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Maria Eberle

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Continuing the unpleasant theme of aggressive state tax proposals, a bill has surfaced in the New York Assembly (following a companion bill that was introduced in the New York Senate last Spring) that seeks to impose a five percent tax on the “gross income . . . [from] every corporation that derives income from the data individuals of this state share with such corporations.” The new data tax is being proposed for inclusion in Section…

In an era of ever-expanding state tax bases, there are two new legislative proposals in Maryland (SB 2) and Nebraska (LB 989) that seek to either extend a current tax base (in the case of Nebraska, the sales tax base) or create a new tax (in the case of Maryland) to capture digital advertising revenues. The Maryland tax also signals a continued trend toward nuanced gross-receipts-type taxes. If a tax targeting digital advertising services sounds familiar, that is because the Ohio Department of Taxation attempted to extend the Ohio sales tax to digital advertising services in 2016 (though this extension was rejected by the Ohio Legislature’s enactment of an exemption from the sales tax for digital advertising services later that same year).

Massachusetts recently joined a handful of other states (read: States over the Edge and Testing Boundaries with Business Activity Tax Nexus) by issuing a final revised regulation adopting a bright-line, $500,000, nexus threshold for its corporate excise tax. See generally 830 CMR 63.39.1. Echoing the language of the Wayfair decision, the state’s revised nexus regulation provides that “the Commissioner will presume that a general business corporation’s virtual and economic contacts subject the corporation to the tax jurisdiction of Massachusetts under M.G.L. c. 63, § 39, where the volume of the corporation’s Massachusetts sales for the taxable year exceeds five hundred thousand dollars.” 830 CMR 63.39.1(3)(d).

Wayfair has, for now, answered the question (at least, in part) of whether economic activity creates substantial nexus under the Commerce Clause for purposes of sales and use taxes. However, questions remain regarding whether and to what extent business activity tax nexus standards could be impacted. While states had boldly asserted economic nexus in the business activity tax context pre-Wayfair, the response since has been somewhat muted, until recently. Three states, Pennsylvania, Texas, and Wisconsin, have recently sought to fill in the blanks with regard to business activity tax nexus, with varied and inconsistent results that may raise more questions and concerns than answers.