertain." With the unemployment ranks at 14.6 million, a significant recovery remains doubtful. In fact, the National Restaurant Association's (NRA) restaurant performance index has now declined for three consecutive months. As is usually the case, some segments are healthier than others, led by schools, universities and healthcare while B&I, casinos, and country clubs lag.

Posted 8/17/10





Review of Revit

By Rick Ellingson, Bargreen Ellingson

If you have not heard much about it, you will be in the not so distant future. Revit is a very robust tool being driven by architectural and engineering communities. It will replace AutoCAD for designing buildings. Revit is very powerful and efficient. It is 3-D and is like virtual reality.

None of the AutoCAD symbols work with Revit. All existing symbols must be re-drawn in 3D. In addition, they must be imbedded with data (mechanical requirements, dimensions etc.)

The symbols in Revit are called families that have to have similar properties (kind of like DNA). If all manufacturers create their own proprietary families, we will have hundreds of incompatible families in the same kitchen configuration.

Most architects do not understand the commercial kitchen and most engineers don’t care. But because they are driving the bus on this movement, we must learn to play by their rules.

AutoQuotes is involved in the initial phases of getting some standards identified. It is critical that the foodservice equipment industry gets behind some form of open architecture that grows into some smart standards.

A few companies in the industry are using it now. There is an industry committee, with primarily FCSI and NAFEM participation. FEDA is soliciting a seat at the table. Stay tuned, as there is more to come. Posted 7/13/10

LMI Freight Rate - Glassware Disposition

Click here to read the Disposition Bulletin

Interior Design Protection Council

The Interior Design Protection Council has been at the forefront of the pro-freedom movement, having assisted in defeating or derailing nearly 100 attempts to expand or enact new interior design regulation since 2006. You can find the details of all these bills on the Legislation page on the website (www.IDPCinfo.org). There you will find the most comprehensive information including details of states already regulated, all twelve government reports concluding that interior design regulation would add absolutely nothing to protect the public beyond measures already in place, and a plethora of media pieces.

End-of-the-Year Analysis by Al Bates

Every year the Profit Planning Group prepares a comparison analysis across lines of trade in distribution.  Both the Word file and Excel file are a part of the process.

The results are particularly important this year.  There are some valuable insights into what happens to performance when an industries enters a recession.  There are some lessons to be learned for future recessions.

R&I 20 Menu Trends for 2010

The ingredients, recipes and strategies that will drive menus in the year ahead.
By Allison Perlik

Click Here to read the full article.