An annual Bloomberg BNA survey of state tax departments released recently asked senior state-tax officials in all 50 states how their jurisdictions are taxing the new technologies and types of transactions that continue to emerge as the U.S. economy shifts to the web-based world, which operates mostly independent of state or local borders. The recent […]
Get Instant Access to This Article
Become a Central New York Business Journal subscriber and get immediate access to all of our subscriber-only content and much more.
- Critical Central New York business news and analysis updated daily.
- Immediate access to all subscriber-only content on our website.
- Get a year's worth of the Print Edition of The Central New York Business Journal.
- Special Feature Publications such as the Book of Lists and Revitalize Greater Binghamton, Mohawk Valley, and Syracuse Magazines
Click here to purchase a paywall bypass link for this article.
An annual Bloomberg BNA survey of state tax departments released recently asked senior state-tax officials in all 50 states how their jurisdictions are taxing the new technologies and types of transactions that continue to emerge as the U.S. economy shifts to the web-based world, which operates mostly independent of state or local borders.
The recent survey findings were presented in a new Bloomberg BNA webinar, “Cloudy with a Chance of Nexus: Analyzing Bloomberg BNA’s 2012 Survey of State Tax Departments” on May 17.
States once believed that a corporation needed a physical presence within its borders before it could be subject to an income-based tax, Bloomberg BNA said in a news release. But new technologies, such as cloud computing, and new transaction hubs such as Groupon and LivingSocial, are challenging the parameters of most states’ tax codes, which either have not addressed how these technologies and transactions will be taxed, or do so under outdated provisions.
What constitutes a taxable “economic presence”?
The Bloomberg BNA 2012 State Tax Department Survey identified a number of different scenarios that can trigger income-tax nexus in different states. (Nexus is generally defined as a business having a presence in a state and being subject to state income taxes and sales taxes for sales within that state.). The survey findings are as follows:
- Sixteen states said having a website on a server physically located within their jurisdiction will trigger income-tax nexus
- Fourteen states said that a firm having a substantial number of customers with billing addresses in the state would trigger nexus for the business.
- Thirteen states would apply sales and use tax to fees paid by in-state customers to remotely access canned or prewritten software that is hosted on a web server.
- Nearly every state agreed that social-media coupon companies, such as Groupon or LivingSocial, are not liable for taxes when their coupons are redeemed at in-state retailers or restaurants, the survey found. But the states were divided on the question of whether sales taxes, paid by the end user, should be assessed on the full or the discounted price of the product or service.
- All but six jurisdictions tax an out-of-state employer that permits an employee to telecommute from a home within their borders.
- Twenty-three states said nexus would arise for reimbursing sales staff for the costs of maintaining an in-home office.
- Job fairs or other recruitment activities would trigger income-tax nexus in 21 states.
- Thirty-six states said tax nexus would arise from having employees hire, supervise, or train other employees within their borders.
Bloomberg BNA is a wholly owned subsidiary of Bloomberg, a source of legal, regulatory, and business information for professionals. It has a network of more than 2,500 reporters, correspondents, and leading practitioners.