Jurisdiction and Nexus: Constitutional limitations on state powers to tax interstate business. Protected solicitation and de minimis activities under Public Law 86-272. Attributional nexus. Consequences of selling over the Internet, through employees or independent contractors, advertising, delivering, owning or leasing property in a state, other issues. Dealing effectively with nexus questionnaires. The applicable standard for franchise, privilege, other non-income taxes and service companies.

Unitary and Separate Accounting: Unitary, combined, consolidated and separate returns: When does the state or the taxpayer have the right to choose? Limitations on the states’ ability to force unitary combination. Tests for determining when a business is unitary after Container and how they may be turned into planning opportunities for the astute tax practitioner.

Business and Nonbusiness Income: The business/nonbusiness distinction as interpreted by UDITPA, Multistate Tax Compact and other states. The latest on the transactional versus functional tests. State taxation of capital gains, dividends, interest, rents, royalties after ASARCO/Woolworth, Allied-Signal and Mead. Factor representation and adjustment opportunities.

The Tax Base and Conformity Issues: State tax treatment of income from federal obligations, taxes paid to other jurisdictions, depreciation, net operating losses, 338(h)(10) transactions, passive holding companies, corporate distributions, foreign source income. State imposition of alternative minimum taxes and the use of other alternative tax bases. Planning and refund opportunities.

Flow-Through Entities: State taxation of flow-through entities and their owners. Types of entities used. Conformity, nexus, unitary, apportionment and tax base issues. Planning opportunities.

Ethics and Managing the State Tax Function: Organizing state tax planning, compliance and audit activities in light of Sarbanes-Oxley, Fin 48 and other developments that have made ethics a more important part of the state tax practice. Improving state tax department image. Conducting effective state tax research that can be relied upon. How computerization of state tax returns helps or hinders the state tax function.

The Property Factor: Determining the relevant property and the timing of its inclusion — tangible, intangible, real and personal. Capitalizing leasehold interests. Using original cost, net book value, basis or fair market value to measure the property factor. Impact of depreciation strategies on, and the role of inventories in, the formula. Situs issues. Treatment of specialized industries.

The Payroll Factor: Examining the scope of the payroll factor — wages, salaries and other personal service compensation. Treatment of management fees, partnership reimbursements, outside contractors, leased or shared employees, specialized industries. Ascertaining the place where services are performed — defining “incidental services” and “base of operations.” Using the cash versus accrual method.

The Sales Factor: Determining the type of receipts — tangibles, intangibles, services or a combination — and the proper sourcing method to apply — destination, cost of performance, origination and more. Treatment of returns, allowances, installment and occasional sales, discounts; services, rents, royalties, investment income, other intangibles. Throwback, throwout and dock sales.

Current Developments: Current administrative, court and legislative developments on such critical interstate tax topics as: the effect of Davis v. Kentucky and Cuno v. DaimlerChrysler on future challenges to state tax incentives; whether states may deny refunds of unconstitutional taxes or limit the applicability of NOLs; how states define the unitary concept and business/nonbusiness distinction; jurisdictional standards after Wrigley, Quill and Geoffrey; apportionment sourcing issues for services and other industries; procedural traps for the unwary; changes to state tax systems such as those enacted by Kentucky, Michigan, Ohio and Texas. Planning and refund opportunities.

State and Multistate Tax Audits: The audit process – from information requests and extensions of the statute to the final conference. Ethical considerations. Dealing with the consequences of centralized versus decentralized records. Handling a Multistate Tax Commission audit. Conducting audits in an electronic environment. The burden of monitoring unclaimed property: reporting responsibilities, recovering funds, potential audits.

Problems Session: Practical application of the concepts presented.