Weekly Round-Up: Is the Physical Presence Standard for Income Tax Nexus 'Bankrupt'?


Oregon's recent efforts to impose corporate excise tax on a bank holding company for the income earned by its subsidiaries doing business in Oregon highlights the need for the U.S. Supreme Court to revisit its holdings in Quill,writes Robert Willens, president of the tax and consulting firm Robert Willens LLC in New York in this week's issue of the Weekly State Tax Report.

The Oregon court refused to find the excise tax unconstitutional simply because the bank holding company lacked a physical presence in Oregon. Instead the court determined that imposing liability on the holding company for the corporate excise tax of its subsidiaries because the holding company had allowed them free use of its trademarks and received a dividend. 

"Does substantial nexus turn on physical presence or is the physical presence test only applicable with respect to sales and use tax inquiries," Willens asks

In the 21st century, can substantial nexus be established by the existence of "economic presence"? Or, as the bankruptcy court found in the instant case, is substantial nexus a function of neither physical presence nor economic presence but, instead, other factors which the instant case does precious little to clarify, Willens questions.

For a comprehensive case study of the decision coming out of Oregon, check out Willens' article here.

In other developments…

Which States Tax Your Travel the Most , by Stateline, the daily news service of The Pew Charitable Trusts.

Ryan Budget Would Shift Substantial Costs to States and Localities , a new report by the Center on Budget and Policy Priorities.

2013 State Sales Tax Holidays , by the Federation of Tax Administrators.

Top Fiscal Issues for 2013 Legislative Sessions , by the National Conference of State Legislatures. 

How Is the Money Used? Federal and State Cases Distinguishing Taxes and Fees , by the Tax Foundation.

 

Compiled by Priya D. Nair
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