Factor Presence Nexus for State and Local Taxes: Meeting the Challenges of Developing State Standards

Navigating Economic Presence Tests and Other Emerging Nexus Trends in Gross Receipts, Income and Sales & Use Tax

Recording of a 110-minute CPE webinar with Q&A


Conducted on Wednesday, September 27, 2017

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide corporate tax advisers with thorough and up-to-date guidance on various states’ attempts to enforce factor presence nexus on nonresident corporate taxpayers in the face of numerous judicial and administrative challenges. Multiple states have been aggressively pushing back against the nexus boundaries that the U.S. Supreme Court established in Quill, seeking to impose tax jurisdiction over activities that reach a certain statutorily-defined threshold or “factor presence.” The panel will discuss the current state of judicial actions interpreting factor presence, and provide updates on other key nexus developments.

Description

Perhaps the most troubling development in state taxation in recent years is the increase in the number of states using factor presence as a standard to impose taxing jurisdiction over nonresident corporate taxpayers. These economic presence justifications represent a direct legislative challenge to the longstanding Supreme Court holding in Quill v. North Dakota that a taxpayer must have a physical presence in a state to be subject to income tax.

These factor presence tests take numerous forms, such as sales tax, gross receipts and other income thresholds. The standards, adapted from a model statute put forward by the Multistate Tax Commission, serve to both remove planning options and increase the complexity and likelihood of tax payment and filing requirements.

A significant and growing number of states use the factor presence tests, with additional states considering imposing the standard as a means of increasing tax revenues. The standard is currently subject to significant litigation in a number of states. However, these court challenges have not impacted states’ plans to adopt some sort of economic presence nexus.

Listen as our experienced panel provides a practical guide to the current state of factor presence nexus standards, as well as other key nexus developments in state taxation of nonresident corporate taxpayers and remote business activity.

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Outline

  1. Factor presence standards and implications
  2. Economic presence as a strategy for states to extend tax reach
  3. Status of challenges to factor presence laws
  4. Other nexus developments affecting remote sellers
  5. Planning strategies to minimize state tax risks of factor presence assessments
  6. Special nexus issues regarding services

Benefits

The panel will discuss these and other important topics:

  • States that are contemplating changing to factor presence nexus standards
  • Current status of factor presence/economic-presence litigation challenges
  • Various factor presence standards and the risks arising from factor presence nexus
  • Other key nexus developments

Faculty

Bernert, Edward
Edward J. Bernert

Partner
Baker & Hostetler

Mr. Bernert concentrates his practice in the area of state and local taxes with a particular emphasis on the major...  |  Read More

Eisenstein, Martin
Martin Eisenstein

Managing Partner
Brann & Isaacson

Mr. Eisenstein is one of the nation’s leading experts in state and local taxation of information...  |  Read More

Schaefer, Matthew
Matthew P. Schaefer

State and Local Tax Partner
Brann & Isaacson

Mr. Schaefer regularly advises clients on state sales and use tax issues, including those involving direct mail...  |  Read More

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