Determining Nexus
A serious case for Sirius XM Radio Inc., Jennifer Mcloughlin in TaxNotes wrote, “They have asked the Texas Supreme Court to review and reverse an appellate court’s conclusion that the company’s subscription receipts should be sourced based on customer location for franchise tax purposes.”
Nexus is not always easily determined and usually depends on many factors from many different angles. There is a lot to know.
We hear it every single day. “Do I have nexus if…” The answer can be frustrating, confusing, and is often initially the same for many businesses. That answer is “It depends”.
A recent example of this is Sirius XM Radio Inc. Sirius XM provides a subscription-based satellite radio service. An appellate court determined that the company’s subscription receipts should be sourced based on customer location for franchise tax purposes.
“Sirius argued that the appellate court’s ‘receipt-producing, end-product act’ test has no legal foundation, as it is not found in any statute, regulation, or judicial opinion, and it conflicts with precedent from the Texas comptroller and the court of appeals.” - Jennifer Mcloughlin of Tax Notes
Sirius paid $456,532 in franchise taxes for services performed in Texas during the relevant years, according to Sirius’s petition. However, the state comptroller sought additional taxes and interest exceeding $2.5 million, with the dispute centering on “whether receipts from Texas subscribers reflected services performed mostly inside or outside Texas.”
Sirius XM is asking for the Texas Supreme Court to review the case but it is, yet again, clear that determining whether or not you have nexus is never straightforward.
Sales Tax And More regularly helps people determine if their business has nexus, because as you are likely aware, it is not always and maybe even rarely straightforward.
So, do you have nexus? It depends. Please reach out to us with any questions about our services or sign up for a nexus determining consultation here.
By: Ellie Moffat
This blog is intended for educational purposes and not as tax advice. Tax policies and procedures change frequently, so specific information, such as thresholds, rates, etc. included in this blog may have changed since it was originally published. Please request a consultation for more in-depth information.