Nexus Pitfalls

As you might guess, a major nexus pitfall includes unpaid taxes. Issues such as uncollected sales tax and flow-through entity issues are sometimes missed. Avoiding sticky situations requires an understanding of what creates nexus for different taxes, and in different jurisdictions.


Is there anything that prohibits imposing net income tax?

Gary Bingel:

There is something called public law 86272 which is federal legislation that was enacted many years ago and all it says is that a state is prohibited from imposing a net income tax if your only contacts with the state are the solicitation of sales of tangible personal property. While it's a short phrase there's a lot of nuances in there. For instance it only applies to solicitation of sales of tangible personal property. So if you're doing actually making a sale as opposed to soliciting the sale, or if you're soliciting sales of services or warranties or some other sort of intangible it doesn't apply. Also it only applies to net income tax so it doesn't apply to sales tax or gross receipts tax or net worth taxes. So it's a very very narrow exception.

Gary Bingel's expertise focuses on state and local income taxation, and sales and use tax consulting. He has significant experience serving clients in the manufacturing, retail, pharmaceutical, biotechnology, technology and service industries.

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