In contrast to the federal nexus standards of engaging in trade or business within the United States or carrying on business in the United States through a permanent establishment situated therein, state income tax nexus standards generally require only a physical presence within the state of a type that is not protected by Public Law 86-272. In addition, some states have adopted the theories of economic nexus, agency nexus, and affiliate nexus. As a consequence, it is possible for a foreign (non-U.S.) corporation to have nexus for state but not federal income tax purposes. This course discusses state nexus standards, and how they compare to federal nexus standards for corporations organized in foreign countries.

Upon completing this course, the student will be able to:

• Describe the federal nexus standard of a permanent establishment under an income tax treaty
• Explain the physical presence test for state tax nexus
• Identify the protections from state income tax nexus afforded by Public Law 86-272
• Recognize that a corporation organized in a foreign country may have nexus for state tax purposes without having nexus for federal income tax purposes