BNA's 2011 Survey of State Tax Departments Puts Practitioners on the Pulse of States' Nexus Attitudes
ARLINGTON, Va., June 30, 2011 /PRNewswire-USNewswire/ -- Since 2008, seven states have enacted a so-called "Amazon" or "click-through" nexus law aimed at requiring sales tax collection from an online retailer that compensates residents for facilitating sales via links from a website. Yet, 20 states said in BNA's 2011 Survey of State Tax Departments that the obligation to collect sales tax exists for an online retailer with web-based sales "associates" in the state. The result suggests that a substantial number of states believe that click-through nexus is already incorporated within their tax code.
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Now in its 11th year, the Survey of senior state tax officials identifies their positions on key state tax issues as of December 31, 2010, clarifying state positions on gray areas in state corporate income taxes and sales and use taxes.
In the area of sales tax, states are coming up with new ways of establishing substantial nexus or reporting requirements for online vendors. The survey addresses this issue as well as additional questions regarding sales and use tax nexus, including the types of in-state solicitation activities that would trigger sales and use tax nexus for a remote vendor. Other sales and use tax questions focus on activities related to distribution and delivery, and transactions involving franchise tax agreements.
"States are facing record deficits and are struggling to find ways to make up for continuing shortfalls in revenues," says Steven Roll, an Assistant Managing Editor at BNA, who oversees the annual survey. "In this year's edition, we not only expanded our questions to include nexus, which has become a major hotpoint in numerous states, but we also delved deeper to ascertain each state's sales and use tax position on the sourcing of services and intangibles for purposes of corporate income tax and software, two additional issues which are intertwined with the nexus issue."
Every state, New York City, and the District of Columbia participated in the 2011 edition of the Survey. In addition to identifying the specific activities that would trigger nexus for an out-of-state corporation, the Survey also includes each state's conformity to I.R.C. section 338(h)(10), treatment of income arising from bankruptcy, position regarding intangible holding companies, and application of throwback and throwout rules.
The Survey covers the following topics:
- Income tax nexus
- Deductibility of state and local taxes
- Conformity to I.R.C. section 338(h)(10)
- Treatment of income arising from bankruptcy
- Treatment of intangible holding companies
- Application of throwback and throwout rules
Highlights for this year include:
- Eleven states said sales tax nexus would result from hiring an in-state third party to refer a customer via website or blog click-through in exchange for a percentage of the sale.
- The states are evenly divided on whether a remote seller's hiring of a third party to distribute promotional materials within their jurisdiction would trigger nexus.
- An employee who telecommutes from a home located within a state's borders would create income tax nexus for an out-of-state employer, 37 jurisdictions said. Among them was Alaska, which changed its answer from last year. Telecommuting would not trigger nexus in Kentucky, Maryland, Mississippi, Oklahoma, and Virginia.
- About half the states said whether software is delivered to a consumer electronically or as a DVD or CD-ROM does not affect its classification as "tangible personal property" for sales and use tax.
- These 11 states said they have no written guidelines for how a taxpayer may invoke an alternative apportionment method: Alabama, Arizona, Colorado, Delaware, Michigan, Mississippi, North Dakota, Pennsylvania, Rhode Island, Utah, and Virginia.
The 2011 Survey of State Tax Departments is available from bna.com. For information on bulk orders, contact BNA at 800.372.1033.
About BNA Tax & Accounting
BNA Tax & Accounting is the foremost source of tax and accounting research, news, practice tools, and guidance for tax attorneys, CPAs, corporate tax managers, estate planners, and financial accountants. For more than 50 years, BNA Tax & Accounting has offered practitioners expert insights and guidance on every significant issue in tax and accounting planning and compliance. Written by practitioners for practitioners, BNA's award-winning Portfolios offer topic-driven, in-depth guidance on transactions designed to help tax professionals achieve new levels of excellence and client service. For more information about our products and services, visit BNA Tax & Accounting online at www.bna.com.
SOURCE BNA Tax & Accounting
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