Businesses taxed in states where they have no property

“For a small company, say they’re getting hit with $50,000 in taxes, it’s going to cost them significantly more than that to hire an attorney to fight it in the court.  They usually don’t have the money so they typically are forced then to settle an audit.”

“Fastsigns has paid these tax assessments because doing so is less expensive than than filing legal challenges. Litigation would require man hours and lawyers we don’t have,” Monson said.

The Business Activity Tax Simplification Act seeks to address this tax loophole. The bill was advanced by the House Judiciary Committee last year, but has stalled since.

The issues stems from vagueness in the law. The Supreme Court’s decision in the Quill ruling established a precedent requiring “physical nexus,” though what that means for corporate income tax is not clear.

“Quill was decided in the context of sales and use taxes, rather than corporate income taxes, and so the question is is there a distinction between those two types of standard that would justify a different nexus standard,” Monson said.

Monson expressed hope that the issue could be included in some kind of overall tax deal that is being discussed for the next session of Congress.

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