Spring 2012 issue of Horizons

the losses cannot be used to offset the income.

The concepts above are not mutually exclusive. A filing requirement by one business entity can affect all companies within the entity. For example, if Illinois were to claim nexus was created by one of the operating entities of a business, then all activities would be subject to Illinois filing requirements under their unitary approach. Thus, all companies under the entity structure have nexus and are subject to Illinois income tax. Where this filing requirement creates a liability or a tax advantage depends on the state. The trucking company, which maintains a fleet in Illinois, is operating at a profit (“income”), while other members of the unitary group are not. The income of the organization would be netted, allowing the losses to offset the income. In states, like Wisconsin, where separate returns must be filed,

in a state to require filing a return. This concept of sufficient activity is known as “Nexus,” meaning a physical or, in some cases, an economic presence in a given state. The states use a variety of criteria in determining whether a multistate trucking company’s activities have sufficient nexus to file an income tax return. Most states assert that nexus is created by trucks passing through the state on a regular basis. Several determine nexus is created based on one of the following: • The driver’s residence • Only if the driver uses a vehicle owned by the taxpayer • Only if the driver back-hauls goods originating in the state • Only if the driver makes a delivery or pickup in the state

Multistate businesses face many hurdles, especially from those states with unique filing requirements. These requirements can be complex. You should take time to visit with your tax advisor and discuss the changes in the states in which your company operates.

RubinBrown’s Automotive Services Group RubinBrown assists the automotive industry through accounting, income tax, retirement, estate and fringe benefit planning.

John Butler, CPA - St. Louis Partner-In-Charge Automotive Services Group john.butler@rubinbrown.com 314.290.3333

Mary Ramm, CPA - Kansas City Partner Automotive Services Group mary.ramm@rubinbrown.com 913.499.4406

Russ White, CPA, MBA - Denver Partner Automotive Services Group russ.white@rubinbrown.com 303.952.1247

Mark Conrad, CPA - St. Louis Manager Automotive Services Group mark.conrad@rubinbrown.com 314.290.3425

www.rubinbrown.com

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