Reference no: EM132595909

Intercompany transactions are commonly utilized as a vehicle to implement state tax planning strategies. Accordingly, such transactions garner considerable scrutiny by the states. The states focus on intercompany transactions in a number of ways. For example, some states rely on combined or consolidated (hereinafter referred to collectively as combined) reporting, which effectively treats affiliated companies as a single entity, thereby avoiding the need for a review of intercompany transactions. Other states pass legislation to negate the impact of intercompany transactions. Still another way states focus on intercompany transactions is by conducting §482-type a audits. And a number of states attempt to tax companies that lack physical presence in the state, but which direct activities (generally through affiliated entities) at the state's economic forum (thus creating economic nexus and/or affiliate nexus according to the states).

Question 1: Discuss why Intercompany Transactions remain front and center for state tax developments