Bloomberg Tax presents in-depth observations into four categories of state and local taxation for the upcoming 2023 fiscal year that litigators should seek to direct their focus toward. The article begins as follows:
Gary C. Bingel of EisnerAmper previews some of the areas of state and local taxes that are most ripe for guidance and litigation in the coming year, including nexus and apportionment, pass-through entities, cryptocurrencies, and sales taxes, as part of our look ahead to 2023.
While nothing is guaranteed, when I look ahead to 2023, there are some interesting things I expect to see in the world of state and local taxation.
Nexus and Apportionment
The major income tax developments should be more of the same: nexus and apportionment, including revenue sourcing. Taxpayers probably will continue to struggle with the Multistate Tax Commission’s new interpretation of P.L. 86-272 and its application to internet activities.
Internet activities that are unprotected under this new interpretation are wide-reaching and affect taxpayers who have an online presence, which includes just about every business.
While California and New York have provided some guidance regarding their adoption of these new provisions, the “how” and “when” are still vague. Other states are still grappling with whether to adopt these new provisions, leaving taxpayers (and their advisers) guessing. Additional states will come out with guidance stating how—and hopefully when—they will follow the MTC’s new interpretation, with most stating that they will follow it prospectively as written.
While market-sourcing for services and intangibles is nothing new, there are still some areas of apportionment where I expect to see more guidance and/or litigation. One area is the appropriateness of “looking through” to your customer’s customer when determining the relevant market, especially when a business may lack the information to do so. Both taxpayers and state tax authorities continue to struggle with determining when and how a customer’s customer approach should be used. States seem to be moving toward this approach through regulation. As such, we should see additional litigation here in 2023.
To see the full article, click: From Crypto to Sales Taxes, a Look at State Taxation for 2023
Posted by Melissa Zheng, Associate Editor, Wealth Strategies Journal.