3. #WBInsights15
Nexus – What causes it?
Historical perspective
– Physical presence
– Public Law 86-272
– Sales of Services
4. #WBInsights15
Nexus – Other Standards
Bright line nexus
– Factor presence test under Multistate Tax
Commission
• Sales > $500,000
• Payroll > $50,000
• Property > $50,000
• Greater than 25% test
– Indexing and other threshold levels used by states
– Application to income, franchise, gross receipts tax
5. #WBInsights15
Nexus – Other Standards
Economic nexus
– Licensing, use of intangibles, financial, software
• “Lanco” “Geoffrey”
• “KFC” “MBNA”
– Physical presence is not
required “Quill”
– Application to income, franchise,
and gross receipts tax
6. #WBInsights15
Nexus – Traps for the Unwary
• Fulfillment activities
• Warranties
• Remote employees
• Independent contractors
7. #WBInsights15
Nexus – Traps for the Unwary
• Investments in pass through entities
• Internet activities
• Digital goods
• Intangible property
9. #WBInsights15
Nexus – Opportunities
• State by state analysis of laws and court cases
• Preventative measures by taxpayers
• Review of includible apportionment factors
10. #WBInsights15
Nexus – Opportunities
• State by state analysis of laws and court cases
• Preventative measures by taxpayers
• Review of includible apportionment factors
• Voluntary disclosure agreements vs amnesty
programs
• Credit for taxes paid to another state
19. #WBInsights15
Sales tax: Why be concerned?
• $406 Billion-- sales tax collections estimated for
2015
• 28% of total state revenue from sales tax
• $20 billion in unremitted tax due
• States view your company as:
– Source of future tax remittances on taxable sales
– Source of revenue from taxable purchases (use
tax)
– Source of revenue from historical errors (audits)
20. #WBInsights15
Four Common Sales Tax Risks
• Improper Nexus Determination
• Inaccurate tax rules applied to sales
• Insufficient exemption documents
• Inherited tax liability (successor)
21. #WBInsights15
Sales Tax Legislative Trends
• Nexus Expansion Legislation
1. Click-through (“Amazon”) nexus
2. Affiliate Nexus
• Expansion of tax base to services
1. Software as services (SaaS) (TN)
2. Digital products
3. Installation and repair services
4. Staffing and personal services
• 2016 Georgia Legislative Session
22. #WBInsights15
Thank You!
Tim Clancy
Windham Brannon
tclancy@windhambrannon.com
678.510.2804
Ned Lenhart
Interstate Tax Strategies
nlenhart@salestaxstrategies.com
770.985.9573