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Q：
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How is corporate income tax nexus generally determined?
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A：
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Corporate income tax nexus is generally established under one of the following three standards:
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Physical Presence. A business has a physical presence in a state, such as maintaining a registered entity, employing personnel, leasing or owning office space, leasing or owning warehouse facilities, or operating any other physical business location within the state..
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Economic Presence. Economic nexus is determined based on the extent of a taxpayer's economic activity within a state rather than its physical presence. For example, a business may establish nexus by exceeding certain sales revenue thresholds or transaction-count thresholds. As a result, a business may become subject to a state's income tax filing requirements even without any physical presence in that state.
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Factor Presence. Under the factor presence standard, nexus is determined by whether a taxpayer's in-state property, payroll, or sales exceed specified thresholds established by the state.
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Q：
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What is the Factor Presence standard?
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A：
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Under the factor presence standard, a taxpayer generally establishes nexus with a state if any one of the following thresholds is exceeded during the tax period: More than $50,000 of in-state property; More than $50,000 of in-state payroll; More than $500,000 of in-state sales; or At least 25% of the taxpayer's total property, total payroll, or total sales is attributable to that state. Meeting any one of these thresholds may be sufficient to establish nexus for state income tax purposes.
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Q：
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What are the requirements for protection under P.L. 86-272?
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A：
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Public Law 86-272 limits a state's ability to impose a net income tax on businesses engaged in interstate commerce. Even if a business has certain contacts with a state, it may be protected from the state's income tax if it satisfies all of the following conditions:
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The business's only activity within the state is the solicitation of orders for the sale of tangible personal property.
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The orders are transmitted outside the state for approval or rejection, and the goods are shipped or delivered from a location outside the state.
If both requirements are satisfied, the business may qualify for protection from the state's net income tax under P.L. 86-272.
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