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Jurisdictional Limitations: Attributional Nexus (Portfolio 1430)

Product Code: TPOR44
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Jurisdictional Limitations: Attributional Nexus focuses on the expansion of traditional nexus principles by state tax administrators in their continued quest for revenue. While there are numerous restraints on the ability of state tax administrators to widen the scope of their jurisdiction to tax, the most effective restraints are the Fourteenth Amendment Due Process Clauses and the Commerce Clause of the U.S. Constitution. This Portfolio, written by Arthur R. Rosen, Esq., a partner in the law firm of McDermott, Will & Emery, discusses various applications of both Commerce and Due Process Clause principles in the specific area of states' jurisdiction to tax foreign entities.  

In addition, this Portfolio provides analysis and discussion of numerous cases and rulings in which states attempted to assert attributional or affiliate nexus on the basis that a business entity has an agency, alter ego, or unitary relationship with an entity that has direct nexus with a particular state.  These issues become most pronounced when related corporations are involved and are the principal focus of this Portfolio.

Consequently, this Portfolio first presents a two-dimensional model that can be utilized for analyzing state tax jurisdictional questions. Then, utilizing that model, the Portfolio discusses the most important aspects of the traditional jurisdiction rules as they relate to presence and transactional nexus. Finally, the Portfolio discusses developments—some of which are or should be quite alarming to taxpayers and their representatives—in attributional nexus.

Jurisdictional Limitations: Attributional Nexus allows you to benefit from: 

  • Hundreds of hours of original research on specific tax planning topics from leading practitioners in this area.
  • Invaluable practice documents including tables, charts and lists.
  • Plain-English guidance from world-class experts.
  • Real-world and in-depth analysis that lets you explore various options.
  • Time-saving access to relevant sections of tax laws, regulations, court cases, IRS documents and more.
  • Alternative approaches to both common and unique tax scenarios.

This Portfolio is part of the Premier State Tax Library, a comprehensive series, which covers major state tax transactions and issues with expert, in-depth analysis, and offers commentary on a wide range of multi-state and state-specific taxation topics, including Sales and Use, Corporate Income, Individual Income, Property, Gross Receipts, Limitations on States' Authorities to Tax, Credits and Incentives, Electronic Commerce, Mergers and Acquisitions, Procedure and Administration, Special Industries, and more.

 

Detailed Analysis

1430.01. ATTRIBUTIONAL NEXUS

A. Introduction

1430.02. PRESENCE NEXUS V. TRANSACTIONAL NEXUS

A. Introduction

B. Transactional Nexus: The Connection Between State and Transaction

C. Presence Nexus: The Connection Between the State and the Corporation

D. The Two Nexus Requirements Need Not Be Related

E. The Relationship of Tax Nexus to In Personam Jurisdiction

F. The Presence Nexus Requirement and Its Application To Various Taxes

G. Unitary Apportionment

1430.03. THE CURRENT STANDARD OF PRESENCE NEXUS

Introductory Material

A. Historical Background

1. Activities Within State

2. Tangible Property in a State

3. Intangible Property in a State

B. Post–Quill Developments

1. Sales and Use Taxes

2. Other Taxes

3. Intangible Property in a State

1430.04. APPLICATIONS OF ATTRIBUTIONAL NEXUS

A. Background

B. The Agency Relationship As a Basis for Attributional Nexus

1. Non–Tax Authorities

2. Tax Authorities

a. The Book Club Cases

b. Direct Marketing Computer Companies and Provision of In-State Warranty Services

c. Electronic Commerce Companies and Provision of Customer Service by In-State Subsidiary

d. Nexus By Affiliation Statutes and Cases

(1) Current, Inc. v. California State Bd. of Equalization

(2) G.P. Group, Inc. v. Missouri Director of Revenue

(3) SFA Folio Collections, Inc. v. Tracy

C. The Alter Ego Basis for Attributional Nexus

1. Non–Tax Authorities

2. Tax Authorities

D. The Unitary Basis for Attributional Nexus

1430.05. CONCLUSION

Working Papers

Table of Worksheets

Worksheet 1 Geoffrey, Inc. v. South Carolina Tax Commission 437 S.E.2d 13 (S.C. 1993)

Opinion

Worksheet 2 Nexus Program Bulletin, NB 95–1 Computer Company's Provision of In-State Repair Services Creates Nexus

Bibliography

Bibliography

Arthur Rosen
Mr. Rosen is a partner in the law firm of McDermott Will & Emery, where his practice focuses on tax planning and litigation relating to state and local tax matters. He has served as the Deputy Counsel to the New York State Department of Taxation and Finance, Tax Counsel to the New York State Senate Tax Committee and Counsel to the N.Y. Governor's Temporary Sales Tax Commission. Mr. Rosen has held executive tax management positions at Xerox Corp. and AT&T. Mr. Rosen holds leadership positions in professional tax organizations including the New York State Bar Association tax section, the NYU Tax Society, and the National Association of State Bar tax sections. He is past chair of the State and Local Tax Committee of the American Bar Association tax section. Mr. Rosen is editor of the newsletter Inside New York Taxes, is co-editor of the newsletter New York Tax Highlights and of New York Tax Cases. He has written scores of articles that have appeared in numerous professional publications, has made hundreds of presentations on state and local tax matters, and founded and chairs the New York University course entitled “Introduction to State and Local Taxes.” He is a member of the American College of Tax Counsel and is listed in The Best Lawyers in America.