Congressman Cohen Holds Hearing On State Tax Policies

Press Release

Congressman Steve Cohen, Chairman of the Subcommittee on Commercial and Administrative Law, held a hearing today to examine the role Congress can play in further defining state taxation.
Currently, states levy a tax on income earned or on a transaction occurring within its borders. The taxpayer is liable only if there is a nexus, or a connection, between the state and the activities of the taxpayer.

"To weather the current economic crisis, state legislatures are looking to their tax codes for new sources of revenue to balance budgets or fund essential services," Congressman Cohen said. "However, in some cases, state legislatures have used an overly broad interpretation of existing law and legal precedent to impose new taxes. Some of these changes are confusing and have ledft some taxpayers with unpredictable tax bills."

Congressman Cohen continued, "Before determining what constitutes sufficient nexus for state tax purposes, Congress should ensure that it understands how defining nexus would affect State revenues. Additionally, we must consider how defining nexus would affect business development and investments, and we must explore how clarifying nexus would impact individual taxpayers."

Congressman Cohen noted in his opening remarks before the start of the hearing that many legislative proposals have been introduced to clarify nexus requirements. These legislative proposals seek to limit or expand the ability of states to impose certain taxes.

One such proposal urges Congress to grant states the authority to collect and remit use taxes from those with whom the states currently do not have sufficient nexus. Another proposal would prohibit a state from taxing the income of a taxpayer who has not established a physical presence within the state.

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