Multistate Challenges to Quill Physical Presence Standard: Navigating Nexus in State Sales and Income Tax

As the retail sales landscape continues to change from in-store purchases made from brick-and-mortar locations, states are constantly seeking ways to make up sales tax revenue shortfalls. A significant component of these efforts is comprised of states seeking ways to impose sales tax jurisdiction over internet-based sales shipped to individuals within their states. However, states have been limited in their tax reach by the "physical presence" standard articulated in Quill v North Dakota. Several states have enacted statutes, regulations or administrative guidance to try to challenge or reinterpret Quill, through alternate economic or factor presence standards.

For nonresident companies making sales into those states seeking to challenge Quill, these efforts present significant reporting, collection and remittance challenges, as well as uncertainty as to whether they should comply with these questionably constitutional laws. Tax advisers are constantly faced with the task of keeping up with various states' interpretations of just what constitutes taxable "presence," beyond the traditional understanding of what the Supreme Court held as physical presence.

Tax advisers should be keenly aware of the status of various state initiatives. South Dakota will almost certainly appeal its loss in Wayfair to the Supreme Court, and several other states including Alabama have pending challenges as they also seek to broaden tax jurisdiction to cover internet sales. Despite these constitutional challenges, several states have introduced and enacted factor presence economic nexus legislation during the first half of 2017, including Indiana, Maine, North Dakota and Wyoming.

Listen as our experienced panel provides a current update on key states' initiatives to circumvent or challenge the long-established Quill standard of physical presence as a prerequisite to imposing state sales or income tax.

1. Current Quill Standard Requiring Physical Presence
2. State legislative challenges to Physical Presence standards: Sales/transaction thresholds
   1. South Dakota
   2. North Dakota
   3. Wyoming
3. Other states’ regulatory challenges to Quill
   1. Alabama
   2. Tennessee
   3. Massachusetts
4. States that have successfully enacted economic nexus legislation in the first half of 2017
   1. Indiana
   2. Maine
   3. Wyoming
   4. North Dakota
5. Other expansive efforts taken by states
   1. Marketplace provider nexus provisions
   2. Notification and reporting laws
6. Planning strategies in anticipation of possible reversal of Quill

The panel will reviews these and other important topics:

• States that are currently presenting or contemplating statutory challenges to Quill's physical presence standard
• Mitigating risk in anticipation of the reversal of Quill
• How apportionment factors impact how a company may reach revenue or transactions thresholds.
• Risks and possible benefits of waiting to determine further state actions in terms of statutes challenging Quill standard

Learning Objectives

After completing this course, you will be able to:

• Identify the basis on which states are premising legislative or regulatory challenges to Quill standard
• Recognize the status of court challenges to state nexus initiatives
• Determine planning options to reduce and manage sales tax risk on transactions shipped into states engaged in Quill challenges
• Discern the role apportionment factors may play in reaching revenue or transaction thresholds in states seeking to broaden sales tax nexus

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, dealing with complex multi-state sales and use tax collecting and reporting; supervisory authority over other preparers/accountants. Knowledge of the U.S. Supreme Court's ruling in Quill v. North Dakota, Multi State Tax Commission model nexus standards, and the primary nexus approaches used by most states.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.