WASHINGTON – The U.S. Supreme Court this week declined to review two cases challenging the constitutionality of states taxing out-of-state companies who lack a physical presence in those states, better known as “state tax nexus.” The decision to deny review increases pressure on Congress to enact legislation that will clearly define a bright-line standard for states to follow, the National Marine Manufacturers Association said in a release yesterday.
“Increasingly our manufacturers are being targeted by states that are aggressively using a variety of poorly defined nexus standards to tax out-of-state businesses to boost state treasuries,” said Thom Dammrich, president of the National Marine Manufacturers Association.
NMMA was among those who were watching the court’s decision closely, and had filed an amicus curiae (friend of the court) brief urging the Supreme Court to take up the matter.
“It is a bedrock belief that taxes should be levied because they benefit the entity being taxed, and shouldn’t exist solely to benefit state governments looking for a quick dollar from out of state companies,” Dammrich said. “This hurts small businesses, like many of our members who find themselves unwittingly caught up in a vague tax nexus, because it is costly and extremely difficult to determine without a clear uniform standard.”
NMMA has joined other groups to lobby Congress to enact a uniform and reasonable definition of nexus that businesses can rely upon. NMMA supported legislation in the previous Congress, the Business Activity Tax Simplification Act, which would have provided a “bricks and mortar” definition of presence had it been passed into law.
“Without a clear standard for states to follow that businesses can anticipate and plan by, it makes it impossible to predict who is or isn’t liable to pay income taxes,” Dammrich said. “In the absence of action by the Supreme Court, it’s imperative for Congress to address this issue fairly and expeditiously so that businesses aren’t left speculating about the changing tax nexus standards of all fifty states.”
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