For foreign commerce to be taxable by a state, there must be constitutional nexus in order to assign the business activity to that state. Public Law 86-272 does not apply to foreign commerce. It is not relevant that the taxpayer does not file a return in the destination state, or that the state chooses not to tax the activities in question. Note 5 What is relevant is whether the state could tax the activities if it chose to do so. Thus, sales of tangible personal property into the U.S by a foreign corporation will be includible in the sales factor if the foreign corporation has nexus in the state to which the goods were shipped.
Nexus is determined on a state by state basis.
Regular, systematic displaying of its products by catalogs, samples or the like. Physical presence within a jurisdiction has long been recognized as a requirement for nexus, although the trend in recent court decisions appears to be a de-emphasis of the physical presence requirements in recognition of the changing business environment. Tax treaty provisions, including the permanent establishment rules, generally do not apply to the states. These rules are are not applicable for purposes of determining if a foreign entity has a taxable presence in a particular state. For purposes of determining taxable nexus, the states are bound only by the laws and constitution of the U.S. Note, however, if the taxpayer is claiming a treaty exemption, it provides an indication that the foreign corporation may have a presence in the U.S. since it probably has property, payroll or sales in the U.S. 2.