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Economic Nexus in Wisconsin – Any Activity at All?

In many states, there is an income tax filing requirement if you perform services and your customer receives the benefit of your services in a foreign state. You do not have to have a physical location in that state, nor do you or one of your employees have to step foot in that state. This is one description of Economic Nexus.

States have written laws with regard to new nexus requirements and, thus far, state courts have upheld these laws. In most of these cases, the states have initiated a threshold where nexus is created only if sales in that state exceed that threshold. For example, New York State initiated Economic Nexus in 2015 with a threshold of $1 million in sales. If your sales of services which would be apportioned to New York exceed $1 million, you are deemed to have nexus in New York for Corporation Tax purposes.

Wisconsin does not have a dollar value threshold, so why am I focusing on Wisconsin?

They are sending out tax notices asserting nexus and their tax department is claiming that a corporation that has any sales of services at all, where the customer receives the benefit of the service in Wisconsin, is subject to Corporation Tax.

What does the law actually say?
71.22 (1r): “Doing business in this state” includes … regularly performing services outside this state for which the benefits are received in this state

It appears that they do have a threshold, although it is not stated in dollars. The threshold is: “regularly.” When I finish wrestling with the state of Wisconsin tax department, I will let you know what ‘regularly” means.

Nexus laws are changing quickly; state by state, involving all types of state taxes. Many practitioners are utilizing my services to do nexus reviews. If you have any questions on nexus, please call 516-938-5219.

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