2012 Hot Topics in State Taxation: Nexus, Apportionment Among Most Active Topics This Year

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Originally published in Tax Management Weekly State Tax Report on June 8, 2012 Issue: 23, 06/08/2012. Copyright 2012 by The Bureau of National Affairs, Inc..

The past year saw marked developments in state tax law. Although participation by the United States Supreme Court was still too limited, many important developments occurred at the state level. Among the most active topics were nexus and apportionment.

U.S. SUPREME COURT

Goodyear Tires, SA v. Brown

In Goodyear Tires, SA v. Brown, the U.S. Supreme Court held that a foreign corporation is not subject to general personal jurisdiction on causes of action not arising out of or related to any contacts between it and the forum state merely because other entities distribute in the forum state products placed in the stream of commerce by the defendant.1 The foreign subsidiaries of a tire manufacturer were sued in North Carolina by the parents of two boys from North Carolina who died in a bus accident outside of Paris, France. In their complaint, the parents alleged that defective tires manufactured by the foreign subsidiaries caused the deaths. The U.S. Supreme Court reversed the North Carolina courts, concluding that the foreign subsidiaries’ connections to North Carolina (i.e., allowing their products to reach North Carolina) fell ‘‘far short of the continuous and systematic general business contacts’’ necessary for North Carolina to ‘‘entertain suit against them on claims unrelated to anything that connects them to the State.’’ This case, and J. McIntyre Machinery Ltd. v. Nicastro (discussed below), could have significant implications in the state tax world.

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