Knowledge Center

Thursday, May 09, 2013

David Fruchtman, Of Counsel with Horwood Marcus & Berk, was quoted in Bloomberg BNA's analysis of its 2013 50-state tax survey "2013 Survey of State Tax Departments: States Specify Nexus Policies on Web Servers and Non-U.S. Entities; Address Many Other Gray Areas", published on April 26, 2013.

When asked to comment on the states' efforts to reach foreign businesses, Mr. Fruchtman explained that

''Even more than their domestic counterparts, foreign companies have a steep learning curve when it comes to state taxes. When a foreign company enters the U.S. market, its U.S. sales volume is small, its state tax liability insignificant and its knowledge of U.S. sub-national taxes essentially nonexistent. At this point, a foreign company's failure to comply with state tax obligations often will go undetected by state tax agencies.  Unfortunately, even after generating meaningful amounts of U.S. sales and state tax liabilities, foreign businesses often remain unaware of their state tax obligations. As a result, these companies may have significant multistate tax exposures before they are genuinely aware of their liability for these taxes.''

Mr. Fruchtman was quoted later in the same article, when he was asked to put the states' responses into perspective.  According to Mr. Fruchtman

''The survey demonstrates the state income tax hazards confronting foreign-based businesses, too many of which are neither complying with nor planning for state income taxes.  The states have long sought to shift the burden of their income taxes to out-of-state businesses. Now, as borders of all kinds become less significant to both commerce and taxation, the states' interest in taxing foreign businesses is continually increasing.''

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