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Stealing Bases–Which State will take the Lead?

03.19.18 | SALT Chat

Taking a lead is not always a good thing. Case in point; yours truly playing Little League Baseball as a sixth grader, decides that after getting one of his few and far between singles, to stand way ahead of the comfort zone of first base, practically touching second. Those of you who know me, especially way back in sixth grade, know my nickname was never Flash, Mercury, Speedy Gonzales, or Hermes. You can guess the result, can’t you? The pitcher leisurely tossed the ball to the second baseman, who tagged me out without much fanfare.

Stealing the tax base, at least as perceived by state and local taxing authorities has resulted in similar outcomes for taxpayers as well as the taxing authorities, however usually with a great deal of fanfare and wasted dollars on both sides. As I read the Daily Tax Report one day last week,[1]
I thought for sure some jurisdiction tried to steal home by imposing a new tax on Major League Baseball. 

States have been struggling for years to replace an eroding tax base. Requiring physical presence has evolved to attributional or agency nexus, transactional nexus, economic nexus, and beyond.  The holes in the state and local tax base have been satiated with some sensible and many misguided attempts to raise revenue.  Streaming services, apparently have the potential to create another shortfall to those states that impose a tax on cable television revenue.

The author of Daily Tax Report article raises the streaming tax issue in the context of the rise of streaming video services, particularly the agreement between Facebook and Major League Baseball to stream 25 upcoming games. This made me think that maybe baseball is the proper forum to get our federal government moving to enact consistent nexus and sourcing requirements.  (A quick Google search of “politics and baseball” generates an inordinate amount of results.) Let’s all get out to the ballgame this season armed with banners with motivating slogans such as “no nexus is good nexus” and “I can regulate my own internet, thank you.” I’m open to any and all reader suggestions.

Seriously, where does this all stop? I spent several hours this very day “negotiating” ridiculously small settlements with two different states regarding nexus issues on the fringe. The information sought in both cases was, in part, more than ten years old and not readily available. The cost to go back and file tax returns in these jurisdictions far exceeded the actual tax; in one instance, less than $50. This is inefficient for business and I can’t imagine that states not taking a common sense approach, until such time as the feds step in and impose some uniformity, are actually generating revenue from pursuing these matters.

Nexus issues are never simple and are only getting more entangled as new products and services are constantly evolving. This is a particularly uncertain time as states are still feeling their way forward and no one has yet taken a lead. If you’re caught in a nexus tangle, you’ll need the help of tax professionals who are on the front lines. I can help. Contact me at WBerkowitz@BERDONLLP.com or your Berdon advisor.

Wayne K. Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, New York Accountants, advises on the unique requirements of governments and municipalities across the nation.

[1] Prete, Ryan, “State Streaming Tax Efforts Buffering as Facebook, MLB Connect.”  Bloomberg BNA Daily Tax Report,
March 16, 2018.