‘Inherited’ Nexus And Other Extreme Nexus Theories

Nexus — whether a corporation has a sufficient connection such that it may be taxed by a state — is one of the most important issues in state tax. Various legal theories have been asserted (and are being asserted) to justify a state’s imposition of a tax obligation on a corporation. While some courts have accepted such theories, several courts have pushed back against states’ assertions of jurisdiction, including on due process grounds.

One theory — that a corporation has nexus with a state because it is part of the unitary business of an in-state taxpayer — is the primary theory discussed in this article. The Maryland Court of Special Appeals, in Comptroller of the Treasury v. Gore Enterprise Holdings, Inc., recently articulated that theory, stating that if ‘‘a parent company undoubtedly has a requisite nexus, the only question is whether the subsidiary partakes in the parent’s unitary business; if so, it inherits the parent’s nexus. . . .’’

Originally published in State Tax Notes on 7/1/2013.

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