Nexus

California Business Tax May Provide High Court Nexus Test

Posted April 16, 2019

by Carley Roberts

Carley Roberts

(This article was originally published by Law360 on April 16, 2019.)

In recent years, many have openly criticized California for its income tax litigating position involving out-of-state companies that hold passive, minority interests in pass-through entities doing business in California. The state argues these out-of-state companies are doing business in California solely by virtue of their passive, minority investment in pass-throughs that conduct business in California. The state has lost the issue twice in the last two years. Most recently in September 2018 before an administrative appellate body in a nonprecedential decision involving a 25% passive ownership interest and the other in 2017 at the California Court of Appeal in a published decision involving a 0.2% passive ownership interest.

The U.S. Supreme Court Changes Sales and Use Tax Collection Nexus

Posted June 22, 2018

by Pillsbury SALT

Pillsbury SALT

TAKEAWAYS

The Court holds that the South Dakota law satisfies the Commerce Clause “substantial nexus” requirement based on the “economic and virtual contacts” with the State.

The Wayfair decision does not prohibit the retroactive application of this new standard for Commerce Clause “substantial nexus.”

The decision strikes a blow to the U.S. Supreme Court’s stare decisis jurisprudence.

The Supreme Court in South Dakota v. Wayfair, Inc. overruled the “physical presence” requirement as “unsound and incorrect” and ruled that “substantial nexus” is satisfied when an out-of-state seller has sufficient “economic and virtual contacts” with the state. The prior Supreme Court precedent in National Bellas Hess, Inc. v. Department of Revenue of Illinois and Quill Corp. v. North Dakota required out-of-state sellers to collect and remit sales/use tax on retail sales of certain tangible personal property and services only if the seller had “physical presence” with the state.

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California Assembly Bill Proposes Expanded Sales/Use Tax Nexus Rules Affecting Internet Sellers

Posted July 1, 2001

by Carley Roberts and Eric Coffill

Carley Roberts

Eric Coffill

Assembly Bill 2412 (Migden and Aroner), now pending in the California Legislature, would drastically expand the California rules for nexus to tax under the California Sales and Use Tax Law. The bill should be of high interest to Internet retailers who do not have a physical presence in California. A.B. 2412 would expand California law to provide that a retailer has nexus with California based solely on the relationship between the out-of-state retailer and another retailer who does have nexus with California.

(The remainder of this article can be accessed in the July/August 2000 edition of Cyberspace Lawyer.)