State & Local Tax - Income & Sales Tax, Nexus and Incentives

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State & Local Tax Income & Sales Tax, Nexus and Incentives

28 November 2012

Alon Sherer, Senior International Tax Manager, PwC Israel

Agenda

1. Income / Franchise tax ? Nexus ? Trends ? Credits & Incentives

2. Sales Tax ? Nexus ? Trends ? Exemptions

U.S .Tax Seminar PwC Israel

November 2012 2

The world of state taxes

Gross Receipts

Tax

Income Tax

Property Tax

ABC & Co.

Franchise Tax

Payroll Tax

PwC

Use Tax

Sales Tax

il

Business Taxes

1

Nexus

Generally, nexus is the minimum contact required before a state is able to subject an out of state company to states taxes.

If a company has nexus in a state then the company needs to register, file and pay business taxes (i.e. income/franchise/gross receipts).

Nexus is interpreted differently from state to state!!

U.S .Tax Seminar PwC Israel

November 2012 5

Notable Activities Which May Create Nexus

Employees working in-state and travelling to other states to provide business activities

Corporate office space (owned or rented) Ownership of inventory, including consigned inventory Ownership of a warehouse Ownership of capital equipment, land or other assets General or limited interest in a partnership doing business in a state

(i.e. partnership with rental properties)

U.S .Tax Seminar PwC Israel

November 2012 6

Protected Activities for Income Tax

In-state solicitation - activities of employees engaged in interstate commerce are limited to solicitation of sales of tangible personal property, provided that the employees send the orders out of state for approval and processing.

De-minimis ? varies from state to state

U.S .Tax Seminar PwC Israel

November 2012 7

Nexus impacts you in more ways than one

It is important for a corporation to evaluate and determine nexus for the following main reasons: ? Understating/overstating income tax liabilities ? Compliance cost ? Statute of limitations ? Permanent establishment (PE) vs. Nexus ? FAS 109, FIN 48 ? Due diligence

U.S .Tax Seminar PwC Israel

November 2012 8

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