Over the last several years, at least six states have adopted and several more have proposed some form of a factor presence standard for determining the jurisdiction to impose an income tax. At least two additional states have adopted the standard for other business taxes. The main focus of those proposals has been on determining whether such standards pass constitutional muster, for example, whether they meet the due process standard of minimum connection/definite links and the commerce clause requirement of substantial presence. However, what appears to have been overshadowed by the constitutional questions are numerous administrative and tax policy issues that may not have been anticipated when those bright-line standards were enacted. Two recent California rulings illustrate the complexities of the implementation of the factor presence nexus standards...
MARILYN A. WETHEKAM is a partner at Horwood Marcus & Berk, Chartered in Chicago and a member of the State Tax Notes 2017 Advisory Board. Ms. Wethekam co-chairs the firm's nationally recognized multistate State and Local Tax practice. She has a national SALT practice representing multistate and multinational corporations in all areas of state tax.
Tax Analysts is a non-profit organization which is a leading provider of tax news and analysis for the global community, reaching more than 150,000 tax professionals in law and accounting firms, corporations, and government agencies. Visit http://www.taxanalysts.org/ for more information.
Originally published in State Tax Notes, Board Briefs, Jan. 2, 2017, pp. 99-118
(C) Tax Analysts 2017. Reprinted with permission.