State Income Tax Nexus & BATSA
Decisions by the U.S. Supreme Court have made it clear that a state may impose its corporate taxes on an interstate carrier, even if the carrier is federally regulated and maintains no property or payroll in the state. However, the law is also clear that a business must have a certain degree of connection, or nexus, with the state in order for the state to tax it. How much nexus is unfortunately unclear, but regular and frequent pickups and deliveries of freight in a state is probably enough nexus for a state to impose a tax if it wants to. For more on the legal status of such taxes, click here.
Currently, the two states that most aggressively pursue interstate motor carriers for corporate taxes are New Jersey and Nebraska. New Jersey’s rule is that a motor carrier that does at least one pick-up or delivery of freight in New Jersey is liable for its taxes. The states has agents on the road, at scales, loading docks, and rest areas, and regularly holds trucks, drivers, and cargoes until the operators pay the state thousands of dollars in jeopardy tax assessments. Carriers that are not registered to pay New Jersey corporate taxes and do even a little business in the state should be warned. For more on New Jersey’s practices, click here.
So far, Nebraska does not seem to be seizing trucks for payment of its taxes. The state has sent out hundreds or thousands of notices to motor carriers, however, advising them that they may owe tax under Nebraska’s rules. Nebraska’s position is that just traveling through the state may be enough nexus to trigger taxation. This position may be questionable legally, but an appeal would have to be pursued through Nebraska’s own courts. Colorado click here and South Dakota here have passed legislative resolutions protesting Nebraska’s program.
ATA believes that it may take federal legislation to resolve the many problems in this area. A bill currently before Congress (numbered H.R. 1083 in this session), the Business Activities Tax Simplification Act, or BATSA, could do that, it if passes. ATA is working with a business coalition and with members of Congress to have BATSA enacted. Click here for ATA's Testimony supporting BATSA.