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A Great Divide: 2011 Business and a 1959 State Tax Nexus Standard
The more things change, the more they stay the same. Fifty-two years following the enactment of US Public Law 86-272 as a "temporary" fix, we are struggling to make this jurisdictional standard work in an economy that resembles nothing like what it was in a bygone era. Perhaps, as some argue, P.L. 86-272 needs an update. Perhaps state policymakers should look less at the literal words on a page and carry out Congressional intent through the lens of current times. Taxand US review the current situation and remind us that the application of P.L. 86-272 requires a little bit of art and a little bit of science.
There are other examples of states and taxpayers framing issues and drawing conclusions with a modern view of P.L. 86-272. There are more, however, that rely on strict construction -- a more articulate way of saying "head in the sand" or "tunnel vision." Granted, this may be a bit harsh, as these states would argue they are simply applying the literal words on the page. Perhaps the Public Law needs to be modernised. Until then, and even in developing a framework for a modern version, taxpayers are encouraged to fight for their rights and against efforts by states to overreach and overtax. At the same time, companies are reminded that a P.L. 86-272 inquiry is fact intensive. In a service-oriented economy, it is all too easy to trip over the de minimis threshold. The corporate tax department can play a key role in ensuring that the business understands the potential costs associated not only with activities of its sales force but also with operating personnel who may cross the line.
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