KNOWLEDGE|
(1) |
Physical presence
A business has physical presence in a state to establish nexus such as being registered in the state, having employees in the state, renting or owning warehouses or offices, etc.
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(2) |
Economic presence
Economic nexus standards are based on a business’s economic connections in the state rather than its physical presence. Economic nexus policies have been broadly interpreted for both income tax and sales and use tax.
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(3) |
Factor presence Under a factor presence nexus standard, a taxpayer establishes nexus with a taxing jurisdiction for business activity tax purposes if the taxpayer exceeds a set numerical threshold of property, payroll, or receipts during the taxing period. According to The Multistate Tax Commission (MTC) proposal, factor presence nexus standards is established if any of the following thresholds is exceeded during the tax period: I. $50,000 of property in the state -or II. $50,000 of payroll in the state -or III. $500,000 of sales in the state -or IV. 25% of total property, total payroll, or total sales. |
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State |
Nexus Standards |
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Alabama |
For tax years beginning on or after January 1, 2023: I. $64,000 of property, II. $64,000 of payroll, III. $635,000 of sales, or IV. 25% of total property, total payroll, or total sales. |
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California |
For taxable years beginning on or after January 1, 2024: I. $735,019 of sales II. $73,502 of real and tangible personal property III. $73,502 of payroll compensation IV. 25% of total sales, total property, or total payroll. |
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Colorado |
I. $50,000 of property, II. $50,000 of payroll, III. $500,000 of sales, or IV. 25% of total property, total payroll, or total sales. |
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Connecticut |
$500,000 of business activity revenue |
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Hawaii |
I. Making sales that equal or exceed $100,000 during the current or preceding calendar year; and II. Engaging in 200 or more business transactions with persons within Hawaii during the current or preceding calendar year. |
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Maine |
I. $250,000 of property, II. $250,000 of payroll, III. $500,000 of sales, or IV. 25% of total property, total payroll, or total sales. |
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Massachusetts |
I. 100 sales transactions for residents, II. $10,000,000 of assets, or III. $500,000 of receipts. |
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Michigan |
I. Has a physical presence in this state for more than one day in a tax year, II. Actively solicits sales in this state and has gross receipts of $350,000 or more sourced to Michigan, or III. Has an ownership interest or a beneficial interest in a flow-through entity, directly, or indirectly through one or more other flow-through entities, that has nexus in Michigan.
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New Jersey |
For tax years beginning on or after July 31, 2023: I. $100,000 of receipts II. 200 transactions delivered to customers in this State |
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New York City |
For taxable years beginning on or after January 1, 2024: I. $1,128,000 of receipts for a corporation and a unitary group II. $11,000 of receipts for a unitary group, only total the receipts from corporations conducting a unitary business |
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Pennsylvania |
$500,000 of gross receipts |
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(a) |
The taxpayer’s only business activity within the state is the solicitation of orders for the sale of tangible personal property; |
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(b) |
The orders are sent outside the state for approval or rejection, and, if accepted, the goods are shipped or delivered directly from a point outside the state (e.g., via third-party logistics). Notably, the term “net income tax” here includes franchise taxes measured by net income. |
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(1) |
Uniform Enforcement Standards Across States Multistate Tax Commission (MTC) signatory states have committed to maximizing net income tax collection within constitutional limits and applying uniform criteria to determine protected and unprotected activities under P.L. 86-272. Key practices include: (a) Using identical factual analysis frameworks to assess protected activities; (b) Ensuring consistency in applying throwback rules for cross-state sales, whether for jurisdictional determinations in destination states or tax retroactivity in shipping states. |
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(2) |
Common In-State Activities Not Protected by P.L. 86-272 (a) Investigating creditworthiness; (b) Installation or supervision of installation during or after shipment/delivery; (c) Repair or maintenance of sold property; (d) Conducting training sessions, seminars, or lectures for non-solicitation personnel; (e) Collecting current or delinquent accounts (directly or via third parties); (f) Repossessing property. |
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State |
Taxes |
Gross Receipts Thresholds |
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Nevada |
Commerce tax |
Exceeding $4,000,000 per fiscal year |
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New York State |
Franchise tax and MTA surcharge |
I. $1,000,000 for tax years beginning on or after January 1, 2015, and before January 1, 2022, II. $1,138,000 for tax years beginning on or after January 1, 2022, and before January 1, 2024; and III. $1,283,000 for tax years beginning on or after January 1, 2024, and before January 1, 2025. |
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Ohio |
Commercial activity tax |
I. $150,000 per calendar year for tax periods prior to 2023, II. $3,000,000 per calendar year for tax year 2024, III. $6,000,000 per calendar year for Beginning in tax year 2025. |
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Oregon |
Corporate activity tax |
$1,000,000 of taxable Oregon commercial activity |
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Tennessee |
Business Tax |
I. $50,000 of property, II. $50,000 of payroll, III. $500,000 of sales, or IV. 25% of total property, total payroll, or total sales. |
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Franchise & Excise Tax (F&E) |
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Texas |
Franchise tax |
$500,000 of gross receipts |
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Washington |
Business & occupation tax (B&O) |
$100,000 of gross receipts |
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Disclaimer All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage. |
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