Making sense of multistate taxation
Abstract: To trigger a state’s income or sales and use taxes, a business must have a substantial connection — or nexus — with that state. Historically, that meant a physical presence in the state. But, in today’s digital age, most companies — even small ones — do business beyond their state’s borders, and cash-starved states are eyeing out-of-state businesses as potential revenue sources. Ever-changing rules regarding what constitutes nexus increase the risk that multiple states will attempt to tax the same income. Congress might act to establish uniform standards, but, in the meantime, it’s important that businesses review their activities in each state for potential tax liability.