the usual suspects rise again: economic nexus, combined reporting, market-based sourcing

State legislatures and governors continued to move in the same direction this week - economic nexus, combined reporting, and market-based sourcing. The usual suspects popped up everywhere.

  1. Tennessee enacted the "Revenue Modernization Act" (HB 644 and HB 291) - implementing economic nexus (effective for tax years beginning on or after January 1, 2016), and market-based sourcing (applicable to tax years beginning on or after July 1, 2016); the bills also make changes to the affiliated intangible expense addback (applicable to tax years beginning on or after July 1, 2016) and impose a new use tax on cloud computing starting July 1, 2015.
  2. Tennessee Supreme Court heard oral arguments in the alternative apportionment Vodafone case (see prior posts for details). The case may be impacted by the Revenue Modernization Act's enactment of market-based sourcing.
  3. Connecticut Senate proposed mandatory combined reporting (HB 7061). General Electric and Aetna, Inc. publicly communicated their disapproval by stating they would actually consider moving their operations out of state if the bill is signed by the Governor.
  4. Virginia workgroup met to discuss enacting market-based sourcing.
  5. Maryland Tax Court continued to use unitary principle to establish nexus (Staples Inc. v. Comptroller).
  6. California Court of Appeals held that allowing only intrastate unitary taxpayers to make a separate or combined filing election was discriminatory (Harley-Davidson, Inc. v. Franchise Tax Board).
  7. New York Tax Appeals Tribunal reversed an administrative law judge's determination and decided that affiliated corporations were entitled to file on a combined basis (SunGard Capital Corp).