Final Basics of Nexus Understanding State Tax Issues

CCH® CPELink Basics of Nexus: Understanding State Tax Issues

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Basics of Nexus: Understanding State Tax Issues


Professor Annette Nellen, CPA, CGMA, Esq.MST ProgramSan José State University

©2020, CCH Incorporated. All Rights Reserved.

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3Basics of Nexus: Understanding State Tax Issues

Learning Objectives

• Define nexus for state and multistate tax purposes

• Recognize the judicial and constitutional construct of nexus

• Identify factors that likely cause a business to have income or sales tax nexus

• Describe actions by states, Congress and the U.S. Supreme Court that affect nexus


Agenda

• Why nexus is important

• Defining nexus U.S. Constitutional constraints

State and local tax statutes

Many court cases and rulings

• Income tax nexus and Public Law 86‐272

• Sales and use tax nexus and Wayfair How states have and are continuing to respond to the 2018 USSC Wayfair

decision

• Nexus for other types of taxes

• Due Diligence: Being compliant and avoiding problems COVID‐19 Issues

• Looking forward State trends

Possible federal actions to change/clarify nexus

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Why Nexus Is Important


Why Nexus Is Important

• It is part of the question as to whether a business owes tax in a particular jurisdiction – state, city, county or other local jurisdiction.

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Review Question 1


Does a Business Owe Tax to State or Local Governments?

• Answer depends on the following:

1. Tax base – does the taxpayer have something that falls within that base?

• For income tax also depends on the state’s sourcing and apportionment rules.

2. Authority to impose tax on the business – Does the business have nexus in the jurisdiction?• States must operate within constraints of the U.S. Constitution:

─ Due process clause of the 14th Amendment

─ Commerce clause

• Also check state law on nexus (aka doing business, engaging in business)

• Items 1 and 2 can change via federal and state legislative and sometimes administrative and judicial actions. Tax base generally only changed by the legislature.

• But new types of assets often lead to guidance from tax agency.

Nexus can be reduced standard from what federal law permits, but not greater.

Courts and tax agency often need to provide clarification, such as whether a taxpayer’s action constitutes physical presence nexus.

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Example 1

• ABC develops software that it sells over the Internet; no tangible items are given to customers.

• ABC is physically located in KS; has customers in all 50 states + DC.

• Question – Can CA impose sales tax collection obligations on ABC?

No – CA does not include the item ABC sells in its sales tax base. So even if ABC has employees or property in CA, ABC has no sales tax obligations in CA. But, likely owes income tax and perhaps business license tax to one or more cities.


Example 2• Jasper, Inc. sells widgets; has customers everywhere; property

only in KS, employees in KS, OK and NE; incorporated and domiciled in KS.

• Income tax obligations – KS and perhaps OK and NE J only sells tangible personal property so likely has nexus

“protection” from Public Law 86‐272. Find out what the employees do in other states and where

Jasper has property.• Minimum taxes or gross receipts taxes

PL 86‐272 n/a Physical presence or economic nexus likely sufficient

• Sales tax collection obligations – KS, OK and NE due to physical presence Check for physical presence in other states such as due to

employees visiting or property leased to customers or “representatives” other states.

Wayfair economic nexus possible in other states. Need to check the sales and number of transaction threshold used in each state.

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Example 3

• Credit card company (CCC) headquartered outside of VA with no property or employees in VA

• From outside of VA, CCC uses mail, telephone and Internet ads to solicit credit card customers in VA.

• Per VA Ruling No. 08‐63 (5/19/08), no need to evaluate nexus because CCC has no income sourced to VA. This type of income is apportioned based on “costs of performance” which occur outside of VA, so nothing to apportion to VA, so no income tax liability possible.

• But check law to see if any changes to sourcing rules since this ruling issued.


Example 4

• Indiana Revenue Ruling #2018‐06ST (1/7/19) Prepackaged food products (brownies, cookies) manufactured, sold

and shipped from AZ to IN customers via common carrier.

AZ company has no physical presence in IN.

IN’s Wayfair economic nexus standard:• Gross revenue to IN over $100,000 or 200 or more separate transactions

in current or preceding year. Effective 10/1/18.

But items not subject to sales tax in IN because food sold without utensils and not heated.• BUT, nexus thresholds for IN don’t consider if items sold are exempt from

sales tax.

• So, must register and annually file a “zero” return.

http://iac.iga.in.gov/iac//20190327‐IR‐045190161NRA.xml.html

• Note: States vary on how thresholds measured (some exclude exempt sales) and applied, and whether same threshold applies for income tax. In this example, PL 86‐272 seems to apply so no income tax nexus in IN.

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Challenges in Determining If Nexus Exists

• State legislators often change rules and tax agency interpretations can change too.

• Both nexus and tax base issues are frequently litigated and modified by statute and case law.

So, not always clear

• Law doesn’t always address new types of transactions

Can be conflicting case law

• Some cases reversed on appeal (means law isn’t clear)

Keeping up to date with 50 states, DC and some cities

• Sometimes, for income tax, a business might want to have nexus. Planning opportunities and risks.


Nexus Determinations Not Always Simple

• Does Company X have nexus in State Y?• West Virginia Supreme Court noted in deciding if out‐of‐

state credit card company had income tax nexus in the state (2006): “We are mindful that our task herein is a difficult one. The

US Supreme Court has acknowledged that its dormant Commerce Clause law “is something of a ‘quagmire’ and the ‘application of constitutional principles to specific state statutes leaves much room for controversy and confusion and little in the way of precise guides to the States in the exercise of their indispensable power of taxation.’” Quill Corp. v. North Dakota, 504 U.S. 298, 315‐316 (1992) (quoting Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450, 457‐458 (1959). Likewise, this Court has characterized this area of the law as “nebulous at best.””

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Defining Nexus


Defining “Nexus”

• Sufficient nexusmust exist for a state or local gov’t to impose tax obligations on a taxpayer.

• Connection between the company and state such that subjecting the company to the state's tax rules is neither unfair to the company nor harmful to interstate commerce.

• Fairness to the company and no impediment to interstate commerce stem from the U.S. Constitution—respectively, from the Due Process Clause and the Commerce Clause.

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Due Process Clause

• "No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws." [14th Amendment, clause 1]

• "[D]ue process requires some definite link, some minimum connection, between a state and the person, property or transaction it seeks to tax."Miller Brothers Co. v. Maryland, 347 U.S. 340, 345 (1954).


Review Question 2

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Due Process Clause ‐more

• Unlike the Commerce Clause, the Due Process Clause does not give Congress any power to enact a law that would modify or violate the due process standard.

• "Due process centrally concerns the fundamental fairness of governmental activity.” Quill Corp. v. North Dakota, 504 US 298 (1992).


Commerce Clause

• "The Congress shall have power ... to regulate commerce with foreign nations, and among the several States, and with the Indian tribes." [Article I, Section 8, clause 3]

• Courts often refer to the "dormant Commerce Clause" because Commerce Clause does not specifically limit state activities—it just grants power to Congress to regulate commerce. In applying the dormant Commerce Clause, courts consider the purpose served by the Commerce Clause and "whether action taken by state or local authorities unduly threatens the values the Commerce Clause was intended to serve." [Wardair Canada v. Florida Dept. of Revenue, 477 U.S. 1 (1986)]

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Commerce Clause ‐more

• “Commerce Clause, and its nexus requirement, is informed not so much by concerns about fairness for the individual defendant as by structural concerns about the effects of state regulation on the national economy.” Quill Corp. v. North Dakota, 504 US 298 (1992)


Due Process versus Commerce

• As explained in Quill:

“Despite the similarity in phrasing, the nexus requirements of the Due Process and Commerce Clauses are not identical. The two standards are animated by different constitutional concerns and policies.”

"Due process centrally concerns the fundamental fairness of governmental activity. ... In contrast, the Commerce Clause, and its nexus requirement, is informed not so much by concerns about fairness for the individual defendant as by structural concerns about the effects of state regulation on the national economy. ...”

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Nexus and Type of Tax

• Net income taxes PL 86‐272 can apply if sell tangible personal property

• Check for state guidance as well

If not selling tangible personal property, check state law• Many states use economic nexus for income taxes.

• Sales tax Economic nexus standard (Wayfair)

• Question – how much economic presence?

Physical presence standard still exists• Questions – How much physical presence?

What is physical presence?

• Taxes that are not sales tax or net income tax Example – gross receipts tax

Constitutional constraints and interpretations (including Wayfair decision), state guidance


Nexus Background: Sales versus Income Tax

• Cases have held that the physical presence standard of Quill only applied to sales tax, not to income tax: Lanco v. Director, NJ Division of Taxation, 188 NJ 380 (S Ct NJ

2006), cert denied 6/18/07 (Dkt. 06‐1236) Tax Comm’r of the State of West Virginia v. MBNA America

Bank, 640 SE2d 226 (2006), cert denied 6/18/07 (Dkt. 06‐1228)• Significant economic presence test is appropriate for income

taxes.• Income taxes are not the same compliance burden on interstate

commerce as is the sales tax. MBNA America Bank v. Indiana Dept. of Revenue (Case No.

49T10‐0506‐TA‐53, 10/08) KFC Corp v. Iowa Dept. of Revenue, 792 NW2d 308 (Iowa S Ct

2008), cert denied 132 S. Ct. 97 (2011)• Thus, economic nexus has been used for income tax even

before Wayfair although not all states and taxpayers followed this standard. Wayfair (USSC, 2018) settled nexus matter for all state and

local taxes – economic nexus is sufficient.

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Complete Auto Transit (1977)

• Sets out a Commerce Clause analysis approach to determine if state’s reach is valid.

• Cited by USSC in Wayfair decision, so still applicable.

• 4‐part test: a tax on interstate commerce is valid if it—

1) is applied to an activity with a substantial nexuswith the taxing state,

2) is fairly apportioned,3) does not discriminate against interstate commerce,

and4) is fairly related to the services provided by the state.


Review Question 3

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Meaning of the 4 Tests (As Explained in QuillCase and Cited in Other Cases)

• “The second and third parts of that analysis, which require fair apportionment and non discrimination, prohibit taxes that pass an unfair share of the tax burden onto interstate commerce. The first and fourth prongs, which require a substantial nexus and a relationship between the tax and State provided services, limit the reach of State taxing authority so as to ensure that State taxation does not unduly burden interstate commerce.”

• “Thus, the "substantial nexus" requirement is not, like due process' "minimum contacts" requirement, a proxy for notice, but rather a means for limiting state burdens on interstate commerce. Accordingly, contrary to the State's suggestion, a corporation may have the "minimum contacts" with a taxing State as required by the Due Process Clause, and yet lack the "substantial nexus" with that State as required by the Commerce Clause.”


Income Tax Nexus & Public Law 86‐272

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Income Tax and Multistate Operations

• What may a state tax if t/p earns income in more than one state?

If income is from multistate operations, is state precluded from taxing such income due to Due Process and Commerce Clauses?

• No ‐ “net income from the interstate operations of a foreign corporation may be subjected to state taxation provided the levy is not discriminatory and is properly apportioned to local activities within the taxing State forming sufficient nexus to support the same.” [so income doesn’t get taxed twice (in more than one state)]

─ Northwestern Cement v. Minn., 358 US 450 (1959)


Northwestern Cement – Areas Where Court Thought There Was Clarity

• “From the quagmire there emerge, however, some firm peaks of decision which remain unquestioned.” Congress has exclusive power to regulate interstate

commerce

State can’t impose a tax … • On privilege of engaging in interstate commerce.

• That provides a direct advantage to local businesses.

Ok to impose net income tax on revenues derived from interstate commerce if fairly apportioned.• “founders did not intend to immunize [interstate] commerce

from carrying its fair share of the costs of the state gov’t in return for the benefits it derives from within the State.”

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More on Authority to Tax

• “As a general principle, a State may not tax value earned outside its borders. See, e.g., Connecticut General Life Ins. Co. v Johnson, 303 US 77, 80‐81, 82 L Ed 673, 58 S Ct 436 (1938). The broad inquiry in a case such as this, therefore, is "whether the taxing power exerted by the state bears fiscal relation to protection, opportunities and benefits given by the state. The simple but controlling question is whether the state has given anything for which it can ask return." Wisconsin v J. C. Penney Co. 311 US 435, 444, 85 L Ed 267, 61 S Ct 246 (1940).”

ASARCO v. Idaho State Tax Commission, 458 U.S. 307 (1982)

Due process and commerce clause support this principle.

• Note: Apportionment is not an exact science to measure income earned within state borders. Courts have held ok to tax income of the unitary business.


Congress’ Reaction to 1959 Case

• Concern that states would become more aggressive in taxing multistate income including for past years.

• PL 86‐272 enacted 9/14/59

Just 7 months after Court's decision

Purpose ‐ a more certain rule for when a multistate business is subject to income tax in any particular state.

Over 50 years old law!

• Originally intended to be temporary while Congress studied the matter.

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Public Law 86‐272

• Prohibits a state from imposing a net income tax if a company’s only state activities are solicitation of orders for sales of tangible personal property which are sent outside the state for approval or rejection and are filled by shipment or delivery from a point outside of the state.

• Sales by independent contractors:

A person is not considered to have engaged in business activities in a state merely due to sales in the state or solicitation of orders for sales in the state, of TPP, on behalf of the person by one or more ICs or due to maintaining an office in the state by one or more ICs whose activities on behalf of the person consist solely of making sales or soliciting orders for sales of TPP

• Ok to impose net income tax wrt (1) any corporation incorporated in the state or (2) any individual domiciled in or a resident of the state.

[15 USC 381]


Review Question 4

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Applying PL 86‐272

• Statement of Information Concerning Practices of MTC and Signatory States Under PL 86‐272

Many states are signatories

Defines PL 86‐272 terms

Explains “de minimis activities” that won’t create nexus

Provides list of protected and unprotected activities


State Guidance in Applying PL 86‐272

• Most states have a publication on application and interpretation of PL 86‐272; likely very similar to the MTC guide EX – CA FTB 1050 EX – MD Administrative Release No. 2 EX – AZ CTR 99‐5

• Typical state observation: “It is the policy of the State of Arizona to Impose its net income tax, subject to state and federal legislative limitations, to the fullest extent constitutionally permissible.” CTR 99‐5

• https://azdor.gov/sites/default/files/RULINGS_CORP_1999_ctr99‐5.pdf

• Note: Multistate Tax Commission (MTC) has project to update the interpretation in light of modern business practices including activities conducted via the internet including placement of “cookies” on computers of in‐state customers. http://www.mtc.gov/Uniformity/Project‐Teams/P‐L‐86‐272‐Statement‐of‐

Information‐Work‐Group

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Recent PL 86‐272 case: Blue Buffalo Company, Ltd. v. Comptroller of the Treasury, Ct. of Special Appeals, No. 495 (12/20/19) – Maryland PL 86‐272 Ruling

• Circuit Court for Baltimore City Case No.: 24‐C‐17‐004798

• DE corp commercially domiciled in CT

• Formulates and sells premium pet food produced by independent manufactures located outside of MD and shipped by common carrier to national chains and retailers. BB has not offices or facilities in MD

• Has employees in MD including Distributor Sales Manager, Account Manager, 2 Regional Demo Managers, and several dozen “Pet Detectives” who encourage people to buy BB’s products and help retailers properly display products.

• 2011 and 2012 – BB paid income tax to MD but then filed for refund based on PL 86‐272 protection.

• Court reviewed activities of BB in MD and relevant law interpreting PL 86‐272 “Court reasoned that the statute immunizes the entire process associated with

requesting orders”

“Court held that 15 U.S.C. § 381 protects activities that are entirely ancillary to the solicitation process—those that serve “no independent business function apart from their connection to the soliciting of orders . . . .” Id. at 229. That an activity is not ancillary does not end this analysis; unprotected activities only forfeit the statutory immunity when they establish a nontrivial additional connection with the taxing State.”

• Wisconsin Dep’t. of Revenue v. William Wrigley, Jr., Co., 505 U.S. 214 (1992)

• https://mdcourts.gov/data/opinions/cosa/2019/0495s18.pdf


Blue Buffalo Company ‐ continued

• Court analyzed BB’s activities in MD based on its 2‐step interpretation from Wrigley.

• “From Wrigley we distill a two‐step analysis to review the decision of the Tax Court.

First, we will examine each of Blue Buffalo’s activities to evaluate whether they are ancillary to the solicitation of orders—whether they serve no independent business purpose.

Second, we will evaluate whether the non‐ancillary activities are de minimis— whether, taken together, they constitute only a trivial additional connection to the State of Maryland.”

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Blue Buffalo Company ‐ continued

• Protected solicitation: Encouraging people to buy.

Product training.• “Discussions of the benefits of Blue Buffalo products are not merely ancillary

to solicitation—they are solicitation”

Reworking product displays and checking retail inventories

• Not protected: Quality control and product servicing

• Would be provided independent of solicitation work.

Competitive research and the collection of market data• Done systematically.

• Not de minimis activity

• Court concluded, no PL 86‐272 protection as some activities went beyond mere solicitation. PL 86‐272 “does not provide a blanket protection for an industry to

conduct unfettered activities in the name of sales. Rather, corporations may only claim immunity when the totality of their in‐state activities is ancillary to the solicitation process—as judicially defined—with only trivial exceptions.”


Does PL 86‐272 Apply?

1. ABC Corporation leases computers to customers in five states. All employees and HQ in Minnesota.

2. M Corporation, a Nevada corporation, sells tangible goods over the Internet. Has customers in CA with over $1 million of sales in 2018; no property or payroll in CA. CA franchise tax includes an $800 minimum tax.

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If PL 86‐272 n/a To a Business …

• Check state law to see if state has provided guidance. State needs to be within due process and commerce clause

restraints.

• Today, most states apply: Economic nexus – can exist even if no physical presence

• Example – credit card company with customers in state but no physical presence

Factor presence nexus – objective approach

• But also any type of physical presence will usually create nexus (unless not significant – ck case law).


PL 86‐272 also …

• Called for a study and report on state taxation by a congressional subcommittee

“Willis” Commission – issued report in 1965

• Very extensive analysis of operation and issues of all types of state taxes

• Recommendations made, but not acted upon

• PL 86‐272 remains in its 1959 language

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Economic Nexus

• “The development and proliferation of communication technology exhibited, for example, by the growth of electronic commerce now makes it possible for an entity to have a significant economic presence in a state absent any physical presence there. For this reason, we believe that the mechanical application of a physical‐presence standard to franchise and income taxes is a poor measuring stick of an entity's true nexus with a state.”

Look at quality and quantity of presence

“Systematic and continuous business activity” in the state

Produce significant gross receipts.

Tax Commissioner of the State of West Virginia v. MBNA America Bank, 640 SE2d 226 (2006), cert. denied 551 US 1141 (2007)


More Objective Variation –Factor Presence (“Bright‐line” Nexus)

MTC Approach ‐ Substantial nexus is established if any of the following thresholds is exceeded during the tax period: (approved Oct. 2002)

a) a dollar amount of $50,000 of property; or

b) a dollar amount of $50,000 of payroll; or

c) a dollar amount of $500,000 of sales; or

d) 25% of total property, total payroll or total sales.

http://www.mtc.gov/uploadedFiles/Multistate_Tax_Commission/About_MTC/Policy_S_and_R/2002/FactorPresenceNexusStandardBusinessActTaxes.pdf

• Some states, such as California, adjust the dollar amounts annually for inflation.

• Some states, such as Washington, use a lower sales threshold. $250,000 for sales ($285,000 in 2018 or 2019)

• http://dor.wa.gov/Content/FindTaxesAndRates/BAndOTax/EcNexOutside.aspx

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Why Courts Did Not Apply Quill Physical Presence Standard to Income Taxes

As explained in A&F Trademark, Inc. v. Tolson, 605 SE2d 187 (NC Ct. App, 12/07/04)

• Quill opinion was not a sweeping endorsement of physical presence standard so should not be expanded to apply to other taxes.

• Physical presence never established for taxes besides sales taxes. Per court: "since the physical‐presence requirement has never been

established by judicial precedent for other forms of taxation and since this form of tax reduction in the instant case is relatively new, we dismiss the possibility that analogous substantial reliance, as contemplated in Quill, exists in this case."

• Differences between sales and income taxes. A taxpayer becomes state’s tax collector under a sales tax. Courts

have held that a non‐resident need not be located in a state to be subject to income tax, but could have property or other means of generating income from the state. “[A] state income tax is usually paid only once a year, to one taxing jurisdiction and at one rate, [but] a sales and use tax can be due periodically to more than one taxing jurisdiction within a state and at varying rates.” Id., at 13.”


Finding Guidance on NexusState law – “doing business” statute, regs and other guidance

• Read in light of PL 86‐272 protections

• EX – CA Reg. §23101. “Doing business”—defined.

• (a) "Doing business" means actively engaging in any transaction for the purpose of financial or pecuniary gain or profit.

• (b) For taxable years beginning on or after January 1, 2011, a taxpayer is doing business in this state for a taxable year if any of the following conditions has been satisfied:

• (1) The taxpayer is organized or commercially domiciled in this state.

• (2) Sales, as defined in subdivision (e) or (f) of Section 25120 as applicable for the taxable year, of the taxpayer in this state exceed the lesser of five hundred thousand dollars ($500,000) or 25 percent of the taxpayer's total sales. For purposes of this paragraph, sales of the taxpayer include sales by an agent or independent contractor of the taxpayer. For purposes of this paragraph, sales in this state shall be determined using the rules for assigning sales under Section 25135 and subdivision (b) of Section 25136 and the regulations thereunder, as modified by regulations under Section 25137.

• (3) The real property and tangible personal property of the taxpayer in this state exceed the lesser of fifty thousand dollars ($50,000) or 25 percent of the taxpayer's total real property and tangible personal property. The value of real and tangible personal property and the determination of whether property is in this state shall be determined using the rules contained in Sections 25129 to 25131, inclusive, and the regulations thereunder, as modified by regulation under Section 25137.

• (4) The amount paid in this state by the taxpayer for compensation, as defined in subdivision (c) of Section 25120, exceeds the lesser of fifty thousand dollars ($50,000) or 25 percent of the total compensation paid by the taxpayer. Compensation in this state shall be determined using the rules for assigning payroll contained in Section 25133 and the regulations thereunder, as modified by regulations under Section 25137.

• (c)(1) The Franchise Tax Board shall annually revise the amounts in paragraphs (2), (3), and (4) of subdivision (b) in accordance withsubdivision (h) of Section 17041.

(2) For purposes of the adjustment required by paragraph (1), subdivision (h) of Section 17041 shall be applied by substituting "2012" in lieu of "1988."

(d) The sales, property, and payroll of the taxpayer include the taxpayer's pro rata or distributive share of pass‐through entities. For purposes of this subdivision, "pass‐through entities" means a partnership or an "S" corporation.

http://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=23101&lawCode=RTC

Plus look for further administrative guidance, such as, for California:• https://www.ftb.ca.gov/file/business/doing‐business‐in‐california.html

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Review: Where Does a Business Have Income Tax Nexus?

• State of domicile or incorporation

• Customers or sales solicitation in the state: Check if PL 86‐272 applies

• Sales of tangible personal property

• Employees only solicit sales that are approved and filled from outside of the state; no offices

• Independent contractors can do a bit more

Check “doing business” rule for the state.

• Other activities – ownership of property, an entity, partner in a partnership, licensing intangibles in the state, etc. Check statute and regulations and rulings.


Sales and Use Tax Nexus & Wayfair

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Important Sales Tax Cases

• Scripto, Inc. v. Carson, 362 US 207 (1960)

• Complete Auto Transit, Inc. v. Brady, 430 US 274 (1977) – discussed earlier

• Tyler Pipe Industries Inc. v. Washington Department of Revenue, 483 U.S. 232 (1987)

• Quill Corporation v. North Dakota, 504 US 298 (1992)

• South Dakota v. Wayfair, Inc., et al, 585 U.S. ____ (2018)

“et al” = Overstock.com and Newegg, Inc.

https://www.supremecourt.gov/opinions/17pdf/17‐494_j4el.pdf


Scripto, Inc. v. Carson (1960)• Georgia taxpayer

• No property or operations in Florida, but …

• 10 commissioned salespeople (contractors) in Florida

• Holding: continuous solicitation in Florida was sufficient to constitute “substantial nexus” such that Scripto was obligated to collect Florida use tax on its sales in that state.

• The court did not find the legal distinction between employee and independent contractor affected its conclusion. “To permit such formal ‘contractual shifts’ to make a constitutional difference would open the gates to a stampede of tax avoidance. . . . The test is simply the nature and extent of the activities of [Scripto] in Florida.”

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Tyler Pipe Industries (1987)

• “… the crucial factor governing nexus is whether the activities performed in this state on behalf of the taxpayer are significantly associated with the taxpayer’s ability to establish and maintain a market in this state for the sales.”


Review Question 5

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Quill (1992)

• Must have physical presence in state to have substantial nexus.

• No due process issue – Quill was clearly making a market in ND – via mail order catalogs.

• If Congress wants different result – it can legislate one under its Commerce Clause power.

“No matter how we evaluate the burdens that use taxes impose on interstate commerce, Congress remains free to disagree with our conclusions.”


South Dakota v. Wayfair, Inc., et al, 585 U.S. ____ (2018)

5‐4 decision finding physical presence rule of 1992 Quilldecision “unsound and incorrect.”

Upheld South Dakota’s 2016 law (SB 106) (remand to SD court to check) because:

De minimis threshold: Sales tax nexus if over $100,000 sales to SD or 200 or more sales in prior calendar year or current year to date.

Did not apply retroactively.

Simplified compliance: SD is member of Streamlined Sales & Use Tax Project so provides free software to remote vendors.

• Dissent – better for Congress to address this matter

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Relevance of Wayfair Decision

• Economic nexus similar to South Dakota law is permissible; physical presence not necessary. How similar must it be to South Dakota law?

Physical presence is still enough for sales tax nexus.

• Applies to more than sales/use tax; also to other state and local taxes.

• New query: Will Congress step in to exercise its commerce clause authority to set minimum levels of what states can do?

More information on the case:

http://21stcenturytaxation.blogspot.com/2018/06/us‐supreme‐court‐brings‐big‐news‐for.html

https://arev.assembly.ca.gov/sites/arev.assembly.ca.gov/files/hearings/Wayfair_InfoHearing_NellenOutline_10‐15‐18.pdf


State Reactions to SD v. Wayfair Decision

• Many adopted SD thresholds

Many were effective 10/1/18!

State activities still underway.

http://21stcenturytaxation.blogspot.com/2018/06/state‐reactions‐to‐wayfair‐decision.html [many examples; not updated; look for current lists of how states apply Wayfair decision]

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State Reactions to Wayfair …

• States without a sales tax:

Alaska, Delaware, Montana, New Hampshire, Oregon

Prior to Wayfair, sellers in these states could avoid sales tax collection by not having any physical presence in a state with sales tax.

• Not true anymore.

• See “Looking Forward” (later slide) for congressional proposal from these states.


What Creates Sales Tax Nexus after Wayfair?• Be sure to check specific law in the states where have

customers.• Generally, sales tax nexus from: Economic nexus per Wayfair decision (South Dakota

standard)

Physical presence that is more than slightest presence.• Examples:

─ Buildings, offices, equipment

─ Inventory or other property Including property leased to customers because owned by

taxpayer

─ Employees

─ Contractors

─ Representatives (contractors, agents, third parties)

─ Affiliates Click‐through nexus

Related entities with similar product or advertising as defined under state law

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Economic Nexus per Wayfair

• USSC examined the statute before it – South Dakota’s

• Questions exist and likely we’ll see future litigation:

Is something less permissible?

• For example, $20,000 of sales in a calendar year?

What is a permissible threshold for number of transactions in a year?

• Does it matter that SD population is only about 900,000?

• Should the dollar amount of each transaction be relevant?

How important was it that SD provided free software to remote vendors?


Wayfair In the States ….

• Many states have moved to economic threshold for sales tax using SD thresholds.

• Need to check the state’s law in each state where seller has customers. Practice tip: Seller should track its sales and number of

transactions in each state where it doesn’t already collect sales tax to know when it gets close to the SD thresholds and then look at state law to verify thresholds for that state.

• States continue to change – need to track. Example – California

• Dec 2018 – SD thresholds to start 4/1/19

• AB 147 changed to $500,000 threshold only starting 4/1/19

─ https://www.cdtfa.ca.gov/industry/wayfair.htm

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Policy Considerations of Economic Nexus For Sales Tax

• Application of economic nexus for sales tax means tax agency needs to find sellers throughout the world who might meet it.

• Policy implications:

If state doesn’t pursue harder to find vendors (such as those outside of the U.S.) raises equity and fairness issues for other vendors.

Administrative costs – Higher threshold means fewer vendors to find.

• Tax agencies should continue to pursue collecting use tax from in‐state customers. Need to find appropriate balance of sales tax collection from remote vendors versus use tax collection from in‐state customers.


Don’t forget – Physical Presence Also Creates Sales Tax Nexus

How much physical presence?• Substantial versus “slightest presence”

• Usually, need more than “slightest presence” “While a physical presence of the vendor is required, it

need not be substantial. Rather, it must be demonstrably more than a “slightest presence” (see, National Geographic v California Equalization Bd., 430 US 551, 556, supra ). And it may be manifested by the presence in the taxing State of the vendor's property or the conduct of economic activities in the taxing State performed by the vendor's personnel or on its behalf.”

• Orvis, 654 NE2d 954 (NY Ct App 1995), cert. denied, 516 US 989 (1995)

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Intangible Property – Generally Not Physical Presence, but Some States Label Certain Intangibles as Tangible, Such as Off‐ThE‐shelf Software

• A few diskettes (software)?

Not enough in Quill – “slightest presence”

• Credit cards?

Not enough in TN (J.C. Penney National Bank v. Johnson, 19 SW3d 831 (Tenn Ct App 1999), cert denied, 531 US 927 (2000)) (physical nature wasn’t important to their value)

• Your software you’ve licensed to customers?

TX – creates physical presence; must collect sales tax (Hearing 36,237; 7/21/98)

• Question – does state view certain property as tangible or intangible?


Employees

• 12 trips by employees into the state during 3 years ‐nexus?

Yes. Physical presence need not be substantial, but “must be demonstrably more than a “’slightest presence’” (Orvis, 654 NE2d 954 (NY Ct App 1995), cert. denied, 516 US 989 (1995))

• Lower court had said no nexus.

Look for specific guidance in your state.

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Employees Attending a Trade Show

• What if employees attend a trade show in the state?

They are present!

Enough for nexus? Depends.

Some states have special rules for sales and/or income taxes indicating how many days and amount of sales will not create nexus.

• Check the law before you go!


Example of Physical Presence

• Company sells supplies over the Internet; has warehouse in State X, FBA* with inventory in California, and headquarters in State Y and customers in all states? Nexus in States X and Y and California Look for any other property or relationships in other

states (Does Company have an agent or sales rep anywhere? Sales kiosks?)

NOTE: Internet Tax Freedom Act – doesn’t exempt taxes already owed; basically, only prevents state and local governments from imposing tax on Internet access fees

*Fulfillment by Amazon

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Connection to the Physical Property

• Two offices that solicit advertising ‐ nexus? Yes, even though not involved with product sales (National

Geographic Society v. Cal. Bd. of Equalization, 430 US 555 (1977))• “The Society argues … that there must exist a nexus or

relationship not only between the seller and the taxing State, but also between the activity of the seller sought to be taxed and the seller's activity within the State. We disagree.”

• “the relevant constitutional test to establish the requisite nexus for requiring an out‐of‐state seller to collect and pay the use tax is not whether the duty to collect the use tax relates to the seller's activities carried on within the State, but simply whether the facts demonstrate "some definite link, some minimum connection, between [the State and] the person ... it seeks to tax." Miller Bros. v Maryland…”

• “the Society's two offices, without regard to the nature of their activities, had the advantage of the same municipal services—fire and police protection, and the like—as they would have had if their activities … included assistance to the mail‐order operations that generated the use taxes.”


Teachers as Reps

• Does Scholastic Books (Missouri) have nexus in states where teachers hand out order forms, collect money and distribute books to students? YES ‐ Scholastic Book Clubs, Inc. v. Farr, Comm’r of Revenue,

State of Tennessee, M2011‐01443‐COA‐R3‐CV (Ct App, 1/27/12)

YES ‐ Scholastic Book Clubs v. Commissioner, Docket CV 07 4013027S (CT Superior Ct, 2009), rev'd SC 18425 (CT Supreme Court, 2012)

NO ‐ Scholastic Book Clubs, Inc. v. State of Michigan, Dept. of Treasury, 567 NW2d 692 (Mich Ct App 1997)

CT and TN – cert denied by USSC• http://21stcenturytaxation.blogspot.com/2012/10/us‐supreme‐court‐denies‐cert‐in‐

nexus.html

Why the inconsistency in rulings?http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2012/CorpTax/SalesTaxNexus.jsp

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Third Party Repairs• Provision of in‐state repair services by a third party? Multistate Tax Comm’n (MTC) – yes, per MTC Bulletin 95‐1

‐ repair services not de minimis activities, but instead represent “regular or systematic activities in furtherance of the seller’s business, such as solicitation of sales or provision of services.”

Addresses both sales/use tax and income tax nexus Not followed in all states, including CA Look at facts, particularly nature of relationship between

taxpayer and third party, and nature of the work. And … answer can differ by state. EX:• No nexus ‐ Dell Catalog Sales v. Commissioner, 834 A2d 812

(Conn Sup. Ct. 2003)• Nexus ‐ State of Louisiana and Secretary of Dept. of Revenue

and Taxation v. Dell Int’l, Inc., et al, 922 So 2d 1257 (La Ct App 2006) + Dell Catalog Sales L.P. v. Taxation and Revenue Department of the State of New Mexico,199 P.3d 893, cert. denied, 129 S.Ct. 1616 (3/23/09).


Affiliates

Parent corporation or affiliated entity in the state?• Generally, no. Each legal entity must have its own

substantial nexus in order to have sales tax collection obligations. Parent operates department stores and sub has mail order

business. (SFA Folio Collections, Inc. v. Bannon, 585 A2d 666 (Conn 1991), cert. denied, 501 US 1223 (1991), SFA Folio Collections v. Tracy, 652 NE2d 693 (Ohio 1995), and Bloomingdale’s v. Dept. of Revenue, 567 A2d 773 (1989), aff’d without opinion 591 A2d 1047 (Pa 1991), cert. denied, 504 US 955 (1992))

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Affiliates• Related entities:

Parent operates store in state and a connected entity is Internet vendor with same name.

• If separate entities and treat transactions same as third parties would (for example, Internet vendor pays bricks‐mortar store to place coupons in its bags), then likely no nexus. (Barnesandnoblecom v. BOE, CGC‐06‐456465 (Ca Sup Ct SF, 2007) + New Mexico No. 11‐10 (April 2011))

• If act more like agent‐principal and connection is related to sales, likely to find that in‐state entity creates nexus for out‐of‐state Internet vendor (Borders Online, LLC v. BOE, 29 Cal Rptr 3d 176 (2005))

• Check for affiliate nexus rule in the state (see next slides)

Note: Dependent on facts, activity and state• EX – see VA Ruling 07‐24

─ https://www.tax.virginia.gov/laws‐rules‐decisions/rulings‐tax‐commissioner/07‐24


Affiliate Nexus (Entities)

Approaches in several states to grab certain online arrangements.

Broadens definition of “agent” or “representative.”

Typical approach: if a seller and in‐state business have a specified relationship and the in‐state business in some way promotes sales for the seller or has similar products or company name, the seller must collect sales tax.

Arkansas, Alabama, California, Kansas, Louisiana, Idaho, Minnesota, New York, Utah, and more

Be sure to check your state.

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Affiliate (Or Associate) Nexus (“Amazon” Law) / “Click through” Nexus

• Legislation first enacted in NY in April 2008

• Broadened definition of “vendor” (§1101(b)(8)).

• Sellers presumed to be soliciting business and thus required to collect tax if, per an agreement, they compensate NY residents for directly or indirectly referring potential customers.

• Referrals may be made through a website or other means.

• Presumption only applies to sellers with over $10,000 of sales to NY customers made via the referrals in the prior 4 quarters.

• Sellers may rebut presumption by showing that the residents did not solicit sales in NY for them.

In reality, tough to do.

• Amnesty available for those who registered due to law change.

• Estimated to generate $47 million in 2008/2009 and $73 million in 2009/2010


NY Litigation Result

• Decisions issued in both cases in January 2009.

• Supreme Ct of NY dismissed claims for failure to state cause of action in that there was no way the companies could prevail to find the law unconstitutional.

• Per court ‐ affiliates want to earn money so will encourage sales. “it is not irrational to presume that at least some of them

will actively solicit business for the remote seller from within the State from others within the State."

• Several states then encouraged to follow suit. Rhode Island and NC enacted similar laws first.

• Amazon and Overstock cancelled associate arrangements in these states.

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Appeals Decision in NY Amazon Case

• Amazon.com, LLC v New York State Dept. of Taxation & Fin.,913 NYS2d 129, 2010 NY Slip Op 07823 (App Div, First Dept., 11/4/10) (& Overstock.com)

At stake – constitutionality of law enacted April 2008 and upheld by the lower court.

Remand – “although we do not find that the facial challenges have merit, further discovery is necessary before a determination can be rendered as to the as‐applied Commerce and Due Process Clauses claims.”

• Give taxpayers an opportunity to “develop a record which establishes, actually, rather than theoretically, whether the in‐state representatives are soliciting business or merely advertising on their behalf.”

http://www.nycourts.gov/reporter/3dseries/2010/2010_07823.htm


NY Litigation continued• Affirmed in March 2013 2013 NY Slip Op 02102, 20 NY3d 586 (2013) http://www.courts.state.ny.us/REPORTER/3dseries/2013/2013_02102.htm “the Appellate Division record in this case contains examples of such

[affiliate] websites urging their local constituents to support them by making purchases through their Amazon links. Essentially, through these types of affiliation agreements, a vendor is deemed to have established an in‐state sales force.”

“The bottom line is that if a vendor is paying New York residents to actively solicit business in this state, there is no reason why that vendor should not shoulder the appropriate tax burden.”

Burden to rebut solicitation presumption is reasonable. “Obtaining the necessary information may impose a burden on the retailers, but inconvenience does not render the presumption irrebuttable. In addition, while not determinative, it is notable that the presumption sensibly places the burden on the retailers to provide information about the activities of their own affiliates—information that DTF would have significant difficulty uncovering on its own “

• Appeals filed with U.S. Supreme Court Cert denied

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What Is the Right Answer?

Sales tax nexus if fit within state’s affiliate nexus law or have other sufficient physical presence.

Policy considerations of this issue:

• Advertising or solicitation?

• See dissenting opinion in the 2013 Amazon/Overstock NY case

• “before the Internet existed … advertising was usually sold for a flat fee, while sales agents usually worked on commission, but that has changed. When an advertisement takes the form of a link on a website, it is easy, as well as efficient, for the advertiser to compensate the website on the basis of results. But the link is still only an ad.”http://www.courts.state.ny.us/REPORTER/3dseries/2013/2013_02102.htm

Query – Doesn’t the Internet just allow for more accurate compensation for the advertiser (you can track the clicks and the ultimate purchases)?

Is an Amazon Associate like the contractors in Scripto?

http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2011/Tax/Sales_Tax_Collectors.jsp


Marketplace Facilitator Collection Laws

• Today, most states have them – makes it easier for small vendors using such marketplaces (such as eBay, Amazon, Etsy, others) and the state tax agency.

• Issues:

Not defined the same in all states.

How does marketplace know if it was a sale for resale or otherwise exempt?

If seller also has sales outside of the marketplace, has to collect on those if has physical presence or economic nexus.

Rules continue to evolve.

• Check state laws and info on website of likely marketplace facilitators.

Example ‐ https://www.amazon.com/gp/help/customer/display.html?nodeId=202211260

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Checklist – Sales Tax Nexus

Review states’ economic nexus and “physical presence” laws and rulings.

What is the state’s Wayfair economic nexus threshold(s)?

For states where don’t have economic nexus:

Know where property is located.

Know the whereabouts and activities of employees and representatives.

Examine the nature of transactions and relationships in the state.

Always ask questions to understand company operations.

Follow legal developments in states where you have customers.

Be sure company tax department is consulted on key business decisions.


Nexus for Other Types of Taxes

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Ohio CAT Rulings Uphold Economic Nexus• Crutchfield Corp. v. Testa, Slip Opinion No. 2016‐Ohio‐

7760 (11/17/16)“the physical‐presence requirement recognized and preserved by the United States Supreme Court for purposes of use‐tax collection does not extend to business‐privilege taxes such as the CAT. We further conclude that the statutory threshold of $500,000 of Ohio sales constitutes a sufficient guarantee of the substantiality of an Ohio nexus for purposes of the dormant Commerce Clause. “

• Newegg, Inc. v. Testa, Slip Opinion No. 2016‐Ohio‐7762 (11/17/16)

• Mason Cos., Inc. v. Testa, Slip Opinion No. 2016‐Ohio‐7768 (11/17/16)

“CAT” = Commercial Activity Tax” a type of gross receipts tax


Ohio Updated Info Release on CAT Nexus Standards (Nov. 2019)

• Some items of interest: “A person is subject to the CAT when any of the following applies. The

person: • owns or uses a part or all of its capital or property in this state

[5751.01(H)(1)]; or

• holds a certificate of compliance with the laws of Ohio authorizing the person to do business in this state [5751.01(H)(2)] or

• has bright‐line presence in Ohio [5751.01(H)(3)]; or

• otherwise has nexus with Ohio to an extent that the person can be required to remit the CAT under the Constitution of the United States. [5751.01(H)(4)]”

Bright‐line presence uses factor presence standards

Trailing nexus:• “A person that satisfies the bright‐line presence criteria for any part of a

calendar year continues to be required to be a CAT taxpayer for the remainder of the calendar year. In addition, a person, regardless of when they meet the bright‐line presence standard at any time during that subsequent calendar year, is required to be a taxpayer for the entire subsequent calendar year.”

https://www.tax.ohio.gov/Portals/0/commercial_activities/information_releases/2005-02%20CAT%20Nexus%20Standards%20Rev%20November%202019.pdf

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Due Diligence: Being Compliant and Avoiding Problems


Local Jurisdictions Too

• City income and other taxes, such as business license taxes Check for guidance

Federal and state constitutional constraints too

• EX – Blistex Bracken Ltd. Partnership v. City of Seattle, Dkt. No. 62006‐1‐1 (9/09) unpublished

Trademarks held in a trust; licensed to an IL company

Treated by p/s as portfolio income

City assessed 10 years of city B&O tax, interest and penalty ($131K)

Court – “nexus between the minimal business activities of the [p/s] and the City is insufficient to justify imposition of the B&O tax on the receipt of royalties.”

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How Long Does Nexus Last? Depends

• Check state law

• Example – Iowa: “Nexus for corporation income tax is determined on a year‐to‐year basis, and if a nexus activity occurs during the year, then the corporation has nexus for the entire year. For example, if on‐going service and maintenance is performed by employees in Iowa, then the software developer has nexus in Iowa for that year.”

Iowa Policy Letter 06240045 (5/06)


https://dor.wa.gov/sites/default/files/legacy/Docs/Pubs/SpecialNotices/2017/sn_17_TrailingNexus.pdf

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Nexus – Good or Bad?

• Depends:

For income tax planning, a corporation may want to establish nexus if it prevents throwback to a higher tax state

Also consider though, effect on liability for other types of taxes.

Also consider customer wants.

• Many online customers want to touch mdse or return it to a real store. Creating such a physical store creates sales tax nexus, as well as income tax nexus.


Nexus Questionnaires

• Available on most state websites for your reference

Perhaps not all questions key to having nexus.

Might help you help your clients (don’t wait for state to send one).

• Tax agency may mail to businesses they suspect might have nexus and ask for them to be completed.

• Take it seriously and complete it carefully.

Barr Laboratories v. Michigan, Dkt. 291968 (Ct. Appeals Mich. 2010) – answers on questionnaire were treated as evidence that oral testimony did not supercede.

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Review Question 6


Example ‐ Iowa

https://tax.iowa.gov/iowa-tax-filing-requirement-nexus-out-state-business

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Assistance in Being Compliant

• Many states have detailed info on web

EX – Massachusetts ‐‐‐‐‐‐

• Up‐to‐date software used properly.

• If unsure how law applies to you, consider seeking a ruling.

• See if tax agency audit manual is online – can be helpful resource.

• Consult with a state tax adviser.


https://www.mass.gov/corporate-excise-tax

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Self‐Audit Considerations

• What sales volume, people, connections, property and activities do you have in states with customers but in which you don’t presently file?

• What is the economic nexus standard for the state for all tax types?

• Employee versus independent contractor determinations may also be important (particularly for income tax).

• Be sure tax software is up to date and working properly.

• Be sure customer locations are correct in billing system.

• Where is inventory located?

• Any new business relationships, marketing approaches, products, etc.?

• Be sure system for getting and documenting resale certificates is working.

• Is there any state where you collect where you no longer need to?

• Keep up with law changes.


What If You Find You Have Nexus but Have Not Filed?

• Consult with tax adviser experienced in resolving these matters.

• See if amnesty period exists.• Consider “voluntary disclosure agreement” Most states have info on website. Do before state contacts you. Usually a shorter lookback period and/or

reduced penalties and interest.• EX – California is 3 year lookback rather than 8.

Work with your tax adviser; states may allow anonymous query first to see if VDA will be permitted.

• Usually best to act before state contacts you.

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COVID‐19 Issues

• Business might now have employees working at home in states where company did not have nexus before. Does this create obligations:

• To collect income tax?

─ Affect apportionment factors in any states with payroll factor?

• To collect sales tax (assuming had not already met economic nexus threshold for that state, but now may have physical presence)?

• To register and collect employment taxes for that state?

• Some state have provided relief for COVID‐19 situation. Check stat laws and find out how long any relief lasts.

• Example: DC OTR Tax Notice 2020‐05 (4/10/20) – “will not seek to impose corporation franchise tax or unincorporated business franchise tax nexus solely on the basis of employees or property used to allow employees to work from home (e.g., computers, computer equipment, or similar property) temporarily located in the District during the period of the declared public emergency and public health emergency, including any further extensions by the Mayor.”

• What about employers that will allow remote work after the pandemic?


Looking Forward

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State Trends

• Figuring out initial and continuing application of Wayfairdecision to sales/use tax and other types of taxes.

• Will states create one economic nexus standard for all taxes? Example: Hawaii, SB 495 – uses SD thresholds for income and

sales tax.

• More broadly and intensely pursue economic nexus Example – Indiana SB 563 (PL 158 (5/1/19) – “Income derived

from Indiana shall be taxable to the fullest extent permitted by the Constitution of the United States and federal law, regardless of whether the taxpayer has a physical presence in Indiana.”• http://iga.in.gov/static‐

documents/e/4/f/b/e4fbd379/SB0563.04.ENRH.pdf

• http://iga.in.gov/legislative/2019/bills/senate/563


Congressional Activities

• Typically there are regular proposals to update/modernize PL 86‐272

Usually called Business Activity Tax Simplification Act, such as H.R. 3063 (116th Congress)

• Expand to more than sales of tangible personal property.

• Expanding protected activities such as providing information.

• Defines physical presence with a de minimis standard so must be 15 days or more in the year (or states can provide higher threshold).

https://www.congress.gov/bill/116th‐congress/house‐bill/3063/

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Congressional Proposals Related to Wayfair

• H.R. 379, Protecting Businesses from Burdensome Compliance Cost Act

Protections for remote sellers, such as state may not require remitting to more than one location in the State.

• “The term “remote seller” means a person that sells a good or service and that does not have a physical presence in the State in which purchaser is located at the time the purchase of such good or service occurs.”

─ Note: So still need to know if have physical presence.

• S. 128, Stop Taxing Our Potential Act

Generally supported by states w/o sales tax.

Require physical presence for seller collection obligations.


Congressional Proposals Related to Wayfair ‐more

• H.R. 1933, Online Sales Simplicity and Small Business Relief Act “It is the sense of Congress that the States should develop

an interstate compact for the collection of sales tax by remote sellers that identifies a clearly defined minimum substantial nexus between the remote seller and the taxing State, that simplifies registration, collection, remittance, auditing, and other compliance processes to the greatest extent possible in order to avoid undue burdens on interstate commerce, and that, due to such simplification, eliminates the need for the continuation of the small business remote seller exemption under section 4 [3].”

Small seller exception – sales in U.S. in prior calendar year of $10 million or less

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H.R. 1933 ‐moreDefinitions include:

• “(1) REMOTE SELLER.—The term “remote seller” means a person without a physical presence in the State who makes a sale in the State.

• (2) PHYSICAL PRESENCE.—

(A) IN GENERAL.—Except as provided in subparagraph (B), the term “physical presence” means, with respect to a person, that a person's business activities in the State include any of the following during such person's taxable year:

• (i) Being an individual physically in the State, or assigning one or more employees to be in the State.

• (ii) Using the services of an agent (excluding an employee) to establish or maintain a market in the State, if such agent does not perform business services in the State for any other person during such taxable year.

• (iii) The leasing or owning of tangible personal property (other than digital or alphanumeric data) or of real property in the State.

(B) EXCEPTION.—A person does not have physical presence in a State if the person’s physical presence in the State under subparagraph (A) was for less than 15 days in a taxable year (or a greater number of days if provided by State law), or if the person’s physical presence in the State was solely for the purpose of conducting limited or transient business activity.”


Thank You for Attending Today’s Program

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Final Exam

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Final Basics of Nexus Understanding State Tax Issues

Documents

Transcript of Final Basics of Nexus Understanding State Tax Issues