State Tax Filing Obligations for Pass-Through Entities

Thomson Reuters has released a Checkpoint report to help practitioners and companies navigate state tax filing obligations for pass-through entities, such as partnerships, limited liability companies taxed as partnerships, and S corporations. It focuses on the complex challenges faced by entities that must research and comply with the rules and regulations of multiple states.

The report, Top 5 Easy Ways to Identify and Comply With State Tax Filing Obligations for Pass-Through Entities, outlines approaches to determine nexus, which describes the amount and degree of a taxpayer’s business activity that must be present in a state before the taxpayer becomes subject to the state’s taxing jurisdiction. It provides examples of activities that can create nexus for both income tax and sales and use tax purposes, and discusses the current political environment in which a growing number of states are asserting economic nexus to circumvent federal law.

It also addresses the various scenarios for non-resident withholding on pass-through entity income, which include state withholding thresholds and differing requirements based on the type of partner or entity type. Entities have their own considerations, such as whether to conduct composite filings on behalf of their nonresident members.