Rhode Island Code of Regulations › Title 280 - Department of Revenue › Chapter 20 - Division of Taxation › Subchapter 25 - Business Corporation Tax › Part 8 - Nexus (280-RICR-20-25-8) › Section 280-RICR-20-25-8.6 - Nexus - Generally

Current through June 14, 2024
A. Establishing
				 nexus generally means that a business has sufficient connection or presence in
				 Rhode Island for the State to have taxing authority. A foreign corporation is
				 subject to Rhode Island corporate income tax if it conducts business activity
				 in Rhode Island and has income properly apportionable to Rhode Island pursuant
				 to R.I. Gen. Laws §
										44-11-14,
				 et seq., regardless of whether it is authorized to do business in Rhode Island.
				 The State Tax Administrator construes Rhode Island law to assert the tax
				 jurisdiction of Rhode Island to the fullest extent permitted by the United
				 States Constitution and the laws of the United States. Some type of physical or
				 economic presence is necessary to establish nexus with the State. The United
				 States Constitution places limitations on a state's jurisdiction to tax. These
				 constitutional limitations derive from two clauses in the United States
				 Constitution: the Due Process Clause, in Amend. XIV, Section
				   1; and the Commerce Clause,
				 in Art. 1, Section
				   8, cl. 3. The nexus
				 requirement of both clauses must be satisfied before an out-of-state business
				 may be subject to the taxing jurisdiction of a state.
1. Due Process Clause nexus is satisfied when
				 a person has minimum contacts with a state such that maintenance of a lawsuit
				 against the person would not offend traditional notions of fair play and
				 substantial justice. Due process clause nexus is satisfied when the person has
				 a physical presence in the state, but physical presence is not always necessary
				 to establish Due Process Clause nexus. Even without physical presence in the
				 taxing state, Due Process Clause nexus is satisfied when an out-of-state
				 commercial actor's efforts are purposefully directed toward residents of the
				 taxing state.
2. A state tax
				 satisfies the Commerce Clause if it meets the following four requirements: the
				 tax is applied to an activity with a substantial nexus with the taxing state,
				 the tax is fairly apportioned, the tax does not discriminate against interstate
				 commerce, and the tax is fairly related to services provided by the state. The
				 Commerce Clause nexus requirement limits the reach of state taxing authority so
				 as to ensure that state taxation does not unduly burden interstate commerce.
				 The Commerce Clause "substantial nexus" requirement is not satisfied when the
				 only contacts of a vendor of tangible goods with the taxing state are by mail
				 or common carrier. However, in the area of corporate income taxation, the
				 substantial nexus requirement can be satisfied through a showing of significant
				 economic presence, absent any finding of physical presence. Significant
				 economic presence can be demonstrated through activities such as the
				 solicitation of orders for services and intangibles by in-state residents, and
				 through the provision of significant services and intangibles to in-state
				 residents.