Oct 01, 2017
Todd Helle, EA Partner at Terry Lockridge & Dunn
The Multistate Tax Commission developed the concept of Factor Presence nexus for businesses doing business in more than one state in October 2002. However, it has only been adopted by 9 states (Alabama, California, Colorado, Connecticut, Michigan, New York, Ohio, Tennessee and Virginia). The constitutionality of the standard was recently tested for the first time late last year in Ohio. It is believed many states may have been waiting for a constitutional challenge to provide comfort to them that enacting such a standard is unlikely to be overturned. Now they have it.
The factor presence nexus standard allows the states to set an arbitrary sales factor threshold to be used to determine nexus with their state (and thus collect business taxes). It does not require physical presence in the state.
As states continue to grapple with tight budgets, we are keeping an eye on further states enacting factor presence nexus. If you do business in more than one state and would like to meet to discuss your potential exposure, please contact Todd Helle at firstname.lastname@example.org.