Nexus - the amount of contact between a taxpayer and the state that subjects the taxpayer to taxation - continues to vary widely from state to state. In addition, the nexus for sales and use tax differs from the nexus for income tax.The nexus requirement is derived from the language in two different places in the Constitution - the commerce clause, which prohibits states from unduly burdening interstate commerce, and the due process clause, which requires a minimum connection between a state and an entity it seeks to tax.

Since nexus is a dynamic factor in state taxation - it can change from year to year within a state due to administrative changes, legislation or litigation - it can surprise even the most astute state tax specialist. In fact, it is possible for a business to accidentally trigger nexus, resulting in unexpected income tax or sales tax liability, according to George Farrah, executive editor of state taxes for BNA.

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