State Tax Return. Maryann B. Gall Laura A. Kulwicki Chen Meng Lam Columbus Columbus Columbus Law Clerk (614) (330) (614)

Transcription

1 September 2006 Volume 13 Number 9 State Tax Return NEXUS: Update On Recent Developments Maryann B. Gall Laura A. Kulwicki Chen Meng Lam Columbus Columbus Columbus Law Clerk (614) (330) (614) We keep track of nexus developments on a regular basis legislation, administrative interpretations, the passage of rules and regulations, and court cases. This issue of our newsletter outlines important nexus developments from June, 2006, through August, It is organized by the kind of activity that tends to give out-of-state entities nexus planning and litigation difficulties, such as employee visits, whether certain activities constitute "doing business" in a state, affiliate nexus, and nexus for an already-registered vendor in a state. We hope you find it helpful in your planning and compliance work. I. "SUBSTANTIAL NEXUS" LITIGATION IN THE STATE COURTS A. Non-resident Limited Partner and Gain From Sale of Non-resident Company Here are two interesting cases about the necessary connection between a state and a non-resident. The Lanzi case has gone through the Alabama court system and the final determination was pro-taxpayer a non-resident limited partner was not subject to Alabama income tax. However, as noted, this holding is limited to tax years before 2001 because of subsequent Alabama legislation. The Maryland decision is also pro-taxpayer. The Maryland Tax Court concluded that gain from the sale of a subsidiary's stock did not produce taxable income for Maryland corporate income tax purposes. 1. ALABAMA a. Lanzi v. Dep t of Revenue, No , 2006 Ala. Civ. App. LEXIS 406 (Ala. Civ. App. June 30, 2006). i. Taxpayer was a Georgia resident who owned 62.5% limited partnership interest in an Alabama family investment partnership that was formed to hold and invest the taxpayer family s investment

2 securities. The general partners, who were all Alabama residents, managed the partnership s investments and worked with financial consultants in Alabama and other states. Taxpayer stipulated that he had only a passive limited-partnership interest in the partnership and took no part in its management. The interest in the Alabama limited partnership was the taxpayer s only connection to Alabama. i iv. For the audit years, Taxpayer reported and paid Georgia income tax on his pro rata share of the partnership s income. The Alabama Department, however, determined that the taxpayer s income was from property owned or business transacted in Alabama and issued an income tax assessment. Taxpayer argued that he did not have sufficient nexus with Alabama for the state to tax his income without violating the Due Process and Commerce Clauses. The Administrative Law Judge ( ALJ ) concluded that Alabama lacked the nexus necessary to subject the taxpayer s Alabamasource income to tax. The circuit court, however, reversed the decision of the ALJ. While the ALJ focused on the connection of the taxpayer to Alabama for purposes of taxing his pro rata share of the partnership income, the circuit court instead focused on the connection of the income to the state. According to the circuit court, a person purposefully earning substantial Alabama-source income through an Alabama entity knowingly assumes the risk that the state of Alabama will exercise some jurisdiction over that Alabama income. Therefore, under this reasoning, if the income is from Alabama sources, it is taxable by Alabama, regardless of where the nonresident partner is located. On appeal, the court of civil appeal reversed the circuit court s decision, holding that Alabama could not tax the nonresident taxpayer s income from the Alabama partnership. Under Alabama case and statutory law, the state may tax a nonresident s income from intangible personal property, such as a partnership interest, only if (i) the taxpayer has established a commercial domicile in the state; or (ii) the intangible property acquires a business situs within the state. The court concluded that because the taxpayer had no other contacts with Alabama other than his limited-partnership interest, the above rule did not apply to the taxpayer, and thus, Alabama could not tax the taxpayer s income. v. The appellate court also analogized the case to Shaffer v. Heiter, 433 U.S. 186 (1977), in which the U.S. Supreme Court held that the Due Process Clause prohibits a state from asserting jurisdiction over a nonresident shareholder solely on the basis of the nonresident s ownership of stock in a domestic corporation. The appellate court concluded that because a nonresident s interest in a limited partnership is directly analogous to a nonresident s 2

3 ownership of stock in a corporation, mere ownership of a limitedpartnership interest therefore does not provide sufficient minimum contacts with the forum state for purposes of judicial jurisdiction. Alabama therefore could not tax the taxpayer s income. vi. The appellate court further noted that its holding is limited to tax years before Effective January 1, 2001, the Alabama legislature enacted a new law that requires a nonresident partner to consent to personal jurisdiction in Alabama for purposes of paying taxes on Alabama-source income or, failing that, requires the partnership to pay the income tax on behalf of the nonresident partner. See Ala. Code (c). The appellate court s ruling did not reach the constitutionality of the statute. 2. MARYLAND a. Science Applications Int l Corp. v. Comptroller of the Treasury, No. 04-IN-OO-0632, 2006 Md. Tax LEXIS 3 (Md. Tax Ct. May 11, 2006). i. Science Applications International Corporation ( SAIC ) was a California-based research and engineering firm that provided technical services to customers located throughout the United States, including Maryland. SAIC conducted its business, in part, within Maryland. In 1995, SAIC purchased 100% of the shares in Network Solutions, Inc. ( NSI ), a Virginia based company providing Internet domain registration services worldwide. NSI had no facilities, employees, or operations in Maryland, nor did SAIC s Maryland operations have any involvement with NSI. The two entities operated distinct businesses with minimal contacts between them, which were conducted at arm's-length. Subsequently, SAIC sold shares of NSI, resulting in a significant capital gain for SAIC. i SAIC reported the capital gain as income on its Maryland corporate income tax return and paid the applicable tax. After further review, SAIC filed an amended return and requested a refund of the tax paid relating to the capital gain income. The Comptroller denied SAIC s refund claim and SAIC appealed to the Maryland Tax Court. On appeal, SAIC argued that (i) there was no nexus linking the gain from the sale of NSI shares to SAIC s activities in Maryland and (ii) NSI served an investment function, rather than an operational function, and therefore the companies lacked the requisite unitary relationship for Maryland to impose a tax. The court held in favor of SAIC, concluding that the gain on the sale of NSI shares could not constitutionally be taxed by Maryland. In reaching its conclusion, the court relied on Hercules, Inc v. Comptroller, 716 A.2d 276 (Md. 1998). Under Hercules, before 3

4 Maryland may tax income earned outside its borders, there must be a rational relationship between the income attributed to the state and the intrastate values of the enterprise. As a result, to levy a tax, there must be some nexus linking the gain to the activities in the state. Because SAIC s Maryland operations had no involvement with NSI, and NSI had no facilities, employees or operations in Maryland, the court concluded that there was no nexus linking the gain to the state. iv. The court further concluded that the acquisition and ultimate sale of NSI stock served purely an investment function, and there was no integration of the business of NSI into the regular business operations of SAIC (citing Allied-Signal, Inc. v. Director, Div. of Taxation, 504 U.S. 768 (1992)). According to the court, SAIC s investment in NSI did not serve an operational function as the stock was not acquired as a short-term investment of working capital analogous to a bank account or certificate deposit. Therefore, because SAIC s investment served an investment function, and not an operational function, Maryland could not constitutionally tax the NSI gain. B. In-State Personnel This section summarizes a Tennessee decision and two Texas Comptroller decisions dealing with in-state employees and activities. The Tennessee assessment was affirmed by the trial court and the appellate court, finding that the Georgia corporation had sufficient nexus in Tennessee because of its business relationships with Tennessee contractors. In the Texas Comptroller decisions, the Comptroller determined that franchise and sales tax assessments against two non-texas companies were correct. In both situations, in-state Texas activities were performed by independent contractors and various distributors and representatives for the non-texas companies. Here, again, are decisions in which the out-ofstate companies were not careful in their relationships with Texas representatives and agents. Finally, Oklahoma has an amended regulation stating that company trucks will not create nexus. 1. OKLAHOMA a. Okla. Admin. Code 710: i. The Oklahoma Tax Commission has amended the rule that provides a list of activities that constitute nexus with Oklahoma. Effective June 25, 2006, the following activity will not constitute 4

5 2. TENNESSEE nexus with Oklahoma: The delivery of merchandise in a company owned or leased vehicle to a destination within the state from a source outside the state, in connection with the solicitation of sales. Okla. Admin. Code 710: a. Arco Building Systems, Inc. v. Chumley, No. M COA- R3-CV, 2006 Tenn. App. LEXIS 395 (Tenn. Ct. App. 2006). i. Arco Building Systems, Inc. ( Arco ), a Delaware corporation with its principal place of business in Georgia, was in the business of selling single-story metal buildings. Arco did not manufacture the buildings, but contracted with four manufacturers, one of which was in Tennessee, to contract the building based on its customers specifications. In a typical sale, a customer of Arco contacted Arco to inquire about purchasing a metal building. Arco would then contact one of the four manufacturers to obtain a price for producing the metal building. If the customer decided to purchase, Arco then sent a purchase order to the manufacturer which then prepared the plans and sent them directly to Arco s customers for approval. Arco also specifically authorized the manufacturer in Tennessee to accept and deposit final payments from the customers. The manufacturer was involved in Arco s Tennessee operations from beginning to end, including post-delivery consulting services and shipping of replacement parts. i All four manufacturers with whom Arco contracted were registered as Tennessee dealers for sales and use tax purposes. Arco also registered as a Tennessee dealer and issued blanket resale certificates to its manufacturers. Arco filed annual returns with the Department, but did not report any of its sales to customers located in Tennessee. Upon audit, the Department assessed tax, penalties, and interest against Arco for its sales to Tennessee customers. Arco argued that it did not have sufficient nexus with Tennessee on the ground that it lacked property or employees in the state. The trial court upheld the assessment. On appeal, the court of appeals affirmed the assessment on the ground that the Tennessee manufacturer had conducted substantial business activities on the taxpayer s behalf. Specifically, the court found that the Tennessee manufacturer was Arco s representative in Tennessee. According to the court, Arco s use of the Tennessee manufacturer as a de facto representative and extensive participant in its Tennessee business operations to engineer, manufacture, and distribute the buildings Arco sold to its customers in Tennessee satisfied the physical presence standard of the Commerce Clause. 5

6 iv. Furthermore, the court held that Arco s use of resale certificates was an attempt to shield the four manufacturers from use tax collection and found that such purported manipulation of Tennessee s tax laws was an additional basis to find physical presence of Arco in Tennessee. Specifically, the court found that Arco had relied on its Tennessee registration to issue blanket certificates of resale to keep its manufacturers from charging Tennessee sales or use taxes on the buildings they sold to Arco or shipped to Arco s customers in Tennessee. The court concluded that such registration and issuance of resale certificates created an additional basis for determining physical presence. 3. TEXAS a. In Re: ***, Texas Comptroller Decision Hearing Nos. 46,540 and 46,541, CCH and (Tex. Cmptr. Pub. Acct. May 10, 2006). i. Taxpayer, located outside Texas, was a facilities maintenance company and had an Internet website. On its website, Taxpayer offered a full range of services such as general repair, plumbing, floor maintenance, and security services. Taxpayer also had professionals nationwide (including Texas) to serve its customers. The Comptroller imposed franchise taxes and sales taxes on the taxpayer. Taxpayer contended that it did not have sufficient nexus with Texas. The Administrative Law Judge ( ALJ ) upheld the assessment for both franchise taxes and sales taxes, finding sufficient nexus from the taxpayer s use of Texas independent contractors to perform maintenance and repair services for its customers. According to the ALJ, an out-of-state retailer can have physical presence in Texas if the retailer s activities, whether conducted by an employee, agent, or independent contractor, are significantly associated with the retailer s ability to establish and maintain a market in the state. Based on this, the ALJ concluded that the taxpayer s use of independent contractors in Texas to perform services to operate its business in Texas constituted the requisite physical presence, thereby creating sufficient nexus with Texas. b. In Re: ***, Texas Comptroller Decision Hearing No. 44,665, CCH (Tex. Cmptr. Pub. Acct. Apr. 10, 2006). i. Taxpayer, a California corporation, was a manufacturer of commercial and industrial washroom equipment and toilet compartments. Taxpayer had contracts with various distributors and representatives in Texas, under which the distributors and representatives promoted the taxpayer s products. Taxpayer sold 6

7 its products to distributors who then resold them to their customers. On occasion, a sales manager of the taxpayer would visit the distributors to answer questions on new products. Taxpayer did not make any direct sales in Texas, and had no office, warehouse, or facility in Texas. Taxpayer collected current and delinquent debts in Texas by entering into financing agreements with distributors and engaging collection agencies. i iv. Taxpayer claimed that it did not have sufficient nexus with Texas for purposes of franchise tax and sales tax. Taxpayer argued the following: (i) its representatives did not seek to obtain customers in Texas and had only served to get the products to customers; and (ii) its distributors were purchasing the taxpayer s products for resale, not acting as the representatives of the taxpayer. Finding that the taxpayer had sufficient contacts with Texas, the Comptroller upheld the assessment for both franchise tax and sales tax. The Comptroller rejected both arguments by the taxpayer, reasoning that the activities of the distributors and representatives amounted to promotion or inducement of sales of the taxpayer s products in Texas. On the assessment of franchise tax, the Comptroller found that the promotion of sales by the representatives and the collection of current and delinquent accounts by the agents were not ancillary to solicitation of orders, and thus were not protected by Public Law On the assessment of sales tax, the Comptroller found that the taxpayer had maintained a presence in Texas through its representatives and distributors, who were independent contractors authorized to promote sales on the taxpayer s behalf. Moreover, Taxpayer s sales managers visited distributors in Texas to answer questions and review inventory compliance. Such contacts were therefore sufficient to establish substantial nexus with Texas. C. Affiliate Nexus This summer brought significant activity in determining affiliate nexus and agency nexus tests. Georgia passed a new statute, effective July 1, 2006, which creates a statutory "affiliate nexus" series of tests. Generally, related Georgia "affiliates" can create nexus for an out-of-state retailer. This statute, however, has a series of "safe harbors" for activities within Georgia which will not create nexus. The Indiana Department of Revenue issued a Letter of Findings concerning a combined return because of affiliate's activities within the state. 7

8 There was activity in two Dell Catalog Sales L.P. matters. In Louisiana, the Supreme Court denied DCSLP's application for discretionary review and remanded the case back to the trial court for further proceedings. On June 22, 2006, an administrative law judge in the New Mexico Department of Revenue & Taxation determined that DCSLP had agency nexus in New Mexico. An appeal has been filed there from to the Court of Appeals. Briefs will be filed over the rest of GEORGIA a. Ga. Code Ann i. Effective July 1, 2006, the definition of dealer for sales and use tax purposes is amended to include a person who engages in the regular or systematic solicitation of a consumer market in Georgia, unless the person s only activity in the state is: i iv. Advertising or solicitation by direct mail, catalogs, periodicals, advertising fliers, print, radio, or television media, telephone, computer, the Internet, cable, microwave or other communication system; or; The delivery of tangible personal property within the state solely by common carrier or U.S. mail. Ga. Code Ann (3)(I); H.B. 111 (Ga. 2006). The new definition of dealer also includes an affiliate of a dealer if the affiliate sells at retail, offers for sale at retail in Georgia, or engages in the regular or systematic solicitation of a consumer market in Georgia through a related dealer located in Georgia unless: v. The related in-state dealer does not engage in advertising, marketing, sales or other services on behalf of the affiliate; and vi. v The related in-state dealer accepts the return of tangible personal property sold by the affiliate and also accepts the return of tangible personal property sold by any person or dealer that is not an affiliate on the same terms and conditions as an affiliate s return. Ga. Code Ann (3)(J). The term affiliate means any person that is related directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, or is subject to the control of a dealer as described in Ga. Code Ann (3). 8

9 2. INDIANA a. Letter of Findings No (Indiana Dep t of Revenue June 1, 2006). i. Taxpayer consisted of a number of corporations engaged in various businesses. The Department held that the taxpayer was required to include three subsidiaries on a combined report for Indiana financial institutions tax, regardless of the subsidiaries lack of economic nexus with Indiana, because the combined filing was based on the combined business of the group, not each separate company. The presence of the unitary business in Indiana was sufficient to impose the Indiana tax on the group. In addition, the Department noted that even if the issue of nexus was relevant, sufficient nexus was created from the subsidiaries conducting of their credit card business with Indiana customers at various times during the audit period. By doing so, Taxpayer has sought the benefit of Indiana laws and the business environment that Indiana provided for the taxpayer and the taxpayer s customers. Accordingly, the subsidiaries conducted the business of a financial institution in Indiana, and were properly subject to tax during those periods in which they had credit card customers in Indiana. 3. LOUISIANA a. State of Louisiana and Secretary of Dep t of Revenue and Taxation v. Dell Catalog Sales, L.P., Docket No. 456,807 (La. 19th Jud. Dist. Ct. 2004), reversed, No CA 1702, 922 So. 2d 1257 (La. Ct. App. Feb. 15, 2006). i. On June 23, 2006, the Louisiana Supreme Court denied DCSLP s application for review. The case is currently pending at the trial court for further proceedings. 4. NEW JERSEY a. N.J. Stat. Ann. 54:32B-2. i. Effective October 1, 2006, the newly expanded definition of seller for sales and use tax purposes will include a person who has an agent with a place of business in New Jersey. N.J. Stat. Ann. 54:32B-2(i)(1)(B); A.B (N.J. 2006). The definition of agent has also been amended to include the following: 9

10 (1) A related entity that uses an identical or substantially similar name, trademark or goodwill as the seller to develop, promote or maintain sales, (2) A related entity that pays for the seller s services (and vice versa) in whole or in part contingent upon the volume or value of sales; (3) A related entity that shares a common business plan or substantially coordinates its business plan with the seller; and (4) A related entity that provides services to, or that inure to the benefit of, the seller related to developing, promoting, or maintaining the seller s market. N.J. Stat. Ann. 54:32B-2(i)(2). i For this purpose, a related-entity relationship exists if the in-state and out-of-state companies are both 50% or more owned by the same entity. N.J. Stat. Ann. 54:32B-2(i)(2) and 54:10A NEW MEXICO a. In the Matter of the Protest of Dell Catalog Sales, L.P., No , CCH (N.M. Dep t of Revenue June 22, 2006). i. Dell Catalog Sales L.P. ( DCSLP ), a Texas limited partnership, sold computer products to individual home consumers. DCSLP s principal place of business was in Texas. DCSLP did not own or lease any real property, did not maintain any office or other place of business, did not operate any retail stores, did not consign merchandise, and did not have any employees or independent sales agents in New Mexico. DCSLP contracted with BancTec, an independent third-party company, to provide onsite repair services for DCSLP s products sold to customers in New Mexico. A customer who wished to purchase a service contract had to purchase the contract through DCSLP. BancTec s name did not appear in DCSLP s catalogs advertising the availability of the service contracts. DCSLP mailed catalogs to potential customers in New Mexico, but did not use vendors in New Mexico to design, prepare, print, store, or mail the catalogs. The Department conducted an audit of DCSLP and determined that DCSLP was selling property in New Mexico and was therefore liable for New Mexico gross receipts tax on DCSLP s sales of property to New Mexico customers. In addition, the Department determined that DCSLP was liable for compensating tax on catalogs mailed into New Mexico. DCSLP argued that the Department lacked the requisite statutory authority to tax DCSLP s sales to New Mexico customers and that New Mexico lacked the nexus necessary to impose gross receipts tax on the sales. 10

11 DCSLP further argued that constitutional nexus did not exist for compensating tax purposes because DCSLP did not control the production or distribution of the catalogs from within New Mexico. i iv. The Department upheld the assessment of both gross receipts tax and compensating tax. First, the Department concluded that DCSLP was selling property in New Mexico and was therefore liable for New Mexico gross receipts tax on its sales to New Mexico customers. The court reasoned that the sales of the computer products were consummated when the merchandise was physically delivered to DCSLP s customers in New Mexico, not when title to the goods passed to the buyer at DCSLP s Texas facility. Therefore, DCSLP had gross receipts from selling property in New Mexico. The Department also held that DSCLP had sufficient nexus with New Mexico to be subject to gross receipts tax on its sales to New Mexico customers. According to the court, the in-home repair services performed in New Mexico by BancTec established DCSLP s physical presence in the state because DCSLP exercised a substantial degree of control over BancTec s activities and those activities served to further the market for DCSLP s products in New Mexico. The Department rejected DCSLP s argument that BancTec s activities in New Mexico could not be attributed to it because BancTec did not solicit sales on DCSLP s behalf. The Department found that the crucial factor was not the nature of the in-state activities, but rather whether those activities were significantly associated with the taxpayer s ability to establish and maintain a market for sales, which was the case here. v. The Department further rejected DCSLP s argument that BancTec s activities in New Mexico could not establish nexus because BancTec did not meet the legal definition of an agent. The Department reasoned that a formal agency relationship was not required in order for the activities of an in-state representative to establish nexus for an out-of-state vendor. Moreover, according to the Department, DCSLP s affiliation with a Dell limited partnership which had ownership and control of replacement computer parts located in New Mexico was another contributing factor in establishing that DCSL had nexus with New Mexico. vi. In upholding the assessment of compensating tax on catalogs mailed into New Mexico, the Department reasoned that DCSLP operated as a direct catalog sales company and the distribution of catalogs to potential customers was essential to establishing and maintaining its market for sales in New Mexico. The fact that DCSLP contracted with a third party to produce and mail its catalog did not negate DCSLP s control over the distribution of the catalogs 11

12 in New Mexico. DCSLP therefore had nexus with New Mexico for purposes of compensating tax. v DCSLP has appealed to the New Mexico Court of Appeals. D. Registration as a Vendor It is not clear to what extent tax departments and state courts will find that the voluntary act of registration as a sales tax vendor creates nexus or "waives" any objection to becoming a sales tax vendor. The better rule is that mistaken or involuntary registration does not create tax nexus. The Wyoming Supreme Court had an odd situation before it in the following case. The taxpayer-manufacturer was located in Utah and manufactured concrete blocks at its Utah plant. It sold its products inside and outside of Utah. Some of its customers were in Wyoming. The company held a Wyoming sales and use tax vendor's license for many years and had voluntarily registered for it. However, it did not collect and remit Wyoming taxes for all the sales in issue during the audit. It claimed lack of nexus for these sales, but failed to persuade either the State Board or the Supreme Court of its nexus argument. 1. WYOMING a. In the Matter of the Appeal of Buehner Block Co., No (Wyo. Bd. of Equalization Apr. 27, 2005), affirmed, Buehner Block Co. v. Wyoming Dep t of Revenue, No (Wyo. July 27, 2006) i. On appeal, the Wyoming Supreme Court affirmed the decision of the Board, holding that the taxpayer was liable for Wyoming sales and use tax on products delivered to Wyoming customers via common carrier. The Court determined that the title of the goods was transferred to buyers in Wyoming, and not Utah, because (i) the invoices specified Wyoming as the destination, (ii) the invoices stated that the goods were to be inspected by the purchaser in Wyoming, and (iii) the taxpayer did not collect and remit Utah sales taxes on these transactions. The Court held that such sales were not exempt from tax under the Commerce Clause because the taxpayer s contacts with Wyoming involved substantially more than the shipping of goods by a nonresident vendor. Specifically, the taxpayer s voluntary holding of a Wyoming sales tax license and remittance of Wyoming sales taxes on many other similar transactions, coupled with the common-carrier delivery of its goods into the state, provided sufficient nexus for imposition of Wyoming sales tax. 12

13 E. "Intangible" Nexus Sometimes a state tax department sees "non-nexus," especially if an income taxpayer is included in a combined or consolidated return and will produce a refund or no taxable income. 1. INDIANA a. Letter of Findings No (Indiana Dep t of Revenue July 1, 2006). i. Taxpayer was an out-of-state corporation that provided management services to its subsidiary located in Indiana. Taxpayer performed these services at its office in California, but received no management fees during the relevant audit period. Taxpayer s only income during the audit period was a nominal amount of interest income. Taxpayer sought to file a consolidated return with its Indiana subsidiary. The Department held that the taxpayer could not be included in the consolidated Indiana corporate adjusted gross income tax return. According to the Department, the taxpayer had minimal amount of interest income but substantial losses. Although the taxpayer claimed to have an Indiana employee and interest income from Indiana, the taxpayer did have any supporting payroll record and receipts. Moreover, the audit report did not show any Indiana property, payroll, or sales for the taxpayer. Based on these, the Department found that the taxpayer did not have sufficient nexus with Indiana and that its inclusion in the consolidated return would not fairly represent the taxpayer s income derived from Indiana sources. Accordingly, the Department excluded the taxpayer from the consolidated return. F. Doing Business In The State 1. KENTUCKY a. Ky. Rev. Stat. Ann (25)(e) and (26) i. Applicable to taxable years beginning on or after January 1, 2007, the definition of doing business in Kentucky will be changed from maintaining an interest in a general partnership doing business in this state to maintaining an interest in a pass-through entity doing business in this state. Ky. Rev. Stat. Ann (25)(e). 13

14 Pass-through entity includes any partnership, S corporation, limited liability company, limited liability partnership, and limited partnership. Ky. Rev. Stat. Ann (26). This article is reprinted from the State Tax Return, a Jones Day monthly newsletter reporting on recent developments in state and local tax. Requests for a subscription to the State Tax Return or permission to reproduce this publication, in whole or in part, or comments and suggestions should be sent to Susan Ervien (214/ or shervien@jonesday.com) in Jones Day s Dallas Office, 2727 N. Harwood, Dallas, Texas Jones Day All Rights Reserved. No portion of the article may be reproduced or used without express permission. Because of its generality, the information contained herein should not be construed as legal advice on any specific facts and circumstances. The contents are intended for general information purposes only. 14