Colorado Adopts Factor Presence Nexus Standard for Income Tax
Colorado recently adopted a new income tax nexus standard which takes effect on April 30th.
The standard is based on the Multistate Tax Commission (MTC)'s "factor presence" nexus standard.
The standard says:
A corporation is doing business in Colorado for income tax purposes whenever the minimum standards of Public Law 86-272 (15 U.S.C. 381) are exceeded, and it has substantial nexus with this state.
The Substantial Nexus Standard is described as follows:
- Business entities that are organized or commercially domiciled in this State have substantial nexus with this State.
- Business entities organized outside the State are doing business in this State, have substantial nexus, and are subject to Colorado filing requirements and, if applicable, Colorado income tax imposed by Article 22 of Title 39 when in any tax period the property, payroll or sales of the business in the State, exceed the following thresholds during the tax period: $50,000 of property; or $50,000 of payroll; or $500,000 of sales; or twenty-five percent of total property, total payroll or total sales.
For all of the details, please go to Reg. 39-22-301.1.
If your company exceeds those thresholds and you have never filed an income tax return in Colorado, please contact me at email@example.com to determine your next step.
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
You can reach Brian at firstname.lastname@example.org.
Because state and local taxes are deceptively simple and endlessly complicated.