Contents
- State nexus in 2025: economic nexus maturity
- P.L. 86-272: why “cookies” and web features can void protection
- Gross receipts taxes: why losses don’t mean zero tax
- Apportionment & sourcing: SSF, market sourcing, COP collisions
- Nowhere income: throwback and throwout rules
- Federal–state interaction: SALT deduction, addbacks, PTET traps
- International: transfer pricing, GILTI/FDII shifts, BEAT, withholding
- A practical 2025 operating playbook
1) State nexus in 2025: economic nexus is no longer “just sales tax”
The post-Wayfair model has expanded: states increasingly assert corporate income/franchise tax jurisdiction based on in-state receipts alone—even without employees, property, or offices. Thresholds differ by state and can include special unitary-group aggregation rules, so receipts tracking must be state-specific and continuous. :contentReference[oaicite:2]{index=2}
2) P.L. 86-272: the “digital solicitation” safe harbor is eroding
P.L. 86-272 historically shielded sellers of tangible personal property from state net income taxes if their in-state activity was limited to solicitation and orders were approved and shipped from out of state. The modern problem: common web behaviors (customer support chat, certain cookies, post-sale features, job application portals) can be characterized as non-ancillary business activity—voiding protection in states adopting aggressive guidance. :contentReference[oaicite:3]{index=3}
Practical conclusion
If you run a modern commerce site, assume P.L. 86-272 protection may be unavailable in key states and build your nexus posture accordingly. :contentReference[oaicite:4]{index=4}
3) Gross receipts taxes: cash-flow risk even when profit is negative
Several jurisdictions impose taxes measured by receipts (or modified receipts) rather than net income. These regimes can be especially punitive for fast-growing, low-margin companies because deductions for operating costs may be limited or nonexistent. :contentReference[oaicite:5]{index=5}
4) Apportionment & sourcing: SSF makes “where the customer is” decisive
The dominant state trend is single sales factor (SSF) apportionment, paired with market-based sourcing for services and intangibles. That combination shifts the tax base toward destination states (where customers receive the benefit), and it raises double-tax/nowhere-income risks when market-based and cost-of-performance rules collide across different states. :contentReference[oaicite:6]{index=6}
5) Nowhere income: throwback and throwout rules reclaim untaxed sales
Where a corporation is not taxable in a destination state (including due to P.L. 86-272 claims), origin states may “throw back” those sales into their numerator, or “throw out” untaxed sales from the denominator—raising effective apportionment percentages. In some structures, creating nexus in a destination state (even if tax is small) can reduce overall liability by preventing throwback. :contentReference[oaicite:7]{index=7}
6) Federal–state interaction: the C Corp SALT advantage (and the addback reality)
Unlike individuals, C corporations generally can deduct state and local income/franchise taxes federally. But states typically require addbacks of taxes “on or measured by income” when computing their own state tax base—so the benefit is primarily federal, not state-level. The report also highlights how PTET elections (designed for pass-through owners) can create awkward outcomes when a C corp is a partner. :contentReference[oaicite:8]{index=8}
7) International: transfer pricing discipline + OBBBA-driven system changes
Cross-border planning is dominated by three pillars: (1) transfer pricing (Section 482) with contemporaneous documentation to mitigate penalties, (2) minimum-tax style regimes like BEAT (including services-cost-method nuances), and (3) the evolving GILTI/FDII framework—renamed under OBBBA with meaningful parameter changes heading into 2026. Add in withholding on U.S.-source FDAP payments, treaty access constraints, and portfolio interest rules, and international tax becomes a documentation-first sport. :contentReference[oaicite:9]{index=9}
Transfer pricing: the “best method” + 30-day response reality
The report emphasizes contemporaneous documentation timelines and penalty exposure—treat TP files like a deliverable that’s “always ready,” not something to assemble after an exam notice. :contentReference[oaicite:10]{index=10}
BEAT: routine services can be a leverage point
Payments eligible for services-cost-method treatment can reduce base-erosion exposure when properly scoped and documented. :contentReference[oaicite:11]{index=11}
A practical 2025 operating playbook
- • Implement automated state receipts tracking (sales + services + digital) and alert on threshold crossings.
- • Maintain a state “policy matrix” for sourcing rules, SSF weights, throwback/throwout, and GRT regimes.
- • Treat P.L. 86-272 as a position that requires website-activity review and evidence—not a default assumption.
- • Build a VDA remediation workflow for late discoveries, and coordinate sales-tax and income/franchise exposure together.
- • Align transfer pricing narratives with operational reality (functions/risks/assets) and keep documentation contemporaneous.
- • Map 2026 international “cliffs” (GILTI/FDII parameters, BEAT rate) into multi-year cash tax forecasts.
- • Standardize withholding + treaty onboarding (W-8 collection, LOB checks, portfolio interest eligibility).
The report’s core message: success requires a cohesive strategy where state nexus monitoring and international documentation operate as one system. :contentReference[oaicite:12]{index=12}