What constitutes “doing business in” another state for purposes of business reporting purposes, and do I have to file an additional state return?
A. Each state defines “nexus” differently based upon its state laws. However, the states have a goal to collect as much revenue as possible, and they often interpret the interstate commerce laws liberally to capture business activity. If you send sales persons into a state for purposes of soliciting business, you may have to file franchise or similar taxes. If you or your employees have a physical presence within a state, however briefly, you may become subject to income taxes. Taxpayers should consider filing these returns for general compliance, but also to trigger the statute of limitations and permit offsetting credits on their primary state tax returns.
