[REG] Nexus, state income tax considerations

 

Nexus

- typically caused by a company having property, payroll, and sales within a state

- Determined by the specific laws of each state

- federal laws offer some protection to companies regarding state taxation

trigger

 - owning/leasing tangible personal or real property

- sending employees into the state for training or work

- soliciting sales in a state

- providing installation, maintenance, etc., to customers within a state(even through a third party)

- accepting or rejecting sales orders within the state or accepting returns

 

* Federal limitations on a state's rights to impose income tax do not apply to

- individual domiciled in, residents of the state

- corporations are incorporated under the laws of that state

- companies soliciting sales of services or other products that do not qualify as tangible personal property

- sales and use tax

- franchise tax

- gross receipts tax

 

 

State allocation and apportionment of federal taxable income

nexus established > how much of its total federal income/loss should be taxable by each state

Business income > apportion to nexus states 

* nonbusiness income allocate to commercial domicile(residence) state