New Jersey

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On January 10, 2011, the New Jersey Division of Taxation (the Division) started the new year off with a bang by issuing a Technical Advisory Memorandum (TAM), TAM-6 (Jan. 10, 2011) regarding the Division’s Corporate Business Tax (CBT) nexus policy. The issuance of this TAM sent both overt and subliminal messages to foreign corporations, particularly financial institutions.  

The Division advised that for privilege periods and taxable years beginning on or after January 1, 2002, amendments to the CBT made it clear that foreign corporations are subject to the CBT “for the privilege of deriving receipts from sources within this state, or for the privilege of engaging in contacts within this state.” N.J. Stat. Ann. § 54:10A-2. In addition, the Division adopted the holding of Tax Comm’r of W.Va. v. MBNA America Bank, N.A., 640 S.E.2d 226 (W.Va. 2006), cert. denied sub nom FIA Card Services, N.A. v. Tax Commissioner of W.Va., 127 S. Ct. 2997 (2007), as the constitutional standard by which New Jersey’s nexus statute would be measured. Based on this foundation, the Division set stated: “taxpayers performing services and domiciled outside the State that solicit business within the state or derive receipts from sources within the State must file a [CBT] return” (emphasis added). The Division expressly targeted this nexus policy at financial institutions by stating that “a [financial institution] that has its commercial domicile in another state [is] subject to tax in this State if during any year it obtains or solicits business or receives gross receipts from sources within this state.”Continue Reading New Jersey’s “Situation”: Economic Nexus and Endless Possibilities

Despite the overwhelming business opposition to “throwout” sales factor apportionment rules and New Jersey’s recent repeal of its “throwout” rule, Maine is now bucking the trend and adopting a new “throwout” rule. Effective for 2010 and subsequent years, Maine adopted the Finnigan methodology for computing the sales factor for a combined return and to replace its “throwback” rule with the “throwout” rule.

Under the new Finnigan methodology of Code Me. R. 810 for determining the numerator of the sales factor in a combined report, “total sales of the taxpayer” in Maine now includes sales of the taxpayer and sales of any other entity included in a combined return, regardless of whether those entities themselves have nexus with Maine. The adoption of Finnigan applies to both unitary groups that have elected to file a single combined return and those that file separate returns utilizing combined apportionment. If separate returns are filed, each taxpayer’s  return will include in the numerator of the sales factor its own Maine sourced sales as well as a portion of the Maine sourced sales of those entities in the unitary group that do not have nexus with Maine.Continue Reading Throw Out the Throwback: Maine Replaces “Throwback” with “Throwout” and Adopts Finnigan

The New Jersey Division of Taxation is revisiting a proposed regulation that would provide new rules governing the sale of software and related services. While the draft regulation has not been formally published for public comment, the Division is working with interested parties to accept comments prior to the draft’s publication.

The draft would…

On September 1, the Superior Court of New Jersey, Appellate Division, issued its opinion in Praxair Technology, Inc. v. Dir., Div. of Taxation, Case No. A-6262-06T3 (N.J. Super. Ct. App. Div. 2010), which upheld the Director’s imposition of a penalty on Praxair for failing to file a tax return for the 1994, 1995, and 1996 tax years. Praxair took the position that it was not subject to tax under New Jersey tax law because it did not have physical presence in New Jersey. Although the statute remained unchanged, the New Jersey Division of Taxation made a regulatory change in 1996 to add an example that explained that it was the Division’s position that Praxair was subject to the corporate business tax. In addition, the Appellate Division upheld a post-amnesty penalty against Praxair because it failed to take advantage of the 2002 tax amnesty, even though the New Jersey Supreme Court, in 2006, held that economic presence was put into effect in 1996 with the regulatory change.  Lanco, Inc. v. Dir., Div. of Taxation, 908 A.2d 176 (N.J. 2006).Continue Reading New Jersey Appellate Division Says Praxair Should Have Read the Tea Leaves on Tax Liabilities