Weekly Round-Up: Nexus, Market-Based Sourcing, Taxation of Pass-Throughs Debated by Top Experts

As the Multistate Tax Commission (MTC) and several states have adopted a market-based approach to sourcing receipts from certain services and intangibles, prominent state tax practitioners and government officials at the Bloomberg BNA annual Roundtable May 4 debated the extent to which taxpayers should “look through” to whom the end recipient or ultimate beneficiary is in determining where the “market” for the sale is located.

Defining the “market” is often complicated, and the states use different approaches. Taxpayers are eager for states to shed some light on these provisions. With the release of the MTC sourcing regulations and detailed guidance from Massachusetts, practitioners at the panel were hopeful that these provisions would serve as a model for states that use a market-based sourcing approach.

In addition to sourcing issues, the state tax policy experts discussed other topics, including the U.S. Supreme Court's decision in Direct Marketing Association v. Brohl (U.S. 2015) (DMA) and the taxation of pass-through entities at the Bloomberg BNA annual Roundtable in Washington D.C.

The panel was moderated by Arthur R. Rosen, a partner in the law firm McDermott Will & Emery LLP and chairman of the Bloomberg BNA State Tax Advisory Board. The panelists included Steven Cordi of the D.C. Office of Tax and Revenue, Joe Henchman of the Tax Foundation, Kendall Houghton of Alston & Bird, Joe Huddleston of the MTC, Douglas Lindholm of the Counsel On State Taxation (COST), Richard Pomp of the University of Connecticut School of Law, Diann Smith of McDermott Will & Emery and Steve Wlodychak of Ernst & Young. A special report including the full transcript of the proceedings will be published in the June 26 Bloomberg BNA Weekly State Tax Report.

Some notable developments from the State Tax Developments Tracker–Bloomberg BNA’s new tool for monitoring important developments in all the states:

Colorado Department of Revenue Issues New Affidavit of Exempt Sale Form

Florida Department of Revenue Publishes Guidance Document Discussing Imposition of Sales and Use Tax on Boat Owners and Purchasers

Indiana General Assembly Enacts Law Including United States Savings Bonds in Property Subject to Escheat Under Unclaimed Property Act

For more information about this and other state tax issues, sign up for a free trial of the Bloomberg BNA Premier State Tax Library. 

In other developments…

Taxes and the Star Wars Universe, by the Tax Foundation

Connecticut Revenue Commissioner Suggests that States “Ramp up” Economic Nexus for Sales Tax Purposes, by Alston& Bird

Compiled by Megan Finnerty