United States

Vermont: Physical Presence Not Needed For Income Tax Nexus

Mar 19, 2018
From KPMG TaxWatch

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The Vermont Department of Taxes recently issued a technical bulletin (TB-70) summarizing the circumstances under which a foreign (i.e., a non- Vermont incorporated) business entity is deemed to have Vermont corporate income tax nexus. Notably, the guidance provides that under Vermont law, substantial nexus does not require physical presence. Rather, income tax nexus is established when a foreign corporation intentionally or regularly exploits Vermont's market. The list of activities that are presumed to create nexus include, but are not limited to, using or selling intangible property in Vermont, including the receipt of royalties and the licensing of software and other properties, making loans to Vermont residents, and making sales of tangible personal property into Vermont. The bulletin does recognize that Public Law 86-272 prohibits Vermont from taxing out-of-state corporations if the only business activity of the taxpayer within Vermont consists of the solicitation of orders for sales of tangible personal property, subject to certain other requirements. However, if the out-of-state company conducts any additional activity that establishes separate Vermont nexus, such as using Vermont roadways on trucking routes unrelated to fulfillment services, then the protections of Public Law 86-272 would no longer apply. Furthermore, if an out-of-state company sells both tangible personal property and other products into Vermont, the company will have nexus and will not be protected under Public Law 86-272 as a result of the sale of the other products. Please stay tuned to TWIST for additional state nexus guidance.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.