SALTy Bits: Nexus and Apportionment 101
BE Informed
On this episode of SALTy Bits, Jared Brown (Partner, Bristol, TN office) sits down with Will Clark (Director, Kingsport, TN office) from the firm's SALT (State and Local Tax) team to break down two foundational state tax concepts: nexus and apportionment.
Will explains what nexus is and how it differs across tax types—covering physical presence, economic nexus, and factor-based nexus—and why sales tax and income tax rules rarely line up from state to state. The conversation then moves to apportionment, where Will distinguishes it from allocation and walks through the classic three-factor formula (sales, property, and payroll), explaining how sourcing rules and formula weighting (single sales factor, double-weighted sales, or equal three-factor) vary widely by state, including Tennessee's own shift to a single sales factor system.
The episode wraps with practical takeaways: understanding nexus mainly triggers a filing requirement (not necessarily a tax bill), keeping the three main types of nexus straight, and recognizing how apportionment formulas can sometimes result in taxpayers being taxed on more than 100% of their income when totaled across all states of operation.
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